Earnings Call: Q3 2022

Nov 10, 2022

Welcome to the ČEZ Group Q1 to Q3 2022 results. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Barbara Seidlová, who will lead you through this conference. Please go ahead. Hello everyone, and welcome on our regular call. It's my pleasure to welcome today's speakers, Martin Novák, Chief Financial Officer, and Pavel Cyrani, Chief Sales and Strategy Officer. I will now hand over to Martin to walk you through the first section of the presentation. Thank you. Good afternoon, good morning, everybody. I will briefly go through the first two sections and then hand over to Pavel. On the first slide, you can see actually our financial highlights both for Q3 and the first nine months of 2022. It is worth mentioning that our EBITDA has grown year-on-year for the first nine months by 88% to 89.3 billion CZK. Which is a record high ever in the history of our company, I believe, for the first three quarters. Same with net income, 52.3 billion CZK for the first nine months. Revenue, 211 billion CZK. Financial outlook for full year is being increased by 10 billion CZK, as you will see later in the presentation, to a range of 115 billion CZK to 125 billion CZK for EBITDA and 65 billion CZK to 75 billion CZK on net income. On the next slide, there is a chart showing the main variances. The main variances are fairly easy to describe this time. Basically, vast majority of positive variance of 43.4 billion CZK is coming from generation segment. 36 billion CZK is coming from higher power prices, meaning those prices of the product that we are selling throughout the year on mostly spot market or short products, shorter than one year. At the beginning of 2022, we still had about 10% of unsold generation. This actually being sold at spot prices around €500 for a big part of the year is making such a significant increase in our sales and also, of course, EBITDA and net income. Another record high result is coming from our trading activities. Prop trading has generated almost CZK 13 billion for the first 9 months, which is almost CZK 11 billion more than last year for the same period of 9 months. Our trading team was able to see the trends on the market, but also volatility on the market was helping the result, as volatility is what prop trading mainly needs for their success. On the next slide, you can see actually the details going down to net income that I already described. Basically, all items are in line with what are the main key drivers. You can actually see the details of depreciation and the interest income and all those line items in the text below. So important, our net income, CZK 52.3 billion up from CZK 16.9 adjusted net income or even CZK 6.7 net income for previous 9 months of previous years. We increased our financial outlook, as I said. That is mainly due to extraordinary positive results for the first third quarter and for first 9 months of the year. The main reasons for increasing our outlook is mainly income from trading activities. As I said, it is CZK 11 billion higher than last year. This is very simply said, basically, the difference by which we increase our expectations. So by CZK 10 billion, both on EBITDA and net income. Predicted or potential opportunities available with the generating facilities, as always. Possible revaluation of commodity derivatives for 2023. Movement in power prices, significant increase or decrease in spot prices. That results actually into our estimated 2022 dividend, that should be record high, CZK 97-CZK 112 per share, or CZK 50 billion-CZK 60 billion dividend, if we take into consideration 80% payout ratio. So again, record high dividend. I think our record dividend was around CZK 53 about 10 years ago. As you know, there are plenty of developments on the front of solving high power prices in Europe in terms of national government and also EU. EU has implemented a framework and suggested to national governments to implement a few measures to make sure that significant increase in power prices will not have an extremely negative impact both on households, but also companies and the economy in general. So basically, there is a revenue cap on certain power resources being allowed by EU, saying that it should be on different level based on different source of power. In case of Czech Republic, the law proposal says that there should be a cap on nuclear plants, about EUR 70 per megawatt hour and on lignite plants on around EUR 880 per megawatt hour. It is still not approved. It will go through the parliament, and then the levels need to be decided by the government that will have an ability to change those levels, which should be in place for 2023. Exceptional tax or windfall profit tax will be levied on the rest of the profits according to EU and suggested minimum rate is 33%. Czech Republic is implementing a 60% for 3 years, 2023, 2024, and 2025, with tax being first time paid in advance on tax will be paid for 2023 in September 2023, based on the best estimate of the companies. There is also consumption reduction target that has been suggested by EU. On next slide, you can actually see how the market cap for power generators will work, how special tax would work or windfall profit tax, and then how it actually relates to cap on the power prices, which has been set for households and small and medium enterprises at 60 koruna, including VAT, per megawatt hour, which equals basically to EUR 180 and 3 Czech koruna or EUR 90, for natural gas. Producers will be taxed and they will be also capped and taxed. The state will subsidize from the proceeds of the producers the power prices that exceed the cap of 60 Czech koruna per megawatt hour on power. Next slide number 9, is actually what I described. For modeling purposes, if you look at it, basically it really doesn't matter whether you calculate it as a cap. When you try to calculate actually or your models, whether there is a cap on power generation prices or there is a windfall profit tax because it's just a split between those two. The pool of money is the same. For very simple reasons, just to make it simple, it could take for 2023, 2024, and 2025, something like 19% corporate income tax at 60%, which is 79%. In reality, the effective tax rate will be lower because it does not impact all our companies, but just power generation. Also it's not based on pre-tax profit, but as a taxable income from tax return which is increased by 20%. The effective tax rate will be lower, but it will be close to 79%, maybe a few percentage points lower. It really doesn't matter whether it's collected through the cap on the power prices or through the windfall tax. Next slide. We actually respond to the situation on the market and we have contracted LNG terminal. We booked 1% of capacity for 4 to 5 years on the LNG terminal, which provides us for 5 years the annual capacity of 3 billion cubic meters of gas every year, which is the consumption of one third of Czech Republic for entire year. Significant capacity for the market. We already had a few cargoes coming. We have back-to-back contracts, again, agreements with the state, so we don't bear a risk of prices falling down, for example. That's other countries that are interested to see have contracted such a terminal in such a short time. Other market events, Modernisation Fund has actually had a deadline of October 31 for applying for subsidies. For photovoltaic plants, we actually submitted 44 projects, a total installed capacity of 1,012 megawatts. We will expect to see how many projects actually won the support during the first half of 2023. We also accelerated projects of small modular reactors. We see small modular reactors as equivalent to CCGT plants with safe delivery of fuel, which is much more predictable than deliveries of gas these days. This has shifted our priorities from some kind of interesting, nice-to-have projects to something very real. We would like to commission our first small modular reactor around 2032 on the site of Temelín, which is the new nuclear plant. Dividend payment for 2021 started on November 1. Many of the investors should have already dividend on their bank accounts. Strategic objectives of our company VISION 2030, we often get asked or we are asked whether there is any significant change given the changes on the market, given the politics, given the caps on power prices. Our answer is that we basically don't change anything. Taxes are viewed as a short-term thing. On the other hand, looking at it, the profits that we are facing, even after taxation, are pretty much in line what we expected before the war. It's not that our cash flow would be significantly lower or higher compared to pre-war times or the times before a significant increase in gas prices. Even more, we can see the importance of green solutions like photovoltaic plants or investments into ESCO companies. To make sure that the independence on fossil fuels is even higher, or urgency of independence on fossil fuels is even higher than it was before. Important slide actually on margin calls. I think our record-high margin call on money that we deposited on margin calls were on 26th of August, when we had CZK 125 billion deposited on power exchange margins. This is almost our annual sales of entire group, which is a significant amount of money. Something we could not imagine in the past. As of 31st of October, CZK 116 billion, due to the fact that in the meantime, we again delivered another two months of deliveries of power 2022. Power does not need to be margined anymore. There is also a significant increase of power prices now, somewhere to €330 for 2023 base load contract. Our liquidity position is as strong as it has never been, but you never know whether it might be needed in the future. We keep the cash and credit lines available on a very high level. As of October, we had CZK 137 billion in cash and credit lines and another CZK 116 billion deposited with the power exchange. Basically, in euro terms, we are sitting on a €10 billion cash buffer, which is something that was unprecedentedly high amount of cash compared to a year ago, for example. We also successfully proceed on our ESG targets. You have a few rating agencies for explanation to the ratings. The most important for us is MSCI. That is up to date numbers. We have significantly improved our rating from B to double A. We have moved from bottom 20% companies to 66% to 91st percentile. Top third of the companies in ESG topics. Same for S&P Global and other rating companies as well. We are well on track with our targets. That's overall agenda. That's overall general overview. Now, a few words on generation mining segment. Generation segment and mining are actually those that contribute heavily. Basically, entire difference in our EBITDA between 2021 and 2022 is driven by generation segment. Details of generation segment can be seen on slide number 16. Basically, semi-strong nuclear, renewable, also coal plants, trading activities from CZK 2 billion to almost CZK 13 billion that I already commented. All the reasons I already mentioned and more detail is actually on slide 16. Mining segment the same. There is significant increase for coal, both from our power plants, but mainly from external market. Increase of EBITDA year-on-year, 59%. Power, nuclear generation and renewable generation is up by 1%. Renewables down by 15%, mainly due to hydro situation in the Czech Republic last winter, and nuclear is 3% up. We expect for full year nuclear to be flat, almost 31 terawatt hours, and hydro being slightly 10% below, 11% below half year due to hydro conditions. Generation from coal and gas, 1% down on nine months and 2% down full year with lignite still to be flat. Increase on generation in Poland, decrease on our gas plant that is running only when the power prices and gas allow and carbon credits allow it to run. So we expect to generate 2.7 terawatt hours instead of 3.2 last year. Emission targets are basically in line with our long-term plans, slightly higher between 2021 and 2022 due to the fact that our power plants, lignite plants, are running a bit more due to the need for supplying electricity onto the European market. Other sulfur dioxide and nitrogen oxides are also shown below. Important slide, 21. On hedging activities, you can see how much our power is hedged, 73% for 2023, 44% for 2024, and 18% for 2025. Average achieved price is growing, EUR 108 for 2023, EUR 120 and EUR 126 for the out years. Same related to our position on carbon credits, where, again, average achieved price of carbon credits is growing, especially in the out years like 2025. That is all for generation mining. Now I will hand over to Pavol Srámek to guide you through distribution sales segment. Thank you, Martin. In terms of distribution of sales, let me walk you quickly through the three quarter results in terms of distribution in 2023. We see a flat development both in the third quarter and in the first two quarters. We see a small drop in the actual volume of electricity distributed. I will comment on the next slide. What is offsetting some of the drop in the volume is higher revenue from activities to ensure new connections. So we see a big increase in new connections, often related to people installing photovoltaic systems or heat pumps. In terms of the volumes, there was a 4% drop year-on-year between 2021 and 2022. When you look at these numbers, it looks like that the number one reason for the drop of electricity distribution is the residential customers, the households. But if you look in a longer period back, what you would find is that the distributed electricity for households in 2022 is comparable or even higher than it was back in 2019, so before COVID. So what we then saw that during the COVID times, 2020 and 2021, people stayed home more. So we saw a pretty sharp increase in the electricity distributed in the segment, and now we see a normalization. If you would then look at the other segments, where you would see a drop between 2019 and 2022 would be the large customers. Here it seems flat, but again, it is compared to the COVID time. What we are seeing is that now, while the companies did start recovering from the COVID, the increased cost of energy driven by the war in Ukraine is keeping the consumption for the large customers lower than we saw before COVID. That is how these numbers compare. What you do also see is that the temperature-adjusted electricity consumption decreases, so it is lower. It is driven by the fact we are experiencing a very warm year, especially now with the third quarter, which is obviously keeping electricity consumption a little bit lower. It is impacting gas more than electricity. That is for distribution. If you look at the sales segment, there are two stories, although split in several lines. The story number one is that we see a decrease in EBITDA for the commodity supply, so gas and electricity, both in retail, where you see a half billion drop, and then also the B2B segment, the large industrial customers, where you see a CZK 1.6 billion drop. It is driven by the fact that although we are updating our prices quite often. We still, especially at times of significant volatility, we did not keep up in the speed of updating the price list. So there was a pressure on our margins driven by the extreme increases in electricity prices. Even though our open positions for the end user customers are always very small, the increases of tenfold sometimes of electricity prices had impact on our margins. We obviously expect these to be temporary and improve over time as the wholesale prices stabilize, and then we update the price lists going forward. Now, in terms of the actual energy services, there is a 59%, although smaller in terms of absolute numbers, so $0.3 billion increase in Germany, other countries, and there is a pretty much flat development in Czechia and Slovakia first three quarters, and we are expecting this to turn into an increase for the full year. That is driven by the high demand for these services. Obviously, when you, then we will see that the revenues grew even more. But some of the margins have been taken away by the shortage of supplies of some of the components, which obviously drives the price of these components up. In terms of the supply volumes of electricity and gas, which is page 26, we see a 13% increase, which is driven by the fact that the number of customers is increasing 15% year-on-year. The reason why it is somewhat lower is the warmer temperatures. Now, the last slide on the revenues from the sale of energy services, as I mentioned, we see a significant growth, again, driven by the demand. As it is the case today, we are trying to keep up with the growth of demand, but sometimes we are short in a few of those sub-components. But we are solving this along the way. And we think that these dynamics and a significant increase in the demand of decentralized generation, gas-free, independent, and so forth and so on, will stay with us going forward, and we will capitalize on our scope to supply these services. The one number that I would like to explain is there is a 55% increase in the revenue in Czechia and Slovakia. That is, beyond the demand growth that I mentioned, also driven by the fact that in these two markets, we also supply decentralized electricity and heat, where you see growth of the cost of fuels such as gas, and also the cost of prices of heat and electricity as an output. This is what drives beyond the significant 15%-20% demand growth that you would normally see. I think this is it. The supply segment is this year under pressure. It will probably stay under some pressure also next year. But as you see the demand growth for the services and also our customer base growth, we will be well positioned to capitalize on this once the wholesale prices stabilize at more standard levels. Katju, back to Barbara. Yes. Operator, we are now ready for questions. We will now begin our question and answer session. If you have a question for our speakers, please dial 0 and 1 on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial 0 and 2 to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. Our first question comes on the line of Joe Molander of REDD Intelligence. Please go ahead. Hello. Thank you very much for taking my question. I would just like to ask what the company intends to do regarding the capital markets. I am aware there is an upcoming maturity, and last year it was planned to be financed. Has the invasion of Ukraine and the subsequent effect on markets made this impossible? Are you going to pay down the debt, or is it still a plan to refinance? Also if you could speak more generally to your medium to long-term plans, that would be great. Thank you. We actually don't plan to pay down the debt. The level is not that high in our case. But we now need liquidity for just in case scenarios due to margining, as any other power generation company. But on the other hand, our debt capacity is fairly significant, so we don't see it as a burden. Yes, it's not perfectly optimal to sit on such an amount of cash, but not having it in the right time is actually even more difficult. That is where we are. It does not impact, basically, we are not impacting our CapEx plans. Now going forward, for example, for renewables or acquired positions. Basically, no change there. I see. Thank you very much. We are ready to pay the dividend for this year, next year, which will be a significant amount of cash as well, as you could see. Everything as usual. You'll refinance then, if I got that right? We will be refinancing, but I think our nearest refinancing is a real kind of the big bonds, EUR 700 million bonds are only due in 2024, 2025. Nothing interesting next year, really, just a few billion CZK. Okay. Thank you very much. Our next question comes on the line of Piotr Dzieciolowski of Citi. Please go ahead. Hi. Yes, good afternoon, everybody. I have two questions really. The first one, I wanted to understand this, why did we move from kind of a discussion in Czech Republic in summer of no windfall taxes and kind of a price caps at a certain level and with a minor risk to all of a sudden, extreme opposite situation where you are 79% marginal tax rate plus the cap, and is like a brutal application of everything that could go wrong. What made the external environment change so quickly and so drastically against you? Then secondly, what is the company responding to this new profitability level in the sense of CapEx or OpEx or any other initiatives you could take to address the issue? Look, Piotr, this is a question that should be asked to us, but rather the Czech government who came up with the proposals. If I look from a broader perspective, what we see today is that more and more countries are introducing these measures across Europe, and they have been discussing this even before they announced it publicly. I think there is a general sense that in order to stabilize and achieve public support, social peace, and so forth, these steps are necessary. This is all I can tell you. In terms of our CapEx and OpEx plans, look, there are two parts to it. One is, the government announced that all these measures are temporary. We are looking at the next 13 months for the price caps and maximum 3 years for the windfall tax. If you look at our longer-term plans, we are not changing them. We still want to achieve all the targets in the renewables, upgrading our distribution, smart grids, and eventually beyond 2030 also in our nuclear fleet in order to achieve our decarbonization goals. We are keeping up with those. My second point is, if you look at our investment presentation, when we were calculating the health of our company and the ability to actually perform this plan, we had an outlook of electricity prices between EUR 50 and EUR 60 per megawatt hour. Although I'm obviously not happy about all these temporary measures, such as price caps or windfall tax, it does not impact our long-term plans because we were planning those and we were balancing those with our net to EBITDA ratio at the times when prices were actually well below any of the caps that have been introduced. Mm-hmm. As a quick follow-up, you said the maximum of 3 years for the windfall tax. Is there a chance it will be shorter than 3 years, or that's approved for 3 years? Look, I can only basically repeat some of the public comments that have been mentioned. The windfall tax is introduced for three years, but there was a public comment that if the extraordinary situation goes away, then the extraordinary measures will no longer be needed. But again, there was no strong commitment that this comment will stay. That's why I'm saying maximum three years. Understood. Thank you. Our next question comes on the line of David Rickards, who's a private investor. Please go ahead. Good afternoon, gentlemen. Thank you very much for the presentation. Two questions really. Firstly, with regards to your transition to green sustainable energy, do you have any further updates regards your gigafactory plans? That's the first part. The second part, obviously, you own 61% of Geomet, the lithium mine Cínovec project. Are there any plans or any updates regarding those two specific exciting moves into lithium? Thank you. Look, I will start with the latter one. In this one, we are working hard on developing the projects, both in terms of engineering the mining process and the refining process, and I think we are progressing well there. We are also working on the permitting. This work on the regional zoning plan has been launched by the region, and we have also been in the process of doing the environmental impact assessment. So I think this is going well. In terms of gigafactory, we are preparing our site at Prunéřov for such a development. The Prunéřov plant, old one, the so-called Prunéřov one, is now being dismantled so the field will be ready. At the same time, some of the discussions that we had with Škoda Auto/Volkswagen have not led to them using the site. They decided for a different site because of the size. They need a much bigger area. So we are now looking for other gigafactory partners for this site. The project is still on, although I do not have any specific news to announce as of today. Okay. Thank you very much. Our next question comes on the line of Wanda Serwinowska of Credit Suisse. Please go ahead. Hi. Good afternoon. Wanda Serwinowska, Credit Suisse. A few questions from me. The first one is on your comment on the revenue cap, that you assume it will be only for one year. I would ask what makes you confident? Because if we look what the Czech government has been doing, it has been pretty harsh. The EU was talking about the revenue cap until end of June, and in Czech Republic it is already until the end of next year. So what makes you confident that it won't be extended into 2024? That's my first question. The second question is on the earnings contribution from the LNG terminal. I know there are many moving parts, but can you give us some rough idea what's the earnings contribution? I'm not asking for a very precise number, just a range, or that we may expect Q4 this year or next year. The last question is on the 2023 numbers. I know it's too early to get any flavor on the guidance, but can you talk about the impact of a very high inflation that we have seen this year? Because I would expect that at some point it will bite EBITDA. So any comments would be much appreciated. Thanks a lot. I'll comment on the revenue cap and the LNG terminal. As I said when I was answering the first question, this is such a question like for how long and how much and why, is not really a question that we can properly answer because we were not the ones designing, proposing, or putting this into the actual law. Why I am saying this is that if you look at the proposals of the laws, the proposal of the law says three years for the windfall tax. With some of the public comments is that it may not be in place for the full three years, or it may not be in place with the same tax rate for the full three years, at least in general comments from the Ministry of Finance. Again, it may. I don't know. With the revenue cap, again, it was put in place for 13 months. Again, with the general comment that all these things are temporary measures for unprecedented situation, and as such, they should not stay. At the same time, I cannot promise they will not stay, which is a question that then you would need to revert to the Ministry of Finance on both of these. In terms of LNG terminal, at this moment, we are not able to give you any more specific guidance. What we can tell you is that LNG terminal will contribute to the In general, put it in the one bundle of trading activities, and trading on top of LNG terminals will be one of them. This has been factored in the updated outlook for this year, so it's already in there. I think we'll comment again more in detail once we have the proper results for the full year in Q1 next year. Martin, inflation impact on our EBITDA for next year? No inflation EBITDA or inflation impact is in terms of obviously related to power prices, I would say very marginal. First, we have long-term contracts with many suppliers. Second, our EBITDA and net income, even after taxes, will be as strong as it used to be in the past. I wouldn't say that there is something extremely significant there basic in inflation area. If I may ask a few follow-ups. How about the labor cost? The inflation across Europe is pretty high. We're talking about high teens, 18%, 19%. As you can imagine that at some point the workers will ask for a pay rise. The second question, if I may, why the EBITDA guidance? In the former years, you were looking to guide us towards EBITDA. Now you are widening it from the range from CZK 5 billion to CZK 10 billion. You have the clarity on the revenue cap and on the revenue cap. So why did you widen it? We widened it before because of the fact that there are significant movements of power prices. There can be big gains on trading, possibly, and there are also revaluation of derivatives that relate to 2023. So there are so many moving parts that our range is CZK 10 billion. We are very confident that it will be within this range, but we just feel that giving a narrower range could be riskier to make sure that we will actually manage the obligation, actually getting into this range. Our next question. You also asked about wages. Yes, wages will probably be growing clearly. I think our company compared to other costs, actually, it is not a major part of our cost. I think total wages are something like you would find in our reports, but I would think it will be about CZK 1 billion. So even if it goes by CZK 1 billion, it is CZK 1 billion. So again, when we look at the overall numbers, it is not that significant. Okay. Thanks a lot. Our next question comes from the line of Jan Raška of Fio. Please go ahead. Sorry, we cannot hear you at all. No. I am afraid not. Maybe if you can redial and ask later. Yeah. Okay. We can hear you now. Could you speak the question now, please, Jan? Yeah. Can you hear me okay? We can hear you now. Yeah. Thank you. Again, windfall tax, it is a big topic during last weeks and months. Do you have any calculations in this way for the year 2023? Is it possible to communicate your estimates regarding windfall tax or what payments do you expect in the fourth year, 2023? Thank you. Of course, windfall tax calculation is based on the profit that we will expect. We normally announce our guidance in March. When we will report 2022 numbers, we also announce 2023 guidance that will also include effects of windfall profit tax. Or simply, if you want to get a feeling, you can simply take our 2022 estimates and multiply it by 4.79 in terms of where you can calculating a tax, and this will give you a range. We would expect higher tens of billions of CZK for 2023. Higher tens. Yeah. Okay, thanks. Great. Obviously, it will depend how the revenue caps will be, what the impact of the revenue caps would be, as we said it. Taking from the revenue cap and windfall profit tax is the same bunch of money in the end. Yeah. Okay. I understand. So your estimate is higher tens of billions CZK caps plus windfall tax. I understand correctly. Correct. Yeah. Okay. Thank you. Just to remind everyone, if you would like to ask a question, please dial 0 and 1 on your telephone keypads now. Our next question comes from the line of Piotr Dzieciolowski, Citi. Please go ahead. Hi. Yes, I have a quick follow-up question. You said you accelerated your small modular reactor program. Can you say a little bit more like which technology and why you chose or you are aiming to choose, and then any details on this will be welcome. We haven't chosen technology yet. We have, as of today, seven technologies or seven cooperation agreements, MOUs with technology providers. We are now in the process of analyzing all seven in order to shortlist and then eventually pick one for the first implement. At the same time In general, especially with the small modular reactors and the higher number of reactors, you don't necessarily take just one technology company, you can deploy more than one to achieve enough synergies. How much money you want to spend on this, and when would this money be spent? We want to bring the first small modular reactor online around 2032. We are now working on it. Obviously, it was not part of our CapEx plan until 2030 when we announced it. Actually, it did not include too much nuclear because the large reactors came only after 2030. So we will update the plan eventually, but if you recall, we have announced a 500 billion CZK investment plan by 2030, and it will not have a significant impact on this plan. We don't have the detailed numbers yet because we are still in the process of preparing the project, the first one in Dukovany. Okay. Understand. Thank you very much. Our next question comes from the line of Vladislav Grechne of Consilium. Please go ahead. Good afternoon. Thank you for the presentation. Two points. First, in the past, one of the division, called CEZ ESCO, did not fully deliver on the expected numbers. Do you have any improved outlook or view or potentially cost-cutting measures in place for ESCO? That is the first. Second, regarding to already several time mentioned windfall tax, et cetera, we somehow did not seen or did not monitor or heard any IR or PR activity or lobbying activity by the senior management. Was it somehow a capitulation or was there any effort or are there any activities in line with maybe some dramatic measures because the European ones are obviously minor. Thank you. In terms of ESCO, as I mentioned, when you look at the revenue growth, you see a 15% plus, 15%-20% revenue growth. In terms of the EBITDA growth, it is lower, and it is mostly driven by the cost of components that we put in our projects. We are working on streamlining our supply chain. It is not the fixed cost, but it is rather cost of delivering the services. We are rather putting together and finding new kind of suppliers and cheaper suppliers for the components. In terms of this, we are working on some cost cutting, if you will, or reducing our costs. Also, Czechia and Slovakia specifically has been impacted by the commodity growth, as you said. I mean, gas and electricity price growth as they supply decentralized heat and electricity and buy fuels for that. So again, at the times of extreme volatility in these prices, there is some delay in factoring into the end product. Again, this will improve over time as early as next year already. So actually, we expect a pretty healthy growth also on the bottom line, not only the top line for ESCO next year. Perfect. Thank you. In terms of senior management response to the tax proposals, obviously, we are part of the working group that are discussing this. But on the other hand, decision of the parliament, it is a decision of the parliament. So I try to explain today- No, I was more referring to the fact that the financials and the senior management of the publicly quoted financial institutions were somehow more active and from CEZ, I didn't somehow see anything. I mean, not necessarily you have to be active publicly. You can be active on the working groups and on the forums where it makes impact rather than putting into tabloid newspapers. That's what it is. This is also a big decision of parliament. If parliament decides, that's what it is. We often have disputes with state, especially on taxes, for example. But it's always when there is a valid tax law and we have a different point of view on how it should be applied. But it's not really us to oppose and probably not many other companies to oppose what the parliament approves. We may disagree, we may be unhappy, but we have to follow it. On the other hand, from investors' point of view is of course a different story. Anybody can comment on it as much as they wish to do that. Thank you. Our next question comes from the line of Petr Bártek of Erste Group. Please go ahead. Good afternoon. Thank you for taking my questions. First, if you could elaborate a little bit on, let's say mid-term for CapEx for 2023, 2024 and 2025. So specifically for the period when you have this windfall taxes, if there are any large projects or how much you budget for maintenance CapEx? How much you budget for the nuclear project as well? My second question is that before the hike of prices or increase of prices in 2021, already you had a payout ratio of 80%-100%, which is shareholder's returns in difficult times, I would say. Then you have slashed this payout ratio to 60%-80%. So natural question, if you could come back to this 80%-100% in term of this special taxes. And also, if you could tell us whether you continue with the project of the split of the company, if you still work on this, I would say in some more intensive way or anything about it. Thank you. Okay. Let me quickly comment on the CapEx plan. In general, we expect to see some increase in the CapEx, mainly driven by the fact that we should already see the first large-scale photovoltaic projects being put in place. That is driven by the fact that the Modernisation Fund is starting to award the subsidies. As you know, we have received a subsidy support in the first round, and now we have applied for the second round as well. We want the results, but these will be the projects that we want to put in place and that are supported by the subsidy. So that's where we see the increase. We will continue also with the modernization of the distribution grid. Similarly, we will also work on improving the performance of our current nuclear, which is another significant part of our budget. I would say we don't expect other significant projects at this moment. Anything can arise, but we don't expect anything at this moment, or we don't have anything in plan. The last bucket of projects that we had for our new strategy was the upgrade and modernization of centralized heating. That is something that was supposed to come only later, only after 2025. So we will then see how the situation evolves with gas and centralized heating in general. We are working on the projects in terms of permitting and preparing the projects, but it will come only later. So in general, what we have announced as part of the VISION 2030, Clean Energy of Tomorrow holds. Year on year, what you should see more is the actual investment going into the new photovoltaic. Regarding dividend, we announced our payout ratio, I think last year. We also say at the same time that we see it closer to 80%, rather than 60%. So far, there is no change. Of course, shareholders can have a different point of view on a shareholder meeting, but our guidance on this would be, let's say, 80%. Even with 80%, the dividend for 2022 will be double of our ever high dividend, so up to 112 CZK per share, as we said. Regarding transformation, this is not really a topic of this call. I think now we have to digest all the changes in tax legislation and then look at the potentials for transformation of the group. That is a topic of the future, but not of these days. Thank you. Maybe one follow-up question. I would rather ask you about the dividend payout ratio for the midterm, not from the last year. If your earnings are basically going to come back to previous levels, my question was whether your payout ratio would come back also to previous levels. It's difficult to say. Usually, you can see it a few years ahead. We update our payout policy or dividend policy minimum once in a three years time, sometimes three years. It's hard to say, depending on the power prices as well. We also reduced it to 60%-80% to have enough cash for CapEx. If our earnings, let's say, will be as they used to be in the past, so windfall profit tax will let us keep ordinary profits, then we would probably need also a little bit more cash for our projects. Basically, 60%-80% was announced before any significant hike in our power prices. For now, we don't expect any change. What will happen in a few years' time is hard to say. Okay. There are no further questions at this time. Please go ahead, speakers. Okay, thank you everyone for taking part. If some additional questions pop up to your mind, just contact investor relations. Thank you, and have a nice rest of the day. Thank you for your attendance. This call has been concluded. You may now disconnect.