Hello, everyone, and welcome at CEZ Group's First Half 2023 Results Conference Call. It's my pleasure to welcome today's speakers, Martin Novák; Chief Financial Officer, and Luděk Horn; our Director of Trading. I will now hand over to speakers who go through the presentation, and then there will be opportunity for you to ask questions. I'm now handing over to Martin.
Thank you. Good afternoon, good morning. Let me start with financial highlights. For last 6 months, you can see them actually on slide three of our presentation. Our EBITDA has grown by 5% to CZK 62.4 billion. Our net income reached CZK 22.3 billion, which is 34% lower than last year. It's basically all due to windfall taxes, as you can see, actually, as you will be able to see actually in later parts of the presentation. We are actually confirming our guidance for 2023 on EBITDA level, CZK 105 billion-CZK 115 billion, and CZK 33 billion-CZK 30 billion on adjusted net income.
Our shareholder meeting, important information, approved the record high dividend of 145 Czech crowns per share. The dividend was paid on August 1st so most shareholders have the dividend actually in their bank account by now. On the next slide, you can see actually a waterfall chart showing variance between 2022 and 2023, a comparable period of six months. The variances are not very significant. However, there are quite a few important factors that actually often offset each other.
First column is actually generation facilities, our power generation, and we were benefiting from rising average power price for our portfolio, that is now expected to reach anything between 120 and 135 EUR per megawatt-hour, depending on spot prices, as we still have 7% of our power unsold. So the benefit for first 6 months, compared to previous year, is actually 13 billion Czech crowns. On the other hand, actually, it is compensated by levy on excess revenue from generation activities in the Czech Republic, which reached 11.1 billion Czech crowns. Trading activities, pro-trading activities actually reached 5.2 billion Czech crowns, which is about half of what it was last year.
Last year, on the other hand, was full of volatility, as you all remember. CZK 11.7 billion last year was actually very unusual, unexpected income. Normal trading results under normal years was anywhere between CZK 1 billion-2 billion annually, so CZK 5.2 billion for first six months is still very significant income, actually. We also have CZK 2.9 billion of trading, commercial trading and consolidation effects, mainly derivatives revaluation throughout the year that that cancel out actually towards the end of the year. Mining segment also better results than expected, mainly due to commodity prices, higher prices for coal. As you will see later on, despite the decrease in significant decrease in mining volumes, there is a significant increase in EBITDA.
Distribution segment, fairly flat, just CZK 500 million below last year. Sales segment, CZK 2.4 billion positive. Half of it is actually attributable to one of core decision against a railway operator, where we won actually 2011 court case for the electricity that they did not buy, although they were bound by the contract to buy it. We had to sell it cheaper, at a lower price, because the price of the power in, in, in the meantime deteriorated, and our actual loss on that was CZK 1.2 billion, or not lost, but lower profit. Finally, now the court has ruled in our favor, and we received the cash.
This is how we get to CZK 62.4 billion, or 5% higher than last year. On next slide, we can see actually changes in net income. Depreciation amortization is somewhat higher due to faster depreciation on especially our coal-fired assets and some new assets as well. Impairments, basically no impairments in 2023, and almost no impairments in 2022. We had some interest income from cash that was sitting on our bank accounts because of the margining, and so being ready for the dividend payment, so being accumulated actually over that period of time, so significantly better interest income compared to the previous year.
Income tax is CZK 13.7 billion, higher income tax, mainly due to CZK 13 billion, which is attributable to windfall tax, that is actually accounted for in the first six months of 2023. Obviously, it was not in place in 2022. Net income is CZK 22.3, and adjusted net income, CZK 22.5 billion. The next slide, we just repeat what I've already said. We are holding our both EBITDA and also adjusted net income guidance on the same levels. You can see also some selected assumptions, which is a level of power generation and our average achieved price to be between CZK 120 and CZK 135.
We expect excess levy on continues to be between CZK 8 billion-CZK 13 billion, and windfall tax anywhere between CZK 22 billion and CZK 30 billion. Again, depending, depending, how we sell remaining 7% of our unsold position in power. The next slide, comparison to the, on the dividend. We paid 100% actually, of our 2022 earnings, which reached CZK 145 per share, paid on August 1st of 2023. Now, let's switch to generation mining activities. I will not go through it, detail, because you all- we already covered some of it, and you can read it on the slide number nine.
Basically, overall generation segment is fairly, pretty much flat, just 1% below 2022. It already includes actually levies as I said. Otherwise, the result would be definitely better. You can see actually increase in slight increase in emission-generating facilities, mainly because emission-generating facilities benefit from higher prices, but they are not impacted really by the levies, because the power prices that we are selling power at today is actually or is below the level set by the law on the levies for the for the emission-generating facilities. Unlike nuclear, which is obviously traded, and where we sell electricity above the levy set by the law.
Trading activities, that's what I already explained, a little bit lower than in, in, last year, but last year was really extraordinary. Mining segment, we had a, 14% decline in volume, 81% increase in, in, EBITDA, driven by higher, coal prices. Clearly, that we are actually charging to our, to our businesses, but also our external customers. Nuclear and, renewable generation, was, nuclear was fairly, flat, actually just 1% up. For the full year, we expect 30 terawatt-hours, or 33% lower, mainly due to longer scheduled outages for both power plants.
On renewables, we were 15% higher, year-on-year, for the first 6 months, and we expect to keep that trend actually, for the full year, mainly due to better-than-average hydrogeo, hydrological conditions in Q1 of 2023. Electricity generation from coal and natural gas. Coal was down 22%, natural gas, 16%. Overall to 22% decline. We expect to catch up actually on coal-fired power plants in the Czech Republic, and to be just 5% down, and the same in Poland will be about 18%. Mainly, you know, the, the market conditions during the second quarter were not supportive of running the coal plants, as power prices were fairly low.
Carbon credits a little bit higher, but again, winter season is coming, so we expect to catch up during the second quarter of, so actually, third and mainly fourth quarters of this year. Our CO2 and SO2 and NOx emissions are on slide 13. We are actually below our benchmarks, and are moving towards our decarbonization and desulfurization, and targets, and also targets on reducing nitrogen oxides. So the thousands of tons actually are shown on the slide number 13. Emission allowance that lose 6%, is open position on emission allowances that we still did not buy for 2023. 7%, which means basically the same number, is actually open position on power.
You can see assumptions on the slide actually of how on about our expectation on how we sell the remaining volume towards the end of the year. Next slide, important slide, slide 15, actually shows our hedging position, both on carbon credits and also on electricity sold. Both in showing you average achieved price, which is for following two years, around EUR 128-EUR 127. We are 66% hedged for 2024, 41% for 2025, and 14% for 2026. After reducing our hedging volumes last year due to margining issues. We actually are back, and we have started to hedge our position again, of course, introducing many new metrics on liquidity. Now the volatility is much lower than it was in the past.
Power prices are, have calmed down, and gas prices as well. It looks like there will be no gas this winter, so, there's no reason for, or there's no expectation that there should be anything, similar to what we lived through 2021 and beginning of 2022, spring 2022 coming. That's all for generation mining. Now I will hand over to Ludek Horn, and he will guide you through distribution and sales slides.
Good afternoon, good morning, everybody. First slide is related to our distribution business. You can see in the first half of the year, distributed volumes decreased by 4%. The main reason is that our customers decreased their consumption because of high prices, and it resulted in the decrease of EBITDA by 6%. On the next slide, you can see figures related to sales to end consumers itself. On retail segment, it means the daughter company, ČEZ Prodej, the decrease of EBITDA is CZK 0.1 billion. Actually, the commodities sales was even lower, minus CZK 1.5 billion, but it was almost compensated by revenue from a court case with railway company, and we received CZK 1.2 billion back.
The B2B segment, our daughter company, ČEZ ESCO, we can see the increase compared to the last year, 2.6 billion Czech crown. Commodity sales was successful. They managed to increase EBITDA by 1.3 billion Czech crown, and also they have increase in their energy services activities, both in Czech Republic, Slovakia, and Germany. On next slide, you can see volumes of electricity and natural gas sold. In retail, you can see decrease on by 4% on year-on-year basis. We expect that on the whole year, the decrease will not be that high. That's probably almost everything. On the last slide, you can see revenues from an sale of energy services is our ČEZ ESCO group companies in Germany.
BE-ON Group increased their sales by 15%, in Czech Republic, Slovakia by 61%, and in other countries, like Poland, Romania, Austria, by 16%. Average increase of revenues is so far 29%. On a calendar year level, we expect that the increase will be 23%. That's all from my side.
This concludes the presentation, and now we are ready for the questions. If you are connected by the Teams, just click on the Raise Hand icon, or if you are connected with telephone, just press star five. The first question is from Wanda Serwinowska.
Hi, good afternoon. Hopefully, you can hear me. Wanda Serwinowska from Credit Suisse. Three questions from me, if I may. The first one is on your 2023 EBITDA guidance. When I look at the midpoint of your segmental EBITDA, and I compare it to the guidance that you disclosed back in May, basically, there's, like, CZK 5 billion upgrade, if you sum up the midpoints. At the same time, you decided to keep the, the group-level EBITDA guidance unchanged, so the question is, why? The second point is on the some press speculation on the windfall profit tax that might be shortened. Any thoughts from you or comments on that one would be appreciated. The third one is on the GasNet acquisition, I mean, the potential acquisitions.
ČEZ publicly stated that, that it's looking into this. My question would be: Why are you interested? Is it just because it's, it's a regulated asset in the Czech Republic, and would you see any synergies because of your electricity networks? Thanks a lot.
Thank you for, for the questions. Regarding the 2023 EBITDA, actually, guidance, you know, there are still plenty of unknowns. It's important to say that our EBITDA is not, you know, is a seasonal EBITDA, so fourth, third quarters is, is usually the weakest, and first and fourth quarters are the best. Fourth quarter sometimes impacted by impairments, you know, so, so basically. We still have some % of power unsold, so depending on spot short-term prices, it can impact EBITDA fairly significantly. That's why we actually decided to keep range unchanged, same with net income. Windfall taxes, as you all know, actually levies, are just 2023 issue.
Windfall tax was approved for 2023, 2024, 2025, and there has been a lot of rumors. However, we did not notice any activity on the parliament side or anybody's side actually changing the law, because you can only do that through changing the law, and there's no activity going on in terms of that situation. There were some discussions about maybe that actually the caps on power prices for retail customers should be lifted earlier than by the end of the year. Again, no parliamentary activity is carried out these days, you know. I would assume for planning purposes, that things stay as they are, you know, and if there is any windfall tax discussion, it will definitely happen after August, sometime September, October, if at all.
Other, other things like levy and so on, probably not likely before, because, you know, we have only four months to go actually, of those, of those, measures, anyway. GasNet, yes, we are interested. It's a regulated asset actually, in our, portfolio. We, we actually know how to operate distribution assets, we know how to work with the regulators. It is on our backyard here, we understand it, very well. It's a regulated asset, so relatively safe, investment. Gas will be here with, with us for a few more decades for sure. As something that will be replacing sooner or later, for example, the, lignite plants, but of course, also consumed by the companies and households. That's one of the main reasons.
Of course, you can have certain synergies between power, power group and gas group of the company in terms of distribution. Of course, in terms of sales business, not really, because we are living in an unbundled world, so anybody can access your both electricity, but also, gas distribution. So that's.
Yeah.
There is no process as far as I know. It's just a discussion, but nothing official out yet, you know?
Okay. Can I have a very, very quick follow-up? Basically, on the 2023 DD&A, is it fair to say that you guys, you incorporate some buffer, given the risk for Q4, and under normal circumstances, the guidance would be raised at the group level?
No.
Is it a fair statement?
I don't think so. I don't think so. I think it's just a fair estimate, you know? It's not that we would be overly conservative, you know, so I think.
You know, if you raise The divisional guidance by CZK 5 billion, and you don't move basically the group level, it's just inconsistent a bit, in my view.
You know, I think we are now, our guidance is in the middle of our, of our, kind of. I mean, 105-115 is probably fair on both sides, you know, so, that, that's the only thing we can say, you know?
Okay. Okay, fair enough. Thanks a lot.
Okay, the next question comes from Polish telephone numbers, starting 721. Yes, you can ask your question.
It's Piotr Dzięciołowski from Citi. Can you hear me?
Yes, hi, Piotr.
Oh, yes, apologies, sorry. My darling with the phone. I wanted to ask you a couple of questions, firstly, on the, you know, what are the next steps in the process, in the investments, and, and when essentially, you need to start spending some CapEx on the asset realistically? 'Cause that potentially could interfere with this restructuring program that you are planning. Second thing on, do you think this transaction? Do you know any timing around this transaction and how that could interfere with this restructuring process as well? You know, you were talking, you know, the market was talking about possible company breakups. If you were to acquire this asset before that had, that could potentially have implications. Can you link the two things together, or these are totally separate, elements?
These two questions, to start with, please.
You know, actually, I didn't catch, the first question was about the investments in nuclear investiments, but it was related. I didn't, didn't catch, you know, we didn't hear well.
Sorry.
Sure.
I wanted to ask you about the nuclear investments. What are the next big milestones in the process, in the investments, when you have to start spending CapEx?
You know, we actually are not going to spend any CapEx. You know, it will be all paid for by state. This is the agreement. Actually, we only finance the preparatory work, which will-... after selecting the winner, which should be towards the end of this year, then, and after being approved by the government, because they are actually financing party, then, only then actually the planning phase will start, and I think our total exposure was something like EUR 1 billion over following few years, actually, of planning it. So relatively immaterial CapEx. We paid for no construction, so all construction is going to be paid for by the government with a zero percent interest loan.
Only after the plant is up and running and we receive Contract for Difference, basically, we will start, or the entity will start repaying it. Whoever it belongs to, it may be ours, we also might actually use an option and put it on state, or state can use a call option, so we are very far from any, any CapEx out nuclear. Break up of the company, I know there are many talks, you know, and we already talked about it a few times, that it might actually make sense to split the power generation assets, nuclear, coal, renewables, and also actually, or separate it on balance sheet. For example, level from our sales distribution assets. So far, we are not working physically on day-to-day basis on any project like this.
Originally, the main reason was actually to be able to obtain cheaper financing for the non-coal part of the business. However, if this happens, it's fairly simple, it's just shuffling with shares, because all companies, like sales as distribution, are a hundred percent owned by CEZ, so you will only be actually, moving shares between entities. Same with GasNet, you know, if, if it ever happens, you know, we would be acquiring shares that can be actually folded onto either parent company or, or a subsidiary of CEZ that would be specialized on customer segment, but nothing has been approved yet, you know, and, now, no, no, no detailed work is being done. Regarding the transformation on the shareholder level, it, it has been also discussed, many times, actually, during last call.
There is no action from the government, clearly, and I wouldn't expect anything, you know, over summer, but, you know, that's, that's only my point of view.
Okay, thank you very much.
The next question came through chat. So Michael Kozak is asking: What is the reason for the decrease in EBITDA from emission-generating facilities, from EUR 11 billion in Q1 2023, to EUR 0.7 billion in second quarter 2023?
Yes, so, it is a seasonal effect, you know. Basically, as the power prices are normally lower, especially power prices on, on sold parts of the power generation, and also demand for heat, which, which we generate as a often main product of our power plants, is actually much smaller during second quarter rather than first quarter, so just a seasonal thing. Okay. Next question.
Mm-hmm.
Hey, can you hear me? Can I ask my, my, my follow-up question? Would it be okay?
Yes.
Yes, we hear you.
Okay, I mean, would you be able to comment on the liquidity in the market? That's something that's all the European utilities have been complaining a bit, that basically the liquidity in the forward curve, in the forward market, it's pretty tiny, so you can't really take an advantage of the, of the prices that you can see on the screen. When I look at your 2024 volumes, you are slightly below the historical levels, but the gap has been basically closing versus the levels in Q1 or Q4 last year for the 2023, 2024 volume. Any comment around the liquidity in the market would be appreciated. Thanks a lot.
Yes, definitely we can observe a certain decrease of liquidity, but the effect on us is not significant because we sell a pretty high share of our production through our sales companies, so we don't need to sell on the market. We manage to keep the speed of hedging without any, any, let's say, negative effects.
Thanks a lot. Any observations from on, on, on the forward market? I mean, if you, if you go to the exchange, any observations there, that what you can see?
I think, of course, after crisis, which was caused by war and resulting margining or liquidity crisis, we can see that the pattern of trading slightly changed. Anyway, we, we, we can, we can sell what we need. No, no, no problem for us with it.
Okay, thanks a lot.
Okay, I, I see there is no more people waiting with their, with their hands raised, so I think that that concludes the conference call for, for today. If some further questions come up, just contact Investor Relations at CEZ. Thank you very much, and have a nice rest of the day.
Goodbye. Bye bye.