Transformation and integration year of the CEZ Group

"We want to take some actions which used to be taken in the CEZ Group five of six times only once," said to the basic purpose of the VIZE 2008 Radomir Lasak, Member of the Board of CEZ, a. s. and director of administration division. Regarding the VIZE 2008 project management, this year, when the largest transformation and integration in the modern history of the Czech electro-power industry is taking place, is considered to be the most ambitious. Competitiveness

The purpose of the VIZE 2008 project is to use the advantages of integration and changes in the organizational structure for development of CEZ Group´s economic performance. The implementation of unbundling provided by law, i. e. separation of a regulated distribution area from other business activities, and reaching the best practice of successful foreign power companies are important goals. Accomplishment of integration will lead to a creation of conditions for further international expansion.

"CEZ Group´s vision is to transform the local profitable company CEZ, a. s. and its capital participations into the Group, which will become number one on the power markets in Central and South-Eastern Europe," states Radomir Lasak, Member of the Board of CEZ, a.s. and director of administration division. And he adds: "We want to enter the objective year 2008 as the Group with one face, where employees endeavour to reach a common vision and realize common goals."

Holding structure

The new business model proposal respects a regional aspect so that it avoids an unequal impact on employment in single regions. As a result, the ten new companies have been placed into individual regions by twos. New companies CEZ Data and CEZ ZakaznickĂ© sluĹľby (Customer Services) operate in western Bohemia, CEZ Distribuce (Distribution) and CEZ Sprava majetku (Property Administration) in northern Bohemia. CEZ ObnovitelnĂ© zdroje (Renewable Resources) and CEZ MeĹ™eni (Measuring) will be based in eastern Bohemia, CEZ DistribuÄŤni sluĹľby (Distribution Services) and CEZ Logistika will be in northern Moravia. CEZ Prodej (Sales) and CEZnet will remain in central Bohemia.

"Transfer of activities, employees and assets from the present regional power companies to the new-established companies will apply to 4,400 employees within the CEZ Group during 2005, and it will be connected with assets transfer in the amount of 74 billion CZK," says to the unprecedented extend of changes Tomas Pleskac, director of integration section and VIZE 2008 project leader, and he adds: "All changes were conditioned by creation and implementation of new information systems and by a huge data transfer, which accompany establishment of new companies. The financial IS on the SAP platform was implemented already last year, when SAP FIS (financial information system) was launched in five distribution companies during 9 months."

The main changes will take place during the last four months of this year. Requisite activities and assets will be gradually transferred to the new companies CEZ Distribuce and CEZ Prodej after the legal separation of distribution and trade with electric energy, by which the required organizational separation will be accomplished.

Lower costs

"We anticipate gross cost economies to reach 1,830 million CZK in 2006 - compared to 2003. Implementation of the best operational experience, the best practice will be their main resource. These benefits will increase by another 450 million CZK. Part of the economies, however, will be swallowed up by implementation costs- particularly costs connected with unbundling, corporate support of the IT area and indemnity for the leaving employees" says Tomas Pleskac. Besides using the best known practice, rigorous adherence to the principle of central purchase and reduction in the number of employees is another resource of benefits of integration and process optimization.

Employees

The first downsizing took place already in 2004, when almost 300 employees out of over eight thousand, who the project changes applied to, left the Group. More than 200 employees will leave the Group in 2005. Further gradual reduction is anticipated in the two following years as well. The number of employees will decrease by total 1,800 in the CEZ Group by 2008, which is a little more than 10 % of the total number of CEZ Group´s employees.

Ladislav Kriz. Press Officer, CEZ, a.s.

30. 6. 2005