ČEZ draws attention to the suspicion of TES Praha being an intentional or unintentional party to tax evasion.

This year in May the company ČEZ drew the revenue office’s attention in writing to its suspicion that the company TES Praha, a.s. could have become an intentional or unintentional party to so-called carousel transactions resulting VAT evasion. In April ČEZ, when these transactions began intensively, it began to suspect that this trader may be breaking the law. Therefore it submitted all source documents to the revenue office. ČEZ also stopped trading with emission tickets and with other companies which used a similar trading model as TES Praha a.s. Standard trading with other reputable partners continues.

ČEZ began trading with TES Praha a.s. this February and concluded a standard EFET framework agreement with the company under which European transactions with commodities, i.e. emission tickets take place.

TES Praha a.s. described its concept of trading with EUA tickets as the use of its contacts with industry acquired during the provision of consultancy services for trading with redundant emission tickets of these industrial enterprises.

In February and March several small insignificant transactions took place. However in April there was a great increase in the volume of transactions made by this company which no longer corresponded to the potential that TES Praha had stated (i.e. remaining volumes from Czech industry). Likewise, the method of trading by TES Praha began to appear unusual to ČEZ traders. Therefore, we began to intensively uncover these transactions and subsequently submitted the matter to the tax administration authority.

We suspect that this could be fraud arising only from trading with emission tickets based on spot transactions allowed by the different tax legislation existing across the EU countries.

ČEZ, a.s. has been trading on the European market with emission tickets since 2005. We trade with emission tickets in order to adjust the needs of our power plants which consume the tickets as well as for purely trading purposes. We trade with emission tickets on organised EEX and ECX stock exchanges in the form of term (futures) products for future years.

9. 8. 2010