CEZ will gain the Bulgarian power plant Varna, generating capacity of CEZ Group will increase by 10 %

“Today represents another milestone in the fulfilment of our vision of becoming number one on the electricity markets in Central and South-Eastern Europe. It is very pleasant that we have managed to gain a part of power generation in Bulgaria, where we have owned a part of distribution since last January,“ said at the signing of the contract Jiri Borovec, Vice-Chairman of the Board of Directors and director of the production division of CEZ.

“CEZ Group has long-term experience in operation of thermal plants and in making them more ecological; their generating capacity accounts for more than a half of our production portfolio. In the years 1992-1997 we completely desulphurized all our thermal plants, which now meet the tough EU emission standards. At the moment we are preparing a comprehensive program for the renewal of our production portfolio. We are planning to use all that experience in the case of the power plant in Varna as well,“ added Jiri Borovec.

“The privatization of Varna TPP is a project crucial to the sustainable development and the security of supply of the Bulgarian energy sector before the country’s accession to the EU. I am glad that CEZ as a strategic investor, which has already made its first steps in Bulgaria, remained focused on the opportunities in the Bulgarian energy market and have committed to bring Varna TPP up to EU standards,” said Rumen Ovcharov, Bulgarian Minister of Economy and Energy on the occasion of the signing of the Varna TPP deal.

CEZ will pay an amount of over 206m EUR for 100 % shares of the plant in Varna to the Bulgarian government. Another almost 100 million EUR will be used for a 16 % increase in the authorized capital of the plant. Consequently the total investment into Varna will amount to 306m EUR.

In addition, CEZ also signed a memorandum with the Ministry of Economy and Energy, to invest an amount of 40m EUR into power projects in Bulgaria within 4 years. The projects concerned are, for example, projects in the area of renewable resources – hydro power plants, biomass combustion, or projects concerning power infrastructure.

The settlement of the transaction (i.e. shares transfer and payment of the purchase price) is expected in the weeks following the settlement of the suspensory conditions, i.e. the approval of the transaction by the Bulgarian antitrust office and negotiation of the conditions for the operation of the plant under the „cold reserve“ with the company NEC.

“Our objectives regarding our operation in the Bulgarian power industry are on a long-term basis, and on that account, we are glad that we are also adding an important plant in to the present three distribution companies. Our experience with the local environment has been positive so far, and we feel a very close relation between our cultures. Our Bulgarian colleagues are actively participating in the work of the entire CEZ Group, not only in Bulgaria. After the almost two years we have been here, we can say that it was a step in the right way to enter this market, last year results of our Bulgarian distribution companies confirm it as well, and that both sides benefit from it,“ commented on the signing of the contract Tomas Pleskac, Member of the Board of Directors and director of distribution division.

Varna power plant is situated in the South-Eastern Bulgaria near the Black Sea port of the same name, and its location therefore represents rather significant logistic advantage. Due to its generating capacity of 1,260 MW (6 x 210 MW), Varna will become the largest conventional plant of CEZ Group. The largest power plant so far – the Prunerov plant II (5 x 210 MW) in North Bohemia- will fall to the second place then. Varna burns imported black coal and in 2003 generated ca 2.3 TWh of electrical energy. The production in the following ten years, however, is estimated at a gradually increasing value in the range from 4-6 TWh, the main reason for that being modernization and a growing demand for electricity in Bulgaria and the whole South-Eastern region of Europe.

In its foreign expansion, CEZ Group has already succeeded in Bulgaria. Since January 2005 it has owned three Bulgarian distribution companies in the west of the country. Regarding the area of distribution, CEZ has also acquired the Romanian distribution company Electrica Oltenia, which supplies power in the region directly neighbouring the Bulgarian distribution area of CEZ Group. In the area of power generation, CEZ and the American concern PSEG concluded a contract about a purchase of two power companies Elcho and Skawina at the beginning of this year, and the company is continuing to seek new opportunities in its target region of Central and South-Eastern Europe.

Eva Nováková

Press Officer, CEZ, a.s.

Attachment:

Generation capacity of CEZ Group
Czech Republic	12 298 MW
Poland	810 MW	Elcho and Skawina plants
Bulgaria	1 260 MW	Varna plant
Total	14 368 MW

4. 5. 2006