OREANDA-NEWS. November 8, 2011. Renaissance Capital, the leading emerging markets bank, has further expanded its CE3 research coverage, with initiation reports on CEZ (Czech Republic) and Polish integrated power utilities PGE, Tauron and ENEA. Renaissance analysts consider CEZ attractive, thanks to its exposure to the cleaner nuclear energy segment and export potential; while finding the Polish electricity utilities less compelling, due to their heavy reliance on the least environmentally friendly coal and dedication to the domestic market.

Renaissance Capital values the companies in the context of the arguably unprecedented challenges facing European electricity companies today. Among the challenges, it notes the reduction of greenhouses gases as paramount and judge – notwithstanding German Chancellor Angela Merkel’s phase-out decision – that nuclear power generation is an essential part of the solution.

In this context, CEZ stands out, analysts say. CEZ has a successful track record as a builder and operator of nuclear plants, and in recent weeks the Czech government has evinced a new commitment to expanding CEZ’s nuclear capacity. Not underestimating the consequences of the Fukushima tragedy, analysts believe the prospect of having to address global warming and the search for energy security will eventually persuade most governments that nuclear energy is the least bad solution. The report cites evidence that the Czech population is supportive of nuclear energy, and Renaissance sees strong demand and attractive prices for CEZ’s base-load output in neighbouring Germany. Renaissance Capital initiates coverage of CEZ with a BUY rating and a target price of CZK 1,117, implying 53% potential upside to the current market price.

The three Polish companies covered, which Renaissance notes have overwhelmingly coal-fired generation and are largely dedicated to domestic consumption, represent a less compelling investment story, in the analysts’ view. Renaissance initiates coverage of PGE with a HOLD rating and a target price of PLN 20.38, Tauron with a BUY rating and a target price of PLN 6.68 and ENEA with a SELL rating and a target price of PLN 15.30.