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EU Taxonomy KPI Report

CEZ Group - EU Taxonomy KPI Report

Economic activities 2021 Code Turnover CAPEX OPEX1)  
CZK Billion % CZK Billion % CZK Billion %
A Taxonomy ELIGIBLE activities TOTAL   69.0 30.3 17.3 53.2 2.1 23.0  
A.1 Generation - Renewable energy sources   5.6 2.4 0.6 1.9 0.3 3.6  
  Electricity generation from hydropower 4.5 2.8 1.2 0.1 0.4 0.2 2.0  
  Electricity generation using solar photovoltaic technology 4.1 1.8 0.8 0.2 0.6 0.1 0.6  
  Other Renewables * * 1.0 0.4 0.3 0.8 0.1 1.1  
A.2 Heat and Electricity Distribution   42.1 18.5 14.5 44.4 1.6 17.4  
  Transmission and distribution of electricity 4.9 38.8 17.0 14.4 44.2 1.4 15.2 E
  District heating/cooling distribution 4.15 3.3 1.4 0.1 0.3 0.2 2.2  
A.3 Energy services and other eligible activities   21.4 9.4 2.3 6.9 0.2 1.9  
  Installation, maintenance and repair of energy efficiency equipment 7.3 16.9 7.4 0.4 1.2 0.1 0.8 E
  Other energy services, electromobilty, other activities * * 4.5 2.0 1.9 5.7 0.1 1.1  
B NON-ELIGIBLE Activities - TOTAL   158.8 69.7 15.2 46.8 7.0 77.0  
B.1 NON-ELIGIBLE TRANSITIONAL activities **   43.9 19.3 7.8 24.1 3.2 35.0  
  Generation – nuclear sources N/A 37.5 16.4 7.4 22.9 3.1 33.7 T
  Generation – combined-cycle and cogeneration sources N/A 6.4 2.8 0.4 1.2 0.1 1.3 T
B.2 NON-ELIGIBLE NEUTRAL activities ***   81.1 35.6 1.4 4.4 0.5 5.1  
B.3 NON-ELIGIBLE EMISSION activities   33.8 14.8 5.9 18.2 3.4 36.9  
  Mining activities N/A 4.2 1.8 3.1 9.4 0.9 9.6  
  Generation – coal sources N/A 29.6 13.0 2.9 8.8 2.5 27.3  
A+B CEZ Group TOTAL (ELIGIBLE+NONELIGIBLE)   227.8 100 % 32.5 100 9.1 100  

* List of activities in this category is disclosed in Report — Implementation at CEZ Group.
** Based on EC proposal of Complementary Delegated Climate Act from 2. 2. 2022.
*** Neutral activities include sales and trading of commodities (electricity, gas), distribution of natural gas, ICT and telecommunication services. facility management and other services.
1) Total OPEX KPI is based on Taxonomy definition and thus include only fraction of operating expenses in CEZ Group. KPI includes maintenance and repair expenses. Definition and further information are disclosed in 3.6.6 KP] OPEX.
E – Enabling activity
T – Transitional activity

Disclaimer: Due to rounding some totals may not correspond with the sum of the separate figures.

  Turnover CAPEX OPEX
CZK Billion % CZK Billion % CZK Billion %
KPI breakdown - TOTAL ELIGIBLE activities 69.0 30.3 % 17.3 53.2 % 2.1 23.0
Taxonomy Eligible activities - sustainable 9.1 4.0 % 2.0 6.2 % 0.5 6.0
Taxonomy Eligible activities - enabling 59.8 26.2 % 15.1 46.4 % 1.5 16.3
Taxonomy Eligible activities - transitional 0.2 0.1 % 0.2 0.7 % 0.1 0.7

Turnover

CAPEX

OPEX

  Turnover
%
CAPEX
%
OPEX
%
 Eligible 30 53 23
 Noneligible — transitional 19 24 35
 Noneligible - other 50 23 42
General Principles

CEZ Group reports EU Taxonomy key performance indicators in line with Taxonomy Regulation 2020/852 and associated delegated acts. For the 2021 fiscal year, we considered only the eligibility of economic activities for two environmental objectives: climate change mitigation and climate change adaptation.

In line with regulation, CEZ Group will report additional information on alignment from 2023. After the adoption of additional classification, the report will be extended by disclosure on four additional environmental objectives:

  • Sustainable use and protection of water and marine resources
  • Transition to the circular economy
  • Pollution prevention and control
  • Protection and restoration of biodiversity and ecosystems

The future report will include reporting of alignment based on defined technical screening criteria and compliance with minimum social safeguards related to international human rights and social and labor standards. Technical screening criteria of any activity consist of Substantial contribution criteria towards one environmental objective and Do No Significant Harm criteria for other five environmental objectives. We expect a high level of alignment with taxonomy criteria across current eligible activities. This assumption is based on our available knowledge, corporate governance, and current understanding of taxonomy criteria in the industry.

Contextual Information on Methodology

The methodology for identification of activities and financial data was prepared to avoid the risk of double counting. If more activities are present in the company, we report each revenue or expense towards only one activity based on business lines, technology, or projects. CEZ Group does not report on overlapping activities (e.g., no eligibility in case of using fuel mix).

In the case of pumped hydropower storage, we report these activities under category 4.5 together with other hydropower facilities. The reasons are natural and technical specificities of dams in operation, connection to the river, and data availability. CEZ Group applies recommended procedure based on vgbe-Interpretation note.

For taxonomy KPIs, we use data of companies under full consolidation, i.e., companies under the management control of ČEZ, a. s. This Report uses International Financial Reporting Standards (IFRS) used for Consolidated Financial Statements in the CEZ Group 2021 Annual Report, which are assessed by an independent auditor.

Implementation at CEZ Group

CEZ Group is an international vertically integrated energy company with a large portfolio of economic activities. We have identified 31 taxonomy-eligible activities across multiple sectors.

Based on reporting principles of materiality and transparency, we disclose all significant eligible activities with a direct impact on taxonomy KPIs. Other identified activities are grouped as they have negligible impact on KPIs and no materiality for disclosure.

The list of CEZ Group eligible activities in 2021:

Taxonomy – Code and Activity CEZ business or activity description
ELIGIBLE activities
Generation – Renewable energy sources
4.5 Electricity generation from hydropower Modernization and electricity generation from hydropower dams. Owned assets. incl. pumped hydropower.
4.1 Electricity generation using solar photovoltaic technology Development. construction and electricity generation from photovoltaic technology. Both own assets and assets under long-term contractual operation on behalf of client are included.
Other Renewables: List of nonmaterial eligible activities included:
4.3 Electricity generation from wind power;
4.8 Electricity generation from bioenergy;
4.20 Cogeneration of heat/cool and power from bioenergy.
Heat and Electricity Distribution
4.9 Transmission and distribution of electricity Electricity distribution. incl. Grid development and modernization. Reported both national and local distribution systems connected to European network.
4.15 District heating/cooling distribution Heat distribution to customers.
Energy services and other eligible activities
7.3 Installation, maintenance and repair of energy efficiency equipment Installation, maintenance and repair of HVAC, heating and lightning in buildings
Other eneray services and electromobility List of nonmaterial eligible activities included:
3.2 Manufacture of equipment for the production and use of hydrogen;
3.5 Manufacturing of eneray efficiency equipment for buildings;
6.5 Transport by motorbikes. passenger cars and light commercial vehicles;
6.15 Infrastructure enabling low-carbon road transport and public transport;
7.2 Renovation of existing buildings;
7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings;
7.5 Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings;
7.6 Installation, maintenance and repair of renewable energy technologies;
7.7 Acquisition and ownership of buildings;
9.3 Professional services related to eneray performance of buildings.
Other activities List of nonmaterial eligible activities included:
1.1 Afforestation;
5.1 Construction, extension and operation of water collection. treatment and supply systems;
5.2 Renewal of water collection, treatment and supply systems;
5.3 Construction, extension and operation of wastewater collection and treatment;
5.4 Renewal of wastewater collection and treatment;
5.9 Material recovery from non-hazardous waste;
6.2 Freight rail transport;
6.6 Freight transport services by road;
8.1 Data processing, hosting and related activities;
A8.2 Computer programming, consultancy and related activities;
M9.1 Close to market research, development and innovation;
11.1 Education.
NONELIGIBLE TRANSITIONAL Activities
Generation – Nuclear sources3) Material activities included:
4.28 Electricity generation from nuclear eneray in existing installations.
  Nonmaterial activities included:
4.26 Pre-commercial stages of advanced technologies with minimal waste from the fuel cycle;
4.27 Construction and safe operation of new nuclear power plants, for the generation of electricity or heat, including for hydrogen production, using best-available technologies.
Generation – low emission combined-cycle and cogeneration sources3) Material activity included:
4.29 Electricity generation from fossil gaseous fuels.
  Nonmaterial activities included:
4.30 High-efficiency co- generation of heat/cool and power from fossil gaseous fuels.
4.31 Production of heat/cool from fossil gaseous fuels in an efficient district heating and cooling system.
NONELIGIBLE NEUTRAL Activities
  Neutral activities are sales and trading of electricity and gas, distribution of natural gas, ICT and Telco business and other noneligible services.
NONELIGIBLE EMISSION activities
Coal mining Coal mining activities and connected services in coal mines under ownership of CEZ Group.
Generation - coal sources Electricity generation and combined heat and power from coal power plants.

3) Transitional activities are based on classification of European Commissions Complementary Climate Delegated Act proposal from 2. 2. 2022.

KPI Turnover

CEZ Group defines KPI Turnover as total operating revenues in line with IFRS.

These are mainly accounting units of “Sales of electricity, heat, and gas,” “Sales of services and other revenues,” and “Other operating income.” The denominator is based on the audited result of operating revenues from Consolidated Financial Statements in line with IFRS.

The share of CEZ Group revenues from taxonomy eligible activities is 30.3%. These are predominantly revenues from the distribution of electricity (17%), installation of energy efficiency equipment (7.4%), and district heating distribution (1.4%). Other material activities are hydropower (1.2%) and photovoltaics (0.8%).

KPI Capex

KPI covers all capital expenditures that were realized in 2021 and are part of audited Capex in the CEZ Group 2021 Annual Report.

These are additions to property, plant, equipment, and intangibles compliant with IFRS, regardless of whether it is cash expense, including nuclear fuel procurement. It includes capitalized interests, unfinished assets, and advances on fixed assets and does not include emission allowances, emission credits, and green or similar certificates. The share of taxonomy eligible Capex is 53.2%. It is predominantly based on infrastructure investments for electricity distribution (44.2%).

KPI Opex

CEZ Group defines Taxonomy operational expenses KPI as selected operational expenses in consolidated companies linked to equipment care, meaning maintenance and repair of facility and equipment.

In line with the definition, the KPI includes only a fraction of the total operating expenses in CEZ Group. The denominator is based on the internal standardized category of Equipment Care. The KPI is not comparable to the current metrics in the CEZ Group 2021 Annual Report or financial statements. In cases of change in business ownership (new acquisitions, divestments), we count towards KPI only months of company activities under CEZ Group.

Eligible activities have a share of 23% KPI OPEX. The result is predominantly based on maintenance and repair expenses on electricity distribution infrastructure.

CEZ Group plans to include allowed categories as Research and Development (R&D) expenses and inhouse maintenance personal costs to OPEX KPI in the future. These categories are not used in our KPI definition, as they are currently available at best only as an expert estimate.

Disclaimer: General comparability of KPI OPEX between competitor companies is low. The current legal definition of OPEX KPI in the disclosure delegated act does not allow for collecting necessary data from regular accounting disclosures and systems. That leads to different interpretations and a different KPI definition in each company, which does not allow comparison between companies. To provide transparent and credible disclosure, CEZ Group applies the conservative metric defined above.

Noneligible Activities – Voluntary Disclosure

The total share of non-eligible activities reflects the fact that CEZ Group is a vertically integrated utility and that taxonomy does not define some neutral activities as eligible (such as electricity and gas trading and sales, commodities trading, and IT and telecommunications services). This limits CEZ Group’s potential to achieve a very high share of eligible activities.

The total share of non-eligible activities reflects the fact that CEZ Group is a vertically integrated utility and that taxonomy does not define some neutral activities as eligible (such as electricity and gas trading and sales, commodities trading, and IT and telecommunications services). This limits CEZ Group’s potential to achieve a very high share of eligible activities.

Transitional activities include nuclear energy and combined-cycle or cogeneration energy from natural gas. This category is based on the classification of the European Commissions Complementary Climate Delegated Act proposal from February 2, 2022. Neutral activities include activities with neutral impact on the environment. Those activities include trading and selling commodities (electricity, gas), natural gas distribution, ICT and telecommunication services, facility management, and other services. Emission activities include coal mining activities and generating electricity and heat from coal sources. Definition of this category follows Taxonomy Regulation and Do No Significant Harm (DNSH) criteria.

The largest share of non-eligible revenues is represented by neutral activities. Those activities themselves have low or no impact on the environment and are outside of the scope of Taxonomy in principle. A significant share belongs to non-eligible transitional activities (mainly nuclear energy), which are on track to be taxonomy eligible since 2023. In CEZ Group, this category includes mainly two nuclear power plants in operation, new nuclear power plant development, and one CCGT power plant. Electricity generation from nuclear energy in existing installations has the largest share of total shareholder value. Emission activities (mining and energy generation from coal) are non-eligible activities based on their impact on the environment and have a share of 14.8%.

Capex in nuclear energy is connected to facility maintenance and nuclear fuel procurement. Capex for coal energy is oriented towards modernization, maintenance, and ecologization of operations necessary for adequate heat supply until low-emission and zero-emission sources are in operation. Capex in mining activities is oriented towards retrofitting and modernization of mining and processing technology to provide the necessary coal supply and is in line with development plans for current mining locations.

OPEX in non-eligible activities is connected mainly to the repair and maintenance of coal and nuclear power plants and the maintenance of mining equipment.