Cez As S/Gdr 144A

Hello everyone and welcome on Chess Group first quarter 2026 results call. It's my pleasure to welcome Martin Novak, Chief Financial Officer and Pavel Serany, Chief Sales and Strategy Officer. We will start the call with the presentation and then we will have room to ask questions. Now I'm handing over to Martin.

Good morning, good afternoon. So, let's start with slide number three, where we actually summarize our quarterly earnings and compare it to the first quarter of 2025. I think it's important to note the EBITDA number, which has reached 35.3 billion check rounds, or 18% less than in the first quarter of 2025. Our net income on the other hand has risen by 13% to $14.5 billion and adjusted net income $13.5 billion where we actually adjusted for non-controllable interest from our shareholdings. Breeding cash flow is somewhere higher due to especially accounting treatment of our investment into state bonds. And CAPEX is significantly higher as we are actually progressing with our intensive CAPEX program. This year and following year will be probably the record high in terms of CAPEX, so we can see an increase of 130%. I will note that it's a personal level of around 200 billion CZK. Next slide, you can see actual contribution of two segments of our business, two key segments. One is actually generation and mining segment, and the other segment is actually distribution and sales. And you can see that our distribution and sales segment is fairly stable, reaching around 16.3 billion EBITDA, very similar to last year as sales and distribution business, so that's no surprise. On the generation segment, there is a significant decrease of about 33% actually in generation, mainly due to lower power prices and a few other effects. So clearly those two segments are almost even and they will be even actually for the full year when you look at it going forward. One of the most important slides is slide number 5 where we actually explain the variation between or variance between $43 billion that we made for the first quarter of last year compared to $35.3 billion this year. By far the most significant change is actually in generation segment, generation facilities. where almost $8 billion is attributable to the decrease in power prices and sales prices. As we indicated many times in the past this year, the difference in prices is fairly significant, so about $8 billion is coming from this effect. And another important effect is actually different schedules of planned nuclear outages. As you know, we have switched to more than 12-month fuel cycle at our pipelines. So we enjoyed actually very little of those fuel replacement outages in 2025 and we reached 32 terawatt hours of power generation. This year we'll be aiming at about 30 terawatt hours because we will have those refueling cycles in place. So this is the effect of the first quarter 1.1 billion. Generation segment trading is up by 1.5 billion, 1.1 billion is coming from temporary evaluation of derivatives and 400 million is actually higher margin due to pro-trading activities. Another important variant is actually coming from the gas distribution segment where, as you know, we acquired actually as of January of this year a company that we are missing geographically in our portfolio that was covering south of the Czech Republic or Bohemia and it's called Gas Distribution. This company will be integrated into Gasnet. It was actually acquired through Gasnet. and this company brought us for the first quarter 400 million Czech crowns and the remaining part is actually another 800 million, 7 to 800 million attributable to higher allowed revenues of GasNet due to higher capex in the past years. Exactly the same amount of 1.2 billion but negative is an impact of our sales segment that this kind of that has somewhat declined back to kind of standard numbers, so that the sales margin is after a very strong year, 2025, coming back to normal, I would say, and actually 600 million chip counts attributable to retail, and about 400 million plus to escrow activities, but mainly commodity sales, not services themselves. Next slide are actually key drivers related to net income. We have somewhat lower depreciation of 1 billion or 7%. This is mainly the effect of accelerated depreciation of local assets that we started to accelerate as of October 2024. 2025 was probably the highest level of depreciation of those assets and now it will be declining down to 2030, where we see the end of lifetime of those assets around 2030. So now there is a lower depreciation in 2026 versus 2025. Other items are pretty much the same as they were last year. although there are different variances that come to the same result. The most important effect of net income and this is actually why our net income is going up versus EBITDA that is going down is actually windfall tax that is not being accounted for in 2026 and it brings us about 8.6 billion check rounds. It's not only windfall, it's also an ordinary income tax as our pre-tax profit is lower and therefore the effect of income tax is lower as well. So this is how we get actually to 14.5 billion check rounds and adjustment of about 1 billion to adjusting that income is attributable to actually to the shareholding of minority shareholders mainly in GasNet. that we have to take out from consolidated numbers. Next slide are actually volumetric data that you can go through yourself on power generation, distribution and sales. Slide number 8, our dividend, I think we announced on 23rd of April our dividend proposal of the Board of Directors And it will be voted about as a shareholder meeting on June 1. We also announced actually the date of the shareholder meeting. All materials and documents for the shareholder meeting are out as of 29th of April, so they are available publicly. And the proposal is 42 check rounds per share, which is 80% of adjusted net income for 2025. Important news, the day later we actually announced One important point that is part of our shareholder meeting agenda and is actually optimization of ownership structure and management structure of the group. We are proposing to create a new entity that will be 100% owned by Chess parent company and actually include into that entity or under that entity all non-power generation assets or core non-power generation assets, meaning distribution of gas, distribution of power, ESCO activities, which is retail business, which are ESCO activities abroad. and carve out actually trading out of Chess and put it into a special trading unit that will be again a subsidiary of the new entity. So that will actually allow us to have an independent view on the assets that are known generation assets that are customer actually oriented and why we actually do it, we already announced this I think in 2022 when the shareholder meeting when we had a change or modification of our strategy that would actually allow this thing to happen. Now we feel there is the best time to do that for many reasons. One of them is also that the segment has grown significantly, so now it's actually on par with the generation segment in terms of future EBITDA. and it has many other advantages I would name. Increase in value, we believe that actually by carrying out stable regulated customer oriented activities from generation activities would probably be very interesting for external investors and they might put higher value actually on those assets versus combined company that we are today. We would also have improved efficiency and governance, enhanced transparency and more targeted management on this segment and One of the most important factors is actually improved financing. There is a big demand for us to be financed actually by external parties, but still many of them are limited due to our coal exposure. Although we belong among 7% of best traded companies in ESG area worldwide, For some investors coal is still an issue and of course then this separate entity would be able to take its own debt, its own financing that would be coal free. So this is something that we will actually ask shareholders at the shareholders meeting to approve. Next step after we do that is actually to, after it is approved, we would actually create this entity and make all legal steps that would actually make sure that this entity is fully functional, operational and all those assets are transferred into that entity by the end of first quarter of 2027. And then we would start exploring the market and work on potential divestment up to 49% of this entity, so that we could actually extract some value from this transaction. The proceeds could be used for future growth, new MA activities, but also something that we have to take into consideration that our government announced a few times. and actually it would be buying back shares of shares of parent company using proceeds from sale of minority in customer company that I just described. So all those options are notable and this is a step to get there. Important development on nuclear side, especially in relation with Rolls-Royce SMR project. We signed a memorandum of understanding with Czech state, where we actually agreed that we will start working on financing process, meaning the investors model that will be important to make sure that we can go ahead on the notification by the European Commission and basically cooperating on those projects together. We also signed a contract for preparatory work with Rolls-Royce, which is called Early Work Contract, and it actually allows us to continue with processing documentation for licensing, permitting process, construction process, paperwork basically for first SMR in the Tamerlane location. Next slide you can see actually what happened in March when the power crisis and gas crisis and crude oil crisis of course moved significantly. And this is one of the reasons that is actually impacting our numbers going forward even for 2026. And because of the move actually in the power prices, We have a positive effect on our entire portfolio of unsolved electricity, where we will definitely enjoy a positive impact of those high prices, although the amount of unsolved electricity was fairly low, definitely below 10%. This move will allow us to optimize on that. And also, this move allows us to produce more electricity than we originally anticipated, which is an important factor. And this electricity will be produced mainly at the coal plants, where we originally anticipated something like 14 terawatt hours, or slightly above 14 terawatt hours to be made. And now I think we moved our expectation to 15.3 terawatt hours. So it's not only about selling power that is unsold for more but also producing new power to be sold and of course also mining more coal to produce this power. So based on those expectations we moved our EBITDA estimate from 103 to 108 billion shekels to 107 to 112 billion shekels and net income from 27 to 31 to 30 to 34 billion Czech crowns. Now I will quickly cover generation segment and mining segment. Actually on slide number 16 you can see more detail to what I already described that EBITDA development slide. It's important to note that price effect is fairly significant and volume effect as well, corrosion nuclear, where we are down by 38% on nuclear or 7 billion check rounds, but even higher decline in percentage is actually in emission generation where we went down from 2.8 to 1.1 billion only, or 61% decline, meaning that profitability of coal plants is really going down. Then, on the next slide, nuclear and renewable generation of the first quarter is actually down by 8%. It's all mainly coming from nuclear. As I already explained, we had a longer scheduled outage on the primary nuclear plant due to the extension of the fuel cycle, so 2035 was without fuel replacement. 2026 is with fuel replacement. Only for a year we actually expect to produce slightly above 30 terawatt hours on nuclear and on the other hand we plan to grow actually on renewables mainly due to standard hydro conditions in 2026 versus rather with dry winter of 2025. On the coal and gas generation front our power generation Those assets was, on a core front, was very similar to Q1 2025. We made significantly more from gas, about 50% more from gas, which was mainly driven by favorable market conditions, actually, in our gas plant in Pochettie. And here you have actually a change in estimate in our a generation of coal, ignited electricity, and that's basically increased 10% year-on-year, but technically speaking also versus original plan, which was basically on the level on target 2025. Last slide from this section, actually hedging. You can see our hedges for 2027-2028 through 2030. Average achieved prices, how much power is actually hedged. We actually used the opportunity of seeing if it increased in coal power spreads. and actually locked in a significant part of our coal generation for 2027 and 2028, where the spread turns from negative to positive. 2029 and 2030 still kind of around zero or even negative. So the same slide is actually on the right side showing you how much carbon credits we have secured and at what prices. So now that's all for me and I'll hand over to Pavel to guide you through distribution and segment.

Okay, Martin, thank you. Let's start with distribution. We saw a 12% EBITDA increase for year-on-year. I said that the story behind it is more extensive, I would say. It makes sense to look at the growth excluding correction factors, which would be one billion higher on electricity. So this, taking into account the year-on-year growth, would be about 19%, which is driven by fundamental changes in In the investments and the underlying wrap, as well as the increased WACC, we are in the first year of the new period. As you all know, the WACC has a variable part based on the amount of investments we make. We are making enough investments to achieve this bonus part of WACC, and that's driving the growth. On the gas side, as already mentioned, also the acquisition of gas distribution. Then the correction factors mainly from year 2024 are having impact on the accounting results of the electricity distribution, but actually that's the nature of the distribution business. In terms of the full year, we still expect around 11% growth without correction factors, so the first quarter which is the quarter mostly affected by winter weather and so forth and so on, cannot be 10 multiplied by 4 for the full year. In terms of the accounting numbers, given the extensive correction factors from 2024, we are expecting about a flat number year on year. And you have all these numbers also in the backup to go through them. But anyway, what is to remember is that we see a very healthy growth of the fundamental business. In terms of the volumes, we see about 4% growth for electricity and 8% growth in gas. Gas being more affected by weather in general, by the colder winter, together with also the acquisition of gas distributions. In terms of sales segment, on page 23, again, a topic we discussed also when we were discussing the full year results, we see a 25% decrease for the overall segment. What I would like to bring to your attention is that if you compare the Q1 of 26 to Q1 of 24, so like looking two years back, you would see a 38% growth. The year 2025 was somewhat an outlier, especially on the sales of commodities, where the combination of a very low payment for ancillary services and in general for the fluctuations led to some extraordinary results, both for Cesprode and ESCO. But even without this taking aside, we see a good underlying growth for the supply business. In terms of the volumes, we see a 7% growth for the sales of electricity and natural gas. And we see a stable portfolio of customers with a a stable portfolio of customers. In terms of the revenues for the energy services, we see a slight decrease year on year for the first quarter, but we consider this temporary driven by the somewhat different revenue trend in the years of 25 and 26. We are still aiming for a healthy 9% growth year-on-year for the full year. And with this, I think we are complete.