Cez As S/Gdr 144A

Hello, everyone, and welcome on first half 2024 results call of Chess Group. It's my pleasure to welcome Martin Novak, chief financial officer, who will go through the presentation. And I also have Ludwig Horn, head of trading with me, who will be also available for the Q&A part. Now I'm handing over to Martin to go through the presentation.

Good afternoon. Good morning, everybody. So let's start with the financial highlights of our four-year outlook. As you can see on slide number three, our EBITDA has grown by 6.8 billion Czech crowns to 69.2 for 11%. Net income has reached 21.1 billion Czech crowns, which is 5% below last year's numbers. operating cash flow is negative by almost 50%. This is due to margin, basically margin margins that were paid to the market due to higher prices in 2022 and that were actually coming back in 2023. So that is the main effect actually of very high operating cash flow in 2023, where the margins were actually coming back to our accounts. Our capex reached 20.5 billion CZK. Our estimated EBITDA for a full year is actually being increased. Our original guidance was 115 to 120 billion check rounds. Now we are moving to 118 to 122 billion check rounds, so both increasing our estimate and also narrowing it by 1 billion. Net income or adjusted net income is expected to be 25 to 30 billion check rounds, so we don't change guidance in that income. Main differences of year to year changes in EBITDA are shown on slide four. By far the largest positive impact is actually coming from the fact that in 2023, in the first half of the year, we paid 11 billion Czech crowns on actually caps on power prices. And this was actually discontinued as of the end of last year. So in 2024, there is no such a charge. And therefore, actually, our result is or generation margin is actually 11 billion crowns better. Two billion negative impact is coming from our nuclear plants, mainly due to plant outages that were planned for first half of 2024. In trading, our profit is lowered by 3.2 billion CZK. 1.3 billion is coming from lower income from prop trading, 3.9 billion versus 5.2 billion last year. It's important to say that last year was the second best year after 2022. Extraordinary good, I would say, due to still relatively high volatility on the market, which is not the case today. this year or not in such an extent. So even 3.9 billion in first six months is a big success because normal trading profit when those prices are stable is between one and two billion Czech crowns annually. And then there is a relation of derivatives of one point negative billion Czech crowns, negative number. Mining segment is 1.5 billion below last year EBITDA. This is mainly due to fairly warm winter, actually the warmest winter this year compared to last year. So our sales of coal both to our own companies or power plants and also to external customers are lower than in 2023. Distribution has a positive impact of 1.4 billion. In general, distribution segment should be pretty stable. 1 billion out of 1.4 is due to negative correction factors that actually hit our P&L distribution in 2023. And those were correction factors related to 2021. So 2021, we received one billion more than we should have as originally planned from our customers due to COVID, mainly households. And we had to return it back in 2023 after it was audited in 2022. So this puts us together with 600 million positive or increase in sales segment to 69.2 billion Czech crowns EBITDA. When we look at net income for the first half of the year, there are a few items actually in terms of net income. depreciation and amortization is 5% higher. Other income expenses is 4.5 billion versus 1.2 billion. One of the variances is definitely lower interest income due to lower amount of cash and lower interest rates. There is also interest from nuclear and other provisions. There is an increase of 400 million Czech crowns. And then there is a few other items that in total actually generate 1.7 billion negative number compared to 2023 exchange rate effects on Turkish operations, the valuation of financial derivatives. high interest rates from nuclear provisions and so on. So this brings us to 21.1 billion Czech crowns of net income and at the same time adjusted net income as there is no adjustment so far. On the next slide, you can see actually our financial outlook for 2024. As I said, 118 to 122 on EBITDA level and 25 to 30 billion on net income. The main reasons for adjusting EBITDA is due to higher profits from commodity trading, lower cost on actually deviations for our customers when you have to buy power on the open market when they consume more than you expected and on the other hand sell when they consume less. So actually those variations are lower. We have also higher expected deployment of power plants and lower operating costs. We did not change our outlook for net income as actually range of 25 to 30 billion is wide enough to accommodate all potential movements actually in net income area or area after EBITDA, which is much more difficult to predict. And another reason is that we are subject to windfall taxes. So every one billion Czech crowns on EBITDA actually is taxed with a marginal tax rate of 81%. So really the impact on net income is fairly small, only 190 million Czech crowns that actually falls through to net income. We have a few important events in the past quarter. By far the most important one was that government actually decided to go forward with negotiations on building two nuclear units at our Dukovany plant station. and awarded or just chosen as the best offer South Korean company KHMP and this was announced actually on 17th of July so now we have ahead of us negotiations that will take till spring of next year the supplier we also have to resolve financing of the second unit. We have the financing agreed for the first unit and notified the European Commission. Clearly, it would probably be very similar model, but it all needs to be still, there is still a lot to negotiate. We are now ranking in terms of ESG among top 10% companies in the world. So 90% through CSR hub. That actually looks at 37,000 companies in their portfolio. Important thing, we are in arbitration with Gazprom in Switzerland. Gazprom tries to take action actually in front of their own court. in Russia, but actually they were banned from doing that by the International Chamber of Commerce in Geneva. That is the only body that can actually decide on our claim against Gazprom for gas they did not supply and that we had to buy one billion more crowns more expensive and supply to our customers. uh those are probably the most important uh three uh pieces of information and now let's go to generation mining segment uh generation and mining segment uh is improved by seven percent uh in total or 3.8 billion check rounds uh the biggest positive variance is a nuclear as it is as i said already earlier not impacted by charges or caps on power prices and clearly the nuclear plants were impacted the most. So this is not the case anymore. So out of 12.4 billion, about 11 billion is actually attributable to nuclear assets. Emission generating facilities are somewhat below last year. and there is price effect and also increase in purchase prices of carbon credits. Generation segment in total 5.3 and mining segment down 1.5, mainly, as I said, due to lower supplies to our external customers. On the next slide, you can see actually in graphical form our power generation. So it was 4% down compared to 2023, 5% on nuclear and 4% positive on renewables. In nuclear it was mainly because of plant shutdowns that were in nuclear power plant of Dukovany and they were not actually planned for first half of 2023. Year on year we plan to be close to nuclear generation, close to 30 terawatt hours. Again, we will have those outages that are kind of part of the plan that was not the case last year. We have lower availability of tamarine and we hope to increase capacity of the coal. Renewables 4% higher, 3.7 TWh that we expect to produce. We are adding new photovoltaic power plants in Germany and we have commissioned wind farms or wind parks in France. On electricity generation from coal and natural gas, we had a 4% increase in coal generation in Czech Republic due to shorter outages at Sušimica two-part plant. We had lower power generation in Poland, 31% decline due to market conditions, meaning prices and carbon credits. And we had basically flat generation from natural gas. We actually expect to generate 2.3 travel towers of natural gas, which would be about 2% lower than last year for full year. We expect to provide, actually to generate coal. in Poland 15% below last year and coal generation or coal-fired generation would actually be down by 3% year-on-year. Important slide actually on hedging prices. We are, as you know, selling power three years ahead. Average achieved price for 2024 will be somewhere between 132 and 136 euros per megawatt hour. Now you can see how much actually power is sold for what year and at which prices. So we are sold 71% sold for 2025 at 120 euros per megawatt hour. going down to 72 in 2028, but the volume is really low, 1.3 travel towers. And we also at the same time purchase carbon credits that are ranging from 90 to 74 in 2027. Current situation in the market is that prices for 2025 are around 100 or slightly below and prices for the out years are close to 80 euros or below 80 for 2028. Carbon credits are trading at around 70 euros these days. Distribution and sales. Distribution segment, we made 16% more or 1.4 billion, but 1 billion out of it is actually attributable to lower revenue in 2023 as a correction of 2021 number. Otherwise, the distribution as it is to large customers was basically unchanged. And residential customers are 5% down, small businesses 3%, in total 2% down, but it's mainly due to warm weather, warm winter. And if you take actually climate and calendar adjusted electricity consumption, it is 1% below 2023, which is definitely attributable to also energy savings. Sales segment, our retail segment is coming back to normal. So first half 2024 results are significantly above first half of 2023, where we still were caught with high purchase prices and very sharply declining sales prices for retail segment. ESCO companies actually made about 2 billion Czech crowns. It is less than last year, but it's important to know that actually it all basically comes from commodity sales in Czech Republic, where we had a different situation than on retail. We had an extraordinarily good year in commodity sales to large customers. That is again normalizing, coming back to 800 million. 1.5 billion was really significantly higher than normally under ordinary times it would be. And the total segment is actually 3.8 billion or 20% higher than last year. Volume of electricity and gas sold. It's actually down by 15%, electricity 11% and gas 21%. This is all attributable to very warm winter. Actually, February was 6% 6 degrees centigrade above the normal February, which is extraordinary. Nothing that we would experience in the past. We have a slight decline in customer base. This is something that could be expected after we got several hundred thousand customers in our portfolio after collapse of a few entities in 2021. The biggest one being Bohemia Energy. So now actually after the market situation has come down, some of the customers are seeking better value or better proposition and they are changing the supplier. So nothing that would not be expected. And I think our strategy is not necessarily to fight for every single customer, but keep the overall margin on an optimum level. Revenues from sales of energy services are up by 20% so far, and we expect an increase of 6% year-on-year, basically in all segments or in all countries. Of course, the Czech Republic The whole market will be somewhat down, but it's mainly because of lower sales of our revenues related to commodity sales. And we expect to have a significant growth in Germany that is from ESCO activities, our key market. both organic growth and also adding new acquisitions with a few companies actually that were added in the second half of 2023. So this is the last slide from the presentation. Generally, I will say that we had a very good quarter and very good first half of the year and with no significant surprises. stable results, so I think it's a good news. We have, I think, overachieved almost all analysts actually that cover chess, so I think we can be very happy with our second quarter and first half of the year.

Okay, this concludes our presentation and now we are ready to take your questions. If you are connected via Teams, just raise your hand through an icon. If you are connected by a phone, press star five on your telephone. And I can see that first question comes from Anna Webb. You can unmute yourself and go ahead.