CEZ's Consolidated Quarterly Report on Operational, Economic and Financial Results for 1st Three Quarters 2003, in accordance with IFRS
Main Features
- ČEZ Group turnover totaled CZK 58.0 bn, which is CZK 18.5 bn higher than the previous year due to significant enlargement of the Group as well as higher electricity sales both in the Czech Republic and abroad
- As widely expected, net income (CZK 13.2 bn) according to IFRS was lower compared to the CAS result, due to a different valuation of the costs associated with the sale of the 66% equity stake in ČEPS.
- ČEZ Group total electricity generation amounted to 45.0 TWh; contributing to this figure wasgeneration in nuclear power stations (share 41.1%) and in fossil power stations (share 56.9%).
- ČEZ power plants provided 62.6% of electricity consumption in the Czech Republic compared to 57.2% in the same period of 2002
- Electricity demand in the Czech Republic reached 39.7 TWh, which represents a year-on-year increase of 2.2%.
- ČEZ's stakes in the distribution companies STE, VČE and ZČE are increasing to 97.7 – 99.1% due to a share swap and obligatory buyouts from minority shareholders.
- ČEZ began the sale of electricity for year 2004 under extremely favorable conditions, better than those existing in western European markets.
- Mr Jaroslav Míl was recalled from both positions of Chairman of the Board of Directors and CEO in October. The new Chairman of the Board of Directors is Mr Petr Vobořil, who is also acting CEO.
Prague, November 27, 2003
| Income Statement in Accordance with International Financial Reporting Standards | September 30, 2003 | September 30, 2003 | September 30, 2002 | Index 03/02 |
|---|---|---|---|---|
| CZK m | EUR m | CZK m | ||
| Operating revenues | 58,046 | 1,823 | 39,543 | 146.8% |
| Operating expenses | 48,888 | 1,535 | 31,195 | 156.7% |
| Fuel | 10,626 | 334 | 9,387 | 113.2% |
| Purchased power and related services | 13,231 | 416 | 5,296 | 249.8% |
| Depreciation and amortization | 12,094 | 380 | 8,097 | 149.4% |
| Operating income | 9,158 | 288 | 8,348 | 109.7% |
| Other expenses (income) | -10,290 | -323 | -972 | 1,058.6% |
| Income before income taxes | 19,448 | 611 | 9,320 | 208.7% |
| Income taxes | 6,103 | 192 | 2,795 | 218.4% |
| Net income | 13,201 | 415 | 6,525 | 202,3% |
| Unit | September 30, 2003 | September 30, 2002 | Index 03/02 | |
| Earnings per share (EPS) | CZK | 22.3 | 11.0 | 202.7% |
| Price/earnings ratio (P/E) * | 1 | 5.3 | 8.3 | 63.9% |
| Return on equity (ROE) net * | % | 10.2 | 4.8 | 212.5% |
| Return on total assets (ROA) net * | % | 5.8 | 3.0 | 193.3% |
| Assets turnover * | 1 | 0.28 | 0.24 | 116.7% |
| Total indebtedness (provisions excluded) | % | 33.2 | 26.6 | 124.8% |
| Long-term indebtedness | % | 11.0 | 16.2 | 67.9% |
| *For the last 12 months | ||||
Revenues, Expenses, Income
Establishment of the new ČEZ Group on 1 April 2003 makes year-on-year data incomparable. The new ČEZ Group consolidated unit for January – September 2003 contains 33 companies (ČEZ, 22 fully consolidated companies and 10 companies consolidated by equity method). Compared with the consolidated group for January – June 2003, the Group was expanded by the addition of Severočeská energetika, a.s. (SČE) and První energetická a.s. For further details see www.cez.cz. The non-financial figures presented herein are also for the January – September 2003 period but, on the other hand, they are for ČEZ and the 22 fully consolidated companies mentioned above only. Thus, the 2003 financial and non-financial figures disclosed herein do not have the same base.
ČEZ Group turnover totaled CZK 58.0 bn, which is CZK 18.5 bn higher than in the same period of 2002, 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.
Net income for the period January to September 2003 amounted to CZK 13.2 bn, an increase of CZK 6.7 bn (by 102.3%) in comparison with the same period last year. EBIT was higher by CZK 0.8 bn and EBT increased by CZK 10.1 bn mainly due to the gain realized on the sale of the 66% stake in ČEPS. Operating expenses increased by CZK 17.7 bn (56.7%), mainly as a result of the Group's enlargement(distributors’ activities are newly included),as well as depreciation and amortization, as Unit One of Temelín Nuclear Power Station started commercial operation in June 2002 and Unit Two followed in April 2003. Increased fuel costs are connected with the rise in electricity generation. Increased operating expenses were more than compensated by higher operating revenues (up CZK 18.5 bn, or 46.8%). Other income amounted to CZK 10.3 bn, up CZK 9.3 bn from the same period of 2002.
These results were due to the gain on sale of the ČEPS stake (CZK 10.8 bn) and, on the other hand, lower foreign exchange rate gains (by CZK 2.1 bn). Interest on debt, net of capitalized interests, grew year-on-year by CZK 0.8 bn due to a decrease in capitalized interest and a corresponding rise in debt interest. Income tax (CZK 6.1 bn) was higher by CZK 3.3 bn (118.4%) due to a change in methodology – starting in 2003, income tax is determined from current period income, not as prepayments based on the previous year's income tax.
Earnings per share more than doubled, from CZK 11.0 to CZK 22.3, due to the 102.3% increase in net income. The price/ear nings ratio decreased from 8.3 to 5.3. Although the share price on the Prague Stock Exchange rose by a substantial 43.6%, the growth in net income over the past twelve months was even greater – 125.0%. Net return on equity increased from 4.8% to 10.2% because net income for the previous 12 months grew much faster than average equity. Net return on total assets increased from 3.0% to 5.8% as a result of higher net income and a lower increase in the average value of total assets. Assets turnover rose from 0.24 to 0.28. Total indebtedness (provisions excluded) increased from 26.6% to 33.2%, which is caused by enlargement of ČEZ Group (current liabilities of regional distribution companies are included) and bills of exchange issued to pay for new acquisitions (described below). Long-term indebtedness fell to 11.0%.
Sales of Electricity
In monetary terms, total sales of electricity, at CZK 55.0 bn, were up CZK 17.2 bn due to establishment of the new Group as well as higher electricity sales volume in both domestic and foreign markets. The total amount of electricity sold in the domestic market, 35,718 GWh, was up 9,238 GWh (34.9%) over the same period of the previous year. Approximately 25% of this growth was secured by higher ČEZ sales, with the remainder being caused by enlargement of the ČEZ Group. Heat sales were up 10.2% due to establishment of the new ČEZ Group.
Demand for electricity in the Czech Republic, amounting to 39.7 TWh, increased year-on-year by 849 GWh (2.2%).Industrial consumption increased by 401 GWh (1.7%). Household consumption increased by 2.5% over the period January - September and small business consumption rose 4.1%.
ČEZ power plants increased their share of overall Czech Republic net electricity consumption from 57.2% to 62.6%.
Investment Program
The net effect of investing activities on cash was CZK 22.8 bn. This figure includes: CZK 25.1 bn (net of cash) paid toward acquisition of subsidiaries (including the swap described below), CZK 12.2 bn (net of cash) in proceeds from sale of the majority stake in ČEPS, CZK 18.5 bn consisting of the amounts paid for minority stakes and Group-wide additions to property, plant and equipment (PPE), and CZK 9.1 bn in proceeds form the swap transaction and from PPE sold.
Financing
Net cash provided by operating activities increased by CZK 13.8 bn to CZK 25.6 bn (by 117.9%). This was mostly influenced by growth of depreciation and amortization (by CZK 4.0 bn). Total cash used in financing activities increased by CZK 1.1 bn to CZK 4.9 bn (by 28.6%).
The 5 th bond issue (date of issue: June 27, 1996) was replaced by the 9 th issue in June 2003 at much more advantageous interest conditions. the new issue amounts to CZK 3 bn and matures in 2008. It was the most favorably priced corporate debt in the country during 2003Proceeds from borrowings increased by CZK 8.8 bn to CZK 17.3 bn. Payments of borrowings increased by CZK 8.7 bn to CZK 19.5 bn.
Current credit rating for ČEZ:
from Moody’s - 'Baa1' with a stable outlook, from Standard & Poor’s - 'BBB+' with a stable outlook (change from positive to stable outlook in November 2003, the main reason being risk connected with planned expansion of ČEZ Group to other Central and East European countries).
Other information
Effective 1 January 2003 entities that consume over 9 GWh per year became eligible customers. ČEZ Group served 237 out of 341 eligible customers as of 30 September 2003.
The new ČEZ Group was established on 1 April 2003. ČEZ Group is a major Central European utility and the tenth biggest in Europe. The favourable impact of its establishment was experienced by households located in the distribution territories of ČEZ Group’s distribution companies, where electricity is cheaper effective 1 October 2003. Positive synergies are expected to show up in the coming years as the outcome of “Project of regional distribution companies", the main goal of which is to improve efficiency and accelerate the decision making process.
ČEZ had to offer to buy out minority shareholders of ZČE and STE in June, and the offer was accepted by significant minority shareholders. ČEZ and E.ON concluded a share swap transaction, on the basis of which ČEZ acquired E.ON’s shares in VČE and ZČE in exchange for its shares in JME and JČE. The shares were swapped and the difference in their values was paid on 30 September 2003. In connection with the swap, ČEZ offered to buy out minority shareholders of ZČE and VČE in September and October. As a result of these transactions, ČEZ’s stakes in STE, VČE and ZČE are increasing to 97.7 – 99.1%.
Sale of electricity for 2004 began in September. The price of “yellow electricity" (Yearly Baseload) increased by less than half in comparison with western Europe. The easily understandable huge demand for this product made it possible, as previously announced, to lower the price even further – from the initially offered CZK 837 to a mere CZK 813/MWh. ČEZ was the only Czech electricity producer to publish its complete price offering on the web.
ČEZ Group is about to expand abroad. It is bidding in the tender for the dominant Slovak energy producer Slovenské elektrárne, a.s. and has expressed interest in acquiring certain Bulgarian distribution companies.
Mr Jaroslav Míl was recalled by the Supervisory Board from the position of Chairman of the Board of Directors on 23 October and from the position of CEO by Board of Directors on 24 October 2003. He was replaced by Mr Petr Vobořil who was appointed Chairman of the Board of Directors on 3 November 2003 and who is also acting CEO.
| Income Statement | Sept 30 | Sept 30 |
|---|---|---|
| in Accordance with International Financial Reporting Standards (IFRS) (CZK m) | 2003 | 2002 |
| Operating revenues | 58,046 | 39,543 |
| Sales of electricity | 54,955 | 37,761 |
| Heat sales and other revenues | 3,091 | 1,782 |
| Operating expenses | 48,888 | 31,195 |
| Fuel | 10,626 | 9,387 |
| Purchased power and related services | 13,231 | 5,296 |
| Repairs and maintenance | 2,583 | 2,258 |
| Depreciation and amortization | 12,094 | 8,097 |
| Salaries and wages | 5,453 | 2,838 |
| Materials and supplies | 2,422 | 1,279 |
| Other operating expenses/income, net | 2,479 | 2,040 |
| Income before other expenses/income and income taxes | 9,158 | 8,348 |
| Other expenses/income | -10,290 | -972 |
| Interest on debt, net of capitalized interest | 1,208 | 387 |
| Interest on nuclear provisions | 1,253 | 1,142 |
| Interest income | -260 | -110 |
| Foreign exchange rate losses/gains, net | -1,266 | -3,359 |
| Gain on sale of subsidiary | -10,771 | |
| Other expenses/income, net | 110 | 1,356 |
| Income from associate | -564 | -388 |
| Income before income taxes | 19,448 | 9,320 |
| Income taxes | 6,103 | 2,795 |
| Income after income taxes | 13,345 | 6,525 |
| Minority interests | 144 | |
| Net income | 13,201 | 6,525 |
| Cash Flow | Sept 30 | Sept 30 |
|---|---|---|
| in Accordance with International Financial Reporting Standards (IFRS) (CZK m) | 2003 | 2002 |
| Cash and cash equivalents at beginning of period | 4,384 | 2,280 |
| Effect of change in group structure on opening balance of cash and cash equivalents | ||
| Operating activities: | 25,569 | 11,736 |
| - Income before income taxes | 19,448 | 9,320 |
| - Depreciation and amortization and asset write-offs | 12,098 | 8,109 |
| - Amortization of nuclear fuel | 2,506 | 1,533 |
| - Foreign exchange rate loss (gain) | -1,266 | -3,359 |
| - Provision for nuclear decommissioning and fuel storage | 299 | 608 |
| - Changes in assets and liabilities | 3,450 | -599 |
| Investing activities | -22,815 | -5,134 |
| Financing activities | -4,913 | -3,819 |
| Net effect of currency translation on cash | -38 | -263 |
| Cash and cash equivalents at end of period | 2,187 | 4,800 |
| Sept 30 | Sept 30 | |
|---|---|---|
| 2003 | 2002 | |
| ČEZ Group electricity supply to the grid (GWh) | 41,247 | 36,350 |
| Electricity sold by ČEZ Group in the Czech Republic (GWh) | 35,718 | 26,480 |
| ČEZ Group electricity exports (GWh) | 13,942 | 12,026 |
| ČEZ Group electricity imports (GWh) | 409 | 415 |
| Capacity, Employees | Sept 30 | Dec 31 |
|---|---|---|
| 2003 | 2002 | |
| ČEZ Group installed capacity (MW) | 12,294 | 11,146 |
| ČEZ Group number of employees (pers) | 18,366 | 7,677 |
| Balance Sheet | Sept 30 | Dec 31 | |||
|---|---|---|---|---|---|
| in Accordance with International Financial Reporting Standards (IFRS) (CZK m) | 2003 | 2002 | |||
| Assets | 293,849 | 231,465 | |||
| Fixed assets | 257,718 | 216,112 | |||
| Plant in service | 349,609 | 242,338 | |||
| Less accumulated provision for depreciation | 141,315 | 103,355 | |||
| Net plant in service | 208,294 | 138,983 | |||
| Nuclear fuel, at amortized cost | 9,816 | 7,931 | |||
| Construction work in progress | 11,777 | 56,513 | |||
| Investment in associates | 10,414 | 5,880 | |||
| Investments and other financial assets, net | 8,896 | 5,631 | |||
| Intangible assets, net | 8,518 | 1,174 | |||
| Deferred tax assets | 3 | ||||
| Current assets | 36,131 | 15,353 | |||
| Cash and cash equivalents | 2,187 | 4,225 | |||
| Receivables, net | 20,800 | 4,117 | |||
| Income tax receivable | 1,738 | 1,994 | |||
| Materials and supplies, net | 3,571 | 2,464 | |||
| Fossil fuel stock | 901 | 618 | |||
| Other current assets | 6,934 | 1,935 | |||
| Shareholders' equity and liabilities | 293,849 | 231,465 | |||
| Shareholders' equity | 154,880 | 143,675 | |||
| Stated capital | 59,138 | 59,041 | |||
| Retained earnings | 95,742 | 84,634 | |||
| Minority interests | 8,408 | ||||
| Long-term liabilities | 60,961 | 59,595 | |||
| Long-term debt, net of current portion | 32,231 | 35,729 | |||
| Accumulated provision for nuclear decommissioning and fuel storage | 24,230 | 23,866 | |||
| Other long-term liabilities | 4,500 | ||||
| Deferred taxes liability | 20,145 | 12,541 | |||
| Current liabilities | 49,455 | 15,654 | |||
| Short-term loans | 1,044 | ||||
| Current portion of long-term debt | 6,414 | 4,235 | |||
| Trade and other payables | 33,307 | 8,934 | |||
| Income tax payable | 12 | 256 | |||
| Accrued liabilities | 8,678 | 2,229 | |||
| Consolidated Statement of Shareholders' Equity inaccordance with IFRS (CZKm) | Stated Capital | Translation Differences | Fair Value and Other Reserves | Retained Earnings | Total Equity |
| December 31, 2001 | 59,050 | - | - | 77,676 | 136,726 |
| Additional paid-in capital | 12 | - | - | - | 12 |
| Dividends declared | - | - | - | -1,480 | -1,480 |
| Net Income for period 1-9/2002 | - | - | - | 6,525 | 6,525 |
| September 30, 2002 | 59,062 | - | - | 82,721 | 141,783 |
| Acquisition of treasury shares | -181 | - | - | - | -181 |
| Sale of treasury shares | 160 | - | - | 17 | 177 |
| Net Income for period 10-12/2002 | - | - | - | 1,896 | 1,896 |
| December 31, 2002, as previously reported | 59,041 | - | - | 84,634 | 143,675 |
| Change in accounting policy-effect of change | - | - | - | - | - |
| in group structure | - | - | - | 638 | 638 |
| January 1, 2003 as restated | 59,041 | - | - | 85,272 | 144,313 |
| Dividends declared | - | - | - | -2,657 | -2,657 |
| Returned dividends on treasury shares | - | - | - | 4 | 4 |
| Sale of treasury shares | 97 | - | - | -4 | 93 |
| Share on equity movements of associates | - | - | - | -9 | -9 |
| Change in fair value of available-for-sale | - | - | - | - | - |
| financial assets recognized in equity | - | - | -52 | - | -52 |
| Net Income for period 1-9/2003 | - | - | - | 13,201 | 13,201 |
| Other movements | - | 1 | - | -14 | -13 |
| September 30, 2003 | 59,138 | 1 | -52 | 95,793 | 154,880 |
This report has not been audited.