Hello, everyone. This meeting is being transcribed. Results to a concurrent call for the first half of 2025. Martin Novak, Chief Financial Officer, will walk you through the presentation, and then we will open the floor to the questions. We also have Luděk Horn, Head of Trading, just in case you have some questions on the power market here. Now I'm handing over to Martin.
Thank you. Good afternoon. Good morning, everybody. Let's start with the presentations. On the first slide, or slide number three, we can see actually overall financial results, where our EBITDA has reached almost CZK 74 billion, which is an increase of CZK 4.7 billion or 7%. Adjusted net income of CZK 16.7 billion and net income CZK 15.5 billion, which is down 21%, respectively 22% year -on -year. Our CAPEX has grown by about 11% to CZK 22.8 billion. Important slide number four actually shows the difference between our first half of 2024 and the first half of 2025. There are a few factors, actually, a few negative factors, a few positive factors. The first negative factor is actually a decline in power prices, which has an effect of CZK 6.4 billion year-on-year decline. Prices tend to go down even in the future. This is about CZK 6.4 billion.
Technically speaking, it's actually CZK 7.3 billion. There is some effect of different scheduling of nuclear plant outages, which is a positive effect. Overall, this segment is impacted by power prices, which is CZK 6.4 billion negative. Trading down CZK 2.1 billion. Again, it's not a loss. It's actually a lower profit as our volatility on the market is lower and lower month by month, basically. Trading achieves a very reasonable result of CZK 1.9 billion. However, in the first six months of last year, it was CZK 3.9 billion. Distribution segment is up by CZK 3 billion, mainly due to higher allowed revenues thanks to increased investments in distribution assets of CZK 1.6 billion, higher distributed electricity volume, half a billion CZK, and mainly higher other allowed revenues and correction factors, which is CZK 0.8 billion.
By far, the largest positive impact of this third half is actually consolidation of GasNet, which is, again, distribution that we acquired as of September 1, 2024. It does not show in 2024 numbers at all. Entire EBITDA is actually a variance, and it is CZK 6.4 billion for the first six months of 2025. Sales segments, so total improvement, are both on sales retail and large customer sales. The commodity purchase prices were lower compared to the previous time or previous period. We also had CZK 1.3 billion effect of undelivered commodities due to warmer weather in the first half. In the first half of 2024, we had a commodity that we did not deliver to customers. We had to return it or sell it back, whatever. It did not happen this year. This is EBITDA variance looking actually at net income.
There is actually a decline, as I said, of 22% or 21%, especially. By far, the highest and basically the only main chart is actually depreciation. As GasNet is impacting our EBITDA, it's also impacting our line items below EBITDA, including depreciation. Part of it actually is related to GasNet, about CZK 5.1 billion out of CZK 10.5 billion variance. The remaining part is basically attributable to accelerated depreciation on coal assets that we adopted as of October 1, 2024. The accelerated depreciation was not in the results of the first half of 2024. We adopted accelerated depreciation because of the fact that coal plants need to be discontinued around 2030. We switched from a straight line method of depreciation to an accelerated method when we are basically, simply said, copying the amount of power which actually produced power.
In 2025, 2026, it will be definitely more than, for example, in 2019 or 2013. Those are the main effects actually on our net income. On the next slide, we have some operating results, volumetric data, which you can go through. We can actually skip that and go to slide number seven, where you can see our financial outlook. We actually increased our EBITDA target by CZK 5 billion. We keep the range of CZK 5 billion, but it is all increased by CZK 5 billion. Now our EBITDA estimate is CZK 132 billion - CZK 137 billion. Adjusted net income was actually, we actually increased the bottom of the range to CZK 26 billion. Now the new range is CZK 26 billion - CZK 30 billion. The main causes of our EBITDA target change are actually listed on the right of the start of the chart.
It has almost equal effect in high power prices than we expected in our last guidance, especially the power prices of the power or the power prices of the power that we had unsold actually or did not sell for 2025 and still have some available for peaks and for optimization and so on. We are also saving on fixed operating expenses. We have higher supplement of electricity not invoiced to end customers, higher revenues from distribution and connection fees, and lower purchase costs for commodities in the sales segment. You can see also assumptions on which our estimate is based. You can see power generation 44 TWh - 43 TWh. Power prices in Czech Republic, EUR 121- EUR 125 per megawatt-hour. Emission allowances EUR 79 -EUR 83. Depreciation that we already mentioned, 55 billion, out of which 9 billion is GasNet.
Windfall tax of CZK 29 billion-CZK 33 billion . On the next slide, you can still see significant growth in nuclear energy developments. As we already discussed in May, we managed to sell 80% share in the new nuclear project to the government. As of April 30, the gas tax was settled actually on May 5. The purchase price was 3.6 billion, which is 80% of original investment of 4.5 billion. We are not consolidating anything other than equity method consolidation. We don't do full consolidation of investments. We are basically a financial investor with a provided estate. We have no obligation to furnish any tax or anything in the future. There was also an agreement concluded between the new nuclear project company, Dukovany II, and the Korean KHNP company. They built actually two units, each of them 1,063 MW.
Another milestone is for the Great British Energy Nuclear Selected Role Purchase MR as a supplier of small modular reactors. We completed the investment in a U.K.-based SMR developer and acquired stake of approximately 20%. This was actually an important milestone. Now, the company where we hold 20% stake will start working on the projects to deliver these three units to the British government. At the same time, we are doing preparatory work for the first SMR in the Czech Republic internally, the new plant location. That's the new nuclear development. Current nuclear facilities, there are some highlights as well that relate to the current facilities. I think the most important one is the increase of Dukovany's whole capacity by 14 MW per unit. It is four times 14 MW that we have now more.
In total, Dukovany power plant has four times 524 MW of installed capacity. On slide number seven, you can see some information on the formation of the heating industry or heat supply, the heat delivery business. Basically all our power plants are also serving to the heat plant or heat location. As you can see, individual power plants and the way we treat it. I think the most important is Mělník, which is about 30 km out of Prague, supplying the city of Prague with heat. Today, it is through using coal-fired plant. We started construction of a large, especially heat plant that will be gas-fired or gas-powered. 266 MW of electricity and 183 MW of heat actually will be installed near Prague. The construction has already started. We also started construction of a waste-to-energy facility that should process 320,000 tons of waste per year.
Generation mining segment in more detail, actually, on slide 12. You can see that the segment actually in total has earned CZK 46.5 billion, which is by 13% less. Actually, the largest negative variance is coming from emission-generating facilities, where we are actually 51% down compared to the first half of 2024. The details are described from the chart on the slide, actually, on the right side. Clearly, you can see an effect of decreasing power prices, increasing carbon credits in our emission-generation facilities. On the next slide, actually, you can see charts of our nuclear and renewable generation. It is an increase in nuclear generation year-on-year of 6%. We would like to keep that actually for a full year, where we are targeting almost 30 to 30 TWh to be produced, mainly due to the extension of fuel cycles and modifications of outage plan.
We will have more kind of running hours in 2025 versus 2024. We have increased capacity in Dukovany. It's already this side and shorter scheduled outages of the Temelín nuclear plant. Renewables were down 13%, mainly due to natural conditions in 2024, when we had enough snow and water, which was not the case actually in 2025. Therefore, we expect that our power generation from renewables will be 7% lower on a year-on-year basis for a full year. Our clean energy generation would then be 5% higher, 35.2 TWh. Fossil fuels, meaning coal and natural gas generation, was 12% up in the first six months compared to last year. We expect it to be 4% down, mainly due to a decline in our coal assets obviously that we don't have anymore. We only had them the first five weeks of 2025, which we disposed of them.
We will be missing 0.9 TWh from those assets. Our power generation from coal should remain flat, although it was 13% up due to colder winter in 2025 compared to 2024. Hedging is a very important slide of market risks. This is actually on slide 15. There you can see our average prices. Those are mainly or those are baseload prices that we are selling at our format electricity. EUR 95 for 2026, going to EUR 71 for 2029. We are 73% sold as of June 30th, actually, for 2026. The paint chart on the right side relates to carbon credits. You can see that the spread between power price and carbon credits is significantly narrower in 2028 and 2029 than it is today. This will be a pressure on the economics of the coal plant, for sure. The next segment, the last few slides, actually, on distribution and sales.
Distribution segment has a significant increase of actually, in total of 90%. They made CZK 9.4 billion, but clearly, it is CZK 6.4 billion coming from GasNet against distribution, which we do not actually have in our numbers in 2024. There is an increase in distribution, power distribution actually, of CZK 3 billion, mainly due to higher allowed revenues due to increased CAPEX in the past of CZK 1.6 billion, higher distributed volume of CZK 0.5 billion, and then higher other allowed revenues and correction factors of CZK 4.8 billion. Comparing the numbers for GasNet, should we have actually the company in our numbers, they would have made or they did make actually in the first half of 2024 CZK 5.7 billion. Now, actually, they are 14% billion better than in the past years. Year-on-year, year-over-year development of gas and distribution and electricity distribution.
On the left side, we have a chart of actually electricity distribution on our territory, which is 2% higher. When you actually adjust it by climate and calendar, it is 1% higher. Gas distribution is actually 11% higher, but climate adjusted 2% higher. I realized that the winter of 2025 was colder than 2024. Sales numbers or sales segment numbers actually are on page 19, where we have a significant improvement in Chat Produit, which is our retail customers' company. It delivered actually or earned CZK 4.5 billion on EBITDA, which is CZK 3.2 billion more than in the first half of 2024. Escrow companies are about 25% higher. They are both providing EBITDA from sales to commodities in Czech Republic, which is 77% increase, and then energy services both abroad and in Czech Republic.
Chat Produit, or the retail organization, actually had a lower acquisition of commodity cost than they had actually effect of sales of undelivered commodities due to warmer weather in the first half of 2024, which had a negative effect of CZK 1.3 billion at the time. Now, actually, it's not there. It's a positive variance. They have also higher volumes of delivered to end-user customers, delivered to end-user customers for the weather CZK 0.2 billion. Those are the main variances of volume of electricity and gas sold and number of customers. I think for the first half of the year, we are actually up by 8%, 17% in natural gas, 3% in electricity. Clearly, and obviously, it's also a function of the weather. Number of customers is stagnating, but we acquired a few hundred thousand customers during quarters of a few retail organizations in 2021 and then later 2022.
The move in electricity of 1% is relatively immaterial. We have 4% more customers actually on natural gas. Revenues from sales of energy services, which is escrow activities, had an 8% decline, which is mainly year-on-year temporary effects, timing effects of big contracts in 2024. Overall, for the.
You are allowed to unmute. To unmute yourself, press star six.
There is more information in the annexes. I think we can face it to the Q&A session. Thank you.
Yeah. We are now open to your questions. Please use Teams to raise your hands or call out your name and open the floor to your questions. Okay. We have a first question from Anna Webb.
Yes. Hi. Thanks for taking my questions. It came from me. The first one is on the reports that Eon would potentially be selling their gas gradients off the earth. I know you probably won't be able to comment on the specifics on that one, but more generally, would you be interested in M&A and grids to increase your exposure there? I mean, you've already done the GasNet deal. I guess would there be the rationale to expand there? I mean, the returns look pretty attractive for the next regulatory period versus other European countries. If you were to expand the gas distribution grid in the country, would there be synergies from that? If you were kind of almost the sole operator of gas distribution, anything you can comment on a high level there would be great.
The second question is a bit more high level on power prices long term. I think you had a very small amount of 2029. It was over EUR 70 per megawatt-hour. Is that kind of where you see power prices settling long term? How do you think about the upside, downside to long-term power prices, you know, given maybe downward pressure from gas prices, but also a lot of discussion around whether there could be new demand in Europe from data centers, etc.? Any views you have on the kind of long-term outlook for the power market would be great. Thank you.
Okay. First question on gas grades. This is an ongoing transaction, and we don't provide any comments, any speculations, any idea from how we view this in detail. We cannot really comment on anything on Eon's sale of their distribution assets. Hedging prices, we have sold just a little for 2029. It's not taking a position. It's really doing a straightforward hedging. 2029 is now available, actually. We are actually really selling our power that we are about to deliver or we intend to deliver straight line with no speculative, with no taking speculative points of view. For speculative points of view, we have actually called Tradings. That is one of our segments that we record, but this is really straightforward linear hedging as it becomes available. We have actually Luděk Horn, who is Head of Trading.
He may tell you any points of view or some speculative points of view rather than from a straightforward hedging point of view. It's really hard to predict what prices look like in the future because, as you know, these prices are connected with the prices of natural gas and EUA. Both of these commodities are dependent. Prices of these commodities are dependent on other factors. In the long term, we expect that the prices will slightly go down. We don't see any reason for the prices going up. It would be a result of extraordinary events like the war somewhere in the Baltics and so on.
Perfect. Thank you. I just want to, and obviously, you can't comment on the Eon transaction, but I guess more generally, do you see balance sheet hedging for potential M&A, whether that be kind of like more generally, I suppose?
Generally, of course, you know, the target net debt/EBITDA of, I think, 1.3 now. There's definitely headroom, but we don't say that it would be necessarily aiming at this as of now. You can see headroom for, and we do actually annual transactions in escrow. However, they are quite small size, but related to gas, we really say nothing.
Got it. Thank you very much.
We can take the next question from Arthur Sitbon.
Thank you for taking my question. It's just one question on the EBITDA guidance increase. You flagged, you identified a few drivers of the increase in the presentation. They are not so noticeable at the net income level because of the corporate tax recharge in 2025. I was wondering if any of these drivers would still be noticeable in 2026 when potentially the drop through to net income would be more significant. Thank you very much.
You know, those drivers are actually drivers between our original estimates from May 15 and now August 7. Those are things that have caused the guidance to move. It's really, I'm just looking at it. It might happen that there might be higher power prices than we think or that we now actually see. Yes, it could be fixed operating expenses. There could be, but it's really a matter of comparison. Also, we really are comparing our original guidance. It's not that we are comparing with last year or with anything else. Some of them might be. If you ask about our EBITDA level, just very simply, we don't provide any guidance on EBITDA. It's too early yet. We would normally do it in the spring of next year. With declining power prices, of course, there will be a pressure on our EBITDA. That's clear.
On the other hand, windfall tax, and this is something that you touched on, could be attributable to 2025 only. As of 2020 peaks, there could be no windfall tax effect, which would be probably by far the largest factor.
Thank you very much.
We can take the next question from Emanuele Oggioni. Emma, can you? I mean, you can.
Excuse me, sorry. Can you hear me now?
Yes, we can hear you.
Okay. Thank you for taking my question. The next one is on GasNet. I think based on H1 GasNet and your updated guidance, you can reach CZK 15 billion this year. Can you confirm this? The second question related to GasNet is the guidance for, or at least the qualitative moving parts for 2026. This is the first argument. The second question is on the sales segment. Still, they provided a positive outlook, and we noticed that the higher profitability of CZK 1.1 billion, CZK 1.4 billion per quarter in Q1 and Q2 was primarily related not only to the lower cost of commodity, but also the lower cost of deviation after the deregulation of the market. I think this could be a more structural profitability at least for 2025, for the remaining part of the year.
My question is in particular focused still on 2026, if this higher profitability could be replicated also in 2026, or what are the moving parts? I also have a third question on the capacity market scheme. If you can update on this subject, we know it is currently under discussion. Thank you.
Okay. So you know, GasNet, actually, I think they are more not really aiming at CZK 13 billion. I think their target is something like CZK 11 billion for 2025 rather than CZK 13 billion. I would not really multiply their result by 2. Partly, you know, again, they are distribution companies, so most of the revenues they get during the winter, which is the first quarter of the year. In the sales segment, yes, lower cost of deviations. After the market got liberalized, the deviation cost was higher than it is today after it is stabilized. We could think that it could last for longer than just 2025. That's perfectly true. Capacity payments, actually, there was a law approved allowing for capacity payments for CCGP plants.
This is basically the key condition for us to be able to build gas plants making electricity, and not heat and power as it is today. However, it needs to be designed. The scheme needs to be designed by the Ministry of Industry and notified with the EU, and it's not done yet. They are working on it and have no really detailed schedule available now.
When you expect more clarity on this?
I have no information on that.
Okay. Let me just follow up on GasNet. Indeed, in your slides, you increased by CZK 1 billion the contribution and only for GasNet. The overall contribution, the overall increase in improvement compared with the previous guidance for the distribution business unit, I think is not only driven, will not be driven only by the electricity improvement, if any. Probably CZK 1 billion more compared with the old guidance, or CZK 11 billion could be achieved based on your slides, or CZK 8 billion increase compared with CZK 7 billion of the previous quarter guidance for GasNet. Is I incorrect?
Barbara, you had.
Yeah. I actually previously guided for GasNet to add CZK 7 billion. Now we are giving the range CZK 7 to 8 billion. Clearly, there is some upside risk, but the main driver for increasing guidance in the distribution segment is coming from the electricity part.
Thank you, and thank you so much.
Yeah. Emanuele, did you answer everything? Yeah.
Thank you. Thank you so much for your clarity.
Thank you. We can now take the questions from Silvery Jansowski from Citi.
Hi. Good afternoon, everybody. Thank you for the opportunity to ask questions. I have a couple of them. The first one I wanted to ask you about is the mark. There was an article today that you may be building one in the Czech Republic. Can you tell us, if you know already, what could be the amount of the CAPEX and when could this CAPEX take place? That may be the first question. I have a couple of ones, but I think one by one would be easier, maybe.
Regarding SMRs, CHPRs, our first project, which would be second after the British project, would be actually in Temelín. We don't communicate any numbers on CAPEX because the scheme would probably be very similar to the one that is today, meaning the state state financing as it is for the big unit. I think the size of the SMRs developed by our approach is actually 470 MW. You know, this is where we are aiming at installed capacity.
Okay. I understand. I just wanted to also follow up about your comment about the net debt of being 1.3 and having room for further M&A action. I just wanted to ask whether you're thinking about it as a kind of on the going forward basis and whether you should not add the different liabilities. How would you, what type of power price you would use to be comfortable at paying leverage? Because my numbers suggest you are quite leveraged going above 3x on the forward-looking basis. I just wanted to cross-check what comes on your estimates as a kind of economic net debt FPTA when the power price is normalized.
You're right. Our target actually is about 3.5 net debt to EBITDA. It used to be 3, but with actually adding GasNet, it provides more stability in our earnings because of the distribution assets. Now it's actually 3.5. I think Moody's actually has issued a new opinion on our rating. We keep the rating, and it went from negative to positive after we disposed nuclear projects from our books, new nuclear projects of Dukovany II. We are planning to reach that level sometime by the end of the decade because, as you know, we have a relatively heavy CAPEX program ahead of us. It's about CZK 400 billion that needs to be invested during a short period of time. On a theoretical question, is there any headroom for M&A? Yes, there is, especially now. 3.5 net debt to EBITDA is our target.
Should we be getting over it, we would probably change our CAPEX plans or postpone them or modify them in some way. The power prices that we are using are mainly those that you can see on Forward. That's the best indication of what we have today.
Okay. I have one more question about the Bohonice project. Apparently, you have a 49% stake in the Slovak one. Is this the active project, and you're going to sell it? What's the, is there any financial involvement there? If you sell it, how much money would you get back?
I think there are some discussions going on with the Slovak government, and that's all we can say, actually.
Okay. Can I squeeze in the last one? Great. Sorry to ask for that. One last question was, you know, we clearly haven't discussed the takeover speculation about CEZ, but assuming such an event takes place, what do you see? Do you see any positive elements for the company itself that the new ownership structure with 100% government, would that help the company operate anyhow from your perspective as a management? You know.
Again, it's a theoretical question that still, you know, we can hear now before elections, but I wouldn't really leave it after the elections. It would have both advantages and disadvantages. An advantage would be, as you can see on other companies, that they are 100% state-owned. They have significant rating uplifts from being state-owned. A great example is EDF that has uplifts of many notches, you know, compared to being an independent company, for example. That could be, for example, positive. I think it's too early to discuss the positives and negatives now.
Okay, thank you very much. Thank you for the answer.
Next question, from Oleg Galbur.
Yes. Good afternoon, and thank you for the presentation. I have two questions, both on your 2025 updated guidance. Sure. Can you please elaborate on your full-year EBITDA guidance for the sales segment, which, if I'm not wrong, implies a strong decline of the segment's EBITDA in the second half of the year? I was wondering what are the underlying assumptions behind this guidance? Secondly, can you tell us if you stick to your original CAPEX guidance for this year, which, if I'm not wrong, was CZK 70 billion? Thank you.
Yes. We do stick on our original CAPEX guidance of about CZK 70 billion. That's correct. Of course, it can be a few percent more or less as the year develops, and some projects may be actually sliding into next year, but generally, it's a correct number. Full-year sales segment, I think, they actually have an impact of one-off payment or settlement of the losses in distribution with retail distribution. Also, there's about CZK 1.5 billion, I think, charges to pay for compared to last year. That's what it is.
Okay. This is the $1.3 billion that we can see here on the slide, yeah? Proceeds from liquidation for?
Yeah.
All right. Understood. Thank you.
From Bree.
Yes, can you hear me?
Yes.
I've left this one for Ian, but nevertheless, in one of the business dailies this morning, the Vice Chair of Babasu's party said that the regulated part of the power bill is out of control. He'd consider it ideal if they cut transmission and distribution costs by 50%, more about CZK 50 billion. Within the context of Czech legislation as it stands like this, what would the impact be, depending on Czech and on CEZ and the other distribution companies, if the government would decide to save CZK 50 billion on these tariffs?
In particular, as we have less than two months before elections, you know, that's important to realize. The regulatory framework is defined by the Energy Regulatory Office, which is an independent body. The government really does not have much force to change that. We don't have a system of ruling the country with, you know, President Dickie or Prime Minister Zoufec. That's what it is. You know, that's clear.
Maybe I would only ask, just for your recollection, when government had a thought that the renewable surcharges in customer bills, when getting out of the control, the measure they took to relieve further and use the bills was to finance part of the subsidies from the budget and from the state budget. This is something that is being used. That's one example from the history when government has used some tools they had, that had a neutral impact on our operations and the distributor and the companies operating in the sector.
As I noted, this idea, as well as the prioritization of the sales, neither of those things are included in the party's electoral platform. It's not mentioned at all.
Yes. Thank you.
Jan Raška has a question. You can unmute yourself, Hunter.
Hi, can you hear me?
Yes, we can hear you.
All right. Thank you. Good afternoon. We do the operational results of net debt in the second quarter, but what about the final results? If you can more elaborate, in a non-component interest, you really lost almost CHF 300 million. Is that loss related to the debt, understanding that correctly?
Yeah. What we do, we actually adjust our adjusted net income by non-controlling interest. We fully consolidate on EBITDA level, and then on the net income basis, we actually have to take out whatever is attributable to the minority shareholders. This is what you're asking.
Okay. I would only ask that, basically, the CAF net assets have to be revalued as part of the acquisition and consolidation process. That leads to the increase of the depreciation on consolidated books, while for regulatory purposes, just stand-alone depreciation, which is lower, is being used. The company basically remains highly free cash flow generative. In our consolidated account, we are using higher depreciation and therefore low contribution to the consolidated net income.
Okay. Thank you. Understood.
The next question is from Piotr Dzieciolowski.
Good afternoon. First, congratulations today. It's really great to be in the north. Very nice month. Fair up to the GasNet consolidation question. In terms of cash flows or dividend payments from GasNet to its owners, it would be paid from the stand-alone profits. There would be a cash flow in, even though the consolidated number looks like zero or in minus. Yeah?
Exactly. Exactly. Yes.
Okay. So far, in terms of cash flow, there will be some 50% outflow to the second part of owners. Yeah?
Yeah. 45%. I guess we have 55%, and they are 45%, I think.
Maybe one more question to the distribution business. If I'm correct, so in this year, you now expect some CZK 2 billion to CZK 4 billion increase in the electricity distribution. Is that sustainable, or how much of that was due to the COVID? That would be it. Thank you.
I think we're very lucky with the distribution segment explanation on the distribution slides. I think it's the CZK 1.6 billion out of those three, is attributable to higher revenues from more CAPEX. Something is called weather, of course, but probably like CZK 0.5 billion, which is highly attributed volume of electricity. Then there are higher, allowed higher connecting fees of, let's say, CZK 0.8 billion, which is actually a higher amount for power connection, both power deliveries, but also uptakes, for example, from photovoltaics and renewables. There's a structure of those CZK 3 billion. Adding CZK 3 billion every year is probably not a reasonable dimension.
Okay. It's a general public question. Thank you, everyone, for taking part in this call. The Industrial License Department is already available for your follow-up questions and detailed discussions on your forecast, etc. Thank you very much.
Thank you. Goodbye.
Bye-bye.