ČEZ energy group’s half-year results exceeded analysts’ expectations. Year-on-year net profit decreased five percent to CZK 21.1 billion, and EBITDA profit increased to CZK 28.8 billion. The financial director of ČEZ, Martin Novák, also evaluates the figures positively.

Following the second quarter, the group improved its full-year operating profit outlook. “The reason for the increase in visibility was the higher profit from selling electricity and gas and other goods,” said Novák in an interview for Seznam Zprávy. For net profit, the group stayed with the original assumption.

The semi-state energy colossus is currently dealing with several major investments. He is negotiating with the South Korean company KHNP about the price and details of the contract for the construction of two nuclear units at the Dukovany nuclear power plant. According to Novák, the financing of the project should not be reflected in the energy prices for customers. On the other hand, market developments show that price lists will decrease.

By the end of the month, ČEZ should have regulatory approval to take over GasNet, which distributes natural gas. “At the beginning of September, GasNet should be included in the ČEZ Group and its financial results should start to be included in the results of the ČEZ Group,” says Novák. The company also ‘ continue negotiations on the sale of its coal-fired power plants in Poland.

What is surprising about the results?

I don’t think there is anything surprising about the results. The results are above the expectations of almost all analysts and are good in my opinion. We see a stable economy, we see an improvement in EBITDA operating profit by 11%, which is the result of several factors.

What influenced the increase of operating profit by CZK 6.8 billion?

The most important factor is the end of taxes on excess sales from production, which was in 2023 and no later than this year.

Then there is the negative impact of the different period of nuclear power shutdown compared to last year, which had a negative year-on-year impact of CZK 2 billion. In addition, we have a year-on-year lower profit from speculative trade with goods by CZK 1.3 billion, although we earned CZK 3.9 billion in the first half of 2024. In the first half of 2023, we even earned CZK 5.2 billion from trade, as we were able to take advantage of the still relatively high volatility in the markets.

Another factor in the year-on-year change in EBITDA is the revaluation of electricity and gas derivatives, which had a negative impact of CZK 1.2 billion. Lower coal consumption than in 2023 had a negative impact of CZK 1.5 billion, due to lower sales of coal for the production facilities of the ČEZ Group and also lower demand for coal from external customers, to especially because of the warmer winter.

On the other hand, the Sales sector improved year-on-year by CZK 0.6 billion and the distribution sector by CZK 1.4 billion, mainly due to the high negative correction factor in 2023. Thus the result total thus CZK 6.8 billion better.

Despite these factors, ČEZ raised the operating profit outlook for this year to 118 to 122 billion CZK, leaving net profit unchanged at 25 to 30 billion CZK. Why did you react to these comments?

I mentioned above the reasons for the year-on-year change in profit. The change in full-year EBITDA outlook naturally has other reasons. Until now, we assumed operating profit before depreciation and EBITDA valuation of CZK 115 to 120 billion, now we have increased the full-year outlook to CZK 118 to 122 billion, and at the same time we are also reduced the range by billion. The reason for the increase in the outlook was higher profit from trading in electricity and gas and other goods. Then we expect lower costs for so-called trends in customer consumption, i.e. buying electricity or gas now when customers are consuming more, or on the other hand selling when they are eat less than the basic assumption derived from the temperature norm for the next period. For net profit, we did not change the forecast because the band is relatively wide and a large part of the additional EBITDA is compensated by the higher income tax.

What energy prices do you expect in the future?

For this year, we expect an average performance price at which we will sell our production of 132 to 136 EUR per megawatt hour, and by the middle of the year we had already reached 97% of the expected output get In the following years, our average sales prices reflect the gradual decline in electricity market prices on the market, until the price for the year 2025 is 120 euros per megawatt hour, for which we have received about 71% of the expected return. . For the year 2026, it is 97 euros per megawatt hour, and we are sure of 40% of the expected result. So we have a certain part of the production at a higher level than the current electricity prices in the market for these years.

So will you continue to discount to end customers?

You can definitely tell by the way the wholesale market is looking today. Prices are falling in the following years and of course this is reflected in prices for end customers. Our sales company ČEZ Prodej buys about a year in advance for non-fixed products and for fixed products for the time the customer wants to fix the price, i.e. usually two or three years in advance.

In recent weeks, ČEZ has been struggling with an unplanned shutdown at one of its nuclear power plants. What is the situation of the nuclear blocks in Temelín?

We had some technical issues which have now been resolved and the store is working again. It was a matter of a few days, it wasn’t a big deal and it usually happens throughout the year. It only happened in the third quarter, so it had no impact on the half-year results.

How will this be reflected in future results?

Multiple day closures are not as evident in the numbers. It depends on electricity prices, but I think it will be a relatively small thing.

In July, the government announced who will build the next two nuclear units at the Dukovany nuclear power plant. ČEZ is still negotiating with KHNP about the price of the project and other details of the contract. How are negotiations going?

Discussions are just beginning. There will be a lot of details that will conclude the contract in the first quarter of next year.

The financing of the project itself will go to the state, but ČEZ was supposed to finance the preparation part. Does funding end for you with the signing of the contract between KHNP and ČEZ? Or are you still going to provide additional funding to prepare this project?

We have a special limit of CZK 4.5 billion for the entire preparation period, the main part of which has already been spent. Next year, we will start drawing reimbursable financial support, i.e. other costs will already be covered from the Czech state funds as part of the funding model announced to the European Union for the fifth block, and it is about how the sixth block will be financed. It can be assumed that it will be very likely, but it has not yet been announced.

The government talked about the fact that the price of electricity will decrease due to new nuclear sources. Do you see it the same way?

This is precisely the reason why the zero interest rate repayable bailout was chosen as the financing model. The interest rate has a significant impact on the cost of production of electricity prices in the future, in other words on the construction of investment. The electricity from that source should be at lower market prices than today.

Will the funding of nuclear projects be reflected in some way in electricity prices for customers?

Of course it shouldn’t, because there is a zero interest rate.

How did ČEZ’s coal-fired power plants perform in the first half of this year?

The production of coal-fired power plants in the Czech Republic reached 6.4 terawatt hours, which is four percent more year-on-year, which was mainly due to a shorter shutdown at the Tušimice power plant than in the previous year. For the entire year 2024, on the other hand, we expect a lower production of around three percent to 13.7 terawatt hours. We expect market conditions to be slightly worse for the second half and coal production to decrease compared to last year, which after all has been the trend for the past few years went away All coal reserves should be shut down around 2030, or some producing blocks even earlier.

How is the GasNet takeover going?

We could have regulatory approvals soon, and we expect the transaction to be completed at the beginning of August or September. This means that GasNet should be included in the ČEZ Group at the beginning of September and its financial results should start to be consolidated in the results of the ČEZ Group.

What else now? are you going

We are mainly working on the disposal of our Polish heating plants, when at the end of July we received several tie-up offers from potential bidders, with whom we are now to negotiate By the end of the year, we should know more, ie if we will sell them and to whom, or if we will keep the centers and stop them in some way under control in the future.