CEZ's Consolidated Quarterly Report on Operational, Economic and Financial Results for 1st Half 2002, in accordance with IFRS

Main Features

• Electricity sales decreased by 1% in comparison with the same period last year, the decrease in domestic sales (by 6.4%) was compensated by an increase in electricity exports (by 14.4%)
• Net income amounted to CZK 6.7 bn, a decrease of CZK 0.2 bn (2.9%)
• Year-on-year operating revenues decreased by CZK 2 bn (6.6%), operating and other expenses decreased by CZK 1.8 bn (8.4%)
• Year-on-year operating revenues decreased by CZK 2 bn (6.6%), operating and other expenses decreased by CZK 1.8 bn (8.4%)
• Year-on-year operating revenues decreased by CZK 2 bn (6.6%), operating and other expenses decreased by CZK 1.8 bn (8.4%)
• During the first half of 2002 the specific number of employees to installed capacity decreased by 11% due to the increase in installed capacity and a reduction in the number of ČEZ employees by 176 (2.3%)
• The 10th annual general meeting approved payments of dividends and directors’ fees, as well as the sale of a majority stake (66%) in ČEZ’s subsidiary company ČEPS and the purchase of the National Property Fund’s stakes in regional distribution companies (REAS).All necessary agreements are signed with one exception (the sale of a 15% ČEZ stake in ČEPS to the Ministry of Labour and Social Affairs) and ČEZ applied to the antitrust office for approval of this transaction

Prague, 31 July 2002

Income Statement in Accordance with International Financial Reporting Standards	30 June 2002		30 June 2001	Index 02/01
	CZK m	EUR m	CZK m
Operating revenues	27,717	947	29,684	93.4%
Operating expenses	20,343	695	20,284	100.3%
Fuel	6,207	212	6,922	89.7%
Purchased power and related services	3,812	130	3,284	116.1%
Depreciation and amortization	5,034	172	4,651	108.2%
Operating income	7,374	252	9,400	78.4%
Other expenses (income)	-804	-27	1,040	x
Income before income taxes	8,178	279	8,360	97.8%
Income taxes	1,466	50	1,463	100.2%
Net income	6,712	229	6,897	97.3%
	Unit	30 June 2002	30 June 2001	Index 02/01
Earnings per share (EPS)	CZK	11.4	11.6	98.3%
Price/earnings ratio (P/E) */	1	5.7	5.9	96.6%
Return on equity (ROE) net */	%	6.5	7.0	92.9%
Return on total assets (ROA) net */	%	3.9	4.2	92.9%
Assets turnover */	1	0.24	0.26	92.3%
Total indebtedness (provisions excluded)	%	27.3	29.7	91.9%
Long-term indebtedness	%	16.0	21.1	75.8%
*/ For the last 12 months

Revenues, Expenses, Income

Our Income Statements, Balance Sheets, and Cash Flow Statements have been converted from Czech Accounting Standards to International Financial Reporting Standards (IFRS) and may differ significantly from the same data prepared according to Czech Accounting Standards. The figures presented include fully consolidated data from ČEZ and ČEPS, and data from the equity earnings of an affiliated company (37.21% of the profit came from Severočeské doly).

Net income for the first half of 2002 amounted to CZK 6.7 bn, a decrease of CZK 0.2 bn (2.7%) in comparison with the same period of 2001. While EBIT was lower by CZK 2.0 bn, EBT decreased slightly by CZK 0.2 bn. ČEZ’s turnover was CZK 27.7 bn in total, CZK 2.0 bn (6.6%) lower than in the same period of 2001. Operating expenses remained at the same level. Other income amounted to CZK 0.8 bn, an improvement of CZK 1.8 bn on last year, when other expenses of CZK 1.0 bn were recorded. This resulted from changes to the exchange rate of CZK. Income taxes (CZK 1.5 bn) reached the same level in comparison with the same period of 2001.

Earnings per share went down from CZK 11.6 to CZK 11.4 due to a decrease in profits. The price/earnings ratio fell from 5.9 to 5.7 due to a year-on-year decrease in share prices (by 4.1%) and profits (by 2.1%). The net return on equity decreased from 7.0% to 6.5% because of a decrease in profits (for the last 12 months) and an increase in average equity.

The net return on total assets decreased (from 4.2% to 3.9%) as a result of the decrease in profits (for the last 12 months) and an increase in the average value of total assets (by 3.7%). Assets turnover decreased to 0.24. Total indebtedness (provisions excluded) decreased to 27.3%; long-term indebtedness also fell, to 16.0%.

The specific number of employees to installed capacity decreased in the first half of 2002 to 0.662 (by 11%) due to the increase in installed capacity (by 1,000 MW) and a reduction in ČEZ's number of employees by 176 (2.3%) to 7,376.

Sales of Electricity

On 1 January 2002 the wholesale electricity market opened up completely. ČEZ sells electricity to customers who have the right to choose their supplier, i.e. regional distribution companies, ČEPS (in order to cover transmission system losses), new licensed traders and eligible customers. The market operator carries out other daily sales, settlements of balancing deviations and regulatory work for the activation of auxiliary services.

The total electricity sales of 25.9 TWh decreased year on year by 1%; the drop in domestic sales by 1,246 GWh (6.4%) was compensated by an increase in electricity exports by 975 GWh (14.4%).

The electricity generated in the company’s fossil power stations decreased by 2,654 GWh (13.9%); in contrast, the electricity generated in the nuclear power stations increased by 2,142 GWh (31.7%) due to generation in the 1st unit of Temelín Nuclear Power Station.

Hydro-power station output increased by 237 GWh (31.7%) owing to the favourable hydrologic conditions during the spring thaw of snow.

Revenues from sales of electricity (CZK 25.6 bn) decreased by CZK 2.1 bn (7.6%), in part due to ČEZ's competitively revised Rainbow Energy prices.

Investment Programme

In total, capital investments amounted to CZK 4.0 bn; CZK 0.9 bn was spent on Temelín Nuclear Power Station.

Since mid-January 2002, the 1st unit of Temelín Nuclear Power Station has been in operation with a nominal output of 100%, with the exception of the planned revision period from mid-February to nearly the end of April. After all tests had completed the 1st unit of Temelín Nuclear Power Station was put into commercial operation on 11 June 2002. From that day it has been depreciated and ČEZ’s installed capacity increased by 1,000 MW. During the first half of 2002 the 1st unit of Temelín Nuclear Power Station supplied 2,081 GWh of electricity to the grid, of which 386 GWh came from commercial operations.

In the first half of March 2002 nuclear fuel was loaded into the second reactor of Temelín Nuclear Power Station and in May 2002 the first fission reaction was initiated. On 25 June 2002 tests at 30% of capacity were started, but on 4 July the 2nd unit was shut down due to generator failure. The 2nd unit is due to be restarted in the first half of August.

Financing

Net cash provided by operating activities decreased to CZK 9.1 bn (by 18.7%). Only CZK 3.4 bn was spent on investments (CZK 3.6 bn lower than in the first half of 2001).

Current credit rating for ČEZ: from Moody’s - 'Baa1' with a stable outlook, from Standard & Poor’s - 'BBB+' with a stable outlook

Other information

Under Decree No. 250/2002, the Czech government approved the sale of the National Property Fund's majority stakes in five and minority stakes in three regional distribution companies to ČEZ and, conversely, the sale of a majority stake (66%) in ČEPS from ČEZ to OSINEK (51%) and the Ministry of Labour and Social Affairs (15%).

On 20 May 2002 the company held an extraordinary general meeting of shareholders to approve the above-mentioned sales. In the end, these transfers were thwarted by the National Property Fund, even though this was the shareholder requesting the meeting.

The transaction was ultimately approved at the 10th general meeting of shareholders, which took place on 11 June 2002, with two conditions - an additional valuation of ČEPS stock would be made by another expert, and both transactions would be executed simultaneously. Now only the contract of sale transferring 15% of ČEZ’s stake in ČEPS to the Ministry of Labour and Social Affairs remains to be signed, some of ČEZ's credits need to be restructured, and ČEZ has applied to the antitrust office for approval of this transaction (expected during the second half 2002).

The 10th annual general meeting also approved:

• payments of dividends totalling CZK 1.5 bn (CZK 2.5 per share) and directors’ fees;
• the possibility of issuing bonds in 2002 and 2003 up to CZK 15 bn to be able to realize the above-mentioned transaction;
• personnel changes to the Supervisory Board.

On 26 June 2002, ČEZ, a.s. was awarded the internationally recognized EMS (environmental management system) certificate, which is valid for all coal and hydro power stations. They account for 8,385 MW, 75 % of ČEZ’s installed capacity.

Income Statement in Accordance with International Financial Reporting Standards (IFRS) (CZK m)	30 June 2002	30 June 2001
Operating revenues	27,717	29,684
Sales of electricity	25,571	27,674
Heat sales and other revenues	2,146	2,010
Operating expenses	20,343	20,284
Fuel	6,207	6,922
Purchased power and related services	3,812	3,284
Repairs and maintenance	1,126	1,187
Depreciation and amortization	5,034	4,651
Salaries and wages	1,927	2,012
Materials and supplies	817	871
Other operating expenses	1,420	1,357
Income before other expenses/income and income tax	7,374	9,400
Other expenses/income	-804	1,040
Interest income	-78	-107
Interest on debt, net of capitalized interest	159	266
Interest on nuclear provisions	749	732
Foreign exchange rate losses (gains)	-4,213	358
Other expenses/income, net	2,812	115
Income from associate	-233	-324
Income before income taxes	8,178	8,360
Income taxes	1,466	1,463
Net income	6,712	6,897

Cash Flow in Accordance with International Financial Reporting Standards (IFRS) (CZK m)	30 June 2002	30 June 2001
Cash and cash equivalents at beginning of period	3,365	3,219
Operating activities:	9,082	11,166
- Income before income taxes	8,178	8,360
- Depreciation and amortization and asset write-offs	5,052	4,659
- Amortization of nuclear fuel	883	781
- Foreign exchange loss (gain)	-4,213	357
- Provision for nuclear decommissioning and fuel storage	411	371
- Changes in assets and liabilities	1,362	-1,697
Investing activities	-3,364	-6,988
Financing activities	-2,919	-2,804
Net effect of currency translation in cash	-377	-52
Cash and cash equivalents at end of period	5,787	4,541

	30 June 2002	30 June 2001
Electricity supply from ČEZ power plants - net (GWh)	24,333	24,543
Electricity sold by ČEZ in the Czech Republic (GWh)	18,167	19,413
- Electricity sold by ČEZ to REAS (GWh)	15,793	19,002
- Price of electricity sold to REAS (CZK/MWh)	879	951
ČEZ´s electricity exports (GWh)	7,733	6,758
ČEZ´s electricity imports (GWh)	413	454

Capacity, Employees	30 June 2002	30 Dec 2001
ČEZ Installed capacity (MW)	11,146	10,146
Number of employees (pers)	7,376	7,552
Specific number of employees (pers/MW)	0.662	0.744

Balance Sheet in Accordance with International Financial Reporting Standards (IFRS) (CZK m)	30 June 2002	30 June 2001
Assets	228,637	229,027
Fixed assets	214,329	216,306
Plant in service	237,525	180,069
Less accumulated provision for depreciation	97,190	92,431
Net plant in service	140,335	87,638
Nuclear fuel, at amortized cost	7,876	5,967
Construction work in progress	55,469	111,929
Investment in associate	5,617	5,518
Investments, net	3,887	4,110
Intangible assets, net	1,145	1,144
Current assets	14,308	12,721
Cash and cash equivalents	5,787	3,365
Receivables, net	3,441	3,933
Income tax receivable	6
Materials and supplies, net	2,598	2,489
Fossil fuel stock	476	657
Other current assets	2,000	2,277
Shareholders´ equity and liabilities	228,637	229,027
Shareholders´ equity	141,970	136,726
Stated capital	59,062	59,050
Retained earnings	82,908	77,676
Long-term liabilities	58,537	64,477
Long-term debt, net amount due within one year	36,676	43,081
Accumulated provision for nuclear decommissioning and fuel storage	21,861	21,396
Deferred income taxes, net	9,720	9,870
Current liabilities	18,410	17,954
Short-term loans		514
Current portion of long-term debt	4,563	5,126
Trade and other payables	10,563	8,651
Income tax payable	869	953
Accrued liabilities	2,415	2,710

Consolidated Statement of Shareholders´ Equity in accordance with IFRS (CZK m)	Stated Capital	Retained Earnings	Total Equity
December 31, 2000, as previously reported	59,209	70,233	129,442
Net Income for period 1-6/2001		6,897	6,897
Dividends declared		-1,184	-1,184
June 30, 2001	59,209	75,946	135,155
Effect of adopting IAS 39		-496	-496
Acquisition of treasury shares	-159		-159
Net Income for period 7-12/2001		2,226	2,226
December 31, 2001	59,050	77,676	136,726
Additional paid-in capital	12		12
Net Income for period 1-6/2002		6,712	6,712
Dividends declared		-1,480	-1,480
June 30, 2002	59,062	82,908	141,970