Cez As S/Gdr 144A

Financial Results Conference call for the first half of 2025. Marky Novak, Chief Financial Officer, will walk you through the presentation and then we will open the floor to the questions. We also have Rudik Horn, Head of Trading, just in case you have some questions on the power market here. Now I'm handing over to Marky.

Thank you. Good afternoon. Good morning, everybody. So let's start with the presentation. In the first slide, or slide number 3, we can see actually overall financial results, where our EBITDA has reached almost 74 billion CZK, which is an increase of 4.7 billion or 7%. Adjusted net income 16.7 billion and net income 16.5 billion, which is down 21, respectively 22% year-on-year. Our capex has grown by about 11% to 22.8 billion CZK. Important slide number 4 actually shows a difference between first half of 2024 and first half of 2025. There are few factors, actually few negative factors, few positive factors. The first negative factor is actually decline in power prices, which has an effect of 6.4 billion year-on-year decline, as prices tend to go down even in the future. So this is about 6.4 billion. Technically speaking, it's actually 7.3 billion. And then there is some effect of different scheduling of nuclear plant outages. which is a positive effect, but overall this segment is impacted by power prices, which is 6.4, very negative. Down 2.1 billion. Again, it's not a loss, it's actually a lower profit as volatility of the market is lower and lower month by month basically. Trading achieved a very reasonable result of 1.9 billion check rounds. However, in the first six months of last year it was 3.9 billion. Then distribution actually segment is up by 3 billion, mainly due to higher allowed revenues, thanks to increased investments and distribution assets of 1.6 billion, higher distributed electricity volume, half a billion check rounds, and mainly higher other allowed revenues and correction factors, which is 0.8 billion. important, by far the largest actually positive impact of this first half is actually consolidation of GasNet, which is a gas distribution that we acquired actually as of September 1, 2024, so it does not show in 2024 numbers at all, so entire EBITDA is actually variant, and it is 6.4 billion check rounds for first six months of 2025. Sales segment shows also improvement both on sales, retail and large customer sales. where the commodity purchase prices were lower compared to the previous times or previous period and we also had 1.3 billion effect of undelivered commodities due to warmer weather in first half, so actually in first half 2024 We had a commodity that we did not deliver to customers, we had to return it or sell it back forever. It did not happen this year. So this is EBITDA variance looking actually at net income. There is actually a decline, as I said, of 22% or 21% respectively. By far the highest and basically the only main charge is actually depreciation. As gas net is impacting our EBITDA, it's also impacting our line items below EBITDA, including depreciation. So part of it actually is related to gas net, about 5.1 billion out of 10.5 variance. And remaining part is basically attributable to accelerated depreciation on coal assets that we adopted as of October 1, 2024. So again, the accelerated depreciation was not in the results of first half of 2024. We adopted accelerated depreciation because of the fact that coal plants seem to be discontinued around 2030, so we switched from a straight line method of depreciation to accelerated method. when we are basically simply set copying the amount of hours it will actually produce power, so in 2025, 2026 it will be definitely more than for example in 2029 or 2030. That's probably, those are the main effects actually on our net income. On the next slide, you have some operating results, volumetric data, which you can go through. We can actually skip that and go to slide number seven, where you can see our financial outlook. We actually increased our EBITDA target by 5 billion check rounds. We keep actually the range of 5 billion, but it is all increased by 5 billion. So now our EBITDA estimate is actually 132 to 137 billion check rounds. adjusted that income was actually, we actually increased the bottom of the range to 26 billion CZK, so now the new range is 26 to 30 billion CZK. The main causes of our EBITDA target change are actually listed on the right of the side of the chart, so it is, I would say, almost equal, it has almost equal effect, it's higher power prices than we expected in our last guidance, so especially the power prices of the power, or the power prices of the power that we had unsold actually or did not sell for 2025 and still have some available for peaks and optimization and so on. We are also saving on fixed operating expenses. We have higher settlement of electricity not invoiced to end customers, higher revenues from distribution and connection fees and lower purchase cost for commodities in sales segment. You can see also assumptions on which our estimate is based. So you can see power generation 44 to 43 terawatt hours. Power prices in Czech Republic 121 to 125. Euro per megawatt hour, emission allowances 79 to 83, depreciation that we already mentioned, 55 billion, out of which 9 billion is gas net, and windfall tax of 29 to 33 billion CZK. Next slide, you can actually see significant events in nuclear energy development. As we, I think, already discussed in May, we managed to sell 80% share in the new nuclear project to the government. As of April 30th, the transaction was settled actually on May the 5th. The purchase price was 3.6 billion, which is 80% of original investment of 4.5 billion. We are not consolidating anything from other than equity method consolidation, so we don't do full consolidation of this investment as we are basically a financial investor with a provided estate, but we have no obligation to furnish any cash or anything in the future. There was also an agreement concluded between the new nuclear project company, Dukovany-2, and the Korean KHNP company. So they have actually two units, each of them 1063 megawatts. Another milestone, actually Great British Energy Nuclear selected Rosrush SMR as a supplier of small modular reactors. We completed its investment in UK-based SMR developer and acquired stake of approximately 20%. So this was actually important milestone now actually the company where we hold 20% stake and start working on the project to deliver 3 units to British government and at the same time we are doing preparatory work for first SMR, road source SMR actually in the Czech Republic internally. The new plant location. So that's That's the new nuclear plant, current nuclear facilities, there are some highlights as well, that relate to actually current facilities, I think the most important one is increase of Dukovane installed capacity by 14 MW per unit, so it is 4 times 14 MW that we have now more, in total Dukovane power plant has 4 times 524 MW of installed capacity. On the slide number 10 actually you can see some information on transformation of the heating industry or heat supply, heat delivery business. We have basically all our power plants are also serving as heat plants or heat locations. And you can see actually individual power plants and the way we treat it. I think the most important is actually Mělník, which is about 30 kilometers out of Prague, supplying city of Prague with heat. Today it is actually through using coal-fired plant, which started construction of largest actually heat plant that will be gas-fired. or gas powered 266 megawatts of electricity and 183 heat megawatts actually will be installed near Prague. The construction has already started. We also started construction of waste to energy facility that should process 320,000 tons of waste per year. Generation mining segment in more detail is actually on slide 12. You can see that the segment actually in total has earned 46.5 billion cheque rounds, which is 15% less. Actually, the largest negative variance is coming from emission generating facilities, where we are actually 51% down compared to the first half of 2024. Again, the details are described on the slide on the right side. Clearly we can see an effect of decreasing power prices, increasing carbon credits in our generation facilities. Then on the next slide actually you can see charts of our nuclear and renewable generation. It is an increase in nuclear generation year-on-year of 6%. We would like to keep that actually for a full year where we are targeting almost absurdity to be produced. mainly due to extension of fuel cycles and modifications of outage plan, so we will have more kind of running hours in 2025 versus 2024. We have increased capacity in Brukovany, as I already described, and shorter scheduled outages of terminal nuclear plant. Renewables were down 17% mainly due to natural conditions in 2024, when we had enough snow and water, which was not the case actually in 2025. And therefore we expect that our power generation from renewables will be 7% lower on a year-on-year basis. for a full year, our clean energy generation would then be 5% higher, 35.2 TWh. Fossil fuels, meaning coal and natural gas generation, was 12% up on first 6 months compared to last year. We expect it to be 4% down. Mainly due to decline in our Polish assets obviously that we don't have anymore. We only had them first 5 weeks of 2025. We disposed them so we will be missing 0.9 TWh from those assets. and our power generation from coal should remain flat, although it was 13% up due to colder winter in 2025 compared to 2024. Hedging, very important slide of market risks. This is actually On slide 15 there you can see our average achieved prices. Those are mainly or those are base hold prices that we are selling at our forward electricity. So 95 euros for 2026 going to 71 euros for 2029. We are 73% sold as of June 30th actually for 2026. The same chart on the right side relates to carbon credits. You can see that the spread between power price and carbon credits is significantly narrower in 2028 and 2029. than it is today. So this will be a pressure on the economics of the coal plants for sure. Then the next segment, a few slides actually on distribution and sales. Distribution segment has a significant increase of actually in total of 90%. They made 9.4 billion, but Clearly it is 6.4 billion coming from gas net, gas distribution, which we did not actually have in our numbers in 2024. And there is an increase in distribution, power distribution actually of 3 billion check rounds. mainly due to higher allowed revenues due to increased cutbacks in the past of 1.6 billion, higher distributed volume of 0.5 billion and then higher other allowed revenues and correction factors of 0.8 billion. Comparing numbers for Gasnet, should we have actually the company in our numbers, they would have made or they did make actually in first half of 2024 5.7 billion, so now actually they are 14% billion better than in the past year. Year-over-year development of gas and electricity distribution. On the left side we have a chart of electricity distribution on our territory, which is 2% higher, but when you actually adjust it by climate and calendar, it is 1% higher. Gas distribution is actually 11% higher, but climate adjusted 2% higher. As I said, the winter of 2025 was colder than 2024. Sales numbers or sales segment numbers actually are on page 19. There we have significant improvement in Chess Pro Day, which is our retail customers company and it delivered actually or earned 4.5 billion on EBITDA, which is 3.2 billion more than in first half of 2024. ESCO companies are about 35% higher and they are both providing EBITDA from sales to commodities in Czech Republic which is 77% increase and then energy services both abroad and in the Czech Republic. Chesterday or the retail organization actually had a lower acquisition of commodity cost. Then they had actually effect of sales of undelivered commodities due to warmer weather in first half of 2024, which had a negative effect of 1.3 billion at that time. Now it's actually not there, so it's a positive variance. They had also higher volumes of deliveries to end-user customers, colder weather, 0.2 billion check rounds. And those are the main variants essentially. Volume of electricity and gas sold and number of customers. I think for first half of the year we are actually up by 8%, 17% in natural gas, 3% in electricity, clearly and obviously it's also a function of the weather. Number of customers is stagnating, but we acquired a few hundred thousands of customers during collapse of a few retail organizations in 2021 and then later 2022. So the move in electricity of 1% is relatively immaterial and we have 4% more customers actually on natural gas. Revenues from sales of energy services, which is ASCO activities, we had 8% decline, which is mainly year-on-year temporary effects, timing effects of big contracts in 2024. But overall for the year, we expect 7% increase in all countries that we operated. So this is all. Then there is more information in the annexes. But for now I think we can switch actually to Q&A session. Thank you.

Yes, so we are now open to your questions. Please use the Teams to raise your hand. I will call out your name and open the floor to your questions. Okay, so we have a first question from Annabeth.