Cez As · PSECZ:CEZ
Cez As — Investor Presentation (October 2019)
24 slides from Cez As's investor presentation, Oct 4, 2019
Slide 1: Coal Energy in the Czech Republic
COAL ENERGY IN THE CZECH REPUBLIC Meeting with Analysts and Investors October 4, 2019
Slide 2: The climate targets in Europe are becoming more and more ambitious
THE CLIMATE TARGETS IN EUROPE ARE BECOMING MORE AND MORE AMBITIOUS... 2020 2030* Reduction of 20% At least 40% (40%) greenhouse gas ▪ Binding EU-wide target ▪ Binding EU-wide target emissions from ▪ Target already accomplished ▪ Can be reached as a side effect of fulfilling other thanks to the econo
Slide 3: The new European Commission president plans to increase the ambitions even further
... THE NEW EUROPEAN COMMISSION PRESIDENT PLANS TO INCREASE THE AMBITIONS EVEN FURTHER Reduction of Declaration of „Green Deal for Europe“: greenhouse gas emissions from ▪ Increase the emission reduction target for 2030 from 40% to 50%-55% 1990 levels ▪ Europe will be the first greenhouse gas emissi
Slide 4: CEZ Group significantly reduced emissions from its coal fleet
CEZ GROUP SIGNIFICANTLY REDUCED EMISSIONS FROM ITS COAL FLEET Sulphur dioxide* Particulate matter* ▪ During 1990’s CZK 111 bn has 800 100 been invested by ČEZ into 724 -97% Thousands of tons complex modernization of power Thousands of tons 700 80 stations, desulphurization, 600 500 60 56 -97% denitr
Slide 5: The price of electricity has grown in recent years, but mainly due to CO2
THE PRICE OF ELECTRICITY HAS GROWN IN RECENT YEARS, BUT MAINLY DUE TO CO2 Breakdown of Cal 20 electricity price changes over the last two years (01/08/2017-01/08/2019) EUR/MWh 5.3 52.3 14.9 1.1 1.7 29.3 Power price EEX Coal price growth Gas price growth Carbon price Other factors Power price EEX 01/
Slide 6: The prices of CO2 allowances grow primarily due to the EU's decarbonisation efforts
THE PRICES OF CO2 ALLOWANCES GROW PRIMARILY DUE TO THE EU'S DECARBONISATION EFFORTS Consideration Emission allowance price development (EUA) of the target EUR/t, spot increase to 50-55% 30 Start MSR Financial and 25 economic crisis 20 Final EED compromise on +24.3 proposal the shape of the EUR/t EU
Slide 7: However, coal power plants are under economic pressure due to the growth of CO2
HOWEVER, COAL POWER PLANTS ARE UNDER ECONOMIC PRESSURE DUE TO THE GROWTH OF CO2 Lignite spread (Price of electricity – emission allowance) EUR/MWh, Cal 20 From 11/2018: Coal price drops, but growing allowance October 2018: several-year prices have negative impact on highs of the prices of coal profi
Slide 8: The economy of coal-fired power plants is highly dependent on their efficiency and integration
THE ECONOMY OF COAL-FIRED POWER PLANTS IS Illustrative HIGHLY DEPENDENT ON THEIR EFFICIENCY AND INTEGRATION WITH MINE New power plant integrated with mine Old standalone power plant Gross margin** [EUR/MWh] Gross margin** [EUR/MWh] Standalone coal power 38.5 40 %* %** plants are still under 34 %* 31
Slide 9: Our strategy for coal-fired power plants varies by their category
OUR STRATEGY FOR COAL-FIRED POWER PLANTS VARIES BY THEIR CATEGORY ČEZ strategy Application of the strategy in the generation portfolio ▪ Effectively manage the portfolio of New ELE CEZ Group basin plants are operated in base load. basin coal plants, heating plants basin ETU Thanks to the low operati
Slide 10: ČEZ plans to decommission a significant part of the coal capacity between 2035-40
ČEZ PLANS TO DECOMMISSION A SIGNIFICANT PART OF THE COAL CAPACITY BETWEEN 2035-40... Installed capacity of CEZ Group‘s coal plants in the Czech Republic (GW) Option Počerady Decommissioning of Standby capacity obsolete sources Installed coal capacity CZ of CEZ Group 0.1 Expected exhaustion of coal 1
Slide 11: ...and intends to reduce its carbon footprint
…AND INTENDS TO REDUCE ITS CARBON FOOTPRINT CO2 emissions per electricity produced* (gCO2/kWh) The average specific CO2 emissions of the marginal power plant are currently approx 650 - 700 gCO2/kWh 390 370 CO2 emission intensity of new steam-gas plants<350 gCO2/kWh 300 300 270 100 2018 2020 2025 203
Slide 12: Further decarbonisation through new gas power plants as a replacement for coal
FURTHER DECARBONISATION CAN BE REALIZED FOR INSTANCE THROUGH A NEW GAS POWER PLANTS AS A REPLACEMENT FOR COAL POWER PLANTS Possible other locations for the development of gas sources of ČEZ ▪ The following ČEZ locations can be considered for possible construction of new gas plants: ČEZ location Esti
Slide 13: Key substantive and general financial objectives in the updated strategy
KEY SUBSTANTIVE AND GENERAL FINANCIAL OBJECTIVES IN THE UPDATED STRATEGY Additional 2025 Strategic Priorities Key Substantive Objectives and Ambitions for 2025 EBITDA* Goal ▪ Safe and efficient generation by nuclear plants (WANO’s assessment of ČEZ’s nuclear power plants above the (CZK bn) global nu
Slide 14: Realization of the strategic priority: efficient operation, optimum utilization & development
REALIZATION OF THE STRATEGIC PRIORITY „EFFICIENT OPERATION, OPTIMUM UTILIZATION & DEVELOPMENT OF GENERATION PORTFOLIO“ Additional EBITDA Breakdown EBITDA 2025* Key influences target 2025* of the goal (bn CZK) (bn CZK) ▪The decline in production capacities due to the gradual phase-out of coal sources
Slide 15: Our strategy for coal-fired power plants varies by their category
OUR STRATEGY FOR COAL-FIRED POWER PLANTS VARIES BY THEIR CATEGORY ČEZ strategy Application of the strategy in the generation portfolio ▪ Effectively manage the portfolio of New ELE CEZ Group basin plants are operated in base load. basin coal plants, heating plants basin ETU Thanks to the low operati
Slide 16: Počerady power plant description and technical parameters
POČERADY POWER PLANT DESCRIPTION AND TECHNICAL PARAMETERS Executive Summary Compliance with IED emission limits (06/2020) ▪ The units will meet the IED limits after certain operational and technical measures are taken Compliance with BREF/BAT emission limits (08/2021) Počerady power plant ▪ The powe
Slide 17: Disputes between 2005-2012 led to the sale of Chvaletice and long-term contract with VUAS
A NUMBER OF DISPUTES BETWEEN 2005-2012 LED TO THE SALE OF CHVALETICE AND SIGNATURE OF A LONG-TERM CONTRACT WITH VUAS IN 2013 2005 ▪ An agreement between ČEZ and Czech Coal, a.s. about future long-term cooperation. ▪ Czech Coal refused to sign a contract for long-term supply of lignite (due to a disp
Slide 18: Contract parameters from 2013 and its benefits
CONTRACT PARAMETERS FROM 2013 AND ITS BENEFITS ▪ Take or pay contract for 5 m tons of ▪ Termination of trade disputes with lignite for ČEZ until the Vršany mine is VUAS, enabling settlement with the exhausted (about 2060) European Commission ▪ Starting price of coal 38.8 CZK/GJ, which ▪ Ensuring sec
Slide 19: Exercise of the options based on the negotiated contract was considered
EXERCISE OF THE OPTIONS BASED ON THE NEGOTIATED CONTRACT WAS CONSIDERED, THE NEXT MILESTONE IS ON JANUARY 1, 2020 ▪ ČEZ had a chance to exercise the 1st Put option in 2016. After valuation and consideration of the circumstances, ČEZ decided to withdraw from the contract for sale of the Počerady plan
Slide 20: Profitability of less efficient power plants decreases significantly over time
Illustrative PROFITABILITY OF LESS EFFICIENT POWER PLANTS DECREASES SIGNIFICANTLY OVER TIME Market spread 2015 (EUR/MWh) * Market spread 2020 (EUR/MWh) * The rising price of the CO2 allowance increases the price of electricity only partially. Growth of electricity prices due to rising CO2 allowance
Slide 21: Počerady power plant economic contribution to the CEZ Group's results
POČERADY POWER PLANT ECONOMIC CONTRIBUTION TO THE CEZ GROUP'S RESULTS EPC contribution to the consolidated results of CEZ Group* 2015 2016 2017 2018 E 2019 Sale of electricity inc. AS bn CZK 5.4 5.3 4.6 4.6 5.1 Electricity supply TWh 5.1 5.6 5.4 5.3 4.7** Costs of coal bn CZK -2.4 -2.6 -2.5 -2.5 -2.
Slide 22: EPC is highly sensitive to CO2 price
EPC IS HIGHLY SENSITIVE TO CO2 PRICE Lignite Black coal Gas Biomass Power Supply Heat supply Heat supply Emissions of CO2 per (TWh) (TJ) ratio 1) EE and HE3) produced Hodonín 0.3 453 12% 129 g CO2/kWh Partly biomass Poříčí 2 0.6 1,312 19% 547 g CO2/kWh Počerady 2 1.8 0 0% 356 g CO2/kWh Gas Energotra
Slide 23: Further operation of EPC would demand considerable investments to fulfil environmental requirements
FURTHER OPERATION OF EPC WOULD DEMAND CONSIDERABLE INVESTMENTS MAINLY TO FULFIL ENVIRONMENTAL REQUIREMENTS BREF/BAT fulfillment Estimated outlays for investment, operation and maintenance of the plant Operation until 2024 until 2029** CAPEX + OPEX (normal maintenance and specific actions) [bn CZK] •
Slide 24: Not withdrawing from the sale contract will enable ČEZ to negotiate other conditions
NOT WITHDRAWING FROM THE SALE CONTRACT WILL ENABLE ČEZ TO NEGOTIATE OTHER CONDITIONS Given the economic disadvantages of retaining EPC, ČEZ can only accept: • Sale of EPC as of 2024, i.e. not to withdraw from the sale until 31/12/2019 • Renegotiation of DKS* ČEZ may unilaterally withdraw from the sa