Introducing Czech Power Company ČEZ

As a powerful, dependable, and stable partner, we are ready to help you realize your power supply plans and concepts.

 

Introducing

The joint-stock company CEZ was established in 1992 by the National Property Fund of the Czech Republic, which is still the majority owner of its shares. The core business activity of CEZ, a.s., is electricity production as well as the sale and related support of power systems.  CEZ is also engaged in the production, distribution, and sale of heat.

JE TemelínIn 2003, a merger of CEZ, a.s., with distribution companies (Severoceska energetika, Severomoravska energetika, Stredoceska energeticka, Vychodoceska energetika and Zapadoceska energetika) gave rise to CEZ Group, which became the prominent energy group in the region of Central and Eastern Europe. CEZ Group ranks among the ten largest energy conglomerates and is the strongest business entity on the domestic electricity market. In the Czech Republic, CEZ Group is the largest electricity and heat producer, and a distribution system operator in most regions. Most production capacities are centralized in the controlling company CEZ, a.s.

Successful acquisitions of distribution companies in Bulgary and Romania, as well as power plants in Poland and Bulgary opened the way to new markets for CEZ Group. During 2006, new subsidiary companies in Serbia, Kosovo, The Republic of Serbia in Bosnia, Herzegovina, and Ukraine joined CEZ Group. Preparations for the obligatory unbundling in Bulgary were started and at the beginning of 2007 they culminated in its implementation.

In September 2008, ČEZ bought the Polish state-owned share in Elektrownia Skawina S.A., and in 2009 the remaining minority shares through its subsidiary CEZ Poland Distribution B.V., which now owns a 100% share in the power station. In May 2009, ČEZ, a. s. acquired a 37.3614% share in the Turkish company Akenerji Elektrik Üretim A.S.

In May 2009, ČEZ, a. s. acquired a 76% share in Operatori i Sistemit te Shperndarjes Sh.A., an Albanian distribution company based in Tirana.

In 2012, CEZ Group completed construction of the Fântânele and Cogealac wind farm in Constanţa County. The last of Fântânele and Cogealac's 240 wind turbines was connected to the grid on November 22, 2012.

CEZ Group is seeking opportunities to diversify its assets and the stakes of shareholders in subsidiary companies within CEZ Group, while maintaining its competitive advantage in the marketplace.

Selected statements

General Company Information
Business name: ČEZ, a. s.
Street: Duhová 2/1444
City: Praha 4
Postcode: 140 53
Phone: 211 041 111
Fax: 211 042 001 
E-mail: info@mail.cez.cz
URL: www.cez.cz
Sector: Energy (OKEČ Classification No 40.10)
Registration number: 45274649
Tax identification number: CZ45274649
Bank: KB Praha 1, account number 24003-011/0100
Core business: Electricity generation and distribution
  Heat production and distribution
Auditor: Ernst & Young Audit s.r.o.
CZECH  MADE award: No
Ratings: A- (Standard & Poor’s)
  A2 (Moody’s)

Incorporated by entry in the Commercial Register kept by the Municipal Court in Prague, Section B, Entry 1581

 

Entrepreneurial conception of the ČEZ, a. s.

Introduction

The entrepreneurial initiative for our company is focused on creating a framework for its business activities, in accordance with the companies moral code. This plan has a crucial impact on the day-to-day business activities and helps defines its mission, as well as its entrepreneurial vision. In addition it sets objectives for individual divisions of the company.

The CEZ Group was established in 2003, through a merger with regional electricity-energy utilities that cover a predominant portion of electricity distribution in the Czech Republic. The activities of this new business entity are more favorably balanced in terms of risks. The ČEZ Group is currently capable of reaching a significant number of end customers directly, both corporate and retail. The Group has updated its business plan for the fourth time since 1995This fourth update reflects the current position of the ČEZ Group and its strategy for the future development of the company. It also includes the companies adherence to the National Energy Policy, which was approved by the Czech government on 10 March 2004 which outlines a long-term framework for the development of the Czech energy industry.

Vte-RumunskoThe energy market has seen an influx of competition, stimulated by the current changes in market structure, related to the ongoing deregulationprocess and the development of European and subsequently Czech legislation. In the upcoming period, it is absolutely vital to complete the ČEZ Group integration project, to implement a single management system and start making full use of the increased effeciancy resulting from the new structure of the ČEZ joint-stock company and the entire ČEZ Group. The aim is to create a trade-production entity capable of successful performance not only on the Czech market, but also in the much more competitive EU markets.

The ČEZ company will pay constant attention to the efficiency of its organizational structure, i.e. its unification, clarity and transparency, reflecting the best practice generated by the integration project. These implemented measures will be aimed at cutting costs by aggregating decision-making teams into logical “super-units”, by integrating a communication interface between these units, and establishing a joint center to house these units. By downsizing the number of management levels, the company will make more efficient use of its human capital. The company will thus become generally more flexible, which will in turn improve its communications with partners and the ability to cope with growing competition.

ČEZ’s main objective is to become a key player on the Central European electricity market. This challenge could be reached by acquiring equity shares in power utilities, especially (but not exclusively) in neighboring countries, through involvment in privatization projects (Slovakia, Poland, but also Bulgaria). In additon CEZ couldacquire equity in companies that alreqady have private owners, if these existing owners reorient the focus of their companies (distributors in Slovakia, Hungary). It is necessary to preserve current regulations for an effective privatization of ČEZ, a. s., either complete or in part, in accordance with the decision of the Czech Government.

ČEZ, a. s., will be regarded as a respectable player on the European market

1.  Corporate Mission Statement

The principal objective of the ČEZ joint stock company is successful business performance on both Czech and foreign electricity markets, which should in turn guarantee appropriate long-term benefits for our shareholders.

ČEZ, a. s., will continue to ensure a stable electricity supply in the CzechRepublic, and will provide its customers with electricity, including ancillary services, and heating of the highest quality. A portion of the generated electricity volume will be sold in European markets.

In order to achieve this goal, ČEZ, a. s., is using all its production resources, plus trade and technical expertise, including its equity stake in companies associated within the ČEZ Group.

2.  ČEZ Group Business Line

The primary entrepreneurial activity of the company is the production, purchase, distribution and sales of electricity and the provision of related ancillary services.

The main entrepreneurial focus of the ČEZ Group is the production, purchase, distribution and sales of electricity to end customers of all sizes. This activity generates the predominant volume of costs and revenues. CEZ’s success in this field depends largely on the efficiency of the electricity trade and customer services, in both the corporate and retail sector. The main objective is to produce an optimum share of electricitygenerated by its own economically viable sources. Our electricity volume will be highly reliable and careful monitoring of systems will help eleminate potential safety risks, while also limited its environmental impact. Nuclear safety is the main concern. The electricity distribution system should provide services indiscriminately, with the required reliability and costs proportional to the regulatory framework. Primary entrepreneurial activities also entail the provision of ancillary services to the transmission network operator, and partly also to the distribution network operators.

Secondary entrepreneurial activity entails generating and selling heat and processing by-products generated by energy-yielding processes.

The most significant secondary entrepreneurial activity is the supply of cogenerated electricity and heat. The company policy in this area is to encourage the maximisation of cogenerated electricity and heat output, rather than maximise solely the revenues generated by the sold heat output.

The secondary entrepreneurial activities of the company also include the reprocessing of by-products, generated in the process of electricity or heat production (industrial gypsum, fly ash). These materials are reprocessed so that they can be used for commercial gain. This is a win-win situation, aimed at cutting costs and generating additional revenue, but also at minimising the environmental impact.

In the context of the ongoing preparation of the greenhouse gas trade, namely the issuing of permits for emitting these gases, these positive activities could become a significant part of the secondary business activities of the company.

The primary and secondary activities will be coordinated, with the aim of generating maximum efficiency.

Tertiary business activities are significantly related to both the primary and secondary entrepreneurial activities.

Tertiary activities are corporate tools, thats purpose is to minimize risks that might jeopardize  core activities and strategic projects, and to facilitate more efficient and beneficial use of the material and intellectual potential of the company and its staff. The end goal of these activities is to support the general corporate strategy. This includes e.g. equity shares or alliances which enable

  • efficient and effective management, maintenance and development of the existing portfolio of providers,
  • capitalize on know-how and experience by providing services to other power utilities and other enterprises,
  • Implementation of entrepreneurial activities, namely in the area of equity participations, both within and outside the energy industry.

    3.  Entrepreneurial Plan

    To increase the company’s share of the Czech electricity market and develop activities outside the Czech Republic.

The company has made a crucial step towards successful performance on the liberalized electricity market, by transforming itself from a purely production enterprise (with guaranteed customer demand) into a trade-production company, which places strong emphasis on trading electricity, which the company generates distributes and sells to its end customers. The production of electricity by the company’s own sources is currently deemed subordinate to trading considerations, on the other hand, the company’s supply and services are tailored according to its own production of electricity.

The merger between ČEZ and the regional distribution companies has yielded a well-balanced portfolio of assets, which enables the group to do well both on competitive and regulated markets. The company is therefore striving to increase its share of the Czech market and to expand to foreign markets as well.

Trade

Exercise an active trade policy, targeted at both traditional and new customers and markets.

ČEZ aims to retain its long-term competitive advantage with electricity and related services, namely in the CzechRepublic based markets, and to strengthen its position on the liberalized European electricity market. The company plans to achieve this by

  • satisfying the demand for electricity and related ancillary services in an efficient manner, the electricity will be generated largely by its own sources, complemented by well-chosen purchases on the market,
  • enlarging its base of satisfied, and therefore loyal customers, by providing them with an electricity supply that meets the expectation,
  • devising an offer of electricity supply and related services, optimizing the range of rates and tariffs for bulk customers and various ways of servicing these customers, and by tailoring special contracts for VIP customers,
  • establishing contractual or co-ownership alliances with other producers, traders, and with suppliers and customers, if it proves beneficial.

The implementation of the trade policy will be facilitated by effective structuring of the services provided to individual customer groups.

Production

The company should use its optimum portfolio of production and distribution assets to help it maintain competitive in its production and distribution of electricity and heat, while retaining a high standard of reliability.

We will optimize our production base by doing the following:

  • The future scenario regarding coal-fired power plants will entail a process of controlled ageing in the intermediate outlook, including the gradual phasing-out of individual units. Long-term considerations evoke the need to start preparations for the renewal of production sources by building up new coal-fired units with better efficiency, or perhaps by retrofitting the existing lignite-fired units, supposing the resources of Czech lignite are only available for a limited perio d of time.
  • The company should maintain safe, reliable and economically-sound operation of its power plant, thus making this type of electricity production acceptable for the public, as is the case today. A gradual modernization of the Dukovany NPP will allow both units to be operational for at least another 40 years. 
  • The company should maintain safe, reliable and economically-sound operation of the Temelín power plant, with the objective of achieving long-term qualitative indicators comparable to Dukovany NPP.
  • The development of our distribution network will be regulated with the aim of ensuring reliable operation in the delineated standards, thus enabling undisturbed electricity supply to the customers.
  • The government’spolicy of supporting the use of renewable sources, which is currently being prepared for the adoption of the pertinent EU legislation, presents a unique business opportunity. ČEZ is therefore going to analyze the potential for the development of the efficient use of renewable sources, with the aim of gradually increasing the share of electricity from renewable sources generated by ČEZ Group production plants; namely by cofiring (what is this word supposed to be) biomass with coal, and by increasing our hydropower, wind power and solar energy sources portfolio.

Capital

With the aim of ensuring maximum long-term revenues for its shareholders, in return for their invested capital, the company will strive to maintain continually increasing market capitalization, resulting in a credible dividend policy. The company will use free funds in order to achieve long-term goals. This entails

  • accumulating the basic funds needed in order to rejuvenate the performance of coal-fired sources, by implementing efficient technologies that comply with the new ecological laws aimed at further emission reductions,
  • the creation of liquidity sources which so far only cover accounting reserves (especially for the future decommissioning of nuclear facilities),
  • appropriate financial investments in the energy chain, aimed at minimizing entrepreneurial risks,
  • effective financial investments in energy industries outside the Czech Republic,
  • allocation of funds outside the core business activity of the company.

The aim is to carry out all these activities, while remaining economically effective, taking into consideration the financial health of all companies associated in the ČEZ Group, keeping cash flow undisturbed and retaining the appropriate credit rating of the parent company as well as its subsidiaries.

Raw materials

ČEZ, a. s., will use primary energy sources, including renewables, with the aim of optimizing the use of the domestic raw material base in the long run.

Within the scope of our business activities, we shall

  • use the competitive advantages of the domestic fuel and raw material base,
  • diversify the fuel base and optimize it according to our needs,
  • implement rationalizing measures in order to make the production sources more efficient,
  • increase the utilization of renewables in the production of electricity, and thus significantly contribute to compliance with the national renewable energy target.

Human resources

In order to ensure the performance of the key activities, we shall train and cultivate a team of capable and efficient employees, who identify themselves with the strategic objectives of the company.

In order to achieve the strategic goals, the company has to optimize the structure, expertise and number of its employees.

Employees shall

  • share common values,
  • accept the required level of efficiency and effectiveness, quality and expertise,
  • will be willing and able to adapt to changes,
  • be willing to share their knowledge and expertise with their colleagues, communicate and be open to cooperation,
  • have appropriate self-confidence and ability to make decisions that comply with the mission and entrepreneurial vision of the company.

Other key aspects of our entrepreneurial activities

ČEZ will observe good business practices, carry out active communication and implement an open policy, with the aim of being regarded as a strong, trustworthy and successful company.

We shall continue  to maintain the following characteristics of ČEZ, a. s., ČEZ Group and its members. They shall be:

  • entities practicing responsible environmental policy,
  • entities with sound entrepreneurial ethics,
  • noteworthy, much-sought-after and reliable business partners of both current and potential customers,
  • top-of-the-line, reputable and popular partners of their suppliers, investors and creditors, and this perception should also extend to the authorities, media, and both the expert and the public.

4.  Corporate Management

The company shall implement an extremely efficient management system in the integrated ČEZ Group. It shall establish a transparent environment at all managerial level, as well as a good communication system, which should provide suitable conditions for a highly efficient performance of the company, which also translates into the long-term prosperity of all members of the ČEZ Group.

The company shall systematically develop a system of satisfying the needs of both domestic and foreign customers, by means of the process-oriented management model, based on:

  • clearly apportioned responsibilities and jurisdictions at individual stages of the line management,
  • the practical application of the principle of appointing a single responsible guarantor in a given area, selected out of the top managers responsible for accomplishing the for mentioned objectives,
  • a declaration and implementation of partial concepts and policies in the management of significant processes that build on the existing concept of business activity and encourage efficiency, e.g. by applying the project management principle when implementing significant innovations,
  • consistent monitoring and regular evaluating of measurable targets, especially with the aim of
    *      satisfying the expectations of company shareholders, customers and employees,
    *      ensuring the safe, reliable and environmentally sound operation of production plants,
  • the adoption of a value-based method of financial management, supported by a single reliable information system that enables the optimal development of feedback (controlling, management information system, benchmarking),

with the aim of adopting and standardizing this system in the ČEZ Group.

Our key corporate management tools in addition to the business plan include, also the strategic and business plan and annual budgets, which specify the intentions of the approved plan by providing key performance indicators, among other things.

5.  Strategic development objectives

When planning future development, we have two basic strategic objectives in mind:

A – concerning acquisitions and divestments

A.1 Acquiring a majority share in the Slovenské elektrárně joint-stock company, within the framework of its currently held privatization process (66% of the company’s equity is on offer) and effectively incorporating this company into the ČEZ Group.

A.2 Acquiring a majority share in Bulgarian distribution utilities, within the framework of its currently held privatization process, and effectively incorporating this entity into the ČEZ Group.

A.3 Monitoring the development of Central European electricity industries, with the aim of acquiring equity in other power utilities, either in their privatization process (e.g. distributors in Poland or Southeastern European countries), or in connection with potential changes in the strategy of Central European owners (e.g. distributors in Slovakia or Hungary).

A.4 Monitor the development of the privatization process in the mining joint-stock company Severočeské doly, in which ČEZ holds a 37% minority share; with the aim of acquiring equity that would enable ČEZ to influence the management and operation of this company, which would in turn ensure stable prices and a long-term supply of brown coal.

A.5 Monitor the potential for retaining or reacquiring its equity and thereby influence in the distribution company Severočeská energetika (North Bohemian power company), as ČEZ has to transfer its majority share in this company to another entity by an appointed date, by a decision of the Czech Office for the Protection of Competition.

A.6 Transfer its minority share in the ČEPS joint-stock company by an appointed date, in compliance with the decision of the Czech Office for the Protection of Competition. The equity is to be transferred to an entity, whose ownership position in the company will not jeopardize the interests of the company. This strategic goal should be prioritized above the short-term financial effects.

A.7 Transfer its minority share in the Pražská energetika joint-stock company by an appointed date, in compliance with the decision of the Czech Office for the Protection of Competition. The equity is to be transferred to an entity which meets the conditions set by the Office; the suitable candidate will preferably be chosen through a competitive tender.

B – concerning electricity and heat generation

B.1 Create preconditions for prolonging the service lives of nuclear power plants up to 50 years or more, within the framework of projects supporting long-term utilization of nuclear power plants.

B.2 Continue the process of optimizing the structure of the power plants’ capacity – modernization of the Dukovany nuclear power plant. These measures include controlled ageing, decommissioning, profitable purchase or equity participation, or possibly also by selling parts or entire power facilities.

B.3 Prepare the technical and legal background for the renewal of the capacities of coal-fired power plants, in connection with the end of service life of their technological components. This should be achieved by building new coal-fired units with better efficiency or by retrofitting the existing lignite-fired units. This aim should be facilitated by securing an adequate capacity of human and financial resources.

B.4 Considering the complexity of the preparations of the new nuclear units, which is  a result of the long-term negotiation process, it is vital to start a study preparation for the construction of one or several new nuclear units, taking into account potential hydrogen production.

B.5 Create protocols for minimizing the impact of greenhouse gas emissions, or generate additional financial benefits in the area of trading with the greenhouse gas emission permits by increasing the efficiency of electricity generation in coal-fired power plants and by optimizing the portfolio of production capacities.

B.6 Increase the amount of electricity generated by renewable energy sources in ČEZ-owned facilities (namely by cofiring biomass with coal, and also by using hydropower, wind power and solar energy).

C – concerning the sales of energy supply

C.1 Implement an effective marketing and commercial orientation of the company and other members of the ČEZ Group on the electricity market, extending down the line to the end consumer. This should be achieved either directly or in alliance with other traders and suppliers, especially with distribution companies associated in the ČEZ Group. This is aimed at increasing our company’s share of the total electricity production, distribution and sales on the Czech market and retaining its position in foreign markets, tailoring the diversification of its electricity supply according to the developing European markets.

C.2 Continue applying management systems for quality, safety and environmental protection. In view of this consideration, the company shall offer its clean, safe, reliable and competitive electricity and the ancillary services on the liberalized European market.

D – concerning electricity distribution

D.1 Comply with the criteria of licensed distribution and trading activities in gradual steps

o        step1 –       functional division (independent decision-making concerning assets, separated access to distribution related data and sales related data)

o        step 2 –      legal separation of distribution and sales (into two independent legal entities).

D.2 Gradually implement the project Vize 2008 (Vision 2008) by outsourcing the core activities of the regional power utilities associated in the ČEZ Group, as independent enterprises with specific areas of business. These separate units will complement each other, with the aim of being more efficient through considerably reducing costs and also improveing the quality of the provided services. This management model of the ČEZ Group is tailored according to EU requirements and its ultimate goal is the legislative division of individual activities within the energy chain – production, sales and distribution.

D.3 The company shall centralize its core activities into the existing localities of power companies, e.g.

  • Sales, telecommunications, marketing and promotion, asset management support
  • Customer services, information technologies
  • Operator of distribution networks – network development, ancillary services
  • Management of electrometers, operator of distribution networks – dispatching, small hydropower plants
  • Distribution services, purchase, logistics.

E – concerning the transformation of the company

E.1 Complete the ČEZ Group integration project and put its results into practice.

E.2 Introduce a single management system to maximize efficiency.

E.3 Increase efficiency of the management by trimming the management organizational structure by implementing a management system with clearly defined jurisdictions and responsibilities for concrete measurable targets, improving personnel management, encouraging the education of employees, and aiding their professional growth.

E.4 Establish a transparent environment at all management levels, and through good communication create the necessary conditions for maintaining the long-term prosperity for all members of the ČEZ Group.

E.5 Continue outsourcing activities, if this proves effective in the long run.

E.6 Continually improve the media image of the company, so that it is perceived as a reliable partner and a trustworthy company that uses its capacities for the benefit of its shareholders and employees but also its suppliers and customers.