CEZ Group Debt Investor Presentation November 2006
SUMMARY 1) CEZ overview and credit rating ratios 2) CEZ Financials 3) CEZ Strategy 1
1) CEZ overview and credit rating ratios 2) CEZ Financials 3) CEZ Strategy 2
CEZ GROUP IS A MAJOR PLAYER IN CENTRAL EUROPE Asset positions CEZ Group in Poland Target markets (75% share in Skawina, 89% in Elcho) Trading office � electricity sales (TWh) 3.6 � market share 2.4% CEZ Group in Romania � installed capacity (MW) 830 (51% share in EDC Oltenia) � market share 2.3% � number of employees � electricity sales (TWh) 776 4.1 � sales (EUR million) � number of customers (million) 194 1.36 � market share 17% � installed capacity (MW) 0 � number of employees 2,969 � sales (EUR million) 368 CEZ Group in the Czech Republic � electricity sales (TWh) 61.2 CEZ Group in Bulgaria � number of customers (million) 3.44 (67% shares in 3 EDCs, 100% in TPP Varna ) � market share 62% � installed capacity (MW) � electricity sales (TWh)* 12,298 7.9+2.7 � market share � m arket share (MWh) 41%+6% 72% � number of customers (million) 1.9 � number of employees 22,241 � market share 42% � sales (EUR million) 3,815 � installed capacity (MW) 1,260 � number of employees 4,693+900 � sales (EUR million)* 409+73 * Last figure relates to TPP Varna Note:Exchange rate CZK/EUR = 29.0, CZK/PLN = 7.5 Source: CEZ, Distribution companies, national statistics 3
CEZ HAS BECOME A MAJOR PLAYER IN EUROPE Top 10 European power utilities Top 10 European power utilities Market capitalization, USD bn, as of August 24, 2006 Number of customers in Europe, million 36,7 EdF 1 EDF 1 104,8 30,0 Enel 2 E.ON 88,2 2 26,0 E.ON 3 Enel 54,7 3 23,0 Endesa 4 RWE 51,3 4 19,7 RWE 5 32,8 Iberdrola 5 9,7 Iberdrola Electrabel 6 31,5 6 7,0 PPC UES 31,3 7 7 6,6 8 8 CEZ Group CEZ Group 22,0 5,8 Vattenfall Centrica 20,1 9 9 5,5 Electrabel Vattenfall 13,0 10 10 Source: Annual reports; Forbes; CEZ; data for 2005 or latest available 4
CEZ IS THE BIGGEST COMPANY AMONG THE NEW EU MEMBER STATES Market capitalization of top 15 companies among the new EU member states* EUR billion 17 18 16 14 12 9.8 10 8.7 8.5 7.3 7.1 8 6 5.5 5.3 5.2 6 4.5 4.1 3.5 3.3 4 2.5 2 0 ) ) ) ) ) ) ) ) ) ) Z ) ) ) ) ) U Z U U L U L Z Y L L L L V C C P H P H P P C C H H P P O ( ( ( ( ( ( ( ( ( ( ( ( ( ( L Z A H m N M O O L P a s m n S E O S k u o P o K H K A T o ( C n r e P O c P P K M B G p c . a d e d T e y E K B e . k l l e C d e P G n T i n T a A f k o c r B y r e K n r a k k a e t R s y h n m B e g K a c a C o i B R K M * As of September 18th, 2006; Source: Bloomberg 5
CEZ GROUP IS ONE OF THE MOST PROFITABLE UTILITIES IN EUROPE AND WILL REMAIN SO EBITDA margin, 2005 Percent CEZ Group’s outstanding performance is driven by a generation portfolio which has potential for further improvements: 17,7 E.ON � Coal Supply � long term framework agreement until 2050 19,9 RWE for >90% of consumption � vary with electricity prices and inflation 21,1 PPC � volume secured for both current and 22,2 ENEL new/refurbished plants 26,7 EdF � Nuclear Past performance: � operations approved until 2027 (Dukovany) 28,8 Endesa 2004: 37.5% and 2042 (Temelin) � further extension technically feasible and 30,7 2003: 35.3% Iberdola likely to be granted 32,9 � Increased capacity of Dukovany (~5% or Vattenfall 80 MW) and Temelin (~5% or 100 MW) 40,1 CEZ Group after turbine rotor upgrades Source: Annual reports; CEZ, Bloomberg 6
CEZ GROUP HAS A VERY ATTRACTIVE LOW COST GENERATION FLEET AND SECURED LOW FUEL COSTS CEZ Group generation capacity (2005) Annual production of CEZ Group MW TWh 100% of Utilization Completion of Temelín 12,297 generation 2005 nuclear power plant 3.4% 12% Hydro (river 2,000 MW accumulation 1 934 15.6% and pump storage) 62.1 61.4 59,5 60.0 54.1 Lignite off basin 52.2 50.8 and hard coal 2 687 (peakload) 58% 39.5% Lignite at lignite 3 916 Basins (baseload) 2000 2001 2002 2003 2004 2005 75% 41.5% 69% 70% 71% 74% 74% 72% Nuclear (baseload) 3 760 Share in power production in the Czech Republic Percentage Source: CEZ 7
CEZ IS A DOMINANT PLAYER IN ALL SECTORS OF THE CZECH ELECTRICITY MARKET Lignite mining Generation Transmission Distribution Supply 5 out of 8 45 % CEZ distribution 56 % 22 million tons companies 72 % 31.0 TWh 60.0 TWh 100 % 62% of customers 62 TWh 55 % Others 44 % 27 million tons 38% of customers 28 % 25.0 TWh 22.6 TWh � CEZ owns the � the Czech � other competitors – � other competitors – largest Czech transmission grid is individual IPPs E.ON, RWE/EnBW mining company owned and (SD) operated by CEPS, � the 3 remaining which is owned by coal mining the Czech state companies are privately owned Source: CEZ, ERU 8
CEZ’S RATING COMPARED TO ITS COMPETITORS � S&P (A-, credit outlook „stable“) Aa1 - Standard & Poors upgraded CEZ’s credit rating to A- on October 2,2006 due to its strong financial performance and strong financial profile. Aa2 - Standard & Poors expects the rating should withstand a degree of increased business risk and debt resulting from CEZ’s expansion strategy. Aa3 - Further rating improvement would require CEZ to s ' y maintain strong financial performance and establish a d A1 o track record of successful integration of international o M acquisitions. s g n A2 i t � Moody’s (A2, credit outlook „stable“) a R - Moody’s has placed A2 credit rating of CEZ with A3 stable outlook which reflects its strong operational cash flow and the expectation that it will remain the leading electric utility in Czech Republic Baa1 - Despite strong financial metrics, no upward movement in the rating is expected in the intermediate term due to the given high event risk AA BBB+ A- A A+ AA- associated with the ambitious M&A strategy - „Moody’s medium support assumption will not be impacted by a potential reduction in state ownership, Ratings S&P as long as CEZ remains at least 51% owned by the Czech Ministry of Finance and the owner supports CEZ’s international expansion strategy.“ Source: S&P, Moody’s (17/10/06) 9
CEZ AND PEER GROUP SECONDARY TRADING SPREADS ON BOND ISSUES CEZ’s recent Utility Peers CEZ 80 Eurobond issue (EUR 500 mil., 7 years) met 70 with strong investor Repsol ‘14 demand, attracting Spread over Euro mid swaps (bp) 60 nearly 2.1 billion euros of orders from 125 50 investors 40 Vattenfall ‘18 CEZ ‘13 30 The strong investor Enel ‘12 demand allowed CEZ Fortum ‘13 CEZ ‘11 20 to sell the issue at a Iberdrola ‘09 tighter spread than the 10 initial guidance (41 bps Vattenfall ‘09 vs 45 bps over mid 0 Enel ‘08 swaps) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 -10 Years to maturity Source: Reuters (18/10/06) 10
STRONG CREDIT RATINGS Source: Bloomberg, 17/10/06 11
CAPITAL STRUCTURE ANALYSIS Despite growing indebtness CEZ will stay above targeted ratios FFO/Total Debt Leverage 140,0% 40,0% 114,9% 33,4% 33,4% 108,9% 120,0% 30,3% 27,2% 30,0% 100,0% 23,9% 76,2% 69,0% 80,0% 57,7% 17,8% 16,7% 20,0% 47,1% 60,0% 44,7% 35 % 40,0% 10,0% 20,0% 0,0% 0,0% 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 � CEZ plans to increase its leverage RCF/Total Debt Interest coverage 100,0% 83,4% 25,0 81,8% 77,7% 77,0% 20,1 80,0% 72,8% 70,6% 71,5% 20,0 17,4 17,3 16,3 15,0 60,0% 15,0 11,7 10,5 40,0% 10,0 30 % 5,0 20,0% 0,0 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 Source: CEZ 12
1) CEZ overview and business profile 2) CEZ Financials 3) CEZ Strategy 13
CEZ GROUP HAS A HEALTHY BALANCE SHEET ASSETS LIABILITIES increase in cash and cash CZK bn CZK bn equivalents by CZK 7.8 bn, in receivables by CZK 5.2 bn, mainly unbilled supply to 336.3 324.2 324.2 336.3 small customers of CEZ Prodej (CZK 3.1bn as a 350 350 ST liabilities result of a higher electricity consumption) 32,0 32,9 58,8 43,8 300 300 21,6 18,6 21,3 22,2 36,0 Deferred tax liability 35,9 250 250 Curre rren t A Assets ts 44,6 45,5 259,1 255,3 200 200 Nuclear provision Other n o n on - n -c u c urren t n t 202,1 asse ssets 191,3 150 150 Total p To property, pl plan t a an d LT liabilities excl. 100 100 equip men t eq provisions 50 50 Equity 0 0 as of 31. 12. as of 31. 3. 2006 as of 31. 12. as of 31. 3. 2006 mainly impact of 2005 2005 current period profit 14
CEZ GROUP’S DEBT STRUCTURE DEBT CZK mil. 6 780 Long Term Debt 8 338 1 558 11 264 Total Long Term Debt + Bonds in CZK 7 230 Short Term Debt 44 760 17 929 36 422 Total Short Term Debt Total Debt EUR USD EUR/USD/CZK CZK EUR/CZK CZK EUR Aggregate value * assuming CZK/EUR 28.495, CZK/USD 22.413 Source:CEZ, as of 30/06/2006 15
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