William Malcolm

CEZ Sees Profits Shrink By 6.7 Billion Crowns

The net profit of the ČEZ energy group for the three quarters of this year fell by almost seven billion to 6.7 billion crowns year-on-year. Revenues amounted to 156 billion crowns, which is approximately the same as in the same period last year. The reduction in profit was influenced by the EU climate policy and also by the recommendation of the Coal Commission of the Czech Republic to stop burning coal by 2038 at the latest. The company stated this on its website today.. After adjusting for extraordinary effects, the profit reached 16.9 billion crowns, and thus fell by ten percent year on year. CEZ stopped selling production assets in Poland and did not receive an attractive offer.

The current dramatic rise in market electricity prices to historic highs will be reflected in ČEZ’s financial results in the years to come. “For this year, all available capacity of nuclear and coal resources has already been sold, and for next year it is already more than 80 percent,” said CEZ CEO Daniel Beneš.

According to the company, the net profit was negatively affected by the deterioration of medium-term market conditions for coal energy due to the increase in climate targets at the EU level. The planned end of coal combustion in 2038 was also signed on it. “For these reasons, the market value of Severočeské doly decreased and CEZ Group created a provision of CZK 9.2 billion this year due to lower expected demand for coal. and earlier cessation of mining, “the company said.

Operating profit before depreciation (EBITDA) for the three quarters fell by CZK 3.4 billion year-on-year to CZK 47.5 billion. This is due to the sale of Romanian and Bulgarian assets. The company specified the full-year EBITDA outlook at 59 to 60 billion crowns, and the company expects a net profit for the entire year adjusted for extraordinary effects of 19 to 21 billion crowns. This is a slight increase compared to the first half of the year, when the assumption of a full-year adjusted profit was 18 to 20 billion crowns and operating profit before tax 58 to 60 billion crowns.

“I would definitely evaluate it positively, it is in line with our expectations. And when I looked at the analysts’ estimates, we managed to surpass the estimates of all analysts, both in terms of EBITDA and net adjusted profit. So I I think this is good news for investors, “CEZ CFO Martin Novak told CTK today.

According to Novák, several factors will affect the outlook for the whole year. “These are better results in individual segments, better results in the distribution segment, because consumption is returning to the pre-target level. This goes hand in hand with the sale of electricity,” said Novák. The current increase in electricity prices will have no effect on this year’s results.

There will also be no influx of clients from the Bohemia Energy group, which has ceased operations. “Although we will gain hundreds of thousands of customers in a slightly unexpected way, there is actually no profit there, because we basically sell them electricity at wholesale prices, so we have no desire to deploy a large margin there,” said Novák. According to him, the inflow of customers will not affect CEZ’s results next year either.

Total electricity production fell by eight percent. Revenues from the sale of electricity, heat, gas and coal increased by about 3.5 billion to 104.4 billion crowns. Sales of electricity and gas to end customers in the Czech Republic increased. “Electricity increased by nine percent in the first three quarters, and by 18 percent in the case of gas. Sales of comprehensive energy services increased by a total of four percent year-on-year. An increase of ten percent is expected for the whole year,” strategy and Deputy Chairman of the Board of Directors Pavel Cyrani.

Electricity consumption in ČEZ Distribuce’s distribution area increased by seven percent year-on-year, and by five percent in climate and calendar terms. Consumption of large enterprises grew by six percent year on year, household consumption by 12 percent. Overall, consumption reached a higher level than in 2019, ie before the coronavirus epidemic broke out.

In emission-free nuclear and renewable sources, ČEZ produced 24.8 terawatt-hours (TWh), one percent less year-on-year. It produced 14.8 TWh in emission sources. This is a year-on-year decrease of 18 percent, which was mainly due to the sale of the Počerady power plant and the shutdown of the Prunéřov 1 and Mělník 3 power plants.

In the third quarter alone, CEZ’s net profit reached 5.1 billion crowns, last year the company had a loss of 1.1 billion over the same period. Operating profit before depreciation increased by 3.7 billion to 15.9 billion crowns. The reason is mainly the higher profit from commodity trading and the elimination of temporary losses of production hedging contracts from the first half of the year.

“According to our assumptions, the production segment, ie the largest, most important and most profitable CEZ division, had the largest share in the successful third quarter,” said Fio banka analyst Jan Raška. Overall, ČEZ evaluates the results positively. “Profitability for the third quarter of 2021 is significantly above market estimates, the outlook has been improved. Overall, today’s results report are positive,” said Raška.

CEZ is the largest Czech energy company. Its majority shareholder is the state, which holds about 70 percent of the shares through the Ministry of Finance.

CEZ stopped selling production assets in Poland and did not receive an attractive offer

The energy company ČEZ has stopped selling its production assets in Poland. The prices offered for five Polish companies, including the Skawina and Chorzów coal-fired power plants, were not economically attractive enough, CEZ CFO Martin Novak told CTK today. In the coming months, CEZ will analyze what will happen to the assets in the future.

“The prices we received in the last round of the tender are not attractive enough for us to accept the best of them,” said Novák. According to him, however, Polish coal-fired power plants are not assets that ČEZ wants to operate in the long term.

Both power plants supply heat to agglomerations of the surrounding cities. According to Novák, all possibilities are now possible, among them the conversion of power plants into much cleaner methods of energy and heat production. Sales are also possible, but not in the form in which the power plants were sold now. A complete shutdown of the sites cannot be ruled out either.

Novák did not state the amount for which ČEZ could sell Polish assets. However, according to him, these are significantly lower numbers than in the case of the sale of Bulgarian assets, for which CEZ collected 335 million euros (about 8.5 billion CZK).

A year ago, 14 potential investors showed interest in CEZ’s Polish assets. Skawina is the second largest supplier of heat to Krakow and Skawina, Chorzów is one of the largest suppliers of heat to Katowice and other urban agglomerations in Silesia. In 2019, they produced a total of 2433 gigawatt-hours of electricity and 5366 terajoules of heat. Both power plants have technologies for biomass co-firing.

In addition to Skawina and Chorzów, including the Chorzów II project, ČEZ also considered selling the companies CEZ Produkty Energetyczne Polska and CEZ Polska. The first provides support in the management of energy by-products, the second sells commodities to large customers and small businesses.

The sale was in line with CEZ’s new strategy. It envisaged a gradual sale of assets in Bulgaria, Romania, Turkey and Poland. An exception is companies focused on ESCO (modern energy services). According to earlier information, the company wants to raise tens of billions of crowns from the sale of foreign companies, which it will use for the construction of renewable sources and new nuclear units as well as the modernization of the distribution network.

CEZ Group entered the Polish energy market in 2006 by purchasing the Skawina and Elcho (now Chorzów) power plants from the American company PSEG. It was an investment worth 10.8 billion crowns. In 2012, ČEZ started its wind energy business in Poland.