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CEZ GROUP CFA INVESTMENT RESEARCH CHALLENGE MARCH 3, 2011 MADRID INVESTMENT RECOMMENDATION TO DECEMBER 21, 2010 11 CEZ GROUP CZECH CZECH REPUBLIC •Technical University of Ostrava CEZ GROUP •European power utility VALUATION •2 phases DCF equity method INVESTMENT RECOMMENDATION ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 22 VALUATION ASSUMPTIONS CZECH Company profile ASSIGNMENT Beta, cost of capital Industry profile • Risk averse investor • Three years perspective • Valuation to 21.12.2010 TARGET PRICE VALUATION Free cash flow prediction 807 CZK • 2 phases DCF equity method • Investment risks • Actual issues Financial analysis RECOMMENDATION HOLD Planned statements ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 33 CEZ AS INTERNATIONAL UTILITY CZECH MAJOR ELECTRICITY PRODUCER IN THE CZECH REPUBIC 74% of market 70% MoF 32.707 emp ONE OF TEN BIGGEST EUROPEAN POWER UTILITIES 65,3 TWh 17 countries 60 plants PRODUCTION BASED ON LIGNITE AND NUCLEAR POWER 45% lignite 42% nuclear 13% other 44% OF REVENUES IN POWER PRODUCTION 39% distribution 4% mining 14% other Source: Company data, Czech team research ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 44 COMPANY COMPARISON 50.0 CZECH 14 EBITDA margin 12 43 40.0 Dividend yield 10 Industry average 25,5 30.0 8 6,48% 6 20.0 4 10.0 2 0 0.0 20.0 P/E EV/EBITDA 15.0 14 12 10 8 6 4 2 0 Industry average 7,6x Industry average 12,1x 9,7x 10.0 6x 5.0 0.0 Data to 21/12/2010 ASSUMPTIONS Industry average 5,6% CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS Source: Czech team estimates, Reuters RECOMMENDATION 55 FINANCIAL ANALYSIS CZECH EBIT/Assets 250% EBITDA margin Revenues/Assets 200% 150% 100% ROCE Revenues/Current Assets 50% 2005 0% 2006 ROC Equity/Assets ROS ROE ROA Source: Company data, Czech team estimates ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 66 FINANCIAL ANALYSIS CZECH EBIT/Assets 250% EBITDA margin Revenues/Assets 200% 150% 100% ROCE Revenues/Current Assets 50% 2005 0% 2007 ROC Equity/Assets ROS ROE ROA Source: Company data, Czech team estimates ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 77 FINANCIAL ANALYSIS CZECH EBIT/Assets 250% EBITDA margin Revenues/Assets 200% 150% 100% ROCE Revenues/Current Assets 50% 2005 0% 2008 ROC Equity/Assets ROS ROE ROA Source: Company data, Czech team estimates ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 88 FINANCIAL ANALYSIS CZECH EBIT/Assets 250% EBITDA margin Revenues/Assets 200% 150% 100% ROCE Revenues/Current Assets 50% 2005 0% 2009 ROC Equity/Assets ROS ROE ROA Source: Company data, Czech team estimates ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 99 FINANCIAL ANALYSIS CZECH EBIT/Assets 250% EBITDA margin Revenues/Assets 200% 150% 100% ROCE Revenues/Current Assets 50% 2005 0% 2010 ROC Equity/Assets ROS ROE ROA Source: Company data, Czech team estimates ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 10 10 FINANCIAL ANALYSIS CZECH ROE EBIT/Assets 100% EBITDA margin 95% 90% 85% ROCE Assets 80% 75% ROC Equity/Assets ROS Enel 35 30 25 20 15 Revenues/Assets 10 5 Revenues/Current 0 ROE ROA 2009 CEZ EDF RWE Iberdrola E.ON 2005 2006 12 10 8 6 4 2 0 2007 2008 2009 2010* ROA 2010* 2010 Source: Reuters, Bloomberg, Company data, Czech team estimates ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 11 11 VALUATION BASE TEAM CZECHE Estimated free cash flows to equity (mil. CZK) 40,000 35,000 30,000 25,000 20,000 Relative changes of chosen value drivers Y.oY.change of EBITDA margin 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2,010 2,011 2,012 -2.00% -4.00% -6.00% -8.00% -10.00% Y.oY.change of sales 2,013 2,014 Y.oY.change of dividends 2,015 2,016 Y.oY.change of Price 2,017 2,018 Y.oY.change of EAT 2,019 2,020 Source: Company data, Czech team estimates ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 12 12 VALUATION TEAM E Phase 1 : 2011 - 2017 Phase 2 : 2018 - ∞ Share price as for 21/12/2010 (in CZK per diluted share) Levered β 0,99 0,99 Rm 6,29% 6,99% 900 Rf 3,64% 4,00% 850 Re 6,26% 8,50% g max, 942 950 In 52 weeks Target price, 807 800 1,49% Market price, 772 750 Values in mil. CZK Value of phase 1 148 795 Continuing value (perpetuity) 436 668 Value of phase 2 285 405 TOTAL VALUE 434 201 min, 741.5 700 Ratio between of DCF equity Ratio phases between phases of DCF equity Number of issued shares (pieces) 537 989 759 VALUE OF SHARE (in CZK) 807,080 Enterprise value 532 200 Indebtness 32,61% 34% 1. PHASE 2. PHASE 66% Source: Company data, Czech team estimates ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 13 13 INVESTMENT RISKS TEAM CZECHE Volatility of exchange rate Possible drop in rating Unstable political situation Low power prices • Business with foreign countries • Possible price increase of debt • In the Czech Republic and in other countries • Contra high fixed costs ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 14 14 POWER PRICES CZECH Historical power prices (EUR) 90 70 50 30 1/1/2005 1/1/2006 1/1/2007 1/1/2008 1/1/2009 1/1/2010 Estimated power prices (EUR) 70.00 65.00 60.00 55.00 50.00 52 52 52 51 54 57 56 59 61 65 63 PXE EEX ČEZ 45.00 40.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: EEX, PXE, Czech team estimates ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 15 15 ACTUAL ISSUES CZECH Development of subsidiary, taxed and bought emission allowances (mil. CZK) Emission allowances - gift tax Emission allowances - buy 9450 4569.6 4636.8 4004 11970 13965 15960 19950 17955 6344.8 Estimated prices of emission allowances (EUR) 70 Dividend per share (CZK) 60 20 19 18 17 16 15 14 13 12 50 40 30 20 10 0 Source: Czech team estimates ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 16 16 SENSITIVITY ANALYSIS Influence of 1% change of the factor to the value of Equity (mil. CZK) CZECH Sensitivity of value to the factor (mil. CZK) 100,000 80,000 60,000 40,000 4,290 20,000 0 -766 -20,000 Return on capital 8,889 -40,000 -60,000 -4,811 -80,000 -100,000 -9% Dividends Sales -5% -2% 0% Return on capital Emmision Allowances Emmision allowances Return on capital 2% 5% 9% Sales Dividends Source: Czech team estimates ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 17 17 SENSITIVITY ANALYSIS CZECH 18.0% 15.7% 16.0% 16.1% 13.2% 14.0% Probability 16.4% 10.3% 12.0% 9.4% 10.0% 8.0% 6.1% 6.0% 802 Variance 10122 Standard deviation 101 Min 487 Max 1126 4.3% 4.0% 2.0% Mean 0.0% 0.5% 485 528 1.2% 2.6% 2.1% 1.0% 0.7% 0.4% 1041 1084 1127 0.0% 571 613 656 699 742 785 827 870 913 956 999 Stock price Probability Percentil VaR CVaR 1% -33,8% -38,8% 5% -20,6% -28,2% 10% -14,6% -22,8% 100.00% Probability density 80.00% Distribution function 60.00% Var 1010% % VaR 40.00% 20.00% -50.00% -40.00% -30.00% -20.00% -10.00% 0.00% 0.00% 10.00% Continuous yield ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION 20.00% 30.00% 40.00% Source: Czech team estimates INVESTMENT RISKS RECOMMENDATION 18 18 SUMMARY TEAM CZECHE Good stable company with Czech political support Majority of indexes around industry average or higher TICKER NYSE EURONEXT: CEZ Reasonable financial analysis indicators Stable production of free cash flow UNDERVALUED HOLD Necessity of cutting down costs TARGET PRICE: 807 CZK Uncertainity about allowances Existing drop in dividends Investment risks ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 19 19 SUMMARY TEAM CZECHE 1150 1050 Recommendation to 21 December 2010 TICKER NYSE EURONEXT: CEZ CZK 950 850 HOLD 750 TARGET PRICE: 807 CZK 650 550 1/7/2010 20/8/2010 9/10/2010 28/11/2010 17/1/2011 Date Source: Czech team estimates ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 20 20 RECOMMENDATION TO DECEMBER 21, 2010 TEAM CZECHE TICKER NYSE EURONEXT: CEZ HOLD TARGET PRICE: 807 CZK ASSUMPTIONS CEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 21 21 CZECH APPENDIX 22 APPENDIX - HIGHLIGHTS CZECH Market profile 23 XI/2010 IX/2010 Source: Czech team estimates, Company data VII/2010 21% V/2010 Return on Equity III/2010 35% I/2010 Debt to Total Equity XI/2009 1 018,94CZK IX/2009 Book Value per Share VII/2009 0,84% V/2009 Insider Holdings III/2009 79,86 % I/2009 Institutional Holdings XI/2008 415 059 IX/2008 Market Capitalization VII/2008 537 989 759 V/2008 Shares Outstanding III/2008 6,48% I/2008 Dividend Yield (Estimated) CEZ stock price (CZK) 1600 1400 1200 1000 800 600 400 200 0 XI/2007 0,99 IX/2007 Beta VII/2007 490 953,30 V/2007 Average Daily Volume III/2007 950,00 – 736,00 I/2007 52 Week Price Range APPENDIX – INVESTMENT SUMMARY CZECH FCFE and EBITDA (mil CZK) 155,000 105,000 55,000 5,000 2,010 2,011 2,012 2,013 2,014 2,015 2,016 2,017 2,018 2,019 FCFE 2,020 EBITDA EU50 (EUR) 1600 1400 1200 1000 800 600 400 200 0 4000 3000 2000 1000 0 XI/2010 IX/2010 VII/2010 V/2010 III/2010 I/2010 XI/2009 IX/2009 VII/2009 V/2009 III/2009 I/2009 XI/2008 IX/2008 VII/2008 V/2008 III/2008 I/2008 XI/2007 IX/2007 VII/2007 V/2007 III/2007 I/2007 Source: Czech team estimates, Company data, Eurostoxx50 CEZ (CZK) EU50 : CEZ 5000 EU50 CEZ 24 APPENDIX – STATEMENT OF CASH FLOW CZECH Statement of Cash Flows (in millions CZK) 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 47 163 44 259 42 877 45 790 49 149 50 320 52 861 55 655 58 669 22 634 22 860 23 089 23 320 23 553 23 788 23 500 23 500 23 500 69 797 67 119 65 966 69 109 72 702 74 109 76 361 79 155 82 169 67 751 59 610 61 468 45 723 47 706 33 380 35 000 35 000 50 000 ∆ Current assets 6 168 774 -456 5 744 8 960 6 319 6 193 6 297 6 564 ∆ Current liabilities 7 011 880 -518 6 529 10 185 7 183 7 039 7 158 7 462 ∆ Working capital -843 -105 62 -785 -1 225 -863 -847 -860 -897 8 078 3 035 2 300 426 0 0 0 0 0 74 986 62 539 63 830 45 363 46 481 32 516 34 153 34 139 49 103 28 520 25 940 24 342 23 583 25 184 27 032 27 676 29 073 30 610 5 797 5 797 5 797 5 797 5 797 5 797 5 797 5 797 5 797 EAT Amortization CASH GENERATED FROM OPERATIONS CAPEX Financial investments CASH USED IN INVESTING ACTIVITIES Dividends Part payment of debts CASH USED IN FINANCING ACTIVITIES DIFFERENCE OF CASH FLOW 34 317 31 736,51 30 139 29 379 30 981 32 829 33 473 34 870 36 407 -39 506 -27 156 -28 003 -5 633 -4 760 8 763 8 734 10145 -3 341 Net debts 39 506 27 157 28 003 5 634 4 760 -8 763 -8 734 -10 146 3 341 Condition of debts 190 519 211 879 234 086 233 922 232 886 218 325 203 794 187 851 185 395 Source: Czech team estimates, Company data 25 APPENDIX – BALANCE SHEET (ASSETS) CZECH Balance Sheet (in millions CZK) ASSETS NON-CURRENT ASSETS Plant in service Less accumulated provision for depreciation Net plant in service Nuclear fuel, at amortized cost Construction work in progress Investment in associates and jointventures Investments and other financial assets Intangible assets, net Deferred tax assets CURRENT ASSETS Cash and cash equivalents Receivables, net Materials and supplies, net Fossil fuel stocks Emission rights Other financial assets Other current assets Source: Czech team estimates, Company data 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 530 259 584 179 621 702 659 626 687 773 720 886 736 796 754 489 772 286 805 351 414 955 462 707 499 457 537 836 560 239 584 392 593 984 605 484 616 984 643 484 509 618 577 369 636 979 698 447 744 170 791 876 825 256 860 256 895 256 945 256 266 377 -289 011 -311 871 -334 960 -358 280 -381 833 -405 621 -429 121 -452 621 -476 121 243 241 288 358 325 108 363 487 385 890 410 043 419 635 431 135 442 635 469 135 5 439 6 000 6 000 6 000 6 000 6 000 6 000 6 000 6 000 6 000 80 125 80 125 80 125 80 125 80 125 80 125 80 125 80 125 80 125 80 125 17 250 17 400 17 400 17 400 17 400 17 400 17 400 17 400 17 400 17 400 49 423 50 000 50 000 50 000 50 000 50 000 50 000 50 000 50 000 50 000 18 653 20 000 20 000 20 000 20 000 20 000 20 000 20 000 20 000 20 000 824 824 824 824 824 824 824 824 824 824 115 304 121 472 122 246 121 790 127 534 136 494 142 812 149 005 155 302 161 867 26 727 38 537 43 258 42 333 47 884 56 429 61 815 67 083 72 449 78 063 47 347 41000 37000 37500 38000 38500 39000 39500 40000 40500 4 959 5 224 5 258 5 238 5 485 5 870 6 142 6 408 6 679 6 962 2 944 3 101 3 121 3 110 3 256 3 485 3 646 3 804 3 965 4 133 1 212 1 400 1 400 1 400 700 0 0 0 0 0 29 706 29800 29800 29800 29800 29800 29800 29800 29800 29800 2 409 2 409 2 409 2 409 2 409 2 409 2 409 2 409 2 409 2 409 26 APPENDIX – BALANCE SHEET (LIABILITIES) CZECH Balance Sheet (in millions CZK) EQUITY AND LIABILITIES TOTAL EQUITY Equity attributable to equity holders of the parent Stated capital Treasury shares Retained earnings and other reserves Non controlling interests TOTAL LIABILITIES LONG-TERM LIABILITIES Long-term debt, net of current portion Accumulated provision for nuclear decommissioning and fuel storage Other long-term liabilities DEFERRED TAX LIABILITY CURRENT LIABILITIES Short term loans and current portion of long-term debt Trade and other payables Accurated liabilities Source: Czech team estimates, Company data 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 530 259 584 179 621 702 659 626 687 773 720 886 736 796 754 489 772 286 805 351 206 675 219 861 235 146 251 381 273 162 297 127 320 415 345 599 372 181 400 240 200 361 214 361 229 646 245 881 267 662 291 627 314 915 340 099 366 681 394 740 53 799 53 799 53 799 53 799 53 799 53 799 53 799 53 799 53 799 53 799 -5 151 -4 600 -4 600 -4 600 -4 600 -4 600 -4 600 -4 600 -4 600 -4 600 151 713 165 162 180 447 196 682 218 463 242 428 265 716 290 900 317 482 345 541 6 314 5 500 5 500 5 500 5 500 5 500 5 500 5 500 5 500 5 500 323 584 364 317 386 557 408 245 414 611 423 759 416 382 408 890 400 105 405 111 177 181 211 238 232 598 254 805 254 641 253 605 239 044 224 513 208 570 206 114 118 921 152 630 173 990 196 197 196 033 194 997 180 436 165 905 149 962 147 506 37 152 37 500 37 500 37 500 37 500 37 500 37 500 37 500 37 500 37 500 21 108 21 108 21 108 21 108 21 108 21 108 21 108 21 108 21 108 21 108 15 335 15 000 15 000 15 000 15 000 15 000 15 000 15 000 15 000 15 000 131 068 138 079 138 959 138 441 144 970 155 155 162 337 169 376 176 535 183 997 37 889 37 889 37 889 37 889 37 889 37 889 37 889 37 889 37 889 37 889 78 212 87 670 88 550 88 032 94 561 107 250 116 436 125 077 133 518 142 005 14 967 12 520 12 520 12 520 12 520 10 016 8 013 6 410 5 128 4 103 27 APPENDIX – INCOME STATEMENT CZECH Income statement (in millions CZK) 2 009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E REVENUES 196 352 206 855 208 173 207 397 217 179 232 436 243 196 253 742 264 466 275 644 Sales of electricity Heat sales and other revenues 173 494 188 050 189 248 188 543 197 453 211 305 221 088 230 674 240 423 250 585 22 858 18 805 18 925 18 854 19 744 21 131 22 109 23 067 24 042 25 059 Operating costs 128 153 118 155 116 577 116 142 121 620 130 164 136 190 142 095 148 101 154 361 4 570 4 637 4 004 6 345 9 450 11 970 13 965 15 960 Gift tax Allowances OPERATING COSTS AFTER ALLOWANCES 128153 118 155 121 146 120 779 125 624 136 509 145 640 154 065 162 066 170 321 Amortization EBITDA EBIT Interests EBT Income tax EAT 22 876 22 634 22 860 23 089 23 320 23 553 23 788 23 500 23 500 23 500 97 075 88 700 87 026 86 618 91 555 95 927 97 556 99 676 102 400 105 323 68 199 66 066 64 166 63 529 68 235 72 374 73 768 76 176 78 900 81 823 3 303 7 841 9 526 10 594 11 704 11 696 11 644 10 916 10 190 9 393 64 946 58 226 54 640 52 935 56 531 60 678 62 124 65 260 68 710 72 431 13 091 51 855 11 063 47 163 10 382 44 259 10 058 42 877 10 741 45 790 11 529 49 149 11 803 50 320 12 399 52 861 13 055 55 655 13 762 58 669 Dividends EAR 26 899 24 956 28 520 18 642 25 940 18 319 24 342 18 535 23 583 22 207 25 184 23 965 27 032 23 288 27 676 25 185 29 073 26 582 30 610 28 059 Source: Czech team estimates, Company data 28 APPENDIX – FREE CASH FLOW CZECH Free cashflow (in millions CZK) FCFF 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E EAT 47 163 44 259 42 877 45 790 49 149 50 320 52 861 55 655 58 669 ODPISY 22 634 22 860 23 089 23 320 23 553 23 788 23 500 23 500 23 500 -843 -106 62 -785 -1 225 -864 -847 -861 -897 INV 67 751 59 610 61 468 45 723 47 706 33 380 35 000 35 000 50 000 úroky 7 841 9 526 10 594 11 704 11 696 11 644 10 916 10 190 9 393 úroky(1-t) 6 351 7 716 8 581 9 480 9 474 9 432 8 842 8 254 7 608 FCFF 9 240 15 331 13 017 33 652 35 695 51 024 51 049 53 270 40 674 FCFE 2 010 2 011 2 012 2 013 2 014 2 015 2 016 2 017 2 018 EAT 47 163 44 259 42 877 45 790 49 149 50 320 52 861 55 655 58 669 Odpisy 22 634 22 860 23 089 23 320 23 553 23 788 23 500 23 500 23 500 ČPK -843 -106 62 -785 -1 225 -864 -847 -861 -897 INV 67 751 59 610 61 468 45 723 47 706 33 380 35 000 35 000 50 000 Saldo U 33 709 21 360 22 206 -163 -1 037 -14 560 -14 531 -15 943 -2 456 FCFE 36 598 28 975 26 642 24 009 25 184 27 032 27 676 29 073 30 610 změna ČPK Source: Czech team estimates, Company data 29 APPENDIX – VALUATION CZECH DCF method 2 010 2 011 2 012 2 013 2 014 2 015 2 016 2 017 Free cash flow to the equity 36 598 28 975 26 642 24 009 25 184 27 032 27 676 29 073 30 610 27266,7 23594,0 20008,4 19751,2 19950,7 19222,1 19002,3 Discounted free cash flow Values in CZK Phase 1 : 2011 - 2018 2 018 Phase 2 : 2018 and more Value od phase 1 148 795 Levered β 0,99 Levered β 0,99 Continuing value (perpetuity) 436 668 Re 6,26% Re 8,50% Value od phase 2 285 405 Rm 6,29% Rm 6,99% Total value 434 201 Rf 3,64% Rf 4,00% Number of issued shares 537989759 CZ/A 32,61% CZ/A 23,02% Value of share 807,080 E/A 37,64% E/A 49,70% Counted growth in the second phase was 1,49% based on planned growth of sales Source: Czech team estimates, Company data 30 APPENDIX CZECH Cross-border power flows (2009) STATE TRANSMISSION SYSTEM PLAN FACT 50 Hertz Trans. -3720 GWh -1400 GWh TenneT -4077 GWh -6321 GWh Poland PSE Operator -726 GWh 5849 GWh Slovakia SEPS -5229 GWh -5825 GWh Austria APG -1997 GWh -6599GWh Czech Republic ČEPS -14297 GWh -14296GWh Germany DE - 51,14€/MWh PL – 50,25€/MWh SK – 49,15€/MWh HU - 51,05€/MWh Source: ČEPS 31 APPENDIX CZECH 50% Rentability 40% ROC 30% EAT/Equity 100% EBIT/Assets 80% 60% 10% ROA 0% 40% ROC ROE 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 EBITDA margin ROS 20% Revenues/Assets 20% 0% Revenues/Current 100% Assets 80% ROS Financial stability Total Indebtedness Debt on Equity 60% ROA 2009 Equity/Assets 2010 ROE 40% Financial Independence 20% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 0% Source: Comapny data, Czech team estimates 32
