Cez As · PSECZ:CEZ
Cez As — ČEZ, a. s. — Investor Presentation (September 2005)
77 slides from Cez As's investor presentation, September 2005
Slide 1: The Leader in Power Markets of Central and Southeastern Europe
THE LEADER IN POWER MARKETS OF CENTRAL AND SOUTHEASTERN Equity story September 2005 EUROPE
Slide 2: Disclaimer
DISCLAIMER Certain statements in the following presentation regarding CEZ’s business operations may constitute “forward looking statements.” Such forward-looking statements include, but are not limited to, those related to future earnings, growth and financial and operating performance. Forward-look
Slide 3: Agenda
AGENDA Summary for investors Introduction Scope of operations Financial performance Strategic initiatives of CEZ Group Integration and operational excellence Plant portfolio renewal M&A expansion 2
Slide 4: Summary for investors
SUMMARY FOR INVESTORS The vision of CEZ is to become the leader in power markets in the Central and Southeastern Europe The largest Czech corporation and the largest corporation among 10 new EU member states The best performing European utility stock with growth at >300% in the last 18 months
Slide 5: CEZ Group provides some unique features for equity investors
CEZ GROUP PROVIDES SOME UNIQUE FEATURES FOR EQUITY INVESTORS Key factors Rationale Strong financial performance EBITDA margin 37% with growth potential Dynamic profit growth expected Growing power prices and consumption, to continue efficiency improvements and synergies Vertically integrat
Slide 6: Agenda
AGENDA Summary for investors Introduction Scope of operations Financial performance Strategic initiatives of CEZ Group Integration and operational excellence Plant portfolio renewal M&A expansion 5
Slide 7: CEZ Group is an international utility with dominant position in domestic market
CEZ GROUP IS AN INTERNATIONAL UTILITY WITH DOMINANT POSITION IN DOMESTIC MARKET AND GROWING PORTFOLIO IN THE BALKANS Target markets CEZ Group in Romania** (51% share in EDC Oltenia) Electricity sales (TWh) 6.8 Market share 13% Number of customers (million) 1.36 Market share 17% Installed c
Slide 8: CEZ is a dominant player in all segments of the Czech electricity market
CEZ IS A DOMINANT PLAYER IN ALL SEGMENTS OF THE CZECH ELECTRICITY MARKET Lignite mining Generation Transmission Distribution Supply 5 out of 8 45% CEZ distribution 58% 22 million tons 74% companies 31.7 TWh 62.1 TWh 100% 62% of customers 63.4 TWh 55% Others 42% 27 million tons 26% 38% of customers 2
Slide 9: CEZ Group steadily increases production
CEZ GROUP STEADILY INCREASES PRODUCTION CEZ Group generation capacity Annual production of CEZ Group MW TWh 100% of Completion of Temelín 12,297 generation nuclear power plant Hydro (river 3% 2,000 MW accumulation 1,934 17% and pump storage) 62.1 61.4 Lignite off basin 52.2 54.1 50.8 and hard coal 2
Slide 10: Major investment program was focused on emission reduction
MAJOR INVESTMENT PROGRAM WAS FOCUSED ON EMISSION REDUCTION Generation structure of CEZ Group CEZ Group emission change 2003/1993 TWh Percent 60 100% Hydro power plants 50 80% -50% 40 -77% Nuclear power plants 60% -95% -92% 1993 level 30 40% Desulphurized coal power plants 20 20% 10 Coal power plants
Slide 11: CEZ Group is the largest Czech company by any measure
CEZ GROUP IS THE LARGEST CZECH COMPANY BY ANY MEASURE Top Czech companies in 2004 By profitability By assets Income before income taxes Total assets, EUR billion* EUR million* CEZ Group 9.4 CEZ Group 598 Český Telecom 4.5 RWE Transgas 345 Škoda Auto 2.4 Mittal Steel 327 Unipetrol 2.4 Eurotel 275 Les
Slide 12: CEZ is the biggest company in new EU member states
CEZ IS THE BIGGEST COMPANY IN NEW EU MEMBER STATES Market capitalization of top 15 companies in 10 new EU member states* EUR billion 13.7 14 12 10.5 10 9.0 8.3 8 7.3 6.9 6.4 6 5.0 4.5 4.5 4.1 4 2.6 2.0 1.7 2 1.2 0 Z) Z) Z) L) I) L) L) L) U) ) L) Y) ) L) U) U U (S (P (C (C (P (C (P (P (P (P (C (H (H
Slide 13: Vision of the CEZ Group is to be the leader in power markets in CSE Europe
VISION OF THE CEZ GROUP IS TO BE THE LEADER IN POWER MARKETS IN CENTRAL AND SOUTHEASTERN EUROPE Business Integrated utility focused on power generation, distribution and supply focus Present in related businesses where relevant (coal mining, heat generation) Our vision Czech Republic Priority
Slide 14: New management team is determined to fulfill the mission
NEW MANAGEMENT TEAM IS DETERMINED TO FULFILL THE MISSION Management Board of CEZ, a. s. CEO Trade Finance Generation Operations Alan Svoboda Petr Vobořil Martin Roman Jiří Borovec Radomír Lašák Responsibility Trading Treasury M&A Conventional Distribution Sales and Accounting Procure
Slide 15: Agenda
AGENDA Summary for investors Introduction Scope of operations Financial performance Strategic initiatives of CEZ Group Integration and operational excellence Plant portfolio renewal M&A expansion 14
Slide 16: CEZ Group attracted many international shareholders
CEZ GROUP ATTRACTED MANY INTERNATIONAL SHAREHOLDERS Shareholders of CEZ, a. s. As of December 31, 2004 Types of funds investing in CEZ shares Emerging markets Hedge Institutional Investors Utilities (mostly international) Growth strategies 24.5% Examples of large foreign investors Baring A
Slide 17: CEZ is among top European power utilities
CEZ IS AMONG TOP 10 EUROPEAN POWER UTILITIES Top 10 European power utilities Number of customers in Europe, million 1 EdF 36.2 2 Enel 29.0 3 E.ON 26.0 4 RWE 20.8 5 Endesa 11.3 6 Iberdrola 9.6 7 PPC 7.0 8 CEZ Group 6.6 9 Vattenfall 5.8 Czech Republic 3.4 Bulgaria 1.9 10 Electrabel 5.6 Romania 1
Slide 18: CEZ Group is one of the most profitable utilities in Europe
CEZ GROUP IS ONE OF THE MOST PROFITABLE UTILITIES IN EUROPE AND WILL REMAIN SO EBITDA margin, 2004 Percent CEZ Group has advantageous low cost generation portfolio Electrabel 17.8 Lignite RWE 19.9 Long term fuel contract till 2050 for >90% E.ON 21.4 of consumption Prices change as fraction of
Slide 19: H1 2005 development confirms continued growth dynamics
H1 2005 DEVELOPMENT CONFIRMS CONTINUED GROWTH DYNAMICS EBITDA Development of CEZ and its peers EUR million 6 000 5 677 140% 5 315 130% 136% 4 465 4 439 5 000 121% 115% 120% 107% 110% 4 000 111% 109% 2 824 100% 99% 2 546 3 000 90% 2 278 1 985 80% 1 596 1 461 2 000 1 218 70% 1 008 850 60% 624 1 000 50
Slide 20: CEZ stock has significantly out-performed the Czech market and European utilities
CEZ STOCK HAS SIGNIFICANTLY OUT-PERFORMED THE CZECH MARKET AS WELL AS EUROPEAN UTILITY Prices of shares and share indexes* Percent Current price CZK 678** 750% CEZ 650% 550% 450% Price on Jan 1, 2003 CZK 92 PX50 350% 250% BBG EUR Utilities Index 150% 50% 2003 2004 2005 CEZ shares are among the most
Slide 21: Analysts maintain positive view on CEZ Group performance
ANALYSTS MAINTAIN POSITIVE VIEW ON CEZ GROUP PERFORMANCE Target share price CZK 705 725 730 Current share price CZK 678* 618 625 639 569 562 561 520 460 KB/ Erste Deutsche Wood ING Raiffeisen CAIB/ Patria/ Morgan Goldman UBS SOGE Bank Bank & Comp. Bank HVB KBC Stanley Sachs 7.6.05 3.8.05 8.8.05 10.0
Slide 22: CEZ generation fleet is the main value driver of the whole group
CEZ GENERATION FLEET IS THE MAIN VALUE DRIVER OF THE WHOLE GROUP EBITDA Growth drivers Contribution of various segments to consolidated EBITDA (2004) CZK billion Generation and trading Regional price convergence to German levels 0.5 CO2 optimization Increased capacity of nuclear 10.0 plants
Slide 23: CEZ Group maintains high dynamics in profit growth
CEZ GROUP MAINTAINS HIGH DYNAMICS IN PROFIT GROWTH IN LINE WITH ANALYSTS EXPECTATIONS CEZ EBIT of CEZ Group 2006 key growth drivers Analysts’ expectations EUR million 15% wholesale price increase (as of Sept. 2, 2005) Savings resulting from group consolidation Compensation of unbundling costs
Slide 24: CEZ dividend policy targets 50% dividend increase by 2007
CEZ DIVIDEND POLICY TARGETS 50% DIVIDEND INCREASE BY 2007 (COMPARED TO 2003) Net income and dividends (IFRS, consolidated) Dividend payout ratio CZK billion Percent 14 14 RWE 37% 12 12 Fortum 41% 10 10 +50% E.ON 41% 8 8 CEZ 41% 6 6 PPC 57% CZK / Share 4 4 2 2 Inberdrola 57% 0 0 EnBW 57% 2000 2001 20
Slide 25: CEZ Group has very strong free cash-flow to finance international growth
CEZ GROUP HAS VERY STRONG FREE CASH-FLOW THAT CAN BE USED TO FINANCE INTERNATIONAL GROWTH Free cash flow of CEZ Group (cumulative) EUR million 3,000 CEZ Group can finance foreign acquisitions 2,375 in the next 3-5 years from 1,750 free cash flow up to EUR 3,000 million without 1,125 impacting 500
Slide 26: CEZ Group generates large operating cash-flow in excess of investment needs
CEZ GROUP GENERATES LARGE OPERATING CASH-FLOW IN EXCESS OF INVESTMENT NEEDS CZK billion 50 50 Generation CAPEX 2005 CZK 3.3 bn – nuclear power plants CZK 0.9 bn – coal power plants CZK 2.3 bn – other 40 40 Distribution CAPEX 2005 30 30 CZK 5.3 bn – domestic distribution companies CZK 2.0 b
Slide 27: CEZ finances are under close scrutiny of rating agencies and bond investors
CEZ FINANCES ARE UNDER CLOSE SCRUTINY OF RATING AGENCIES AND BOND INVESTORS Credit rating of CEZ and Czech Republic CEZ bonds Amount Year Million Currency Placement Repayment Positive Matured CEZ BBB+ Outlook 1993 2,100 CZK Prague 1996 Standard & Poor’s 1994 4,000 CZK Prague 1999 Czech 150 USD
Slide 28: CEZ Group is the least indebted utility in Europe
CEZ GROUP IS THE LEAST INDEBTED UTILITY IN EUROPE WITH STRONG ADDITIONAL BORROWING CAPACITY Additional borrowing capacity equals EUR 2 billion May be used on top of the free cash flow to finance acquisitions if large, interesting and properly priced acquisition targets appear Long-term debt/Total
Slide 29: Cash flow generated in 2005-09 equals almost 70% of market capitalization
CASH FLOW GENERATED BY CEZ IN 2005-09 EQUALS ALMOST 70% OF ITS CURRENT MARKET CAPITALIZATION Cash flow generation 2005-09 EUR billion 13.7 Market cap almost covered by cash 9.6 in next 5 years 70% 3.5 If no value increasing 45% acquisition 2.3 opportunities 3.0 secured distribution 0.8 to shareh
Slide 30: Agenda
AGENDA Summary for investors Introduction Scope of operations Financial performance Strategic initiatives of CEZ Group Integration and operational excellence Plant portfolio renewal M&A expansion 29
Slide 31: CEZ Group has launched four key strategic initiatives
CEZ GROUP HAS LAUNCHED FOUR KEY STRATEGIC INITIATIVES Vision and corporate targets Integration Plant and M&A portfolio operational expansion renewal excellence (2004-08) (2007-20) (2004-10) Performance-oriented culture 30
Slide 32: Performance oriented culture is a precondition for all other initiatives
PERFORMANCE ORIENTED CULTURE IS A PRECONDITION FOR ALL OTHER INITIATIVES Implementation 7 principles of CEZ performance-oriented culture program 1. Value creation is the top priority Top and middle management 2. Enforcing individual responsibility for reaching meetings/ ambitious goals/results wor
Slide 33: Strategic initiatives target value enhancement
STRATEGIC INITIATIVES TARGET VALUE ENHANCEMENT Integration and Plant portfolio operational M&A expansion renewal excellence EBITDA Margin Maintain/increase Acquire assets growth improvements installed capacity abroad with drivers Costs savings/ with competitive performance synergies plants u
Slide 34: Agenda
AGENDA Summary for investors Introduction Scope of operations Financial performance Strategic initiatives of CEZ Group Integration and operational excellence Plant portfolio renewal M&A expansion 33
Slide 35: Market factors drive CEZ's attention to domestic market
MARKET FACTORS DRIVE CEZ’S ATTENTION TO DOMESTIC MARKET Development of CEZ Group sales Key drivers TWh Domestic sales driven by Domestic sales growing demand across all Exports customer groups 49.8 50.8 Exports influenced by high cross-border transmission costs 37.2 Since CO2 trading mechanism
Slide 36: CEZ Group is second largest exporter of power in Europe
CEZ GROUP IS SECOND LARGEST EXPORTER OF POWER IN EUROPE, PROVIDING POWER TO CENTRAL EUROPEAN COUNTRIES Net exports in 2004 TWh Structure of CEZ exports in 2004 France 64.5 Poland ČR 15.7* 3% Germany Poland 10.3 60% Germany Slovakia 8.1 Austria 30% 7% Slovakia 1.9 Diversification of target export mar
Slide 37: Wholesale prices offered by CEZ are the lowest in the region
WHOLESALE PRICES OFFERED BY CEZ ARE THE LOWEST IN THE REGION Wholesale power price* Existing pricing 2005, baseload, EUR/MWh Has been a result of influence of higher +72% German prices and potential cheaper Export markets Import markets imports from Poland and Slovakia Will be changed with full
Slide 38: Gap between electricity prices in the Czech Republic and abroad remains wide
GAP BETWEEN ELECTRICITY PRICES IN THE CZECH REPUBLIC AND ABROAD REMAINS WIDE Wholesale electricity prices (baseload) 2000 index 260 +24.0% EEX Forward 2006 240 43.7 EUR/MWh 220 200 180 160 140 +15.1% Czech Republic 2006 120 35.1 EUR/MWh +11.4% 100 80 60 2000 2001 2002 2003 2004 2005 2006 Source:CEZ,
Slide 39: Domestic and export prices are converging to international levels
DOMESTIC AND EXPORT PRICES ARE CONVERGING TO INTERNATIONAL LEVELS German wholesale price 43 Net export prices 35 Domestic annual Transmission capacity fee baseload wholesale prices 24.5 24.8 27.1 30.2 35 EUR/MWh* 2002 2003 2004 2005 2006 forward prices Price change 1.5% 9.1% 11.3% 15.1% Percent 34.5
Slide 40: CO2 emission permits help CEZ to hedge its exports
CO2 EMISSION PERMITS HELP CEZ TO HEDGE ITS EXPORTS Electricity price*** Emission permit’s price Electricity CO2 EUR/MWh EUR/MWh EUR/t 48 35 Emission 46 Export Minimum 30 permit’s 44 margin margin price** 42 25 40 Cross 38 20 border 36 capacity fee Total 15 34 variable Variable costs 32 10 costs * 30
Slide 41: Allocation of CO2 emission permits allows CEZ to increase lignite generation
ALLOCATION OF 36.9 TONS OF CO2 EMISSION PERMITS PER YEAR FOR 2005–07 ALLOWS CEZ TO INCREASE GENERATION IN LIGNITE PLANTS BY 5.3% Market value of additional allowances EUR 41 million/year 40,8 37,3 36,9 +5.3% 35,1 35,5 33,7 Carbon dioxide Carbon dioxide Allocation Electricity Generation Current ultim
Slide 42: CEZ Group will benefit from fast growing demand and shut down of old plants
GOING FORWARD, CEZ GROUP WILL BENEFIT FROM FAST GROWING DEMAND AND FORCED SHUT DOWN OF OLD PLANTS Power consumption in the Czech Republic Estimated capacity reduction in Central Europe by 2010 TWh Installed capacity, MW 66 64 nuclear phase out – Bohunice V1 -3 % Slovakia 1,540 62 H1 2005 2% shutdown
Slide 43: Additional 8.7 TWh can be generated by increasing utilization
ADDITIONAL 8.7 TWh CAN BE GENERATED BY INCREASING UTILIZATION OF NUCLEAR AND COAL PLANTS Current utilization Auxiliary services Time utilization of generation capacity Reserve for higher utilization Percent of hours p.a. Overhauls, outages Nuclear 77 3 20 100% Higher sales opportunity due to Impro
Slide 44: CEZ Group increased sales margin while maintaining market share
CEZ GROUP INCREASED SALES MARGIN WHILE MAINTAINING MARKET SHARE Domestic wholesale baseload Distribution regions of CEZ Group CZK/MWh + 15.1% + 11.4% 1,041 906 813 Děčín 2004 2005 2006 Market share in power retail Hradec Králové Percent of MWh Praha 58% 58% ? Ostrava Plzeň Target: maintain Brno Česk
Slide 45: Regulatory environment in the Czech Republic is fair and transparent
REGULATORY ENVIRONMENT IN THE CZECH REPUBLIC IS FAIR AND TRANSPARENT <2002 2002-04 2005-09 Prepare team 1st regulatory period 2nd regulatory period Czech energy regulator Introduction of RPI-X Regulation parameters established regulation reassessed for distribution* Introduction of TPA to gr
Slide 46: Project Vision 2008: transparent holding structure
WITHIN PROJECT VISION 2008 CEZ GROUP WILL REORGANIZE ITSELF INTO A TRANSPARENT HOLDING STRUCTURE … CEZ CEZ Group Generation Project Generation Wholesale trading Vision 2008 Wholesale trading Sales Distribution company 5 CEZ Prodej CEZ Distribuce Distribution company 4 Sales Distributio
Slide 47: Almost EUR 100 million in annual savings
… AND ACHIEVE ALMOST EUR 100 MILLION IN ANNUAL SAVINGS Gross costs saving* in 2004-08 Total annual costs savings EUR million related to Vision 2008 project are to reach CZK 2.9 bn by 2008, i.e., ~10% 258 2004 operating costs in supply and distribution segment (excluding 95 purchased electricity) 76
Slide 48: Number of employees will decline by 1,800 by 2008
NUMBER OF EMPLOYEES WILL DECLINE BY 1,800 BY 2008 Includes distribution and Number of employees in CEZ Group CR support services only Thousands 20 -10% 18,100 18 - 300 - 200 - 400 - 600 16,300 - 200 16 14 12 10 2003 2004 2005 2006 2007 2008 2008 Source: CEZ 47
Slide 49: Agenda
AGENDA Summary for investors Introduction Scope of operations Financial performance Strategic initiatives of CEZ Group Integration and operational excellence Plant portfolio renewal M&A expansion 48
Slide 50: Large portion of CEZ power plants will be at the end of their lifetime
LARGE PORTION OF CEZ POWER PLANTS WILL BE AT THE END OF THEIR LIFETIME Age structure of CEZ thermal blocks MW Portion of CEZ thermal capacity approaches end 3,000 2,800 of its life time in 2010-20 2,500 Also desulphurization equipment to reach end 2,000 of its lifetime in 2015 -2020 1,550 1,512
Slide 51: CEZ intends to build its future plant fleet around new lignite plants
CEZ INTENDS TO BUILD ITS FUTURE PLANT FLEET AROUND NEW GENERATION OF LIGNITE PLANTS Coal Nuclear Gas Renewables Environ- Acceptable emissions No emissions Low emissions Limited/no emissions mental if well designed/ Nuclear risk No resources impact managed depletion Competitive Low cost
Slide 52: CEZ has finalized plans for lignite plants renewal
CEZ HAS FINALIZED PLANS FOR LIGNITE PLANTS RENEWAL AND NOW DEVELOPS STRATEGY IN OTHER FUELS Capacity Best case* MW Conservative 7,000 Retrofits Existing plants 6,000 5,000 In the Best case CEZ would maintain existing capacity till c. 2035 4,000 Otherwise c. 30% reduction after 2015 3,000 2,000 R
Slide 53: Lignite plants portfolio renewal CAPEX to reach CZK 100 bn
LIGNITE PLANTS PORTFOLIO RENEWAL RELATED CAPEX TO REACH CZK 100 BN AND BRING 14-25% EFFICIENCY UPLIFT Expected CAPEX – conservative scenario Projects overview CZK million Highly profitable Secured fuel – low risk 14,000 2008-15: Main Assets Renewal Period Retrofits 12,000 Gross efficiency impr
Slide 54: Agenda
AGENDA Summary for investors Introduction Scope of operations Financial performance Strategic initiatives of CEZ Group Integration and operational excellence Plant portfolio renewal M&A expansion 53
Slide 55: CEZ Group wants to grow both in generation and distribution/supply
CEZ GROUP WANTS TO GROW BOTH IN GENERATION AND DISTRIBUTION/SUPPLY Ambition for distribution/supply growth Ambition for target generation growth Millions of customers GW of installed capacity ~20,0 ~10.0 6.6 12,3 Bulgaria 1.9 Hydro 1.9 Romania 1.3 Coal 6.6 Czech 3.4 Republic Nuclear 3.8 CEZ 6th Euro
Slide 56: CEZ Group is best positioned to succeed in Central and Southeastern Europe
CEZ GROUP IS BEST POSITIONED TO SUCCEED IN THE REGION OF CENTRAL AND SOUTHEASTERN EUROPE Intimate knowledge of the region Very well accepted, successful but “local” investor due to close cultural/historical ties First-hand experience with transformation of power markets Natural hedge to curr
Slide 57: Prudent M&A decisions: key criteria and process
EVEN THOUGH CEZ GROUP HAS AMBITIOUS EXPANSION PLANS, WE ARE VERY PRUDENT IN OUR M&A DECISIONS Key criteria for M&A decisions M&A process Target attractive on standalone Always along a global advisor basis (market position, asset with target country ties quality) Valuation prepared by advisor S
Slide 58: Large number of potential targets in the region
THERE IS LARGE NUMBER OF POTENTIAL TARGETS IN THE REGION OF CENTRAL AND SOUTHEASTERN EUROPE Target markets Main acquisitions opportunities Central 2005-06 Europe Bulgaria: generation – TPPs Varna, Ruse Romania: distributors Muntenia Sud, generation – TPP Turceni, Rovinari, Craiova Poland: gene
Slide 59: CEZ participates in all pending privatizations in the target region
CEZ PARTICIPATES IN ALL PENDING PRIVATIZATIONS IN THE TARGET REGION Varna (Bulgaria) Ruse (Bulgaria) Muntenia Sud (Romania) Installed capacity (MW) 1,260 Installed capacity (MW) 400 Number of customers (million) 1.1 Sales (2004, GWh thousands) 2,463 Sales (2004, GWh thousands) 421 Sales
Slide 60: Integration of the Bulgarian EDCs is progressing faster than expected
THE INTEGRATION OF THE BULGARIAN EDCs IS PROGRESSING FASTER THAN EXPECTED Acquisition of distribution in Bulgaria 67% in three EDC (Number 1, 42% market share) Status Control gained faster than expected thanks to tight project management Team of 3 observers quickly extended to international team
Slide 61: Fast integration in Bulgaria brings tangible results
FAST INTEGRATION IN BULGARIA BRINGS TANGIBLE RESULTS Early results Unified organizational structure across all three EDCs implemented All three EDCs adopted international accounting standards Energy losses were reduced by ~10% in all three EDCs during the first half of 2005 Coordination of s
Slide 62: Acquisition of EDC Oltenia is almost complete
THE ACQUISITION OF EDC OLTENIA IS ALMOST COMPLETE AND INTEGRATION HAS STARTED Acquisition of distribution in Romania 51% share in EDC Oltenia*, adjacent to the Bulgarian EDCs (Number 2, 17% market share) Status CEZ Group selected as a tender winner SPA signed; settlement expected in 9/2005 Str
Slide 63: Appendix
Appendix 62
Slide 64: Appendix
APPENDIX Appendix – Czech power market overview Nuclear safety and provisions Selected historical financial figures
Slide 65: CEZ is a dominant player in all segments of the Czech electricity market
CEZ IS A DOMINANT PLAYER IN ALL SEGMENTS OF THE CZECH ELECTRICITY MARKET … Czech electricity market in 2004 TWh End user market – Foreign trade Net production Wholesale Grid losses consumption 16.7* CEZ 56.2 (75%) 39.5 34.5 Gross 62.1 (74%) CEZ CEZ’s grid Export 16.9 Import 0.2 Own consumption 5.9 3
Slide 66: Balance of import and export of CEZ and others
… AND HAS ALWAYS BEEN 90,000 Balance of import and export of the others -4,903 70,000 4,204 1,949 1,023 1,598 22,731 17,720 22,624 22,230 50,000 14,486 Gross production of the others GWh 30,000 46,361 47,892 50,842 54,118 61,602 Gross production of CEZ, a. s. 10,000 -1,531 -3,484 -15,591 -10,000 -11
Slide 67: Demand for electricity in the Czech Republic is driven by industrial customers
DEMAND FOR ELECTRICITY IN THE CZECH REPUBLIC IS DRIVEN BY INDUSTRIAL CUSTOMERS 2003 2004 Installed capacity as of 31st December 17,344 MW 17,434 MW Demand for electricity 54,807 GWh 56,388 GWh Net electricity generation 76,659 GWh 77,919 GWh Gross electricity generation 83,227 GWh 84,333 GWh
Slide 68: Electricity market to be fully liberalized starting 2006
ELECTRICITY MARKET TO BE FULLY LIBERALIZED STARTING 2006, 75% LIBERALIZED ALREADY Time plan of end-user market liberalization in the Czech Republic Percent 100 90 75% of the market Households 80 already liberalized 70 60 Small commercials 50 Continuous metering 40 9-40 GWh 30 20 Over 40 GWh 10 0 200
Slide 69: Agenda
AGENDA Appendix – Czech power market overview Nuclear safety and provisions Selected historical financial figures 68
Slide 70: Dukovany is one of European best performing nuclear power plants
DUKOVANY IS ONE OF EUROPEAN BEST PERFORMING NUCLEAR POWER PLANTS Type of reactor PWR – pressurized water reactor, as majority of reactor types around the world Basic description Based on the original Russian technical design with many improvements in cooperation with Westinghouse Electric to
Slide 71: Nuclear power plants of CEZ are insured according to industry standards
NUCLEAR POWER PLANTS OF CEZ, A. S. ARE INSURED ACCORDING TO INDUSTRY STANDARDS Property damage insurance NPP Dukovany since December 1998 NPP Temelín since July 2000 Nuclear third party liability insurance (operational) NPP Dukovany since January 1998 NPP Temelín since July 2000 Nuclea
Slide 72: Nuclear provisions IFRS statements are fully in line with IAS 37
NUCLEAR PROVISIONS IFRS STATEMENTS ARE FULLY IN LINE WITH IAS 37 CZK 78.9 bn Discounted by 2.5% Interim storage real discount rate 7.4 of spent fuel Temelín 13.7 decommissioning Dukovany CZK 29.4 bn 15.6 decommissioning as stated in BS at December 31, 2004 Annual increase by 7% (discount rate 2.5% +
Slide 73: Nuclear provisions – cash flow impact: nuclear decommissioning
NUCLEAR PROVISIONS – CASH FLOW IMPACT 1. NUCLEAR DECOMMISIONIONING Decommissioning of nuclear power plants Czech law requires CEZ to have accounting provisions created under Czech Accounting Standards cash funded (starting 2002) updated 2004 Temelín cost study – estimate CZK 13.7 bn updated 20
Slide 74: Nuclear provisions – cash flow impact: fuel storage
NUCLEAR PROVISIONS – CASH FLOW IMPACT 2. FUEL STORAGE Final Storage radioactive waste and spent fuel contribution to the „nuclear account“ at the Czech National Bank controlled by the state authority RAWRA (Radioactive Waste Repository Authority) contribution stated by a government resolution
Slide 75: Agenda
AGENDA Appendix – Czech power market overview Nuclear safety and provisions Selected historical financial figures 74
Slide 76: Selected historical financials CZK
SELECTED HISTORICAL FINANCIALS CZK Profit and loss CZK bn 2002 2003 2004 Revenues 55.6 84.8 100.2 Sales of electricity 52.9 79.5 92.7 Heat sales and other revenues 2.6 5.3 7.4 Operating Expenses 32.6 54.9 62.6 Purchased power and related services 7.3 21.1 26.5 Fuel 12.9 14.3 14.4 Salaries and wages
Slide 77: Selected historical financials EUR
SELECTED HISTORICAL FINANCIALS EUR Profit and loss EUR m 2002 2003 2004 Revenues 1 853 2 827 3 339 Sales of electricity 1 765 2 652 3 092 Heat sales and other revenues 88 176 247 Operating Expenses 1 088 1 828 2 088 Purchased power and related services 244 703 884 Fuel 430 477 479 Salaries and wages