Final Word from Monday, November 1, 2010

Some of the Czech Republic's biggest fortunes were made in the run-up on ČEZ shares. Those who saw the spike in the price coming - or helped it along - were able to make a 10, 20 or even 30 times return on their investment by buying and selling at the right time and by using leverage. Some of these same people are no doubt making another killing on the way down. ČEZ is producing nearly as much bad news these days as it is electricity. The row over carbon credits has made investors nervous and has already chopped about Kč 25bn off ČEZ's market capitalization. Daniel Křetínský of EP Holding predicted in HN today that another Kč 100-150bn could be lost (that's as much as 35% of the share price) if the carbon-credit debacle causes ČEZ's credit rating to be cut. In this case, he said, Temelín might not be enlarged at all. A clever energy-sector investor - and Křetínský is very clever - would be shorting ČEZ shares and planning to use the proceeds to help take control of the Temelín project in some form or another.[J&T PPF EPH Hospodářské noviny]

Glossary of difficult words

disclosure - the editors of the Final Word have no financial interest in the share price of ČEZ; 

run-up on/of - a marked rise in the value or level of something; 

spike - a sharp increase in the magnitude or concentration of something; 

leverage - borrowed capital used to make an investment, with the expectation of earning profits that exceed the borrowing costs; 

to make a killing - to have a great financial success; 

carbon credits - emissions allowances; 

debacle - fiasco; 

to short shares - to sell shares that one does not own, with the expectation of a drop in the price so that a profit can be made.


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