Economic Results of the Power-Generation Company CEZ for the First Quarter of 2000

The Power-Generation Company CEZ with More Than 3.5 Times the Profit, However, Mainly Due to Provisions for Exchange-Rate Variances

Total revenue	17,408 (million CZK)
Sales of electricity	14,052 (million CZK)
Total expenses	13,839 (million CZK)
Fuel	3,514 (million CZK)
Income before income taxes	3,569 (million CZK)
Net income	2,937 (million CZK)

"CEZ has generated for the first quarter of this year the profits after taxes amounting to CZK 2,937 million, i.e. more by 268 % compared with the preceding year. This considerable growth is due mainly to the favorable development of provisions for exchange-rate variances. Whereas the development of the rate of exchange decreased in the first quarter of the last year our net profits by CZK 1.6 billion, the favorable development in this first quarter increased the profits by CZK 0.3 billion. In summary, that means the exchange rate of the Czech Crown improved between the two years the net profits by CZK 1.9 billion," said CEZ Executive Director for Economy Petr Voboril.

The sales of electricity to distribution companies amounted to CZK 10,859 million, i.e. less by almost 20 % compared with 1999 which is due both to the reduced sales of electricity to distribution companies and to that the sales of CEZ support services have passed from distributors to the newly established company CEPS. That is why CEZ collected from CEPS almost CZK 1 billion for sales of support services. The sales to distributors decreased between the two years by 1,347GWh to the level 10,481GWh. CEZ managed to make up for the decrease with higher exports of electricity which amounted to 3.1TWh.

The sales of heat amounted to CZK 601 million and decreased between the two years by 3.4 %. CEZ total revenues amounted in the period to CZK 17,408 million and increased between the two years by 3.9 %, especially due to the clearance of provisions for exchange rate variances which amounted to CZK 1.3 billion and to higher sales of electricity exports.

Total costs excluding the corporation tax amounted to CZK 13,839 million and decreased by 8.7 % compared with the preceding year. The decrease in costs is due mainly to the decrease in financial costs, by more than CZK 1 billion, within which the cost of exchange rate variances as well as the cost of adjustments for exchange rate variances decreased. The cost of electricity purchases for resale also decreased by CZK 0.6 billion in connection with discontinued purchases from Opatovice Power Stations, and the operating cost decreased by 2 %.

"One of our main tasks still is a reduction of costs so that we can prepare CEZ for its optimal functioning in a competitive environment. I am pleased we have managed after a long time to decrease our total costs, although the decrease was due mainly to a reduction of financial costs which are difficult to influence. A great success, however, is the reduction of operating costs by 2 % which was due not only to lower costs of electricity purchases but also to our economizing measures. Within the cost cuts, we manage to decrease the number of employees, bringing our company closer to Western European standards. We have been managing this process as long as from 1992 without any social shocks, because ours is a controlled process. In 1992, CEZ had employed almost 16,500 persons and as of the end of this March the number was lower by almost 40 %, i.e. 9,813 employees. Consequently, the productivity has increased and, simultaneously, demands on the grow of costs have been decreasing," mentioned Petr Voboril.

The generation of sources from operations increased between the two years by 27.6 % up to CZK 3.6 billion. Our capital expenditures amounted to CZK 2.7 billion, i.e. less by CZK 1.4 billion compared with the past year. Total of CZK 1.7 billion of CZK 10 billion planned for this year were spent at Temelin Nuclear Power Plant and the current progress of building works indicates that the term for fuel-charging in the reactor of the first unit, i.e. at the turn of this August and September, will be met. Financing of the company was without problems and CEZ fulfilled in time its financial obligations.

The demand for electricity increased by 2.3 % compared with the first quarter of the last year (by 332GWh) to the level of 14,967GWh. The growth in consumption was reflected in industries where the increase between the two years was about 6 %. On the other hand, the retail consumption decreased by 2.3 %. This decrease is due to the increase of prices for electricity for households and the higher average temperature which had been higher by 2.0°C compared with the long-term average and by 0.7°C compared with the actual temperature in the last year. CEZ share in the coverage of the demand for electricity in the Czech Republic decreased from 72.8 % to 64.1 % compared with the same period of the past year. The main reason is growing production by other producers and the termination of the contract of electricity purchasing from Opatovice Power Stations. CEZ has managed to make up for this decrease on the domestic market by higher exports, as mentioned above.

Petr Voboril concluded, "We believe the permanent trend of decrease of our share in the domestic market with electricity will reverse after the new tariff structure of our giving-over prices for distributors, which prices are still regulated, will fully consider also the system services which have been currently rendered by us free of charge also on behalf of the other producers. The other producers thus compete with a "product" which is, however, poorer than ours, and we even have to finish their "products". A following example could be given, we all fry donuts, but only CEZ stuff them with marmalade and has to stuff with marmalade also competitive donuts."

Development of the Electricity Consumption in the Czech Republic in Respective First Quarters

(GWh) 1995 1996 1997 1998 1999 2000 Total demand - net consumption 14,766 16,295 15,392 14,859 14,635 14,967

Ladislav Krizpress, spokesman of CEZ, a. s.

26. 4. 2000