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Hello everyone and welcome on CHESS first quarter 2025 conference call. It's my pleasure to welcome Martin Novak and Pavel Cyrani who will go through the presentation as usual and after that I will open the floor for questions. Now I'm handing over to Martin.

Good afternoon, good morning. So I'll start with Overview of our financial results. Our operating revenue achieved or reached 93.4 billion Czech crowns, which is an improvement year on year, a quarter and quarter of 7%. Our EBITDA, important number, achieved 43 billion check rounds, improvement of 7% as well. Net income and adjusted net income are very close, 12.8 and 12.7 billion check rounds. Decline of 6% versus the first quarter of 2024. Our capex has reached almost 7 billion check rounds, which is a slight decline of 6%. Our important slide actually on page four, this demonstrates the changes in our EBITDA compared to first quarter of 2024. There is actually one negative factor and three positive factors. The negative factor clearly decline of power prices. As you know, power prices are steadily declining. With our straightforward three-year hedging policy that is on slide 14, I guess, you can see actually average achieved prices and the volume of electricity that we actually sold. So this actually leads to not only to steep decline, but to gradual decline. And a negative impact is actually 5.5 billion CZK quarter on quarter. Positive impact is coming from distribution grid, about 1.5 billion coming from Czech power distribution, 800 million is coming from higher allowed revenue due to higher capex in the previous years, and 600 million is coming from so-called correction factors, which is actually leveling up 2023 numbers that are now actually being passed back to us. And it's in total about 1.5 billion Czech rounds of positive impact. By far, the largest positive number is coming from GasNet, EBITDA of GasNet, which is our stake in Czech gas distribution that controls 80% of gas market. is 4.3 billion check rounds it's a full first quarter 2025 EBITDA because actually we only included this company into our numbers as of September 1 so clearly in first quarter 2024 there was nothing actually to compare it with so 4.3 is 100% variance. In sales segment 2.2 billion We actually had a few factors. One is lower purchase prices and also stabilization of the market or payment to the market operator for various different volumes that were originally planned after the market that got there, you like, got stabilized. And there is also an effect of sale of commodity of electricity that we actually purchased for our customers to be delivered in first quarter 24. But due to warm winter, it wasn't delivered. So we had to resell it back on the open market, the lower profit, which is not the case of this year. So this is 2.2 billion on the sales segment. 300 million is actually also coming from our ESCO activities. So this is the key variance in EBITDA. When we go to the next slide, you can see actually our line items below EBITDA. The most significant is actually depreciation amortization, which is 5.8 billion or 66% higher. There are two effects. One is actually the fact that we decided to speed up coal assets depreciation and we started on October 1 to better match utilization of the power plants so it's no more kind of straight line depreciation but it's accelerated depreciation that pretty much follows the amount of hours for the plants to be utilized. So now in 2025, 2026, 2027, it will be more. Towards the end of decade, it will be less. So last year, actually in the first quarter, we did not have this extra depreciation of 2.2 billion, which we have today. So that's one of the effects. And another effect in depreciation is actually including Gasnet, again, as we included and consolidated into EBITDA, we also consolidated into other line items, including depreciation, which is 2.7 billion Czech crowns. Other items are pretty much in line with what what was reported, what is probably mentioning to note is actually a sale of Polish assets and other income and expenses, so one billion is actually a profit achieved on sale of our Polish power plants earlier, during the first quarter, the beginning of February. So now the assets are handed over to the new owners, and they do not impact our numbers in any way since February. Next slide, you can see operating numbers, so maybe we can skip that. Those are volumetric data, which might be of interest, but there is no significant deviation. So let's go to important slide number seven. We actually signed a contract on 30th of April with Czech government where we decided to transfer, agreed to transfer 80% of shares in the company Elektrána Dukovany 2, which is a new nuclear project in Dukovany to state. Shares were actually physically transferred on May the 5th. The purchase price is 3.6 billion Czech crowns and it is actually a function of the cost spent and also the previous agreements. So the full value of the cost actually spent so far is 4.5 billion Czech crowns. So 80% is 3.6 billion. We are keeping stake of 20%. The reason why we actually did it and why we keep the stake is that it allows us to help the company, to support the company from strategic point of view and not only through standard SLA agreements that are fully supporting the company from kind of day-to-day operational stuff like accounting and IT and financing advice and all those things. But we as a shareholder are also sitting on the board of the company that are able to provide some strategic direction. Although the company is fully staffed, there's more than 200 people working in there, so it's not an empty shell, by far not. It's a full-scale company that is able to carry on the task that it was set up for. There is another side effect that all the future debt that will be accepted by the company from the government as part of returnable financial assistance will not be consolidated on our balance sheet and this is a very important factor actually that will impact our future balance sheet so we will not see up to 400 billion check rounds actually consolidated into our ratios. So that's big news I would say for us. Then next slide, important news. We actually approved as a board of directors our proposal dividend of 47 check rounds per share or 80% of adjusted net income. to be approved at the shareholder meeting which will be held on 23rd of June. So the date is also final. We actually analyzed our ability to pay the dividend and our financial strength and we don't see any issue to pay 80%, which is on the top of the provided range, as it is quite usual in our case. We always try to provide maximum dividend that we can afford. So 80% is our proposal and it's perfectly within the range. We will see how shareholders approach that. We assume that this could be a reasonable proposal. On the next slide, we have information about our change in financial outlook and guidance for 2025. We increased our EBITDA guidance from 125 to 130 billion check rounds to 127 to 132 billion check rounds. We are keeping our net income actually on the same level, 25 to 29 billion check rounds. you can see actually the main year-over-year effects on EBITDA and also selected assumptions which are listed on the right side. And also risks and opportunities. Obviously, the largest risk is utilization of our power plants. That's the key to our success. So now I switch to generation mining segment. Generation mining segment in our EBITDA is split into zero emission generating facilities or clean energy. That includes nuclear and renewables. This segment made actually 11% less. But the biggest part coming from renewables, 39% decline due to very, very dry winter season. So our renewables, hydro plants are actually running on much lower output than a year ago. Then we also had a timing of actually nuclear assets outage or scheduled outages in the marine. So another 1.5 billion down, but on a year-on-year basis, we expect a significant increase in power generation, as you will see later on from nuclear assets. Emission generating facilities, 2.7 billion check rounds, which is 53% decline. There are mainly price effects, as I already mentioned, for entire power generation segment, and then a few positive effects, actually, that you can see in the explanation. So, overall generation segment was down 5.5 billion check rounds, but vast majority is actually attributable to prices. Mining segment slight improvement mainly due to sales to external parties where the winter was colder compared to 2024, so there was a higher demand for coal. Nuclear and renewable generation. Next slide. This is what I was talking about. We had a flat generation in nuclear in volume terms. We had decline actually in renewables due to especially hydro situation in 2025 and on the opposite of better than expected or better than average hydro situation in 2024. Full year we would expect actually to increase fairly significantly nuclear generation to 31.6 teratowers. Close to our target of 32. This is mainly due to shorter scheduled outages of Tamil nuclear power plant and unit B2 will be this year without scheduled outage. This is the main reason for increased generation. Renewables should be almost flat actually year on year on 3.6 teratomers. Generation from coal, really higher, 24% generation from coal, again due to colder winter compared to last year, first quarter, but year on year it should be flat, 14.1 TWh from coal. Very little from Poland, you can see 0.2 TWh and this is it, you know, it will not change any longer because we don't have the assets in our balance sheet. We successfully disposed them and gas generation is expected to be somewhat lower than last year, 1.5 TWh. Last but very important slide is actually an update on our hedging as of March 31. You can see that for 2026, we are two-thirds sold. For 2027, one-third. For 2028, 12%. And we just started selling in 2029. Average achieved price is 94 euros down to 70. Corresponding prices of carbon credits actually are on the right side. that we always buy whenever we sell coal electricity, we buy actually appropriate amount of carbon credits. So that's all for this segment and now I will hand over to Pavel to go through distribution and sales segments.

Thank you Martin and hello everyone. Let's start with the distribution. We see a significant growth year on year of more than 50%. It's mostly driven by the inclusion of GasNet, but at the same time we see also some good operational results both for GasNet, even if you look at it stand-on basis, which you see on the left. the down left corner, or if you look at the transition distribution, the electricity distribution. What we only observe is we observe the increase of our revenues through historically increased investments in distribution assets driven to some degree by the energy crisis we have been through, which called for increased investments in both electrical and gas grid. There's also a degree of correction factors coming from those extraordinary years of 2023. And last but not least, and this is more for gas, we also see higher distributed volume of both gas and electricity. So all these things combined together mean that we see a pretty significant growth also on the individual company's level. In terms of demand or distributed volume growth, it's basically driven by two things. Number one, winter of 25 was significantly colder than winter of 24. So what you see is you see a 12% growth in gas, which is mostly linked to temperature, and also the residential customer consumption, which is mostly linked to heating. Now, in terms of the small business and large customers in electricity, they are less affected by cold weather and they are more linked to the general economic growth. The good news is that we see also an adjusted consumption, climate-adjusted consumption to grow in gas by 2.9%. Take it as an estimate. Obviously, all these adjustments are just models, but still we see in our models that there is underlying growth both in gas and also in electricity 0.7%. So after several years of consumption drops, we see now first signs of recovery and increase. If we move on and look at the sales segment, again, in terms of Q1, year-on-year, almost 90% growth, there are some underlying good things happening. Our retail was able to manage a lower cost of deviations both through stabilization of the market and also by improving their prediction and trading capabilities. We also see the effect of the colder winter of 25. And then in terms of chest per day, you should not extrapolate this first quarter by multiplying by four as there are some things that are simply linked to the winter and that will not kind of repeat itself in the further quarters where there is kind of less deviation, less consumption in terms of, because of the weather. We also see a good development in the ESCO companies although there it's linked to the invoicing cycle which is more happening at the end of the year so the development is not linear and there will be more profit coming in the next part of the year. In terms of the volumes, Again, similar to what we discussed under the distribution segment, we see growth, growth that is both driven or mainly driven by the colder winter, but also with signs of recovery of the economy and consumption in general. In terms of the energy services revenue growth stop line, We had a somewhat slower first quarter, but again, it's more linked to the exact situation in the individual projects and the way you invoice them. We still expect a 7% growth in the full year as we expect the invoicing and to that also the operating profit to catch up in the full part of the year. And with this, I think we are at the end.

Yes, so this concludes the presentation and we are now ready to take our questions. If you have a question, just raise your hand through the teams and I will call your name. Then you can unmute yourself and ask your questions. Our first question comes from Artur Siddun from Orgazpenny. Artur, you can do it.

Hello, can you hear me?

Yes, I imagine you can hear me. Okay, great, thank you. Yes, two questions. The first one is just on the moving parts of your guidance. Obviously, you increased the EBITDA guidance, but not the net income guidance. As I understand, part of that is linked to the indication on depreciation and amortization. I think you were indicating 50 billion at the full year result, now 55. I'm just wondering what led to that difference in such a short period. in such a short time because I understand the accelerated depreciation on coal but I think that was already known at full year results so Just if you could come back on that, that would be helpful. The second question is more broadly speaking about the group structure and the future of CHES. I think there were press articles recently suggesting that potentially under a different government, there could be... a plan to nationalize CHES. I was wondering if there is anything tangible at the moment on that. What would be the rationale to do so? I think in the past it was potentially to help the financing of new nuclear, but it seems you've found another solution for that. So any update on the topic would be quite helpful, actually. Thank you very much.

So, you know, on the first question regarding depreciation, there is higher depreciation than originally anticipated on GasNet assets. Everything was based on estimates actually towards the end of the year. There is also higher depreciation on nuclear assets where we had quite a lot of capex in the past. So this is something that we can actually see the effects. And it's important to know that despite the growing EBITDA, We are still subject to windfall tax actually in 2025. So it kind of eats up a lot from especially power generator as chess with the main actually payer of the windfall tax. So the impact of windfall tax into chess numbers is bigger than other subsidiaries. So that's why we are not actually moving net income range corresponding, which would be corresponding to EBITDA increase or EBITDA range increase. So this is for me and now I hand over to Baba.

Well, in terms of the group structure, it's really difficult to comment. We've read the discussion. You have to understand now we are in the middle of an election campaign. The elections have been announced for the 3rd and 4th of October by the President and these ideas about buying out the minors from Czechs are being mentioned by some of the parties. as a part of the election campaign and it's really difficult to comment and from this perspective it's also difficult to comment what the rationale is and how it's linked to financing of nuclear and so forth and so on. I think with this one you and as well us will have to wait until the election and then see who actually forms the government and then what is the strategy for the group structure of Chess.

Thank you very much for the comment. Maybe just as a follow-up question, and if it's difficult to comment on this particular topic as part of the political campaign, are there other measures that, as part of the political campaign, are being implemented? are being highlighted by the various parties. I'm thinking, obviously, you have the windfall tax at the moment. I don't know if there is any strong stance on the topic or anything else that would be particularly relevant to your business.

Well, not really. Not beyond what is the general discussion in the public domain. uh across europe and that is kind of the green deal you know how it should be implemented should we have ets2 immediately or later and how it should be with nuclear and with gas and what is the taxonomy deadlines and like and then should we ban the cars for sales of uh so like these general discussions are obviously ongoing also here But there is no specific topic related to chess that would be explicitly mentioned other than the idea by some of the parties about the increasing government ownership to 100%.

And on Infotech, you know, there is just no discussion. Everybody counts on this to be ended by the end of this year, and that's it. And also no use.

Okay. Thank you very much. We have the next question from Annabeth.

Yes. Hi. Thank you for taking my question. I've got a question on the kind of investment profile. So obviously with the sale of the new nuclear, you've freed up a lot of capex from the end of the decade onwards. So just kind of wondering at a high level where you see the best opportunities to reinvest this. And kind of related to that, I guess, distribution is an area where you've invested with the acquisition of Gasnet and also with quite attractive returns announced for the next period, especially compared to other European countries. So how much could you ramp up CapEx there versus what you've got in the current plan? And then also sort of into the 2030s, anything you can add there would be great. Thank you.

Thank you for the question.

Actually, this project of new nuclear plant in Dukovany is not bringing us new funds to be invested, but it's preserving the old funds to be invested. Should we actually not be able to divest, we would have to significantly cut on our plants, significantly to reduce them, because our debt capacity would be pretty stretched, actually, with more than $400 billion. check rounds of debt sitting on our balance sheet, although financing would be provided by state at 0%, it would impair our debt capacity for sure. And also by selling, disposing the stake, we are just able to do what we wanted to do anyway. And our cutbacks plans are pretty heavy actually by the end of the decade. We will be spending more than 400 billion check rounds actually And we will be reaching by the end of 2030 our target of 3.5 net debt to EBITDA. So everything that needs to be done, meaning refurbishing our heat plants and converting them to gas, distribution investments into both power and gas distribution, building renewables, then decommissioning coal plants, working on the project of CCGTs, All those things will be done, and very importantly, investing into prolonging our lifetime of our current nuclear assets, which is very important. All those things can be done according to the plan. If we kept the nuclear project on our balance sheet, we would have to reduce the expense significantly. So it's not that we will have more money to invest.

Can I just quickly follow up on that? Is there any scope to increase the investment in distribution, or do you feel that with the current investment plan, you wouldn't want to leverage to go any higher, or sort of into the 2030s? I guess, is there any scope to increase there or not?

Look, we... Number one, distribution as a segment is a distribution where we will put most money out of all the other segments. So it's like a number one segment in terms of capex. It's roughly 150 billion over the next six years, including 25, with around 25 billion cheque a year. And with this, I think we are investing well beyond depreciation, so we'll be growing our RAP significantly. If you ask, and as you rightly point out, the returns are good, they do justify the investments, and the investments is needed, because after all, all this energy strategy is based to a large degree on electrification, so like using more electricity and in Czech Republic also gas, while replacing oil and coal in various applications. Now, could we invest more? Probably it would not be as wise, because after all the regulator obviously does look at the returns and all that, but the regulator also looks at the tariffs. And I think with these investments and with the assumed growth in the consumption, we should be able to keep the tariff growth at a manageable level for the consumers, so they will not go away from us, from electricity and gas. So I think it's said quite correctly. Now, where the jury is out a little bit is on renewables. because we have done our share in investing and preparing investment into photovoltaics Now, the government approved acceleration plans, acceleration zones for wind, but they still need to go through the parliament, the acceleration zones, and it will not be this parliament, it will be only the parliament which will come from the election, so that's one area where we may invest more if this actually goes through. Also, please know that unlike the photovoltaic, wind does have a a kind of PPA type of auctions also in Czech Republic, so that would be an interesting investment area, as long as you can permit it in the insolation zones. That's number one. And number two is kind of gas and battery backup. And the government is preparing all kinds of markets and schemes. There is a discussion about a capacity market. A capacity market in general as a tool is now approved as a part of one of the laws that just passed through the parliament. And there's already some kind of work being launched on notifying it and actually putting it in place. So that would be the area where we could invest more if there was a capacity market for backup gas. And also with battery prices going down and various schemes being prepared for the batteries, that could be, again, an area where we invest more beyond what we originally thought maybe a year ago or so.

Great. Thank you. We can take the next question from Jan Raska, from Phil.

Can you hear me?

Good afternoon. Can you hear me? Hello. Good afternoon. First, congratulations to Strong Results for Q1. And I have a question regarding to power prices. What is your actual average realization power price and sold volumes for this year as of the end of March? At the end of 2024, you released 117 euros. per megawatt hour. Is it any change compared to the end of December?

Thank you.

Yeah, so I think our estimate is now somewhere at 120 to 125 euros per megawatt hour. I think it is included on slide 9 in the middle section. So that's our estimate for this year.

Okay, thanks. Okay, thank you.

Next question from Piotr Jentzolowski from Citi.

Good afternoon, it's Piotr Jentzolowski from Citi. I wanted to ask you a couple of questions. So first one on the disposal of the Nucla, 80% of the Nucla program, project. Can you tell us what happens with the liabilities? I remember you had the liability on the 1.7 billion in case of the some slippages in the delivery of the project. Do you receive them pro rata and also on the remuneration? Is it also that you keep your small equity stake in it and will be provided some sort of a CFD on the back of it? I'm just trying to understand what's your role when you say you're going to keep an operational role in the project, what's happening there? So that's question number one. Second, can you explain what this delay in the starting of the project has been caused by the basis of the EDF protest and what the EU Commission may look into this tender? And the final question I have on your assessment of your ability to pay the dividend, you said you will be three and a half times net debt, a bit DA by the end of a decade. So what type of – do you think there's a risk in case of a downturn of the power prices? I'm not sure what this leverage ratio was based on in terms of power prices, but do you think there is a chance you will have to revisit the 60% to 80% payout ratio to facilitate some of these investments? Thank you very much.

So the first question actually, you correctly remember that original setup was such that we were liable should there be any issue caused by us for additional 1.7 billion contingent equity, billion euros contingent equity. This is now gone. So there is no contingent equity from any partners. so that's a fairly good news actually from risk point of view. So we are now keeping our 20% stake that is valued at 900 million Czech crowns and the plant will have such a contract with the government after it is up and running and producing power that should allow us to get a return on our equity of about around 10%. Also, basically, fairly immaterial amount in our numbers, but on the other hand, no risk either. So, that's the first question. Second, EDF filed actually complaint or made a legal action at the court asking the court to review the fairness of the tender, claiming that the Korean offer is way too cheap, kind of, or unrealistically low, and that it couldn't be built without state support. It is actually a slow action against anti-monopoly office, not against us. But as a result of it, we are not allowed to sign the contract. This was actually decided on 6th of May. We hope that the company, not we, but the company will actually file an appeal to higher level of court. Hopefully it will be resolved or we will see some action within weeks. Because this is important thing. From EU Commission we received a letter from French Commissioner, but it's not an official kind of resolution or any action. It's just kind of a letter of a commissioner asking for making sure that the competition is fair and that's all it is. Also there was no legal action taken against the project. So that's where we are today. And of course you'll see how the situation will evolve. With ability of payment of dividend, you know that we have a range of 60 to 80% for very simple calculation and modeling purposes. We use dividend payout of 70% as a middle of the range. And this is actually included in our guidance. And, of course, everything depends. kind of amount of dividend or number of crowns per share depends on the future profits, on the power prices, and that's very hard to predict. But we plan for paying 60 to 80%, meaning 70% dividend payout ratio by the end of the decade, where actually our plans are kind of being shared. So that's it.

Thank you very much. Can I ask a follow-up question on this leverage ratio? You said you will be at the three and a half times net debt EBITDA by the end of the decade with a 400 billion capex. Can I please ask what is the assumption for the power price to embed it within this ratio? And is it net debt EBITDA or economic net debt EBITDA?

It's net debt EBITDA, so really financial net debt EBITDA. And our EBITDA that we actually published in our investor kind of relation materials is somewhere between 90 and 100 billion Czech crowns.

And this is based on the baseload power prices in 2030 between 67 and 80 euros, which gives you the range between 90 and 100 billion cheap ground CBD.

Yeah, and carbon credits of around 80, 83 euros.

So this is basically roughly where the forwards are, still are.

Yeah.

Okay, that's very helpful. Thank you very much.

We might still have a question from Annabeth. Follow up. Is it a follow up, Anna?

No, no, nothing for me. Thank you. Okay.

All right. So then I'm handing over to Andrzej Kedzierski.

Hello, I have a question regarding CAPEX for the nuclear segment. For the 2025-2030 period, the projected annual spending now stands at 20 billion, where, if I recall correctly, the previous version of the strategy indicated around 10 billion per year. So, could you please comment on the reason behind this increase?

It is actually mainly increasing nuclear fuel that has increased significantly over past few years and it is depreciated as capex and also it's an effect of inflation that is definitely playing a role in servicing capex improvements of the plants, but mainly fuel.

Okay, thank you. Now, Petr Bartek, please. Good afternoon.

Thank you for taking my question. Actually, one, if you could talk a little bit about the price spreads between Germany and Czechia. They seem to be kind of skyrocketing lately, so what's your view on that? And Maybe what would be your longer-term view, you know, after the energy transition or change in Czech Republic is finished, we have more gas-fired power plants after 2030. What's the plan for the connection with Germany in terms of grids? Where would you see these press also in the long run? And then what are your estimates for your power price premium to the baseload with the changing structure of assets with more nature gas and so on, where do you see it? Thank you.

I'll start with the first question in terms of the spreads. Yes, we expect the spreads to grow somewhat for a few more years. Until Czech Republic also decommissions all or most of its lignite stations and replaces it with coal, builds more renewables. And then it should then probably reduce. As soon as we have basically a similar type of power plant composition in the country, then the spreads should basically close down again. Also, the network grid operator is planning to increase the connection to Germany. And again, that should contribute to decreasing spreads. And now the speed of this will depend on the speed of the new power plant, build-up gas, renewable, and also the connection. In terms of the premium, now the question is like, I'm not sure I understand the question, because it very much depends on the type of asset. If you look at the solar, it has a negative premium to the base fault. If you look at... I don't know, nuclear, then it's basically baseload. And if you look at the peaking gas stations, it has a pretty, it can have a, the transformer in the winter, it can have a very significant premium. So we see the value of flexibility increasing over time, but it's difficult to give it a specific price tag.

I don't know. In more detail, I was asking about the average prices which you report. For the last two years, you reported ever-rising prices above the hedged baseload price. I think the premium was like 4% or more. Maybe if you have any timing for the new New grid connections with Germany from the TSO. Is there any plan?

It is included in their plan. I'm not sure now exactly. It's before the end of the decade, but it's more a question that you should direct to them.

Okay, thank you.

Okay, it seems we have no further questions, so I will conclude this call and I am always available for further discussions on one-on-one basis. So thank you very much for the participation and good