Hello everyone, and Welcome to ČEZ Group Call on the announcement we made yesterday on optimization of ownership structure and governance of ČEZ Group. We will have only two slides, which will be presented by Pavel Cyrani. We will hopefully spend most of this call on questions. We have also Martin Novák, the CFO, who can also answer your questions. Now I'm handing over to Pavel.
Barbora, thank you, and hello everyone. As you've probably learned by now, we as a board of directors approved, and then later also the supervisory board, a proposal to our general meeting to decide on the optimization of the ownership structure and governance of ČEZ Group. Before I go into more details of this proposal, let me just give you a short context. The last time we have significantly updated our strategy was in May 2021, under the name of Clean Energy of Tomorrow. As a part of it, we have also updated our business policy, which was then approved at shareholder meeting in 2022. Already in this strategy, as a way to achieve the business targets that we've set forth, we've indicated that one of the steps needed would be to adjust and optimize our internal structure.
With the focus of looking independently at two business areas, one being generation and second being supply and distribution, as two pieces of business with significantly different profiles, financing needs, and other aspects. It also indicated that the energy crisis back in 2021, 2022 was also one of the drivers of these changes. Unfortunately, we are today again facing a global energy crisis. The goals and the tools that we've indicated back in 2021, 2022 are as up-to-date today as they were then. What has changed that we have in the meanwhile also managed to consolidate our customer-oriented assets and grow them significantly. We've developed strong energy services companies both in Czechia and abroad. We have become the main natural gas distributor in Czechia by acquisition of majority stake in GasNet and later, just early this year, Gas Distribution.
We've also grew our supply business and, as a result, in 2026 this year, we expect the customer segments to represent approximately 50% of ČEZ Group EBITDA, with this share even growing beyond that in the years to come. Hence, is a proposal, and the proposal is as follows, as you can see on the page. One is, we've proposed to transfer the customer segment of ČEZ Group to a dedicated subsidiary, which for the lack of a better name, we now call a customer segment subsidiary company, as a proposed issue number one, number A. And B, to have the option to sell a minority share in this newly created subsidiary and/or the shares of other companies within the customer segment of ČEZ Group.
What is part of it comes naturally from what is a customer business from our perspective, is the electricity and the natural gas distribution, the main part. ČEZ Distribuce and GasNet, electricity and grid and gas grid. The supply business of electricity and natural gas to end customers, which is now under a subsidiary, ČEZ Prodej. The trading arm of ČEZ, which would be put in a standalone subsidiary and included in this customer segment subsidiary company, including its unit in Hungary. The smart energy services, which are under ČEZ ESCO in Czechia, Elevion elsewhere in Europe, with the exception of Slovakia, and Slovakia is under ČEZ Slovensko. Last but not least is the end customer telecommunication services, which are under Telco Pro Services. This is the proposal.
As I said, this is something we have been aware of and discussed for quite a long time now. Let me just quickly summarize what are the main reasons, what is the rationale behind it. It's on the next page. Number one, the actual transfer of these segments into the dedicated subsidiary, we believe it will create value. It will actually separate this business. It will put a spotlight on it. It will show to our investors that although we are probably still known as a generation company or mostly generation company, the situation has changed over the past years and we are a company with a very large share of stable and regulated activities, which should allow to value the company higher. Secondly, improved efficiency and governance. Again, both generation and customer segments need a different approach.
Making a dedicated subsidiary will help us to differentiate between the governance and management. Last but not least is the financing perspective, which is on a similar note. Today, we see that you can differentiate the financing that covers generation, especially generation from nuclear and lignite stations, which we still operate, and from supply and distribution business. We believe by separating and allowing for separating these two financing streams through a dedicated subsidiary will allow to achieve an overall more favorable financing terms. Now, that's on the transfer alone. As far as for the potential sale, that's basically what it is materializing the value uplift we believe is there.
We've asked for a mandate to sell a minority share of this dedicated subsidiary, as I mentioned, through any of the possible ways, including public offering, a direct sale, a combination of these or any other structure that we will see brings the highest valuation and through that, the highest value to our shareholders. What this mandate will also contain is that at all times, ČEZ Group will hold at least 51% share in this subsidiary and in all the strategic parts of this subsidiary, such as ČEZ Distribuce, GasNet, ČEZ Prodej, Trading, and ČEZ ESCO. We will retain management control, and we aim to still manage the subsidiary as a full part of ČEZ Group, so including all the synergies that can be achieved in having an integrated utility energy group.
What also needs to be said that creating this structure will give us also flexibility in our future financing needs, both for our growth plans, but also we are aware of the government policy statement that the Czech government intends to buyout or initiate buyout of minority shareholders of ČEZ by initiating a share buyback financed by ČEZ Group funds. This is something that if that should be happening, it needs to be initiated by shareholders, so in this case, by the Czech government, and it needs to be initiated at a shareholder meeting. This is not part of what we are proposing here, but it will give us as management, the flexibility to comply with such shareholder decisions if there is one to come in the future. It gives us the flexibility.
Just to wrap it up, these proposals are subject to approval of the general meeting, which will take place on June 1st, 2026. That's all at this moment. Yes, we are happy to take questions. Barbora?
Yes. That concludes the presentation, and we can take questions. The first question comes from Arthur Sitbon. I'll have to allow the microphone. Yes. Arthur, you can unmute yourself and go ahead.
Yes. Can you hear me?
Yes.
Great. Thank you very much for the presentation. Yes, a few questions on my side. The first one may be on the assets that you intend to put in the CSSC. I was wondering, well, why keeping renewables, in particular, the non-Czech renewable assets in the other, well, in ČEZ Group, and why putting retail in the NewCo as quite often it's perceived that there are synergies of managing generation and retail together? Another question more still on the CSSC, on the NewCo. I was wondering what you believe would be the right leverage ratio for that company in net debt to EBITDA terms. As well, given the debt of that entity, as far as I understand, will still be consolidated by ČEZ Group.
I was wondering would not that lead to a situation where ČEZ Group would have a bit of an incentive to favor dividend distribution from that new co as opposed to growth in order to help funding the nuclear business? That's the first big question, let's put it that way. The second one is just, I was wondering how coordinated that proposal was with the government and to try to understand basically how likely is an approval of that proposition on June 1st. Thank you very much.
Okay. I will answer the first few questions that you asked. One is why is renewables abroad not included? Well, number one, it's really marginal. Number two, we really believe that the split is customer business versus generation in general. That's why we propose to retain the Czech renewables in the mother company, in just ČEZ, a. s. The way we have it organized, the way we have the experts is basically for all the renewables in one group. That's why we kept it with ČEZ, a. s. as a generation business. Again, it wouldn't really matter either way, it's really marginal. Secondly, why is retail? You asked specifically from the synergies perspective. Well, on the other hand, retail is a customer business. We believe that the way you manage the companies and you manage it along the customer business.
As for the synergies, again, as we said, we will always retain 51% and more in this NewCo, as you put it, and through that, we will not lose these synergies. Retail will still buy its electricity from ČEZ, a.s. the same way it does today. This practice will continue, so there will be no change.
I will comment, maybe one more comment on retail. Retail is actually buying from ČEZ as a power generator based on market terms, based on power exchange quotations. There is no advantage to retail staying actually in or close to power generation. That's additional comment actually to that. Leverage, yes, now as you know, our group is funded mainly by debt that is actually taken all by parent company and then allocated downwards, with a few exceptions. For example, GasNet. GasNet is actually financing itself, and it is also issuing its own bonds. We would assume that in the future, when there is no 100% ownership of the new company, it would also live its own independent financial life. That allocation of course, depends on criteria so that we actually retain as high ratings as possible for all entities.
Definitely, there is a group of investors who will prefer, especially I'm talking now about credit investors, investing into, I would say, clean company that does not have any exposure to cogeneration. There is a demand actually for it as we can see. I think it's too early to talk about it, but we'll definitely take those things into consideration. Yes, independent company, although majority-owned, will have its own financial policy that will maximize its value.
You asked about the coordination, and you also asked about then the probability of approval of the shareholders meeting. Well, two things. One is this thing is not coordinated. This is our perspective of how we believe that the company should optimize its structure. Obviously, we are doing this in light of what we see the government is announcing. From this perspective, it is preparing the company for the steps that the government is saying that it will take. You can look at the comments from the government members. I've read through some of them. It seems that they understand that it is a step that is in line with their governmental policy. I think that would give you the indication on the likelihood, but again, we'll only see at the shareholders meeting on June 1st.
Thank you very much.
Okay. Thank you. We can take the next question from Anna Webb.
Yes. Good afternoon. Can you hear me okay?
Yes.
Thank you very much for taking my questions. I'll ask two. Firstly, a quick follow-up on the question on the leverage. I saw some headlines that the valuation for the subsidiary could be something like CZK 150 billion. I assume that that's after considering debt. That's like a market cap valuation for the minority stake. Is that correct? Or is it for the EV of the company? The second question is more of a clarification, so maybe just for my understanding, but I think there was some discussion about the sale of the 49% stake in a subsidiary facilitating the government's plan to buy out the minorities in generation in a kind of self-funded way or without using the government balance sheet. I guess that the proceeds from that would go to ČEZ Group rather than the government as the shareholder.
Is the idea there would be some sort of special dividend or return of money to shareholders to facilitate then a buyout? I know this is all potentials down the line, but is that kind of the right logic or am I misunderstanding something there? Thank you very much.
I'll answer your questions. First, valuation. It did not come from us actually, and also I cannot really comment on anything that was produced by somebody else. I think you can see actually the valuation or the value of EBITDA of this segment for 2025 and 2026 and then come down to your numbers less, of course, any potential debt. Second thing, I think, should it go the path that government intends, according to what we hear from the public media, I think their intention would be rather than the money or the proceeds going to the government and government buying the shares, it would rather be an instruction or decision of the shareholder meeting, which would be initiated by the shareholders to do share buyback in any form, so that we actually would use those proceeds and buy back shares of parent company.
That would be kind of the structure that is publicly being discussed.
Makes sense. Thank you.
We can take the next question from Piotr Dzieciolowski.
Hi, yes. Good afternoon, and thank you for the presentation. I wanted to ask you, do you have already in mind how you're going to sell the 49% minority stake in the subsidiary? Is it going to be there via IPO or is it to design the other entity? Or what's the route to disposal? Have you done some math around your capacity to deliver the buyback of the minorities on the holding level, even if you dispose the 49% stake in this subsidiary? Because you presented a CZK 426 billion CapEx program by 2030, and I thought that really makes your balance sheet relatively leveraged. Even if you create extra space by selling this minority, is it enough to buy out all of the minorities at a top holding level? Thank you.
Look, I guess two things. One is, no, we don't have a specific way to bring the minority shareholders to this customer segment subsidiary in mind yet. Two ways or two things. One is first we need to create the subsidiary, and that will take us until Q1 next year. Secondly, we are most likely to run several types of processes in parallel. If we are to sell eventually, then we would make the decision only when we can compare the valuations and the proceeds we could get through the various paths. We would not choose upfront one path, but we would run different paths in parallel and decide only at the very last moment, depending on the valuations we can get. In terms of if the proceeds are enough, look, at this moment, it's very premature to discuss. We have not formed the company yet.
We will see how the markets develop in all forms and shapes. We'll see if and when the government actually initiates this share buyback and all of this. I think it's very early to speculate on this at this moment.
Understood. Thank you very much.
We can take the next question from Emanuele Oggioni.
Good afternoon, and thank you for the presentation and for taking my question as well. I have two. The first one is on the potential target of the financial leverage of the new entity, which is mainly regulated, so could reach a far higher leverage than the current group, including the generation business. This is the first question. The second one is more general and high level. Considering that, my understanding, the ultimate goal of the government is to protect the affordability of the energy bills for the final customers. The government focus is by taking control of the generation assets. In this way, could the retail business, which ultimately is still included in the CSSC assets, a bunch of assets. So the profitability of the retail business could be affected by the government intervention in the generation business, or the decision taken for the generation business.
If you can clarify this or detail more the opportunities or the risk on that? Probably to maximize the value of these assets, probably it would be better to create a pure RAB-based network company without excluding the other assets like sales of electricity, natural gas or trading, et cetera. In my opinion, at least. Thank you.
Okay. Well, thank you for the questions. I guess the questions what the government will or will not do in the future is more to the government. The only thing that I would bring your attention to is that if you read the more recent comments on this, for example, from the Minister of Industry, Mr. Havlíček, he is not talking about general reduction of prices in terms of getting 100% of just a generation to bring prices down at all times. He started talking about times of crisis. Which were, at times of crisis, a number of countries did something to the prices, all kinds of stuff. There were the ceilings and windfall taxes and all that. Again, it's more a question to the government. In terms of the supply business, again, I understand your question.
On the Czech market, the supply business is very strictly separated from generation. It's really at arm's length. The supply business is normally buying baseload and peak standard types of products that everybody can buy. It's very much looked after by the regulator that the fact that you own generation does not give you any advantage over other supply businesses, where the competition in the supply business is very fierce. From this perspective, the synergies that are there, they are, for example, in margining and stuff like this. But in terms of the functioning of the market, it's very independent and we simply think that in our market, it's better to manage distribution and supply business together, rather than supply and generation. That's how we proposed the subsidiary to the shareholder meeting. Martin-
You know, I would.
Yet another question on leverage.
Yet another question on leverage. I would also add one more comment on the question Pavel just answered, that the market is extremely competitive with quite a few players on the market, and government cannot really influence any of those directly. Although it would have a stake, and it has stake, actually, of 70% in our supply business today, but there is no way how it could be influenced, actually. I wouldn't be worried about that. On leverage, yes, the new company will be more stable in terms of predictability of cash flows due to distribution cash flows in both power and gas. It will have also some growth segments, like ESCO activities both in the Czech Republic and in Western Europe. The same for trading.
Generally, the stability of distribution will be there, and for sure we'll be able to allow a higher level of leverage. It all is a process that is ahead of us. We need to find an optimum between those two, actually, both parent company that would have reduced, actually, stability if part of the distribution business is sold. Clearly, there will be less distributed cash flows or distribution cash flows, regulated cash flows in ČEZ as a parent company. On the other hand, should it ever be more state-controlled or even fully state-owned, it would have a relatively significant or higher uplift, higher than it is today, probably, from state support. All those things are ahead of us and need to be well considered.
Thank you for your detailed answers. Thank you.
Next question can come from Farhad Maru.
Hi, can you hear me?
Yes.
Perfect. Thanks for the presentation. I think you've touched upon some of these questions before, but I just wanted to clarify it in a bit more detail. What's the overall intention from the proceeds of a minority stake sale to be used towards? Would you be looking to pay down some debt with it, or do you think it would just be purely debt transfer from parent co to NewCo? And then on both ČEZ or main co and NewCo, would you have any kind of credit rating targets or aspirations in mind? Would it be looking to maintain your kind of A3, A- rating and kind of structuring it in such a way? Is that kind of your aspiration? Or given you have a reduced stake in NewCo, are you happy for that potentially to even have a lower rating? Another question was just on debt transfer.
You touched upon that in your presentation. Have you thought about that in much detail? Could that be bonds or would it be other kind of debt in your structure? Finally, I guess, I assume it is very early to say, but have you decided on what exact percentage you will sell? I know it is a minority, so it is up to 49%, but could you sell less than 49% and then maybe over time sell down a bit more, and it just depends on the valuation and the state of the market at that point in time? Thank you.
If I understood correctly, we are talking about use of proceeds actually from sale. As Pavel already commented, there are many ways of how to use it. Of course, one of them could be actually use it for buying back shares of ČEZ, but not necessarily the only one should the proposal at the shareholder meeting not come, for example. Actually the debt allocation is tied to rating of both entities. Of course, we would like to keep as high rating as possible, understanding that actually rating of parent is usually a limit for the rating of the subsidiary. Of course, our intention is to keep both companies perfectly healthy as we are today, actually. Yes, we could sell less than 49%. 49% is maximum.
The sale might not be done actually in one go as it usually is, especially when things are going through both private sale or IPOs. They are often split into tranches. 49%, if approved by shareholder meeting, is the upper limit. It can be anything below. Yeah. That's it.
Sorry. What about the debt transfer on bonds?
Debt transfer is something that we will be looking at as well. Yes, debt transfer is a question. It can be done. You need actually bondholders' consent. On the other hand, there are a few possible structures, either direct debt transfer subject to bondholders' approval, or you can actually issue new bonds on both parent company and new company and just repay the old bonds in a standard way. Not transfer the ownership and allocate the debt intra company. All those things are actually possible. We are just now looking at it, how difficult it is, what procedures it could take, and that's it. Generally, the new company, if part of it is sold actually on the open market, should start living its own independent financial life.
Okay. The next question comes from Radim Dohnal.
Can you hear me now?
Yes.
Can you? Yes. My question is towards the sale of the 49%. You kind of said we may sell less, but also I'm asking under which circumstance could be higher? A second question related to that is, are you going in case it's 49% for minor shareholder, like a non-public, and 59% is going to be ČEZ. Are you going to provide a managerial control? And third question is, what are your expectations? I believe when ČEZ was buying 55% of GasNet, you were paying 8.3 EV/EBITDA, and some minor shareholders believe that now this valuation could be up to 14 or at least 11. Can you elaborate on that? What are expectations?
If you don't get proceeds of at least CZK 200 million or CZK 1 billion Czech crowns, are you going to stop the process or going for high percentage or sweeten up the deal? How do you want to continue?
Thank you for the questions. A lot of questions. To most of them the question is simply, we are not ready to comment on this. I think this process is ahead of us, and as I mentioned, we will run the potential ways of bringing minority shareholders on board at this customer NewCo in a number of parallel formats, and then we will decide how much, at what timing, and in which way or in which combination only when we have the information and when the time is right. In terms of the 51% minimum.
Yes, within the decision of the shareholder meeting that we are proposing, there is a hard limit of 51% being the minimum that we will retain as ČEZ. Within this decision, there is no way to sell more, and we have the intention to keep at least 51% and keep the management control over this subsidiary. All the subsequent questions, as I said, these are at this moment simply premature. We cannot answer them properly.
Next question from Mr. Kant.
Yeah. Thank you so much for the call. My question is that, basically, the reorganization, can it alter credit positioning or structural subordination anywhere in the group?
You know, I think it's still too early to discuss that. We didn't get into the full detail yet, so I will just leave it for later discussions.
Okay. Can you just show me the first slide? I missed the first five minutes of the presentation.
Show your first slide? I think we can, yeah.
Okay. In the meantime, we can take the question from Petr Bártek.
Yeah, it comes later.
Good afternoon. Can you hear me?
Yes, we can hear you.
Yeah. Two sets of technical questions. First, I understand the debt questions or debt consideration, that it would be easiest to keep debt where it is in terms of timing and speed of the whole process. What is currently the debt on ČEZ Distribuce, GasNet, and the other subsidiaries all together? If it would be okay for you just to keep the debt where it is, the debt component on the parent and the debt in subsidiaries and that's it. Second question, if you can share some details regarding the smaller segments in the new company, meaning the trading business, how much it generates in terms of EBITDA and maybe also the telco business and other small businesses. Thank you.
In terms of financial debt, the last number that we published end of 2025 is CZK 249 billion. Of that, CZK 60 billion is allocated at GasNet, CZK 11 billion is allocated elsewhere, mainly Elevion. There is no debt directly allocated to ČEZ Distribuce. That's all. It goes through the mother company. The rest, which adds up to about CZK 178 billion, is basically allocated on ČEZ as the mother company. That's the starting situation. I think all this timing, the needed approvals, the ways to reallocate the debt, as Martin described, by, for example, issuing new and repaying the old and so forth, that is still ahead of us and that will be part of preparing and using the dedicated subsidiary once it's established in the first quarter next year. We'll use that time also to prepare the details of all the financial structures around it.
There was one question at the end.
Yes, something on trading, but can you repeat maybe?
No, I think I remember trading kind of profits of trading entity. General, as you know, I think I remember last year, trading made about CZK 2 billion, which is CZK 1 billion, but the average achievement or average amount of money under normal times that is trading making is around 2. Of course, we had an extreme in 2022, I think, when it was 27, due to volatility on the market, which was of up to €500 per day per megawatt hour, which hopefully we'll never see again. In normal times, it's about CZK 2 billion. Telco business, it's fairly small. Very low hundreds of millions of CZK, kind of. That's something fairly immaterial to the rest of the group. We are just moving telco business there just because it is customer-oriented. It is actually related to end customers as well.
On the other hand, it is no secret that we are in the process of disposing this business. If we dispose this business, then it will not get transferred. If we won't dispose it, we won't transfer it.
Thank you. Maybe one follow-up. The loans from EIB, EBRD for the upgrades of the distribution grids, they are on the parent company on ČEZ?
Yes. The loans from EIB are on parent company, and they are dedicated actually to distribution assets. We actually are financing CapEx in distribution assets from those loans. There is a ratio of the amount of loans and CapEx that you are able to cover. We take loans on parent company and push it down to distribution. The creditor is actually parent company. I would assume that, for example, those new loans, when we take them, could be taken directly by the new company.
Thank you.
Next question from Andrzej Kędzierski.
Good afternoon. I have one question. Could you provide more detail on the potential timeline for the potential sale of a minority stake in the new company? Assuming everything goes according to plan, could we assume that potential sale could happen in 2008, or this is too early, too late? Could you comment on this?
The first milestone is establishing this dedicated subsidiary, which we have set for Q1 2027. It's only then when the potential process of divesting a minority could start. In terms of how long it will take, it will very much depend on the way we approach it. It's difficult to comment. Definitely that's not something that happens in a few months. This is about the detail I can give you at this moment. We will obviously give you more detail as the time goes forward and, for example, we will have already established a subsidiary and we'll then comment more on the steps forward.
Okay. Thank you.
Okay. It seems we have no further questions, so thank you everyone for participation. As always, investor relations department is available later on for any follow-ups. Thank you very much and goodbye.
Goodbye.
Goodbye.