Cez As S/Gdr 144A

Hello everyone and welcome on Chess Group presentation of results for nine months of 2024. It is my pleasure to welcome Martin Novak, Chief Financial Officer and Pavel Sirani, Chief Sales and Strategy Officer, who will walk you through the presentation and then we will follow with a Q&A session. I'm handing over to Martin.

Good afternoon, good morning everybody. Let's start with slide number three with financial highlights of first nine months of this year compared to last year. You can see that our operating revenue is 1% lower. EBITDA, which is an important number, is actually 5 billion check rounds or 5% higher. And we reached the level of 100 billion check rounds operating income. slightly higher, 6%, basically copying EBITDA. Our net income and adjusted net income is 21% lower compared to 2023, adjusted income reaching 24.8 billion Czech crowns. Our capex is higher by almost 7 billion Czech crowns, or 25%, with details provided actually in the backup. operating cash flow lower, mainly due to high inflow of funds from margining where we were getting actually a lot of funds back from the power exchange as a result of delivering the electricity and getting margins back in 2023, which is not the case, of course, in 2024. Our financial outlook for the full year, we expect EBITDA to reach 126 to 130 billion check rounds. Here we are actually significantly increasing our guidance, as you will see later, and net adjusted income should reach 26 to 30 billion check rounds. When you look at the next slide, slide number four, you actually see the main differences between EBITDA of 23, first nine months, and 24. In total, 5 billion Czech crowns, by far the largest item. It's actually a levy on revenues above price caps. That was in place in 2023 and is not in place actually in 2024, which is 8.5 billion check rounds, which is the vast majority of the generation segment, actually positive variance. Then trading negative 4.1. It's mainly by the lower income from prop trading compared to previous year when volatility was significantly higher than this year. We are still actually above our expected per plant revenue. And so far the income has achieved 4.4 billion check rounds on trading activities. And then we have revaluation of derivative transactions and hedging generation. So this gives us negative 4.1 billion Czech crowns. Year-on-year mining activities, 2.5 billion lower, mainly due to lower sales to external parties and also offtake from our own power plants, both due to warm winter at the beginning of this year and also lower demand for coal due to market conditions. So then... distribution segment positively benefiting from a few factors. One is actually inclusion of GASnet group, which is gas distribution in most of the Czech Republic that we acquired as of beginning of September. So there are numbers for one month only included. And this is 700 million Czech crowns. Then We had high negative correction factor in our check distribution in 2023, which was 1.5 billion negative, meaning if we don't have it now, it means it's a positive variance. And then we have other effects of 700 billion in distribution, mainly higher investments in distribution assets. Sales segment is 1.3 billion lower mainly due to lower margin from electricity sales to end customers due to higher purchase prices. Then on the next slide, we can see actually main changes in year-on-year net income. In the morning, we had a few questions actually on the change of net income of 21%. There are a few factors that are hard to predict or hard to model. One of them is low level of cash that we had actually in 2024, mainly due to managing cash that we received in 2023 from margin calls. And at that time, there were also much higher interest rates. So having free cash and high interest resulted into higher interest income. Now, for the same period of time, with lower level of cash and lower interest, We are 2 billion check rounds below 2023. We have also some exchange rate and evaluation of financial derivative effects. And the important section is also relating to depreciation and amortization. Negative 1.3 billion coming from half a billion from depreciation of gas net, which is again September number. And then we have higher depreciation at Chess distribution grid due to higher investments actually into connecting of our customers. And we have somewhat higher 200 million depreciation of nuclear assets. We have also a revaluation or higher deferred taxes in 2024. We actually decided to accelerate depreciation on coal assets, which you cannot see actually in those numbers, because this is happening as of October 1. but we have to calculate deferred tax that will be a result of faster depreciation, basically copying both lifetime and also utilization of our Lignite assets towards the end of, between today and the end of 2030. And the effect of deferred tax is relatively higher because our tax rate for next year is about 81%. due to info taxes, and it will be significantly dramatically lower in 2026, going down to 21%, where all those charges might be actually somewhat reversed, depending on accounting rules, and that's the main kind of change in the net income. On the next slide, you can see actually updated guidance. We lifted our guidance from the range of 118 to 122 billion cheque rounds, 226 to 130 on EBITDA. This is a relatively significant move, but we have a good reason, and it is for a big part including inclusion of actually a gas net group in our interest group. and as of September 1, we expect about 4 billion check rounds to flow into our numbers on EBITDA levels. We also had better trading results than originally planned, which is adding 1.5 billion, and we also won, finally won the litigation with Czech Railway Administration for electricity. They have ordered, but finally did not buy or take in 2022. So now they are actually after 14 years and we are paying us 1.3 billion Czech crowns as a lost profit plus interest of that time. That's the main driver. Then actually adjusted income is basically staying flat with moving actually the bottom bottom part side of the range from 25 to 26 billion check pounds, mainly due to, as I said, higher depreciation and also higher deferred taxes. And those are basically the main drivers. You can also see some general assumption on the power prices and an estimate of our windfall taxes being 29 to 33 billion for the full year 2024. On August 28th, we actually finalized the acquisition of a 55.21% of stake in Gasnet, which is the biggest Czech gas distributor. We actually fully consolidated the company starting September 1. You can see on the map what kind of what kind of area this company is covering. Very much the same area as we are covering in distribution of electricity with the exception of Southern Moravia where we don't have electricity distribution but we do have gas distribution. We have all the volumetric numbers about the size of the company. and all the other details actually on that slide. On slide number seven, what is important to notice actually, it is just to provide you rough guidance, companies making on average around 10 billion Czech crowns EBITDA as it is regulated business and about 4 billion Czech crowns on net income. So this is something we can, especially on EBITDA level, expect in our numbers going forward. Another important section is on slide eight. We actually became a strategic, or we will become strategic shareholder of Rolls-Royce SMR company, which develops small and modular nuclear reactors. We are now waiting actually for the regulatory approvals. We would require 20% stake in such a company and it will allow us not to be only a customer of the future Rolls-Royce SMR or product, but also be on the side of somebody who will be able to integrate our know-how from our few nuclear businesses that we own that already are now very active in actually nuclear development for other companies. And we are also able to attract the production of nuclear parts, actually, or modules for modular reactors. We own ŠKODA, Jaderná Strovírenská, which is ŠKODA Nuclear Engineering in translation. That is already now actually maker of or producer of parts from the nuclear So we would expect to actually be included into the new chain of Rolls-Royce SMR team and supply team and benefit on both sides, you know, as a customer and also as a supplier or sub-supplier. Then another big news actually is of yesterday. We signed a deal with Polish to sell actual Polish core assets to Czech company Rest Invest Group. We signed it yesterday evening, late evening. So fresh news. We were trying to sell our assets from, you know, 2019. gave it a few tries. This time it was successful and we actually started on March 26th of this year. Totally we sold six companies, but mainly it's about two power plants or heat plants in Skawina and Chorzów in Poland. They are hardcore plants delivering heat to municipalities as well. we received there was quite a high interest actually and then we boiled it down to seven binding offers and four of them were actually moving to the final round and then we chose the best offer. The transaction will be closed after we receive anti-monopoly approval from Polish Monopoly Office. Anti-Monopoly Office and do some technical technicalities on transfer of the ownership. We expect this to happen actually in the first quarter of next year and at that time of course we will book any income that will arise from that transaction and also provide details on the valuation. So I think this can be treated as a success of our M&A team and we are on a good path with our decarbonization efforts actually. Other selected events of past quarter are listed actually on slide 10. Just very briefly, on September 13th to 16th, the Czech Republic was hit by severe flooding, especially in the northern and southern areas of the country. We managed to take care of everything, and basically, with a few exceptions, all the electricity is connected. Actually, all electricity is connected back, and there are just a few customers without gas connection. But we assume to make sure it all works by the end of the year. We also received or won the court against Czech Railway Authority, which I already commented on. There is a boom of connecting actually generating facilities, mainly photovoltaics. And we connected for the first nine months actually 42,000 generating photovoltaics. 42 generating facilities and 40 of which are actually photo-type power plants. Mainly on the roofs, actually, both of the companies and also households. And that's basically the news. Now we will switch to generation mining segment. Very briefly go through it. Our total generation mining segment is up by 2.2 billion chequers. Zero emission generation is up by 18.1, mainly caused by the fact that there is no actually levy on revenues above price caps. That was only applicable in 2023 and not 2024. And that's why you can actually see the big effect on your peer assets. Emission generating assets are down by 2.9 billion check rounds, bringing 10.7 billion into our earnings. Again, the same, there is a little effect of the levy. And then basically a few other factors. The biggest discrepancy or difference is actually about 2 billion check rounds that relates to lower revenue from ancillary and regulatory energy services. Trading down by 4.1 billion as I already commented on. Generation segment in total then 4.7 plus. Mining 2.5 negative due to lower demand for coal. On the sign number 17 you can see actually a chart of the renewables and nuclear generation. We expect to be down by 3% on nuclear facilities, mainly due to lower availability of familiar power plants and somewhat higher on the renewables, mainly general solar and also new photovoltaic plants to be operating. On electricity generation from coal and natural gas, the overall number is expected to be 3% below last year's 17 terawatt hours. decrease on the coal assets by 3%. Then there is a decrease in Poland, 19%, mainly due to lower deployment and the reflecting, which is reflecting market conditions. But they can, but understanding that those are mainly heat plants, they also had a lower heat sales actually during very warm winter of 2024. And there is an increase of 6% in gas generation. Important slide 15, it's actually hedging of the market risks. We are selling electricity, as you know, three years ahead. Now actually we sell 2025, now available even 2028. So we are 80% hedged for next year, almost 50% 2026. going down to 5% for 2028. And as we hedge the power made from lignite plants, we actually hedge carbon credits, and they are actually shown on the right side of the chart. I think that's all for generation mining, and now I will hand over to Pavel to guide us through distribution and sales segments.

Well, thank you, Martin. The main highlights were already mentioned, but let me go through it in more detail. On the distribution, we see a year-on-year growth of 3 billion. On the GasNet side, obviously, it's a new addition to the group. On the lower half of the page, you see what would be the year-to-year difference for the GasNet as it was consolidated the whole year. The main two drivers behind these growths are the same. One is there is a quite significant investment going into the both networks as a part of the transition of the Czech energy sector from coal to gas and renewables. So new connections of all kinds. And secondly, in both cases, the year 2020 was impacted by negative correction factors from 2021. So that's one of the things. In terms of consumption, We still see a slight decrease in consumption, but it's kind of leveling out. So it seems that the savings from the customer-consumer side have been exhausted, and we actually expect to see more growth, again in line with the transition from coal to electricity and gas in the coming years. In terms of the sales segment, although there is a drop on the Q1 through Q3 numbers between 24 and 23, in general, we see the business going well. In terms of the retail, these are kind of one of things that are reflected in the fluctuation of purchasing and selling and pricing electricity, but they typically even out in the full year. In terms of the B2B segment, the energy services ESCO activities in general are growing. We see a drop in the commodity sales, but that was driven by more of an extraordinary profit on on procuring renewable electricity in 23. That was a one-off window opportunity. Again, I think 24 is the year when it's going to be one-off factors still spilling over from the energy crisis are kind of phasing out and we are expecting basically a somewhat steady growth in the years to come. In terms of the volume of electricity and gas sold, I guess two factors. One is in line with the overall drop in electricity and gas consumed. There is a drop. On electricity, there is a one-off drop to be seen between 2023 and 2024. Again, as a part of the consumer behavior during the crisis, there was a segment of few consumers which are typically not interested but they switched to our retail company during the crisis. They had three-year contracts, which expired now, and they are moving to the B2B sectors, or ESCO and other B2B suppliers. So there is a more significant drop in the electricity and gas sold. not in line with the number of consumers. But again, this is a one-off thing, and we expect then the electricity and natural gas supply to go in line with the overall consumption in the country. Energy services in general going well. Obviously, companies still working on switching from coal and other more CO2-heavy technologies into electricity and gas, and in general, trying to save energy. So the energy services focused on providing renewable electricity, on-site generation, and efficiency in general are in high demand. And that's all. And obviously, I'm heading back to Mark.