CEZ's Consolidated Quarterly Report on Operational, Economic and Financial Results for 1st Quarter 2004, in accordance with IFRS

Main Features

• CEZ Group turnover totaled CZK 27.7 bn, which is CZK 11.8 bn higher than in 1st quarter 2003 due to a significant enlargement of the Group as well as higher electricity sales.
• CEZ Group net electricity generation amounted to 15.4 TWh (up 994 GWh); the bulk of this figure consisted of generation in fossil power stations (55.1%) and in nuclear power stations (41.7%). CEZ Group power plants covered 72.0 % of total generation of the Czech Republic.
• Electricity demand in the Czech Republic reached 15.9 TWh, which represents a year-on-year increase of 3.0%.
• CEZ is taking part in tenders for a 66% stake in the dominant Slovak energy producer Slovenské elektrárne, a.s. and for Bulgarian distributors.
• Mr. Martin Roman is the new Chairman of the Board of Directors and Chief Executive Officer as of February and April 2004, respectively. Mr. Alan Svoboda is the new member of the Board of Directors and Chief Sales Officer as of April.
• The previous electricity distribution companies integration project was replaced by the ambitious, Group-wide “Vision 2008" project.
• A new issue of bonds denominated in EUR is planned in June 2004.

Prague, May 24, 2004

Income Statement in Accordance with International Financial Reporting Standards	March 31, 2004		March 31, 2003	Index 04/03
	CZK m	EUR m	CZK m
Operating revenues	27,668	843	15,835	174.7%
Operating expenses	19,387	590	11,191	173.2%
Fuel	3,823	116	3,811	100.3%
Purchased power and related services	7,380	225	1,790	412.3%
Depreciation and amortization	4,575	139	3,140	145.7%
Operating income	8,281	252	4,644	178.3%
Other expenses	929	28	96	967.7%
Income before income taxes	7,352	224	4,548	161.7%
Income taxes	1,688	51	1,211	139.4%
Net income	5,254	160	3,337	157.4%
	Unit	March 31, 2004	March 31, 2003	Index 04/03
Earnings per share (EPS)	CZK	8.9	5.7	157.0%
Price earnings ratio (P/E)*	1	14.4	8.8	164.4%
Return on equity (ROE) net*	%	5.2	4.6	113.9%
Return on total assets (ROA) net*	%	3.1	2.8	108.6%
Assets turnover*	1	0.38	0.24	155.9%
Total indebtedness (provisions excluded)	%	26.3	25.4	103.7%
Long-term indebtedness	%	11.2	13.6	82.4%
*for the last 12 months

 

Revenues, Expenses, Income

Establishment of the new ČEZ Group on 1 April 2003 makes year-on-year data difficult to compare. The consolidated unit of the new ČEZ Group for January – March 2004 contains 33 companies (ČEZ, 23 fully consolidated and 9 consolidated by the equity method), while the consolidated unit for January – March 2003 comprised only 3 fully consolidated companies and 1 consolidated by the equity method. For further details see skupina-cez

ČEZ Group turnover totaled CZK 27.7 bn, which is CZK 11.8 bn higher than in 1st quarter 2003, mainly due to enlargement of the Group (including sales of electricity by distributors to final consumers) as well as higher electricity sales in the liberalized wholesale market.

Operating expenses increased by CZK 8.2 bn (73.2%) to CZK 19.4 bn, mainly as a result of the Group’s enlargement (distribution companies’ activities are newly included), which drove up energy purchases by CZK 5.6 bn (312.3%) and labor costs by CZK 1.0 bn (106%). The Group’s enlargement also had a substantial influence on growth of depreciation & amortization by CZK 1.4 bn, as did the commissioning of Unit # 2 of Temelín Nuclear Power Station for commercial operation in April 2003. Other expenses amounted to CZK 0.9 bn, up CZK 0.8 bn from the same period last year mainly due to a CZK 0.9 bn increase in foreign exchange rate losses and a CZK 0.3 bn increase in interest paid due to a fall in capitalized interest following the commissioning of Temelín Unit Two. On the other hand, other expenses were reduced by income from associates (up by CZK 0.2 bn). Income tax (CZK 1.7 bn) was higher by CZK 0.5 bn (39.4%) due to the increase in gross profit. Net income, at CZK 5.3 bn, increased by CZK 1.9 bn (57.4%) in comparison with the same period last year, as a result of jump of EBIT by CZK 3.6 bn, and EBT by CZK 2.8 bn, respectively.

Earnings per share went up from CZK 5.7 to CZK 8.9, in line with the increase in net income.

The price/earnings ratio went up by 64.4% from 8.8 to 14.4 thanks to a strong rise in ČEZ’s share price (by 95.4 %). Profitability indicators continued at favorable levels - the net return on equity increased from 4.6% to 5.2% thanks to net income for the last 12 months rising faster than shareholders’ equity, and the net return on total assets increased from 2.8% to 3.1% as a result of the mentioned higher net income which prevailed over the increase in the average value of total assets (by 9.8%). Assets turnover rose from 0.24 to 0.38 due to sharp growth of operating revenues (connected with the enlargement of the Group) along with an accompanying but smaller increase in the average value of total assets. Total indebtedness (provisions excluded) < ;/B>edged upward from 25.4% to 26.3%, as a result of ČEZ Group enlargement (current liabilities of distributors are included) and bills of exchange issued to pay for new acquisitions. Long-term indebtedness fell to 11.2%.

Sales of Electricity

In monetary terms, total sales of electricity, at CZK 25.5 bn, were up CZK 10.6 bn (70.7%) due to establishment of the new ČEZ Group as well as higher total electricity sales volume (by 2,776 GWh). ČEZ Group imported only 1 GWh of electricity in the 1st quarter 2004. Direct export decreased year-on-year by 949 GWh due in part to export through third parties (traders) in reaction to new rules that prohibit sale (delivery) to multiple buyers (recipients) by a single entity over a given cross-border transmission profile. The actual decline in export (i.e., adjusted for the above effect) was only 285 GWh. Electricity sold in the domestic market grew to 14,368 GWh (up 3,725 GWh, or 35.0%) driven by higher ČEZ sales and the enlargement of ČEZ Group. However, part of this increase is attributable to the export factor mentioned above; of the total official increase of 3,725 GWh, only 3,061 GWh was actually supplied to the domestic market.

ČEZ Group final customer market share (i.e. share in total supplies to final customers) reached 58.4%.

Demand for electricity in the Czech Republic, amounting to 15.9 TWh, increased year-on-year by 3.0%. Industrial consumption increased by 360 GWh (4.2%). Household consumption increased by 69 GWh (1.5%) and small business consumption rose by 31 GWh (1.3%).

Investment Program and Financing

Net cash provided by operating activities increased by CZK 2.3 bn (36.5%) from CZK 6.3 bn to CZK 8.6 bn. Positive factors included mainly the increase of net profit and depreciation & amortization, while changes in assets and liabilities were the main negative factors. Total cash used in financing activities increased by CZK 2.0 bn to CZK 2.7 bn (up 268.4%). Proceeds from borrowings amounted to CZK 1.7 bn. Payments of borrowings increased by CZK 3.7 bn to CZK 4.4 bn.

Total cash used in investing activities amounted to CZK 2.2 bn, up by CZK 0.7 bn from the same period last year as a result of higher additions to property, plant and equipment and other non-current assets.

The first of the remaining two bills for shares in the eight distribution companies, out of the original four bills, in an amount CZK 3.7 bn, was repaid to National Property Fund of the Czech Republic in May 2004 and the last one in the same amount will be repaid in June 2004.

A new issue of bonds denominated in EUR is planned in June 2004 in the range of EUR 300 m to EUR 400 m, maturity 5 – 7 years. A roadshow is going from 24 to 27 May 2004 to promote the issue.

Current credit rating for ČEZ:

from Moody’s	- 'Baa1' with a stable outlook,
from Standard & Poor’s	- 'BBB+' with a stable outlook

 

Other information

ČEZ Group continues in its transformation. The stake in PRE was put up for sale in line with the Antitrust Office decision of 2003, with the principal criterion being the bid price. Another important change in ČEZ Group structure was an increase in ČEZ’s stake in the engineering company ŠKODA PRAHA a.s. (general technology supplier for Temelín Nuclear Power Station) to 68.9%. Tenders for the dominant power producer in the Slovak Republic Slovenské elektrárne a.s. and one group of Bulgarian distribution companies are in progress. There is still a possibility to boost ČEZ’s share in SME and SČE to 89.36% and 56.93%, respectively, using an option concluded with E.ON during 2004.

Furthermore, the ongoing electricity distribution companies integration project was replaced by the ambitious “Vision 2008? project, which includes whole ČEZ Group and aims to prepare the Group for full market liberalization in 2006, when customer focus and well managed processes will be key factors of success. Synergies are expected to improve ČEZ Group’s position among European electric utilities.

Effective 1 January 2004, all electricity consumers equipped with permanent consumption measurement technology and reserved wattage of at least 250 kW became eligible customers, which together with eligible customers from previous waves of liberalization means that the final electricity consumption market is now approximately 50% open to competition.

Mr. Martin Roman is the new Chairman of the Board of Directors and Chief Executive Officer as of February and April 2004, respectively. Mr. Alan Svoboda is the new Vice Chairman of the Board of Directors and Chief Sales Officer as of May and April, respectively.

ČEZ was recognized by Euromoney as having the best corporate governance in the Czech Republic. It is also listed in the Forbes 2000 - World’s leading companies ranking (measured by a composite of sales, profits, assets and market value) in 1,125th place, which is the highest ranking of any company from the Czech Republic.

 

Income Statement	March 31 2004	March 31 2003
in accordance with International Financial Reporting Standards (IFRS) (CZK m)
Operating revenues	27 668	15 835
Sales of electricity	25 538	14 962
Heat sales and other revenues	2 130	873
Operating expenses	19 387	11 191
Fuel	3 823	3 811
Purchased power and related services	7 380	1 790
Repairs and maintenance	641	415
Depreciation and amortization	4 575	3 140
Salaries and wages	1 984	963
Materials and supplies	727	372
Other operating expenses/income, net	257	700
Income before other expenses/income and income taxes	8 281	4 644
Other expenses/income	929	96
Interest on debt, net of capitalized interest	430	84
Interest on nuclear provisions	493	418
Interest income	-39	-26
Foreign exchange rate losses/gains, net	584	-352
Gain on sale of subsidiary
Other expenses/income, net	-103	217
Income from associates	-436	-245
Income before income taxes	7 352	4 548
Income taxes	1 688	1 211
Income after income taxes	5 664	3 337
Minority interes ts	410
Net income	5 254	3 337

Cash Flow	March 31 2004	March 31 2003
in accordance with International Financial Reporting Standards (IFRS) (CZK m)
Cash and cash equivalents at beginning of period	4 014	4 225
Effect of change in group structure on opening balance of cash and cash equivalents
Operating activities:	8 590	6 291
- Income before income taxes	7 352	4 548
- Depreciation and amortization and asset write-offs	4 575	3 141
- Amortization of nuclear fuel	838	564
- Foreign exchange rate loss (gain)	584	-352
- Provision for nuclear decommissioning and fuel storage	120	156
- Changes in assets and liabilities	-3 172	-856
Investing activities	-2 176	-1 453
Financing activities	-2 678	-727
Net effect of currency translation on cash	44	12
Cash and cash equivalents at end of period	7 794	8 348

	March 31 2004	March 31 2003
ČEZ Group electricity supplied from power plants (GWh)	15 354	14 360
Electricity sold by ČEZ Group in the Czech Republic (GWh)	14 368	10 629
ČEZ Group electricity exports (GWh)	3 203	4 153
ČEZ Group electricity imports (GWh)	1	1

Capacity, Employees	March 31 2004	Dec 31 2003
ČEZ Group installed capacity (MW)	12 297	12 297
ČEZ Group number of employees (pers)	18 214	18 100

Balance Sheet	March 31 2004	Dec 31 2003
in accordance with International Financial Reporting Standards (IFRS) (CZK m)
Assets	276 905	274 143
Fixed assets	251 362	254 443
Plant in service	364 113	363 165
Less accumulated provision for depreciation	154 906	150 426
Net plant in service	209 207	212 739
Nuclear fuel, at amortized cost	8 854	9 574
Construction work in progress	10 686	10 204
Investment in associates	11 441	10 999
Investments and other financial assets, net	8 900	8 642
Intangible assets, net	1 942	1 997
Deferred tax assets	332	288
Current assets	25 543	19 700
Cash and cash equivalents	7 794	4 014
Receivables, net	6 810	7 063
Income tax receivable	362	103
Materials and supplies, net	3 732	3 242
Fossil fuel stock	743	979
Other current assets	6 102	4 299
Shareholders' equity and liabilities	276 905	274 143
Shareholders' equity	155 428	149 687
Stated capital	59 221	59 152
Retained earnings	96 207	90 535
Minority interests	8 527	7 893
Long-term liabilities	59 914	59 486
Long-term debt, net of current portion	31 083	30 965
Accumulated provision for nuclear decommissioning and fuel storage	28 312	28 164
Other long-term liabilities	519	357
Deferred taxes liability	16 155	14 721
Current liabilities	36 881	42 356
Short-term loans	216	2 320
Current portion of long-term debt	5 799	5 691
Trade and other payables	15 988	20 578
Income tax payable	3 063	3 203
Accrued liabilities	11 815	10 564