CEZ's Consolidated Quarterly Report on Operational, Economic and Financial Results for 1st Quarter 2003, in accordance with IFRS
Main Features
- The transfer of shareholdings on 1 April 2003 brought to culmination the nearly one-year Czech power industry integration process and laid the foundations for the new ČEZ Group. In conjunction with this development, Standard & Poor’s leaves ČEZ's rating at BBB+ and increases the outlook from "stable" to "positive".
- ČEZ´s total electricity generation grew by 12.8%; contributing to this figure was generation in fossil power stations (up 19.3%) and in nuclear power stations (up 8.0%).
- ČEZ’s turnover was CZK 15.8 bn in total, which is CZK 0.9 bn higher than in 1st quarter 2002 mainly due to higher electricity sales both in the Czech Republic and abroad.
- ČEZ´s power plants provided for 58.2% of electricity consumption compared to 52.1% in the same period of 2002; ČEZ´s market share increased in year-on-year comparison from 59.5 to 62.1%.
- Electricity demand in the Czech Republic reached 15.5 TWh, which represents a year-on-year increase of 3.3%.
- Net income, at CZK 3.3 bn, exceeded expectations dramatically; the predicted decline in net income due to Temelín Nuclear Power Station depreciation charge and reduced prices of the "Rainbow Power" offering was mitigated by improved electricity sales.
- Unit Two of Temelín was put into commercial operation on 18 April 2003; a planned shut-down of Unit One for inspection and fuel replacement was completed on 26 April 2003 and with this Temelín as a whole began operating at full capacity.
- The contract between ČEZ and Harpen ČR concerning sale of the Náchod Heating Plant was signed in March 2003.
Prague, May 5, 2003
| Income Statement in Accordance with International Financial Reporting Standards | March 31, 2003 | March 31, 2002 | Index 03/02 | |
|---|---|---|---|---|
| CZK m | EUR m | CZK m | ||
| Operating revenues | 15,835 | 496 | 14,949 | 105.9% |
| Operating expenses | 11,191 | 350 | 9,659 | 115.9% |
| Fuel | 3,811 | 119 | 3,123 | 122.0% |
| Purchased power and related services | 1,790 | 56 | 2,168 | 82.6% |
| Depreciation and amortization | 3,140 | 98 | 2,413 | 130.1% |
| Operating income | 4,644 | 145 | 5,290 | 87.8% |
| Other expenses (income) | 96 | 3 | -536 | -17.9% |
| Income before income taxes | 4,548 | 142 | 5,826 | 78.1% |
| Income taxes | 1,211 | 38 | 652 | 185.7% |
| Net income | 3,337 | 104 | 5,174 | 64.5% |
| Unit | March 31, 2003 | March 31, 2002 | Index 03/02 | |
|---|---|---|---|---|
| Earnings per share (EPS) | CZK | 5.7 | 8.8 | 64.8% |
| Price/earnings ratio (P/E) * | 1 | 8.8 | 4.7 | 187.2% |
| Return on equity (ROE) net * | % | 4.6 | 6.9 | 66.7% |
| Return on total assets (ROA) net * | % | 2.8 | 4.2 | 66.7% |
| Assets turnover * | 1 | 0.24 | 0.24 | 100.0% |
| Total indebtedness (provisions excluded) | % | 25.4 | 28.2 | 90.1% |
| Long-term indebtedness | % | 13.6 | 17.9 | 76.0% |
| * For the last 12 months | ||||
Revenues, Expenses, Income
Our Income Statements, Balance Sheets, and Cash Flow Statements have been converted from Czech Accounting Standards to International Financial Reporting Standards (IFRS) and may differ significantly from the same data prepared according to Czech Accounting Standards. The structure of data was changed due to changes in consolidation and 2002 data were adjusted to allow year-to-year comparison. The figures presented include the fully consolidated data from ČEZ and ČEPS, and a portion of the earnings of an affiliated company (Severočeské doly) using the equity method (ČEZ´s share 37.21%).
ČEZ’s turnover totalled CZK 15.8 bn, which is CZK 0.9 bn higher than in 1st quarter 2002, mainly due to higher electricity sales in the liberalized wholesale market. Net income for 1st quarter 2003 amounted to CZK 3.3 bn, a decrease of CZK 1.8 bn (by 35.5%) in comparison with the same period last year. While EBIT was lower by CZK 0.6 bn, EBT decreased by CZK 1.3 bn.Operating expensesincreased by CZK 1.5 bn (15.9%), mainly due to a CZK 0.7 bn increase in depreciation and amortization as Unit One of Temelín Nuclear Power Station started commercial operation in June 2002 and because of a CZK 0.7 bn increase in fuel costs corresponding to the rise in electricity and heat generation. The cost of procuring outside power and related services was down by CZK 0.4 bn due to lower amount (by 38.7%).Other expenses/incomeamounted to CZK 0.1 bn (expense), down CZK 0.6 bn from the income of CZK 0.5 bn reported in 1st quarter 2002. This result was mostly due to lower foreign exchange gains (by CZK 0.6 bn). Income tax(CZK 1.2 bn) was higher by CZK 0.6 bn due to an advance tax payment, which is based on the tax amount paid in the previous year, not on current income.
Earnings per share went down from CZK 8.8 to CZK 5.7 due to the decrease in net income.The price/earnings ratio increased from 4.7 to 8.8 due to a rise in share prices by 27.5% and a 31.1% decrease in net income (over the past twelve months). The net return on equity decreased from 6.9% to 4.6% due to lower net income and an increase in equity (by 4.6%). The net return on total assets decreased from 4.2% to 2.8% as a result of lower net income and a 1.9% increase in the average value of total assets.Assets turnoverremained at the level of 0.24.Total indebtedness (provisions exclu ded)decreased to 25.4% (from 28.2%); long-term indebtedness also fell, to 13.6% (from 17.9%) owing to repayment of debts.
The number of employees to installed capacity ratio was 0.64 at the end of March. In year-on-year comparison, the number of employees decreased by 324 due to ongoing organizational changes, the aim of which is to complete the process of streamlining and making the organizational structure more transparent, the aim of which is to improve efficiency and accelerate the decision making process.
Sales of Electricity
ČEZ grew its electricity sales in the first quarter of 2003 in both domestic and foreign markets. Total amount of electricity sold in the domestic market,at 10,629 GWh, was up 882 GWh (9.0%) over the same period last year.
Demand for electricity in the CzechRepublic, amounting to 15,471 GWh, increased year-on-year by 495 GWh (3.3%). Overall industrial consumption increasedby 114 GWh (1.3%). Consumption of household customers increased by 5.8% in comparison with the 1st quarter of 2002 as did small business consumption. Heat sales were up 9.8%, the main reason for which was a 2.9 °C decrease in the average temperature compared to the same period last year. The lower electricity prices charged by most regional distribution companies is probably a factor in the growing consumption seen in households.
The Czech Republic reported an electricity trade surplus of 3,072 GWh, mainly due to a 98.6% decrease in ČEZ´s imports (to a mere 1 GWh), while others increased their imports slightly. Total export increased by 9.0%; ČEZ´s export was up 4.0%.
ČEZ power plants met 58.2% of the demand for electricity in the CzechRepublic compared to
52.1% in the same period of 2002. ČEZ´s market share increased in year-on-year comparison from 59.5 to 62.1%.
In monetary terms, total sales of electricity, at CZK 15.0 bn, were up by CZK 0.9 bn due to higher electricity sales volume. The average domestic price decreased by 7.5 %, while the average export price remained flat.
Investment Program
In total, capital investments amounted to CZK 0.8 bn, which represents a decrease by CZK 0.3 bn (by 24.7%) compared to the 1st quarter of the previous year.
During the first quarter Temelín's Unit One generated 620 GWh of electricity. The reason for the lower generation volume was a planned shut-down to replace fuel rods, begun in February 2003. After the appropriate checks were completed by the International Atomic Energy Agency and the State Office for Nuclear Safety, bringing the guarantee inspection to a close, and commercial operation was restored on 26 April 2003.
The Unit Two turbo generator was synchronized and connected to the grid for the first time in late December 2002 with the reactor running at up to 55% of nameplate capacity. In January and February 2003, prescribed tests continued with the reactor capacity gradually rising up to 75%, and at the end of February it was stepped up to 100% of full capacity. In the tests that took place during first quarter 2003, Unit Two produced a total of 754 GWh. Unit Two was put into commercial operation on 18 April 2003.
Temelín is now operating at full capacity.
Financing
Net cash provided by operating activities increased by CZK 0.2 bn to CZK 5.7 bn (by 3.6%). The total cash used in financing activities decreased by CZK 0.7 bn to CZK 0.7 bn (by 49.2%).
ČEZ and SMBC together with other banks signed a EUR 88 m guarantee facility in favour of the European Investment Bank. Participating banks include: Kreditanstalt für Wiederaufbau, ABN AMRO Bank N. V., Bank Austria Creditanstalt AG, Bayerische Landesbank, Credit Lyonnais S.A., Dresdner Bank AG, Mizuho Corporate Bank Ltd., Sanpaolo IMI S.p.a., SMBC and WestLB AG.
The Board of Directors has approved early repayment of the 5th bond issue (date of issue: June 27, 1996) because of an opportunity to refinance at much more advantageous conditions.
Current credit rating for ČEZ:
| from Moody’s: | 'Baa1' with a stable outlook |
| from Standard & Poor´s: | 'BBB+' with a positive outlook |
Other information
Effective 1 January 2003 the process of opening the electricity market to competition moved forward another step with the addition of entities that consume over 9 GWh per year to the category of eligible customers. This increased the total number of eligible customers from 76 to 341. ČEZ, a. s. won 14 new eligible customers.
On 24 February 2003, an extraordinary General Meeting approved the sale of the Náchod Heating Plant, replaced several members of the Supervisory Board and added text to the resolution on item no. 15 approved at the Annual General Meeting of ČEZ, a. s. in June 2001. Item no. 15 dealt with the purchase of treasury shares. The contract for the sale of Náchod Heating Plant was subsequently signed with Harpen ČR in March 2003.
The Antitrust Office's decision on ČEZ's appeal cleared the way for transferring the shareholdings in the regional distribution companies and ČEPS, a.s., which took place on 1 April 2003, thereby commencing the process of setting up the new ČEZ Group. ČEZ, a. s. obtained shareholdings in all the regional distribution companies (five majorities and three minorities). At the same time, it sold a 66% shareholding in ČEPS, a.s., which is the operator of the transmission grid. Under a published decision of the Constitutional Court, ČEZ, a. s. was required to offer to buy shares from minority shareholders of Západočeská energetika, a.s. and Středočeská energetická a.s. The Antitrust Office's decision on the appeal removes certain problematic provisions from the conditions placed on the deal, gives substantially more time to fulfill the conditions (as commercially sensitive information, the deadlines are not disclosed publicly), although the material content of the conditions (sale of one majority shareholding and all the minority shareholdings, including the minority in ČEPS, a.s.) remains unchanged. After analyzing the strategic benefits and commercial risks involved, the Board of Directors decided to sell the majority stake in Severočeská energetika, a.s. and approved a plan to commence negotiations on exchanges of minority shares with the companies E.ON and RWE.
| Income Statement in Accordance with International Financial Reporting Standards (IFRS) (CZK m) | March 31 2003 | March 31 2002 |
|---|---|---|
| Operating revenues | 15 835 | 14 949 |
| Sales of electricity | 14 962 | 14 141 |
| Heat sales and other revenues | 873 | 808 |
| Operating expenses | 11 191 | 9 659 |
| Fuel | 3 811 | 3 123 |
| Purchased power and related services | 1 790 | 2 168 |
| Repairs and maintenance | 415 | 381 |
| Depreciation and amortization | 3 140 | 2 413 |
| Salaries and wages | 963 | 943 |
| Materials and supplies | 372 | 337 |
| Other operating expenses/income, net | 700 | 294 |
| Income before other expense/income and income taxes | 4 644 | 5 290 |
| Other expenses/income | 96 | -536 |
| Interest income | -26 | -32 |
| Interest on debt, net of capitalized interest | 84 | 97 |
| Interest on nuclear provisions | 418 | 374 |
| Foreign exchange rate losses/gains, net | -352 | -936 |
| Other expenses/income, net | 217 | 148 |
| Income from associate | -245 | -187 |
| Income before income taxes | 4 548 | 5 826 |
| Income taxes | 1 211 | 652 |
| Net income | 3 337 | 5 174 |
| Cash Flow in Accordance with International Financial Reporting Standards (IFRS) (CZK m) | March 31 2003 | March 31 2002 |
|---|---|---|
| Cash and cash equivalents at beginning of period | 4 225 | 2 280 |
| Operating activities: | 5 677 | 5 481 |
| - Income before income taxes | 4 548 | 5 826 |
| - Depreciation and amortization and asset write-offs | 3 141 | 2 414 |
| - Amortization of nuclear fuel | 564 | 474 |
| - Foreign exchange rate loss (gain) | -352 | -936 |
| - Provision for nuclear decommissioning and fuel storage | 156 | 205 |
| - Changes in assets and liabilities | -1 470 | -1 281 |
| Investing activities | -839 | -1 114 |
| Financing activities | -727 | -1 430 |
| Net effect of currency translation in cash | 12 | -27 |
| Cash and cash equivalents at end of period | 8 348 | 5 190 |
| March 31 2003 | March 31 2002 | |
|---|---|---|
| Electricity supply from ČEZ´s power plants - net (GWh) | 14 360 | 12 753 |
| Electricity sold by ČEZ in the Czech Republic (GWh) | 10 629 | 9 747 |
| - Electricity sold by ČEZ to REAS* (GWh) | 9 631 | 8 502 |
| - Domestic Sales (CZK/MWh) | 884 | 956 |
| ČEZ´s electricity exports (GWh) | 4 153 | 3 992 |
| ČEZ´s electricity imports (GWh) | 1 | 217 |
| Capacity, Employees | March 31 2003 | Dec 31 2002 |
|---|---|---|
| ČEZ Installed capacity (MW) | 11 146 | 11 146 |
| Number of employees (pers) | 7 138 | 7 250 |
| Specific number of employees (pers/MW) | 0,640 | 0,650 |
| Balance Sheet in Accordance with International Financial Reporting Standards (IFRS) (CZK m) | March 31 2003 | Dec 31 2002 |
|---|---|---|
| Assets | 233 119 | 231 465 |
| Fixed assets | 213 523 | 216 112 |
| Plant in service | 242 785 | 242 338 |
| Less accumulated provision for depreciation | 106 273 | 103 355 |
| Net plant in service | 136 512 | 138 983 |
| Nuclear fuel, at amortized cost | 7 529 | 7 931 |
| Construction work in progress | 56 526 | 56 513 |
| Investment in associate | 6 126 | 5 880 |
| Investments and other financial assets, net | 5 718 | 5 631 |
| Intangible assets, net | 1 112 | 1 174 |
| Current assets | 19 596 | 15 353 |
| Cash and cash equivalents | 8 348 | 4 225 |
| Receivables, net | 4 354 | 4 117 |
| Income tax receivable | 1 995 | 1 994 |
| Materials and supplies, net | 2 583 | 2 464 |
| Fossil fuel stock | 606 | 618 |
| Other current assets | 1 710 | 1 935 |
| Shareholders´ equity and liabilities | 233 119 | 231 465 |
| Shareholders´ equity | 147 016 | 143 675 |
| Stated capital | 59 041 | 59 041 |
| Retained earnings | 87 975 | 84 634 |
| Long-term liabilities | 55 793 | 59 595 |
| Long-term debt, net of current portion | 31 751 | 35 729 |
| Accumulated provision for nuclear | ||
| decommissioning and fuel storage | 24 042 | 23 866 |
| Deferred income taxes, net | 12 938 | 12 541 |
| Current liabilities | 17 372 | 15 654 |
| Short-term loans | ||
| Current portion of long-term debt | 7 206 | 4 235 |
| Trade and other payables | 6 738 | 8 934 |
| Income tax payable | 494 | 256 |
| Accrued liabilities | 2 934 | 2 229 |
| Consolidated Statement of Shareholders´ Equity in accordance with IFRS (CZK m) | Stated Capital | Retained Earnings | Total Equity |
|---|---|---|---|
| December 31, 2001 | 59 050 | 77 676 | 136 726 |
| Net Income for period 1-3/2002 | 5 174 | 5 174 | |
| March 31, 2002 | 59 050 | 82 850 | 141 900 |
| Additional paid-in capital | 12 | 12 | |
| Net Income for period 4-12/2002 | 3 247 | 3 247 | |
| Acquisition of treasury shares | -181 | -181 | |
| Sale of treasury shares | 160 | 17 | 177 |
| Dividends declared | -1 480 | -1 480 | |
| December 31, 2002 | 59 041 | 84 634 | 143 675 |
| Returned dividends on treasury shares | 4 | 4 | |
| Net Income for period 1-3/2003 | 3 337 | 3 337 | |
| March 31, 2003 | 59 041 | 87 975 | 147 016 |
| * REAS = regional distribution companies. Totally 8 in the Czech Republic. | |||
This report has not been audited.