PRESENTATION ON CEZ GROUP FINANCIAL RESULTS IN Q1–Q3 2018 NON-AUDITED CONSOLIDATED RESULTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) November 8, 2018
A LITTLE ENERGY RETROSPECTIVE AS CZECH REPUBLIC * CELEBRATES ITS 100TH BIRTHDAY Electricity consumption in Czechia has grown INSTALLED CAPACITY IN 22,266.7 MW 195.5 MW 74 times during the CZECHIA past 100 years. 1,140 GWh 87,037 GWh Gross consumption in Bohemia, Moravia, and Silesia totaled COUNTRYWIDE ELECTRICITY 1 TWh in 1918 when GENERATION the republic came to being, while now it is almost 74 TWh. ACCESS OF POPULATION TO ELECTRICITY * 1918 – 1992 Czechoslovak Republic; since 1993 Czech Republic and Slovak Republic 1
CONTENTS Financial Highlights, Selected Events, and Annual Outlook Results and Selected Events—Development Team Results and Selected Events—Operations Team 2
CEZ GROUP FINANCIAL AND OPERATING RESULTS (CZK bn) Q1 - Q3 2017 Q1 - Q3 2018 Change % Revenues 146.7 129.3 -17.4 -12% Revenues - comparable * 124.7 129.3 +4.6 +4% EBITDA 41.1 38.7 -2.4 -6% EBIT 19.4 16.7 -2.7 -14% Net income 16.6 9.1 -7.5 -45% Net income - adjusted ** 17.3 11.3 -6.0 -35% Operating CF 36.2 36.5 +0.4 +1% CAPEX 19.2 15.3 -4.0 -21% Net debt *** 136.9 135.6 -1.3 -1% Q1 - Q3 2017 Q1 - Q3 2018 Change % Installed capacity *** GW 15.5 15.0 -0.5 -3% Generation of electricity - traditional energy TWh 44.6 44.3 -0.3 -1% Generation of electricity - new energy TWh 1.4 1.3 -0.1 0% Electricity distribution to end customers TWh 38.3 38.4 +0.1 0% Electricity sales to end customers TWh 27.2 27.5 +0.3 +1% Sales of natural gas to end customers TWh 6.7 6.4 -0.3 -4% Sales of heat 000´TJ 15.8 14.8 -1.1 -7% Number of employees *** **** 000´s 29.3 30.9 +1.6 +5% * Comparison applying IFRS 15 (changing the method of reporting since Jan 1, 2018) to Q1–Q3 2017; in line with the standard, neither distribution revenue nor distribution costs are reported where the energy Group sells electricity in an area in which it does not own the distribution grid. The application of the standard significantly affects energy groups’ total revenues and expenses (without affecting total reported profit). ** Adjusted net income = Net income adjusted for extraordinary effects that are generally unrelated to ordinary financial performance in a given year (such as fixed asset impairments and goodwill write-offs) *** On the last date of the period **** The increase is primarily related to acquisitions of foreign ESCOs and the in-sourcing of external employees at sales companies in Czechia and Bulgaria Data from Sept 30, 2017, were recalculated due to final appraisal of the Elevion group’s equity using fair value at the acquisition 3 date. This affects, e.g. change in Net Debt from 137.0 to CZK 136.9 billion.
YEAR-ON-YEAR CHANGE IN EBITDA BY SEGMENT Main causes of year-on-year change in Q1–Q3 EBITDA: Generation—Traditional Energy Segment (CZK -1.5 billion) � Higher expenses on emission allowances for generation (CZK -1.3 billion) � Effect of settlement agreement with Sokolovská uhelná in 2017 (CZK -0.7 billion) � Higher generation at nuclear power plants (CZK +0.9 billion) Generation—New Energy Segment (CZK -0.4 billion) � Lower allocation of green certificates to Romanian wind farms—only one certificate per generated MWh allocated since Jan 1, 2018; two certificates allocated in 2017 (CZK -0.6 billion) 4 Due to precise mathematical rounding, the sum of listed partial values can sometimes differ from the total value.
OTHER INCOME (EXPENSES) (CZK bn) Q1 - Q3 2017 Q1 - Q3 2018 Change % EBITDA 41.1 38.7 -2.4 -6% Depreciation, amortization and impairments* -21.6 -22.0 -0.3 -1% Other income (expenses) 0.0 -5.2 -5.2 - Interest income (expenses) -2.5 -3.6 -1.1 -45% Interest on nuclear and other provisions -1.2 -1.3 -0.1 -11% Income (expenses) from investments and securities 3.8 -0.5 -4.3 - Other 0.0 0.3 +0.3 - Income taxes -2.9 -2.4 +0.4 +15% Net income 16.6 9.1 -7.5 -45% Net income - adjusted 17.3 11.3 -6.0 -35% Depreciation, Amortization, and Impairments* (CZK -0.3 billion) � Effect of non-recurrent income from sale of residential property in Prague in 2017 (CZK -1.1 billion) � Additions to impairments of fixed assets and goodwill write-off (CZK -0.6 billion) � Lower depreciation and amortization (CZK +1.4 billion), primarily due to updated long-term service life estimates of � EZ power plants, which exceeded the effect of the start of depreciation of the new Ledvice facility after its completion at the end of 2017 Other Income (Expenses) (CZK -5.2 billion) � Effect of termination of MOL stockholding in 2017, including related operations (CZK -4.5 billion) � Higher interest expenses (CZK -1.1 billion), primarily due to lower interest capitalization after completion of the new Ledvice facility � Share in profit or loss of Turkish companies, incl. additions to provisions for potential partial obligation in case of claim of guarantee for Akcez group companies‘ loans due to sharp depreciation of TRY against USD (CZK -0.2 billion) � Other effects (CZK -0.1 billion), primarily exchange rate differences � Income from lost interest on refunded gift tax on emission allowances for 2011 and 2012 (CZK +0.7 billion) Net Income Adjustments � Net income in Q1–Q3 2018 is adjusted for the negative effect of CEZ provisioning the value of which corresponds to potential partial obligation in case of claim of guarantee for Akcez group companies’ loans due to continued weakening of the TRY/USD exchange rate in Q3 2018 reflecting Turkey’s macroeconomic and political developments (CZK +1.4 billion) and for the negative effect of fixed asset impairments in Bulgaria (CZK +0.4 billion) and for negative effect of fixed asset impairments inl. Goodwill write-off in Czechia (CZK +0.4 billion) � Net income in Q1–Q3 2017 is adjusted for the negative effect of partial goodwill write-off in Turkey (CZK +0.5 billion)** and the negative effect of fixed asset impairments (CZK +0.2 billion) primarily in Poland * Including profit/loss from sales of tangible and intangible fixed assets 5 ** Reported under Income (Expenses) from Investments and Securities
REFINING FINANCIAL OUTLOOK FOR 2018: ESTIMATED EBITDA OF CZK 50 - 51 BILLION, ADJUSTED NET INCOME OF CZK 13 - 14 BILLION CZK EBITDA Selected negative effects not anticipated in billions CEZ Group’s outlook from Aug 7, 2018: 60 51 – 53 50 – 51 � Delay in expected court decision on payment of SŽDC debt to � EZ Prodej from 40 2011 (CZK -1.3 billion) � Lower generation at coal-fired power plants 20 � Fewer new acquisitions in development made (especially in RES) 0 2018 E (Aug 7) 2018 E (Nov 8) Selected positive effects not anticipated in CZK CEZ Group’s outlook from Aug 7, 2018: ADJUSTED NET billions � Income on account of interest on refunded INCOME 20 gift tax on emission allowances 13 – 14 (CZK +0.7 billion) 12 – 14 � Other effects (primarily lower depreciation 10 and amortization, lower interest expenses, and lower deferred tax) 0 2018 E (Aug 7) 2018 E (Nov 8) The values of adjusted net income exclude extraordinary effects that are generally unrelated to ordinary financial performance in a 6 given year (such as fixed asset impairments and goodwill write-offs).
CONTENTS Financial Highlights, Selected Events, and Annual Outlook Results and Selected Events—Development Team Results and Selected Events—Operations Team 7
GENERATION— NEW ENERGY Germany (+32%) Germany (+23%) + Effect of acquisition of wind farms in Lettweiler Höhe + Effect of acquisition of wind farms in Lettweiler Höhe (belonging to the CEZ Group portfolio since (belonging to the CEZ Group portfolio since September September 2017) 2017) Czechia (+1%) Czechia (-12%) + Lower generation of small hydropower plants � Lower generation of small hydropower plants compensated by higher generation of photovoltaic power plants Romania (-13%) � Worse wind conditions Romania (-16%) � Worse wind conditions Due to precise mathematical rounding, the sum of listed partial values can sometimes differ from the total value. 8
SEGMENT: GENERATION— NEW ENERGY EBITDA (CZK bn) Q1 - Q3 2017 Q1 - Q3 2018 Change % Czechia 1.6 1.7 +0.2 +12% Romania 1.6 0.9 -0.6 -40% Germany 0.3 0.3 +0.1 +25% Generation - new energy 3.4 3.0 -0.4 -11% Czechia (CZK +0.2 billion) � Primarily higher generation at photovoltaic power plants Romania (CZK -0.6 billion) � Primarily lower allocation of green certificates to wind farms—only one certificate per generated MWh allocated since Jan 1, 2018; two certificates allocated in 2017 Germany (CZK +0.1 billion) � Effect of acquisition of wind farms with the installed capacity of 35.4 MW at Lettweiler Höhe (belonging to the CEZ Group portfolio since September 2017) 9
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