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The Power-Generation Company CEZ with More Than Five Times the Profit

31. 7. 2000

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The Power-Generation Company CEZ with More Than Five Times the Profit

"CEZ has generated for the first half of this year the profits after taxes amounting to CZK 3 billion, i.e. more by CZK 2.5 billion (430 %) compared with the same period of the preceding year. This considerable growth is, however, considerably influenced by the favourable development of provisions for exchange-rate variances due to a better rate of exchange of CZK, modified structure of our debt in foreign currencies and also to the fact that the comparison base of the last first half-year had included the discontinuation of retrofit of Tusimice I power plant..."

 

Total revenue 29,986 (CZK millions)
Sales of electricity 25,368 (CZK millions)
Total expenses 26,014 (CZK millions)
Fuel 6,416 (CZK millions)
Income before income taxes 3,972 (CZK millions)
Net income 3,046 (CZK millions)

"CEZ has generated for the first half of this year the profits after taxes amounting to CZK 3 billion, i.e. more by CZK 2.5 billion (430 %) compared with the same period of the preceding year. This considerable growth is, however, considerably influenced by the favourable development of provisions for exchange-rate variances due to a better rate of exchange of CZK, modified structure of our debt in foreign currencies and also to the fact that the comparison base of the last first half-year had included the discontinuation of retrofit of Tusimice I power plant. For this whole year the profit is expected to be CZK 5 billion, upon consolidation for "CEZ Group", CZK 5.5 billion" said CEZ Executive Director for Economy Petr Voboril.

The sales of electricity to distribution companies, that are CEZ most important customers, amounted to CZK 18.9 billion, i.e. less by more than 20 % compared with 1999 which is due both to the reduced sales of electricity to distribution companies and to that the sales of CEZ support services have passed from distributors to the newly established company CEPS. That is why CEZ collected from CEPS CZK 2.2 billion for sales of support services. The sales to distributors decreased between the two years by 11 % (2,313GWh) to the level 18,602GWh. CEZ managed to make up for the decrease with higher exports of electricity which amounted to 6,235GWh. Total sales of electricity decreased by almost 2 %, amounting to CZK 25.4 billion.

The sales of heat amounted to CZK 868 million and decreased between the two years by 6 %. CEZ total revenues amounted in the period to CZK 29,986 million and increased between the two years by 1.3 %, especially due to the clearance of provisions for exchange rate variances which amounted to CZK 1.3 billion.

Total costs excluding the corporation tax amounted to CZK 26,014 million and decreased by 8.8 % compared with the preceding year. The decrease in costs is due to lower electricity purchases for resale by CZK 1.2 billion in connection with discontinued purchases from Opatovice Power Stations. The decrease is also due to the last year, non-recurring increase in costs in connection with discontinuation of retrofit of Tusimice I power plant that were not reflected any more in this year results. Financial costs decreased by CZK 0.7 billion. Payroll costs decreased by 5 %.

"We continue the trend of reducing our costs so that we can succeed as good as possible in the competitive environment that will be fully opened for our company at the very beginning of liberalization of the Czech market with electricity. Although we managed to decrease our total costs also by economizing measures, this trend should be continued. The reduction of operating costs is mostly due to our long-term conceptual work in the field of financial risk management, above all with regard to exchange rate risks. I am pleased we are now reaping the fruits of our long-term labor that are not always visible in the short run. Within the cost cuts, we manage to decrease the number of employees, bringing our company closer to Western European standards. The difference in the number of workers per installed MW is, however, still quite high compared with our Western competitors, and we have to continue this trend, otherwise we could not compete with foreign manufacturers. We have been managing this process as long as from 1992 without any social shocks, because ours is a controlled process. In 1992, CEZ had employed almost 16,500 persons and as of the end of this June the number was lower by 45 %, i.e. 9,111 employees. Consequently, the productivity has increased and, simultaneously, demands on the grow of costs have been decreasing," mentioned Petr Voboril.

Our capital expenditures amounted to CZK 6.1 billion, i.e. less by CZK 2.8 billion compared with the past year. Total of CZK 3.9 billion of CZK 10 billion planned for this year were spent at Temelin Nuclear Power Plant. The total cost of construction of Temelin NPP already amounted to CZK 83.9 billion. Financing of the company was without problems in the given period and CEZ fulfilled in time its financial obligations.

The demand for electricity increased by 2.6 % compared with the first half of the last year (by 888GWh) to the level of 26,801GWh, the growth being 0.7 % after the method of calculation has changed. The growth in consumption was reflected in industries where the increase between the two years was 6.6 %, the real growth being 3.1 % after the method of calculation has been made more exact. On the other hand, the retail consumption decreased by 2.2 %. This decrease is due to the higher average temperature in this first half-year as well as higher prices for electricity for households by 15 %. CEZ share in the coverage of the demand for electricity in the Czech Republic decreased from 73.1 % to 64.3 % compared with the same period of the past year. The main reason is growing production by other producers and the termination of the contract of electricity purchasing from Opatovice Power Stations. CEZ has managed to make up for this decrease on the domestic market by higher exports, as mentioned above.

Petr Voboril concluded, "We believe the permanent trend of decrease of our share in the domestic market with electricity will reverse after the new tariff structure of our giving-over prices for distributors, which prices are still regulated, will fully consider also the system services which have been currently rendered by us also on behalf of the other producers. The other producers thus compete with a "product" which is, however, poorer than ours. Nevertheless, we will not be just waiting for a new structure of tariffs. We will be trying to use also other business tools to improve our position on the domestic market that is of the highest priority for us."