#1COAL ENERGY IN THE CZECH REPUBLIC Meeting with Analysts and Investors October 4, 2019 CEZ GROUP Π#2THE CLIMATE TARGETS IN EUROPE ARE BECOMING MORE AND MORE AMBITIOUS... Π Reduction of greenhouse gas emissions from 1990 levels Share of renewable energy sources (RES) in total final energy consumption** Energy savings (EED***) compared to business-as-usual predictions from 2007 1 2020 20% ■Binding EU-wide target ■ Target already accomplished thanks to the economic crisis, rising RES and inexpensive gas _ 20% Binding on national level in the form of specific national targets ■ Great chance to meet the target on EU level 20% ■ Indicative on national level ■ Mandatory energy-saving measures in final consumption ■ Until recently, little attention from the EC 2030* At least 40% (40%) Binding EU-wide target ■ Can be reached as a side effect of fulfilling other two targets ■ Pressure to increase the ambition to 50-55% At least 32% (27%) Binding at EU-wide level, effectively national targets will be specified Fulfilment in electricity, heat, and transportation RES electricity in the EU should grow to 55% At least 32.5% (27%) ■ Indicative at EU-wide level Binding annual savings of 0.8% of consumed energy at national level ■ Both sub-targets will be similar for the Czech Republic and require a slight decrease in energy consumption by 2030 Note:* 2030 targets may be revised (i.e. increased) in 2023, original targets values from 2014 in the bracket ** RES: applicable to all kinds of energy, not just electricity; EED - Energy Efficiency Directive CEZ GROUP#3THE NEW EUROPEAN COMMISSION PRESIDENT PLANS TO INCREASE THE AMBITIONS EVEN FURTHER Reduction of greenhouse gas emissions from 1990 levels Share of renewable energy sources in total final energy consumption Energy savings (EED***) compared to business-as-usual predictions from 2007 Declaration of,,Green Deal for Europe": Increase the emission reduction target for 2030 from 40% to 50%-55% Europe will be the first greenhouse gas emission neutral continent by 2050 (relevant legislation will be provided in first 100 days in office) ■Consider implementation of CO2 tax on goods imported from countries with weak climate policies Partial transformation of the European Investment Bank into a "Climate Bank" to unlock 1 trillion euros for climate investments in the following decade ■ Financial support for less developed regions (so called,,Just transition fund") Energy savings mentioned only implicitly Π Pressure on decarbonization will grow further ■ Strong long-term incentive for CO2 price growth 2 Note: The areas are assigned for better orientation. Ursula von der Leyen did not assign areas explicitly. CEZ GROUP#4Thousands of tons CEZ GROUP SIGNIFICANTLY REDUCED EMISSIONS FROM ITS COAL FLEET Sulphur dioxide* 100 80 Thousands of tons 88 60 60 Particulate matter* 56 -97% 800 724 -97% 700 600 500 400 300 200 20 100 22 0 0 1993 2018 1993 2018 Thousands of tons Nitrogen oxides* 140 120 100 80 60 40 20 ༄ ༄ ༅ ྂ 8 ¥ བླླ° 125 -82% 20 20 Thousands of tons 40 42 0 1993 2018 3 Note: * Emissions of CEZ Group power stations in Czechia Carbon dioxide* 23,967 45,000 38,828 -38% 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2007 2018 E During 1990's CZK 111 bn has been invested by ČEZ into complex modernization of power stations, desulphurization, denitrification and efficiency upgrades. 1.965 MW of old units have been decommissioned. In 2002-03 nuclear power plant Temelín was commissioned and further contributed to reduction of coal output. Tušimice and Prunéřov TPP's went through compehensive renewal and new supercritical unit at Ledvice was built. Investment of more than CZK 100 bn has led to further increase in efficiency of the power generation and emission reductions. CEZ GROUP#5THE PRICE OF ELECTRICITY HAS GROWN IN RECENT YEARS, BUT MAINLY DUE TO CO₂ 2 E Breakdown of Cal 20 electricity price changes over the last two years (01/08/2017-01/08/2019) EUR/MWh 29.3 1.7 14 1.1 5.3 52.3 14.9 Power price EEX Coal price growth Gas price growth 01/08/2017 (from 56.1 to 62.3 (from 16.2 to 19.3 EUR/t) EUR/MWh) Carbon price growth (from 5.5 to 29.8 EUR/t) Other factors Power price EEX 01/08/2019 CEZ GROUP#65 30 THE PRICES OF CO2 ALLOWANCES GROW PRIMARILY DUE TO THE EU'S DECARBONISATION EFFORTS Emission allowance price development (EUA) EUR/t, spot Consideration of the target increase to 50-55% E Nw 20 25 15 10 Financial and economic crisis EED proposal Start MSR Approval process for MSR Final compromise on the shape of the EU ETS after 2020 5 Delays in backloading and structural reforms 0 Energy commodity prices fall 2008 2009 2010 2011 2012 2013 2014 2015 Brexit referendum 2016 2017 2018 2019 +24.3 EUR/t CEZ GROUP#718 08/17 20 22 11/17 6 Note: For 33% power plant efficiency 24 02/18 26 28 05/18 30 HOWEVER, COAL POWER PLANTS ARE UNDER ECONOMIC PRESSURE DUE TO THE GROWTH OF CO2 Lignite spread (Price of electricity - emission allowance) EUR/MWh, Cal 20 08/18 October 2018: several-year highs of the prices of coal and gas and on the opposite, several-month lows for the allowances From 11/2018: Coal price drops, but growing allowance prices have negative impact on profitability of lignite power plants 11/18 02/19 05/19 CEZ GROUP 08/19 Π#8THE ECONOMY OF COAL-FIRED POWER PLANTS IS HIGHLY DEPENDENT ON THEIR EFFICIENCY AND INTEGRATION WITH MINE New power plant integrated with mine Gross margin** [EUR/MWh] 54 -26 Old standalone power plant Gross margin** [EUR/MWh] -8 54 -30 38.5 %** 31.6 %* ** -20 20 20 4 Power CO2 Coal GM price Power price CO2 Coal GM Apart from the above mentioned illustrative gross margin, it is also necessary to cover other variable costs and fixed costs (wages, maintenance and other items excluding depreciation) in the amount of 8-15 EUR / MWh depending on the type, age and capacity of the plant. Note: The gross margin also needs to cover investments, the amount of which depends on technical condition and especially on changing regulation and legislation (e.g. emission limits) 7 Illustrative Π Standalone coal power plants are still under significant economic pressure and are very sensitive to requirements set by the emission reduction legislative (BREF/BAT) and other external factors. The economy of power plants integrated with mine is more robust. Note: *Gross margin excluding other variable costs; includes coal mining margin for integrated plants **Netto efficiency of electricity production CEZ GROUP#98 OUR STRATEGY FOR COAL-FIRED POWER PLANTS VARIES BY THEIR CATEGORY ČEZ strategy Effectively manage the portfolio of basin coal plants, heating plants and mines (design-to-value), as well as electricity supply Develop backup sources based on the needs of the Czech Republic and the development of capacity markets Application of the strategy in the generation portfolio ELE New basin ETU plants EPR Locality of Mělník EGT EME2 EME3 EDE Old standalone power dependent) EPC Effectively operate and gradually phase out the portfolio of non- basin plants based on economic criteria plants (CDS- Biomass heating plants EHO EPO ECJH Other heating plants TETR TDK Π CEZ Group basin plants are operated in base load. Thanks to the low operating costs, their high availability is crucial. Heat supply is an upside. The largest heating plant of CEZ Group, which supplies the capital city Prague with over 10 PJ of heat per year. Partial modernization of the heating plant is planned after the old units phase out. For the hard coal power plant Dětmarovice, the electricity production is crucial, profitability of which strongly depends on the development of commodity prices. Heat supply is an additional income. Profitability of the Počerady plant depends on market commodity prices, including lignite (based on the prices of hard coal). The power plant is on the edge of the technical life and does not meet the BREF/BAT emission limits. In 2019, ČEZ has to decide about potential withdrawal from the sale of the power plant. Sources with significant heat supply. Incentives for production of electricity from clean biomass burning is of crucial importance. Planned greening of the Trmice heating plant and construction of a new heating source (biomass/gas) in Dvůr Králové in order to fulfill the BREF/BAT limits. Note: CDS (clean dark spread) - margin from electricity sale after subtracting the costs of coal and CO2 allowances; CSS (clean spark spread) - margin from electricity sale after subtracting the costs of gas and CO2 allowances CEZ GROUP#10ČEZ PLANS TO DECOMMISSION A SIGNIFICANT PART OF THE COAL CAPACITY BETWEEN 2035-40... Installed capacity of CEZ Group's coal plants in the Czech Republic (GW) Decommissioning of obsolete sources Option Počerady Standby capacity Π Installed coal capacity CZ of CEZ Group 0.1 6.2 4.8 Expected exhaustion of coal 1.0 reserves in DNT 1.0 3.3 3.2 2.5 Expected exhaustion of coal reserves in DB 0.7 2018 2020 2025 2030 2035 2040 This is the best estimate based on the current assumptions. The values may change depending on the development of various legislative and economic factors (e.g. conclusions of the Coal Commission). 9 Note: DNT - Nástup Tušimice mine, DB - Bílina mine CEZ GROUP#11...AND INTENDS TO REDUCE ITS CARBON FOOTPRINT CO2 emissions per electricity produced* (gCO2/kWh) 390 370 2018 2020 300 300 270 2025 2030 2035 Π The average specific CO2 emissions of the marginal power plant are currently approx 650-700 gCO2/kWh CO2 emission intensity of new steam-gas plants<350 g CO2/kWh 100 2040 Development of the g CO2/ kWh indicator for electricity produced is based on the conservative assumption of maintaining today's nuclear and renewable sources production (i.e. growth of new RES is not included). 10 Note: *Domestic as well as foreign sources of CEZ Group CEZ GROUP#12FURTHER DECARBONISATION CAN BE REALIZED FOR INSTANCE THROUGH A NEW GAS POWER PLANTS AS A REPLACEMENT FOR COAL POWER PLANTS Possible other locations for the development of gas sources of ČEZ ■ The following ČEZ locations can be considered for possible construction of new gas plants: ČEZ location Prunéřov Tušimice Mělník Estimated installed capacity * (MWe) Gas connection length (km) 800 2 x 850 800** 11 10.8 5 up to 800 1.4 Počerady Possible development in the Počerady location even after the sale of coal-fired Počerady Power Plant ■ According to the above, the possibility of constructing a new gas source in Počerady remains: ➤ Sufficient capacity of the existing gas connection owned by ČEZ Electricity connection (reservation of capacity) is associated with a cost of 0.5 m CZK/MW (i.e. CZK 400 m for 800 MW), . The connection is not an entitlement by default, ČEPS shall assess the application and either approve it or determine the conditions under which the source can be connected. The capacity of the connection should be sufficient, as it has recently been doubled ■ There will be sufficient space for a new source, even after the sale of the lignite power plant and its related lands, including the land for construction of a new coal plant by Vršanská uhelná. 11 Note: * In relation to the capacity of the gas connection; ** After decommissioning of EME3, 500 MW, is available with no additional costs for ČEZ CEZ GROUP Π#13KEY SUBSTANTIVE AND GENERAL FINANCIAL OBJECTIVES IN THE UPDATED STRATEGY Strategic Priorities Efficient Operation, Optimum Utilization & Development of Generation Portfolio Modern Distribution & Care for Customers' Energy Needs New Energy Sector Development in Czechia Energy Services Development in Europe Divestment Strategy Key Substantive Objectives and Ambitions for 2025 ■ Safe and efficient generation by nuclear plants (WANO's assessment of ČEZ's nuclear power plants above the global nuclear operators median; annual generation above 31.5 TWh). Long-term NPP operation (Temelín units at least until 2060 and 2062, Dukovany units until 2045 and 2047). I▪ Value maximization in mining and conventional generation, efficient generation by power and heating plants in mining regions. Controlled phaseout of plants outside mining regions. " Negotiating a framework for the construction of a new nuclear unit at Dukovany, which would cover the regulatory and market risks of the project. Commencing project preparations according to the approved contractual framework. ■ Distribution CZ: Increasing revenues by way of increased investments in the context of changes induced by decentral energy; increasing efficiency and reducing operating expenses. ■ Sales CZ: Maintaining current profitability by way of: maintaining the current customer base, increasing customer satisfaction, and expanding offerings in the portfolio of noncommodity products and services. ■ ESCO CZ and SK: 25%+ share in the growing market with target EBITDA margin > 7%. ■RES CZ: Playing a major role in the growth of renewables in Czechia. Total potential for Czech solar installed capacity estimated at up to 5 GW, including about 0.5 GW on land currently owned by CEZ Group. ☐ ▪ Continuing with quick organic and acquisition expansion in Germany, northern Italy, and Poland. Maximizing synergies from the consolidation of activities in target markets. Becoming a Top 3 ESCO player in these markets by 2025, with target EBITDA margin > 7%. ■ Return of capital invested in RES assets in Germany and France. E Additional 2025 EBITDA* Goal (CZK bn) +1 to +2 beyond the effect of market prices ** +2 to +4 +2 to +3 +2 to +3 • Completion of sale of assets in Bulgaria, sale of generation and distribution assets in Romania, Poland, and Turkey. The goal is to sell those assets by the end of 2022. The assets' contribution to CEZ Group's annual 2018 EBITDA was CZK 5.5 bn. The goal of additional 2025 EBITDA* demands significant investments in new assets, primarily in RES in Czechia, ESCO abroad, and distribution in Czechia. Investments in RES development in Czechia and ESCO development will be financed by income from divestments. 12 *Increase in annual EBITDA as compared to today; **Current market prices of electricity and emission allowances indicate an additional CZK 7 to 10 bn. CEZ GROUP#14REALIZATION OF THE STRATEGIC PRIORITY ,,EFFICIENT OPERATION, OPTIMUM UTILIZATION & DEVELOPMENT OF GENERATION PORTFOLIO" Π EBITDA 2025* (bn CZK) Additional EBITDA target 2025* (bn CZK) Breakdown of the goal Convention al Portfolio Key influences The decline in production capacities due to the gradual phase-out of coal sources and the impact of gradual greening/maintenance implementation shall be partly compensated by: Higher flexibility and availability of the sources ▪ Increased efficiency of the investment and operating costs -1.0 to -0.5 Mining Decrease in coal mining by approx. 1-2 mil. tons will be partly compensated by cost optimization +1 to +2 -0.5 to 0.0 beyond the effect of market prices ** Nuclear portfolio ▪ Safe and efficient production from nuclear sources will enable the increase in annual electricity production of up to 2 TWh (i.e. total production would exceed 31.5 TWh) +2 to +2.5 13 Note: *Increase in the annual EBITDA compared to the current level ** Current electricity and CO2 allowance market prices indicate additional 7-10 bn CZK. CEZ GROUP#15OUR STRATEGY FOR COAL-FIRED POWER PLANTS VARIES BY THEIR CATEGORY ČEZ strategy 14 Effectively manage the portfolio of basin coal plants, heating plants and mines (design-to-value), as well as electricity supply Develop backup sources based on the needs of the Czech Republic and the development of capacity markets Application of the strategy in the generation portfolio ELE New basin ETU plants EPR Locality of Mělník EGT EME2 EME3 EDE Old standalone power plants dependent) EPC Effectively operate and gradually phase out the portfolio of non- basin plants based on economic criteria (CDS- Biomass heating plants EHO EPO ECJH Other heating plants TETR TDK Π CEZ Group basin plants are operated in base load. Thanks to the low operating costs, their high availability is crucial. Heat supply is an upside. The largest heating plant of CEZ Group, which supplies the capital city Prague with over 10 PJ of heat per year. Partial modernization of the heating plant is planned after the old units phase out. For the hard coal power plant Dětmarovice, the electricity production is crucial, profitability of which strongly depends on the development of commodity prices. Heat supply is an additional income. Profitability of the Počerady plant depends on market commodity prices, including lignite (based on I the prices of hard coal). The power plant is on the edge of the technical life and does not meet the BREF/BAT emission limits. In 2019, ČEZ has to decide about potential withdrawal from the sale of the power plant. Sources with significant heat supply. Incentives for production of electricity from clean biomass burning is of crucial importance. Planned greening of the Trmice heating plant and construction of a new heating source (biomass/gas) in Dvůr Králové in order to fulfill the BREF/BAT limits. Note: CDS (clean dark spread) - margin from electricity sale after subtracting the costs of coal and CO2 allowances; CSS (clean spark spread) - margin from electricity sale after subtracting the costs of gas and CO2 allowances CEZ GROUP#16POČERADY POWER PLANT DESCRIPTION AND TECHNICAL PARAMETERS Executive Summary Compliance with IED emission limits (06/2020) The units will meet the IED limits after certain operational and technical measures are taken Π Compliance with BREF/BAT emission limits (08/2021) Počerady power plant 175 mg/Nm3 130 mg/Nm3 8 mg/Nm3 7 μg/Nm3 The power plant was commissioned between 1970-77 and passed the first wave of greening (desulphurisation) in the years 1994-96. ■ Over 80% of the produced VEP (especially the fly ash) is transported to the mine of Vršanská uhelná. ■ In the site of coal power plant, the gas power plant is also situated, the ownership of which is separated and the common equipment (e.g. water feeder) is owned by ČEZ. ■ The power plant has already exhausted the usual life of units (~ 240 thousand hours), the average number of hours per unit as of 2018 is about 290 thousand (see right). - SOx NOx PM Hg Average values of continuous emission measurements for 2018 (boilers B2-B5) BREF/BAT limits valid from 08/2021 (average annual values) Further operational and technical measures are planned to comply with the BREF/BAT limits Technical parameters and unit operating hours Capacity 1000 MW (5 x 200 MWe) • Unit B2 • Unit B3 Unit B4 Unit B5 Unit B6 e 306 th. hours 307 th. hours 300 th. hours 271 th. hours 271 th. hours 15 Note: Top - Take or Pay; VEP - Secondary Energy Products Operating hours of the unit as of the end of 2018 - Typical life by number of operating hours (approx. 240 ths. hours) CEZ GROUP#17A NUMBER OF DISPUTES BETWEEN 2005-2012 LED TO THE SALE OF CHVALETICE AND SIGNATURE OF A LONG-TERM CONTRACT WITH VUAS IN 2013 2005 An agreement between ČEZ and Czech Coal, a.s. about future long-term cooperation. 2007 G ■ Czech Coal refused to sign a contract for long-term supply of lignite (due to a dispute about the price of coal, which ultimately lasted until the end of 2012) and prevented ČEZ from building a new power plant in Počerady, ČEZ decided to sue Czech Coal regarding this decision. ■ Czech Coal reached an agreement with E.ON to build a new plant for coal from the Vršany mine. 2009 The European Commission raided the ČEZ headquarters on suspicion of restraining competition. In July 2011, an investigation of ČEZ was initiated. Among other things, ČEZ was suspected of blocking capacity in the transmission network in order to restrain competition. All suspicions, except for this, were disproved. ČEZ faced a possible fine up to tens of billions CZK, or forced sale of a part of its assets. 2012 Settlement agreement with the European Commission. ČEZ committed to sell an 800 MW source. ČEZ prepared four options of the sale (Počerady, Chvaletice, Dětmarovice, Tisová + Mělník 3), a tender was declared for 3 of them (complicated combination Tisová + Mělník 3 was a backup). Czech Coal and EPH were interested in the lignite plants. More parties were interested in Dětmarovice (e.g. Gascontrol). 2013 ■ At the end of the year, conditions of a new agreement with Czech Coal were negotiated (see last point). ■ ČEZ chose the most advantageous offer: selling Chvaletice to Czech Coal, via Litvinovská uhelná, and hereby resolved its obligation to the EC. ■ Other power plants were not sold. The value of Počerady was higher than the best bid in light of the new coal deal. The same was true for Dětmarovice. ČEZ signed a long-term coal purchase contract for Počerady with Vršanská uhelná, the agreement ended all bilateral disputes and significantly contributed to the settlement of the above-mentioned EC investigation. 16 Note: EC - European Commission, EPH - Energetický průmyslový holding, a.s., VUAS - Vršanská uhelná, a.s. CEZ GROUP#18CONTRACT PARAMETERS FROM 2013 AND ITS BENEFITS ヨ Take or pay contract for 5 m tons of lignite for ČEZ until the Vršany mine is exhausted (about 2060) Starting price of coal 38.8 CZK/GJ, which gradually increases to the level of 0.65 ARA until 2023 Sale option for 100% of shares in EPC to Vršanská uhelná in 2016 (option 1); Sale option for 100% of shares in EPC to Vršanská uhelná in 2024 (option 2); In case EPC is sold, also the contract for 5 m tons of lignite is transferred to VUAS Agreement on the reciprocal settlement of relations, withdrawal of the complaint at the European Commission ■ Termination of trade disputes with VUAS, enabling settlement with the European Commission Ensuring secure long-term fuel supply for ČEZ sources: EPC and Energotrans Contribution to stabilization of EPC economy by linking the fuel price with black coal price, resulting in a price advantage over black coal plants In case of unfavorable developments in the energy markets, the possibility to terminate the contract using predefined unilateral options of ČEZ 17 Note: VUAS - Vršanská uhelná, a.s. CEZ GROUP#19EXERCISE OF THE OPTIONS BASED ON THE NEGOTIATED CONTRACT WAS CONSIDERED, THE NEXT MILESTONE IS ON JANUARY 1, 2020 E ČEZ had a chance to exercise the 1st Put option in 2016. After valuation and consideration of the circumstances, ČEZ decided to withdraw from the contract for sale of the Počerady plant in 2016. The reason for not exercising the option 1 were the expected benefits of further EPC operations, which according to the market predictions exceeded the potential one-off sale price at that point. Already in 2017, Vršanská uhelná contacted ČEZ to discuss the possibility of selling EPC to manage the technical condition of the plant on its own. At the end of 2016, ČEZ started negotiations to verify the profitability of the earlier sale of Počerady. In April 2017, ČEZ negotiated with VUAS an alternative option that brought additional economic value. The sale was not approved by the ČEZ Supervisory Board. 2020: 2nd Put Option and an opportunity for ČEZ to withdraw from sale of EPC (until 31/12/2019). If ČEZ does not withdraw, the sale of EPC becomes effective as of 2/1/2024. The sale would also terminate the contract for 5 million tons/year. 18 Note.: VUAS - Vršanská uhelná, a.s. CEZ GROUP#20PROFITABILITY OF LESS EFFICIENT POWER PLANTS DECREASES SIGNIFICANTLY OVER TIME Illustrative ヨ Market spread 2015 (EUR/MWh) * Market spread 2020 (EUR/MWh)* 54 -30 35 -7 -17 11 -20 4 Power price CO2 Coal GM Power price CO2 Coal GM The rising price of the CO2 allowance increases the price of electricity only partially. Growth of electricity prices due to rising CO₂ allowance price has material negative impact on less efficient plants (such as EPC). The resulting gross margin and operating profit declines significantly over time. * Ilustrative calculation based on market forward prices of power and CO2 prices during previous year (Y-1) related to delivery in the year 2015 and 2020. The efficiency of the production source used for the illustrative calculation is comparable with the Počerady power plant. 19 Note.: spread - difference between power price, margin costs of CO2 price and coal CEZ GROUP#21POČERADY POWER PLANT ECONOMIC CONTRIBUTION TO THE CEZ GROUP'S RESULTS EPC contribution to the consolidated results of CEZ Group* 2015 2016 2017 2018 E 2019 Sale of electricity inc. AS bn CZK 5.4 5.3 4.6 4.6 5.1 Electricity supply TWh 5.1 5.6 5.4 5.3 4.7** Costs of coal bn CZK -2.4 -2.6 -2.5 -2.5 -2.4 Costs of CO2 bn CZK -1.1 -0.7 -1.0 -1.1 -1.4 CO2 allocation bn CZK 0.5 0.3 0.2 0.2 0.1 Gross margin bn CZK 2.2 2.1 1.2 0.9 1.2 Avg achieved power price EUR/MWh 40.4 34.8 32.0 31.2 37.3 Avg CO2 achieved purchase price EUR/t 7.7 4.6 6.7 7.9 11.0 Avg coal achieved pur. price (incl. logistics) CZK/GJ 41.8 40.6 40.3 41.3 43.8 Fixed operating costs bn CZK -1.2 -1.0 -1.1 -1.1 -1.3 EBITDA bn CZK 1.1 1.1 0.1 -0.1 -0.1 *Financial results reported for separate company Elektrárna Počerady, a.s. („EPC") differ from the stated contribution to consolidated results mainly due to the inter-company tolling agreement between ČEZ, a. s., and EPC, which enables efficient operation of separate power plant in the ČEZ portfolio. This agreement transfers risks and opportunities from development of power prices and CO2 allowances to CEZ and it guarantees fixed profitability set on the power price and CO2 emission allowances from 2015 for EPC. Moreover, ČEZ Group reports its financial results in accordance with IFRS, while EPC reports in Czech accounting standards CAS. ** Lower volume of estimated electricity supply in 2019 is due to the planned general overhaul of unit 3. 20 Note.: E - expected, AS - Ancillary services CEZ GROUP Π#22EPC IS HIGHLY SENSITIVE TO CO2 PRICE Π Lignite Black coal Gas Biomass Power Supply (TWh) Heat supply (TJ) Heat supply ratio 1) Emissions of CO2 per EE and HE³) produced Hodonín 0.3 453 12% 129 g CO2/kWh Partly biomass Poříčí 2 0.6 1,312 19% 547 g CO2/kWh Počerady 2 1.8 0 0% 356 g CO2/kWh Gas Energotrans 0.9 9,575 80% 428 g CO2/kWh Trmice 0.3 2,929 59% 506 g CO2/kWh Heating Plant Dvůr Králové 0.0 164 68% 542 g CO2/kWh Mělník 2 1.3 2,250 19% 699 g CO2/kWh Ledvice 3 0.5 898 19% 731 g CO2/kWh Ledvice 4 2.7 347 2% 765 g CO2/kWh Dětmarovice 1.4 534 4% 826 g CO2/kWh Prunéřov 2 2.8 262 1% 826 g CO2/kWh Tušimice 2 5.2 460 1% 833 g CO2/kWh Prunéřov 1 2.2 598 3% 909 g CO2/kWh Počerady 5.3 1722) <1% 948 g CO2/kWh Power plant Mělník 3 1.0 0 0% 974 g CO2/kWh 21 Note: CO2 only from coal part of power plant, except PPC Note: 1) Boiler heat supply indicator, Q_sup_oth / Qprod_boi, where Qprod = Qsup + Qown + Qloss, 2) Heat supply for heating purposes; 3) Excluding CO2 emissions from biomass CEZ GROUP#23FURTHER OPERATION OF EPC WOULD DEMAND CONSIDERABLE INVESTMENTS MAINLY TO FULFIL ENVIRONMENTAL REQUIREMENTS BREF/BAT fulfillment Operation until 2024 So NOX PM Hg Overhaul (renewal) Operational and technical measures Increasing the dosage of additives Possibly getting an exemption Overhaul of electro separator DeHg basic capture measures Maintenance (overhaul B3 only) • • until 2029** Overhaul of desulphurisation Exception or technical measures need to be added Overhaul of electro separator, desulphurization modification DeHg greater capture range Major renewal required (of all units) Estimated outlays for investment, operation and maintenance of the plant CAPEX + OPEX (normal maintenance and specific actions) [bn CZK] Operating period: Calculated: On supplied electricity 2-5 2019-2023 9-12 2019-2030 3-8 EUR/MWh 6-9 EUR/MWh 100-240 ths. EUR/MW 430 580 ths. EUR/MW = The revision of BREF / BAT with effect from 2029 is addressed by expected exemption until 2030 On installed capacity Operation beyond 2030 is not considered due to the limited residual life of the source and its ability to meet emission limits and other future conditions following the subsequent revision of BREF with effect from 2029. 22 Note: ** Extended operations until 2030 under the assumption of obtaining an exemption CEZ GROUP#24NOT WITHDRAWING FROM THE SALE CONTRACT WILL ENABLE ČEZ TO NEGOTIATE OTHER CONDITIONS Given the economic disadvantages of retaining EPC, ČEZ can only accept: Sale of EPC as of 2024, i.e. not to withdraw from the sale until 31/12/2019 Renegotiation of DKS* * ČEZ may unilaterally withdraw from the sale of EPC Non-withdrawal DKS EPC 1/1/2020 ヨ Transaction realization (EPC physical sale) 2/1/2024 Potentially 4 years to negotiate DKS * ČEZ-Obligation to buy 5 Mt/year (Top) ČEZ - operates EPC DKS termination Counterparty operates It will be possible to negotiate with the counterparty regarding the change of DKS (and also the ownership of EPC) only if the option to withdraw from the sale of EPC as of 2024 is not exercised (with decision by 31/12/2019) 23 Note.: DKS - Long term purchase coal contract with Vršanská uhelná, a.s. CEZ GROUP