Minister of Labor and Social Affairs Jaromír Drábek (TOP 09) wants to use some Kč 20 billion in dividends from state-controlled energy giant ČEZ to fund his pension reform plan, daily Hospodářské noviny (HN) reported Dec. 10.
“I count on the ČEZ dividend being used for pension reform already next year,” Drábek, who hopes to implement the proposed overhaul of the pension system by 2013, told the daily.
The Prague-listed utility is an important source of revenue for the Czech government as the state holds a 69 percent stake in ČEZ. Finance Minister Miroslav Kalousek (TOP 09) and Prime Minister Petr Nečas (Civic Democrats, ODS) reportedly support using at least a large part of the anticipated ČEZ dividend to fund pension reform, for which the government already has earmarked Kč 21.6 billion.
If the entire ČEZ dividend was used, that sum would rise to more than Kč 40 billion, and the state would not have to change the value-added tax (VAT) rate to a single level of 19 percent, HN reported. Currently, the VAT rate is split at 10 percent and 19 percent depending on the type of product or service.
Drábek’s pension reform plan, which has yet to be approved, would cost the government between Kč 30 billion and Kč 35 billion annually, HN reported.
Population growing older
The current pay-as-you-go pension system in the Czech Republic has long been criticized for not being sustainable due the rapidly aging population. The share of people aged 65 and older is expected to triple by 2050, according to EU figures. Drábek has proposed adding a second pillar using private pension companies, in addition to the state-run pension plan.
ČEZ, the largest listed company in Central Europe, usually pays out 55 percent of its profit in dividends. ČEZ’s profits are estimated to drop 3 percent in 2010. The dividend level is expected to remain the same, however.
The energy giant is two-thirds owned by the state. ČEZ generated record earnings of Kč 91.1 billion before interest, taxes, depreciation and amortization (EBITDA). ČEZ shared are traded on the Prague Stock Exchange (PSE), Warsaw Stock Exchange (WSE) and the Frankfurt Stock Exchange (FWB). The ČEZ Group has 96 companies in total and is active in 12 countries in the CEE region including Turkey.
