Preliminary economic results of the CEZ Power Company for the year 2002, before consolidation and auditing

Preliminary assessment of last year's economic results suggests that CEZ company generated a net profit of 6.7 billion CZK, which means an increase by 0.3 billion CZK in comparison with the previous year. The volume of sold electricity rose by 2.8 % compared to last year, the drop in domestic sales having been compensated by increasing volume of exported electricity. The predictable decrease of domestic sales results from the fact that the market has been fully opened to all producers; this has significant detrimental effect on the situation of CEZ, because other producers capitalise on the compulsory purchase for regulated prices, and importers may take advantage of one of the most open European markets.

In 2002 we made significant progress in the four-year process of changes aimed at transforming CEZ from a company focusing solely on production into a commercial-industrial company,? said Mr Jaroslav Mil, the Chairman of the CEZ Board of Directors and the company CEO. Since the beginning of this year, we have been quite successful in coping with the difficulties of an unevenly opened market with electricity. We have increased our profits, despite the fact that we reduced the prices of our electricity offered through the Rainbow Electricity commercial scheme, in order to maintain our market position. Last year we cut down electricity prices by almost 4 per cent and our offer for this year is by another 8% cheaper. Good economic performance of an enterprise may be influenced by the fluctuating exchange rate, but our company also continuously strives to increase labour productivity, which rose by 14 per cent last year and for full 30 per cent over the past two years, added Mr Jaroslav Mil.

The transformation process also entails the efforts of CEZ aimed at enabling the end consumers to benefit from the cost-effective production of Rainbow Electricity. In December 2002, the Economic Competition Protection Authority (ĂšOHS) approved the merger between CEZ and regional distribution companies, but with restrictive conditions which do not entirely correspond with the original governmental resolution regarding this matter. CEZ lodged a memorandum appealing against this verdict, referring to its legal inconsistencies and also to the fact that ĂšOHS as yet has not decided in the matter of public support. ĂšOHS has not made any ruling as far as the memorandum is concerned.

Total revenues of the company amounted to 59.5 billion CZK, which is 1.6 billion more than last year. The total costs rose by 2.9 billion CZK, chiefly due to an increase in depreciations by 2 billion CZK, resulting from the fact that the first block of Temelin NPP was put into trial operation. The most important thing for the company and its shareholders is the continuing growth of resources created by the operation of the company, which amounted to 17.6 billion CZK, i.e. 1.5 billion CZK more than last year. On the other hand, a total of 5 billion CZK was spent on investment projects. This means that CEZ continues to earn more than it spends. This fact, along with the appreciation of Czech currency, helped to reduce the debt of the company by 9.4 billion CZK.

The Temelin depreciations will significantly influence the statement of account reflecting the economic performance of the company in the next few years. We estimate that this year's profit according to the balance sheet will drop to approx. 1 billion CZK. However, the most significant factor for shareholders is the production of cash flow, which will be boosted by this trend. The company generates more and more free cash, which is why the CEZ management is planning to implement a more attractive dividend policy towards the shareholders, which would correspond with the standard strategy of European power companies.

	(mil. CZK)	compared to prev. year
Total revenues	59 455	+ 2,7 %
Total costs	51 423	+ 6,0 %
- costs of fuel *)	12 714	- 2,6 %
Net profit after taxation	6 713	+ 4,3 %

*) influenced by nuclear fuel

Ladislav Kriz, CEZ Press Officer

28. 2. 2003