Cez As S/Gdr 144A

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.