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Edited Transcript of CEZ.PR earnings conference call or presentation 12-May-20 2:00pm GMT

Q1 2020 CEZ as Earnings Call

Prague Jul 2, 2020 (Thomson StreetEvents) -- Edited Transcript of CEZ as earnings conference call or presentation Tuesday, May 12, 2020 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Barbara Seidlová

CEZ, a. s. - Head of IR

* Martin Novák

CEZ, a. s. - CFO & Deputy CEO of Operations and Director

* Pavel Cyrani

CEZ, a. s. - Vice Chairman and Deputy CEO of Strategy & Sales

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Conference Call Participants

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* Arthur Sitbon

Morgan Stanley, Research Division - Equity Analyst

* Bram Buring

Wood & Company Financial Services, a.s., Research Division - Equity Analyst

* Elchin Mammadov

Bloomberg Intelligence - Utilities Analyst

* Piotr Dzieciolowski

Citigroup Inc, Research Division - VP

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Presentation

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Operator [1]

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Dear, ladies and gentlemen, welcome to the conference call of CEZ Group's Q1 2020 Results.

At our customers' request, this conference will be recorded. (Operator Instructions)

May I now hand you over to Barbara Seidlová, who will lead you through this conference. Please go ahead.

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Barbara Seidlová, CEZ, a. s. - Head of IR [2]

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Hello, everyone, and welcome to our regular quarterly call.

I have Martin Novák, our Chief Financial Officer, with me; and Pavel Cyrani, Chief Sales and Strategy Officer; who will be presenting the first quarter results and will be available to answer your questions.

Now I'm handing over to Martin.

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Martin Novák, CEZ, a. s. - CFO & Deputy CEO of Operations and Director [3]

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Good afternoon. Good morning, everybody.

So let me start with the first slide showing our operating and financial results for first quarter of 2020. Basically, all items are positive compared to 2019. So we had a very strong first quarter of 2020. EBITDA reaching CZK 25.9 billion or 22% up year-on-year. Net income, CZK 14.2 billion, 43% up. Our net adjusted income of CZK 13.9 billion, 34% up. You can also see some volumetric data, installed capacity, where we decommissioned over past 12 months about 0.5 gigawatt, 500 megawatts of coal capacity. And we had about 10% decline quarter-on-quarter in mining activities, mainly due to warm winter and lower supplies of coal both to CEZ and also external parties. We had slight changes actually in all other metrics, which is a few percentage points. So it's really not worth going into detail.

On next slide, you can see actually year-on-year change in EBITDA by segment. Our EBITDA in 2019 was CZK 21.3 billion. Now we have reached CZK 25.9 billion. And the main differences are actually shown on Slide #3. CZK 3 billion is coming from generation traditional energy, mainly due to higher power prices in the Czech Republic, which contributes CZK 3.9 billion. We had additional profit from so-called overhedge from German hedges of CZK 1.4 billion. Higher expenses to pay -- related actually to carbon allowances, CO2, of CZK 1.5 billion. And also higher gross margin on the sales of electricity in Czech Republic, Romania and Bulgaria of CZK 1 billion. So far, we don't see any basically impact of coronavirus. Pavel will touch on that later in the presentation.

When we look at other income and expenses, we have very comparable numbers on depreciation, amortization, impairment. The difference is 6%. This is explained actually in the text. Then, other income expenses, again, very similar numbers to last year of CZK 1.6 billion. Actually, only 2% change.

Income taxes of CZK 700 million lower -- or higher in Q1 2020, and this is leading to net income of CZK 14.2 billion and adjusted net income CZK 13.1 billion (sic) [CSK 13.9 billion]. Actually, this time, it's probably the first time I remember when our adjusted net income is lower than net income, and it's because of actually reversal of provisions in Bulgaria, the positive way, and that's why we actually adjust for the positive effect. Usually, we adjust for negative effects between net income and adjusted net income.

COVID-19, we took a lot of measures to eliminate the operational risks on the company. And there is a number of those actually listed. Again, very similar measures as most of the companies are taking these days or were taking these days. We basically split staff into few groups that wouldn't meet physically at all, and we will rotate them through power plants and also through distribution assets to minimize them actually transferring the coronavirus. On the other hand, in the Czech Republic, the situation is very favorable. We had just a few thousand people, actually, and not very high number of those who had a severe result of the illness, so very good news. And now actually, as of this week, some of the measures are easing out. But we are definitely monitoring the situation, and we'll do everything to be able to fully function as a company.

We also introduced a few programs to help our customers. One of them is that we allowed households to postpone payments for up to 3 months. Since March, we have now 3,400 customers who have taken advantage of this measure, so fairly insignificant number. And this is basically replicating what we did in 2009, '08/'09 with the financial crisis. So the measures are very similar. And we have an experience on how to handle this type of situation. So far, we don't see any significant disruption into our business. What is also maybe important to notice that we produced about 18,600 liters of our own sanitizers, as we have chemical laboratories. And we switched them quickly from analytical laboratories to also production units of chemicals for our company, and so that we actually did not have any shortage of any nature in that respect.

Important question. Normally, this slide on debt position and structure would be somewhere in the appendices. This time, actually, we moved into one of the front pages. For many companies, liquidity is an issue these days. Luckily, we are actually happy that it's not the case of our company. So as you can see, our net debt-to-EBITDA coefficient is safely below 3, which is hurdle for our A- rating. It's at 2.59.

We have about CZK 36.4 billion of undrawn committed credit lines, including EUR 330 million or equivalent of CZK 9 billion actually from EIB. We have only drawn actually about CZK 2.7 billion actually of uncommitted lines and CZK 1.1 billion of committed lines. So our liquidity position is strong, and we don't see any difficulties.

We also have refinanced our bond repayment. It will be repaid, I think, in June, which is close to CZK 20 billion. As you can see actually on the chart on the right side, we actually refinanced by -- through issuing bond in November last year. So we have enough cash to safely pay -- actually do that.

Looking at the situation in our cash flow, at our financial strength, at the ways how coronavirus crisis actually affect our business. We gave it a really thorough thought and decided to suggest or propose to shareholder meeting to pay a dividend of CZK 34 per share, which is basically the highest dividend in past few years, significant growth from 2018 dividend, which was CZK 24. Payout ratio is 97%. So it is on the top of our range, which is 80% to 100% of net income. And that's something that we can afford and we can comfortably live with. We also believe that this will be very good news for our shareholders, especially those days when most of the companies are either canceling dividend or cutting it significantly. Actually, CEZ being able to pay dividend fully would remain kind of a pillar of their portfolios. And we can also see it on our share performance. Looking back a few weeks, the share was much weaker than it is today, basically coming back to CZK 500 level. So that's -- and the dividend is definitely one of the reasons that supports the price going up.

Development in our activities, divestment activities. As you know, in Romania, we actually launched the process on September 9, 2019. The process is still going on. We received 19 indicative offers. We made short list, and now, we are actually in the middle of tendering between fewer parties. There is -- so far, there is no delay in the process. However, according to Romanian law, we are not able to transfer assets under the situation that is caused by COVID-19, so-called emergency state, and -- which will be valid until May 15. Which is no harm to us anyway because we wouldn't be able to sell the assets by that day anyway. So we still expect to close this transaction by the end of this year.

Bulgaria. In Bulgaria, as you know, we signed an SPA for purchase of Bulgarian -- or for sale of Bulgarian assets to Eurohold Group on June 20. Then, anti-monopoly will face and block the transaction. And we filed actually a case with the court. And I think now the hearing -- the first hearing is actually scheduled for May 18. It got postponed a few times because of the coronavirus situation, so let's see if it happens or not. But definitely, I wouldn't expect any significant move this year in case -- in relation to Bulgaria.

Poland, we started the process of disposal of wind assets in Poland, and there are very high chances that we will finalize the sale in second quarter 2020, so basically by June. The same relates to actually our Polish coal assets. And we basically start our plan to sell the process -- to plan to start the process of sale of our coal assets in second half 2020. Again, no significant delay related to COVID-19.

In Turkey, we continuously discuss potential sale with many parties. But this is going on for years without any reasonable offer on the table. And that's why I wouldn't expect any news from Turkey coming anytime soon.

Then on next slide, Slide 10. Traditional electricity generation. We are making environmental upgrades to our power plants. Our plan for discontinuing operations of a few coal plants that we published on early October is still valid. So no change there. And that's probably for power generation. There is some more detail on the slide. In distribution, again, nothing significant. Basically, very similar information as last time. So that's -- more details can be found on the slide.

On Slide 11, you have information about our evaluation of lithium extraction opportunity in the Czech Republic. We actually signed with EMH, which is an Australian company, an agreement with -- through our coal mining company, Severoceske Doly, that we would acquire a 51% stake in a company called Geomet, which is a local company owned by EMH, by raising capital by EUR 29.1 million. Now actually, until 2023, we will have time to do a pilot testing to see whether we are able to extract lithium economically from the project and see if it can be actually extracted in a large scale, not on just laboratory scale. And if the project will not be profitable, we will be able to see, so -- see an exit actually at any time. So by 2023 now, actually, the development of the pilot will go on.

Then we also participate on the construction of the biggest high-temperature electrolyzer for green hydrogen production through our investment in a company called SunFire in Germany. Again, more detail given on the slide.

Next slide. We actually debated cooperation with Czech government and government actually approved 2 contracts with CEZ related to new construction of nuclear plant in Dukovany. And it was actually approved a few days ago on April 27 by the Czech government. First is general nonbinding agreement that actually covers overall cooperation. And second one is implementation agreement for first stage of construction. Meaning time covering between basically today and 2024, where we should do the paperwork, zoning permit, nuclear facility siting permit, select contractor and allow state's control over the contractor, then have all papers basically done, and at the same time, negotiate second stage. Second stage would last from 2024 to 2029. It will be basically about detailed design on the plant. And at the end of first stage, we actually have a put option to put the project on the government and get the money we invested back. Government, at the same time, has call option and they can call the project and pay us actually how much we spent on the first stage.

So now it will be time to agree with the government the level of guarantees and future offtake price and all the financing that would be available. And should it be economic for us at the end of first stage, we will go ahead with the second stage. Should it not be economic, we wouldn't be able to continue, and we would probably hand over the cost -- the project to government.

Now next section actually is financial performance of our business segments. When we look at the segment of generation and traditional energy, you can see that there is a CZK 3 billion variance versus last year. This is the largest variance among all our segments. In Czech Republic -- basically, entire change of CZK 3 billion is in the Czech Republic. And as I said already, the reasons are higher power prices, including effect of hedges and successful commodity trading. Then we had the so-called overhedge from German hedge contracts when actually, the spread between German and Czech prices increased. And that's why this additional profit from -- the significant increase of the spread between Czech and German market is actually booked as the overhedge because the hedge is no more effective.

Then, lower generation in nuclear plants, about CZK 400 million compared to last year. And also, operation at other power plants, mainly coal plants, was CZK 300 million lower. We have to pay more for carbon credits because we get less and less for free, and they are more and more expensive. So CZK 1.5 billion negative coming from carbon credit. And we had also higher asset maintenance cost at nuclear plants of CZK 200 million.

And when you look at actually volumes, we produced 15.8 terawatt hours of electricity, which is 5% less than last year. 7% decline in coal-fired plants, 5% decline in nuclear and increase in other of 11%, which is mainly CCGT in Pocerady, which is now due to very low carbon -- very low prices of gas running at full speed. For full year, we expect very similar power generation as last year. So basically, everything is plus/minus 1%. We expect 61.8 terawatt hours versus 62.4. Again, the variance is explained below the chart.

Generation. Our segment, generation new energy has improved its performance by CZK 300 million, CZK 200 million in Romania, and CZK 100 million in Germany. In Romania, mainly due to higher price and amount of generated electricity. And in Germany, it was mainly about the volume.

Again, the detail of the power generation can be seen on Slide 17, both for Germany and the Czech Republic and Romania. So we plan to increase our sales -- our output by 6% for full year, and our output has increased by 8%, actually up quarter-on-quarter.

Sales segment. CZK 1.2 billion positive change, half of which is coming from the Czech Republic, CZK 600 million, then CZK 300 million of the variance coming from Romania, CZK 100 million in Bulgaria, CZK 100 million in Germany. It's mainly higher -- higher margin on commodities in all countries mainly due to the fact that we were buying electricity later than we sold it. So we benefited from declining power prices in our sales segment.

In Germany, it's mainly about positive financial results of Elevion Group, including effect of Hermos acquisition. And Romania and Bulgaria, similar reasons, higher gross margin and also a positive outcome in margin in Bulgaria.

ESCO companies, quarter 1 sales increased by 21% year-on-year. In Germany, it was 25% growth, which is our strongest market and organic growth, mainly coming from En.plus and Elevion Group. We also acquired company, Hermos, which is consolidated from May 15, 2019. So it means it was not fully consolidated in last first quarter. It was not consolidated or actually in Q1 2019. In Czech Republic, organic growth and in segment other, it's actually 56% growth, mainly due to organic growth in High-Tech Clima, which is a Romanian company, ESCO company, and also acquisition of Euroklimat, which is a Polish company being consolidated starting August 30, '19.

For full year, we actually reduced our expectation a little bit. Originally, we planned to have a sales of CZK 25.9 billion. Now we plan to get CZK 24.1 billion, which is still 11% growth, but 7% reduction compared to original plan that we presented on March 17. This is mainly due to COVID situation. We are not able to install the units where it was already pre-agreed, for example, hospitals. All those things were put on hold until the situation gets better. So partly also harms our sales in ESCO activities.

Segment distribution, 0.4% improvement, the half of which is coming from Romania, half of -- second half from Bulgaria, mainly higher gross margin on distribution due to higher electricity distribution prices in Romania and very similar also in Bulgaria.

Mining segment is actually CZK 200 million down, mainly due to decrease of sales of coal both to CEZ but also to outside customers due to warm winter and a lower demand for electricity made of coal due to -- starting COVID issue. And that's -- and then segment other, which is mainly about support services, where the margin is -- intra-group margin is declining because of the level of sales is actually also declining, which is good news. Savings on internal costs.

Annual outlook. We continue hedging our generation revenues. It's an important slide, on Slide 23. You can actually see that as of May 12, our estimated average price for 2019 is EUR 44.9, with a EUR 15.4 actually per ton of CO2. And future years, 2021, actually, 65% was sold as of 31st of March at EUR 46.3. 34% for 2022 at EUR 48. Current prices are EUR 42 for 2021. EUR 45 for 2022. So a little bit lower than our average that we have achieved so far, but not dramatically. So we definitely stick to our hedging policy and continue to sell our production forward.

Next slide is actually showing the impact of COVID-19 on our earnings. We expect 2020, in fact, to be CZK 3 billion to CZK 4 billion, half of which, which is $1.50 billion to $2 billion, coming from generation, traditional energy segment and mining; and half is coming from distribution and sales.

In terms of generation, we still have some electricity that is being sold on spot market. And of course, with lower demand for energy due to COVID-19, we experienced lower spot market prices, and that's why we sell for lower than expected. Also, some electricity that is not consumed by our customers because their operations are shut down needs to be sold on the open market, again, usually at spot prices. And this -- and there's also lower demand for coal which, in total, leads to CZK 1.5 billion to CZK 2 billion estimate of the 2020 results.

Distribution, segment and sales. We actually have seen decrease in consumed electricity or distributed activity, which means that we have a low revenue for distribution. We also see actually delay in ESCO projects, as I already commented on. And we also see that we will probably acquire less companies this year in ESCO segment because of our inability to travel and all the measures that are taken. We really cannot run due diligence. The business of -- the target is a little bit out of normal standard. So we will probably not gain EBITDA through buying companies. And again, overall, total impact of the distribution and sales segment could be CZK 1.5 billion to CZK 2 billion, which actually leads us to next slide.

And we decided to adjust our estimate on EBITDA, which was CZK 63 billion to CZK 65 billion, actually, to the level of CZK 61 billion to CZK 64 billion, which means that we did not cut it by CZK 3 billion to CZK 4 billion, but less. Because we had a relatively strong first quarter with extraordinary results from trading and also overhedge, so it partly compensated for COVID-19 impact. Why we actually increased the range from CZK 2 billion to CZK 3 billion, that's definitely because we really don't know how the situation will turn out, and the clarity is lower with COVID-19 than it was before. But still basically confirming our numbers at about CZK 60 billion range.

Net income, very similar, decreasing from CZK 21 billion to CZK 23 billion to CZK 19 billion to CZK 22 billion. So again, overlapping ranges between old and new guidance.

From next slide, you can see actually year-on-year change in EBITDA by business segment which we usually present. And then in the appendices, you have all the other information.

So I think it's now all for the presentation part, and so we can switch to questions and -- Q&A part of our presentation.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we've received the first question. It is from Elchin Mammadov of Bloomberg Intelligence.

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Elchin Mammadov, Bloomberg Intelligence - Utilities Analyst [2]

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I have 3 questions, please. The first one is on working capital. I don't know if I missed it or not, but could you please help us quantify the expected impact on your working capital and bad debt and whatnot for the full year, assuming normalization, now that we're seeing slowly quarantine restrictions being lifted?

The second one is on trading. You mentioned that there's been an impact on your trading results, positive one, from increasing spread between German and Czech prices. I know it's a good one for this period. Potentially, it's a risk for you when you think of hedging as a way to reduce the risk. So if you could possibly talk about what you're going to do to manage that risk, that would be great.

And the final question is about the output guidance. So from where I can see, your output is broadly flat this year, where have we seen some sharp decreases and -- for other conventional generator. Can you please talk a bit more about that, and why you're seeing your output more resilient? That would be great.

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Martin Novák, CEZ, a. s. - CFO & Deputy CEO of Operations and Director [3]

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So first, the working capital, we really don't expect any significant impact in the working capital from COVID. As I said, only so far 3,400 people asked for postponing their payment by 3 months, which is basically insignificant. We don't see anything similar on the corporate customers so far. So many of them actually, if you have a hotel, you probably are shut down. So it's not about postponing payments. It's about not consuming power, which we then go ahead and sell on the spot market or short market. So that's actually nothing significant in working capital. What -- and otherwise, everything that we sell through power exchange is actually, there is a daily margin in cash, so there is no issue in that area. CZK 1.4 billion, which is -- yes?

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Pavel Cyrani, CEZ, a. s. - Vice Chairman and Deputy CEO of Strategy & Sales [4]

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If I may just jump in on the trading result?

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Martin Novák, CEZ, a. s. - CFO & Deputy CEO of Operations and Director [5]

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Yes.

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Pavel Cyrani, CEZ, a. s. - Vice Chairman and Deputy CEO of Strategy & Sales [6]

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Okay. Just 2 comments. One is we, overall, commented positive results on -- from the prop trading, exceeding CZK 2 billion. So this is one thing. The other is the overhedge, which is the fact that there is quite a significant price spread between Czech and Germany, even at this moment, I'm just looking at the screen. And this is where the CZK 1.4 billion comes in. And normally, this would be booked as a regular hedge and would come in only when the price -- I mean the electricity is delivered. But when you test the hedge and if it deviates above a threshold, you need to start looking at it as a nonhedge, which happened to us.

Obviously, we cannot easily manage this risk simply. That's why we are hedging in Germany on the 2 years and 3 years ahead because there is a very low liquidity on this long front on the Czech market. So we can't simply wait what the margins or the spreads will do. At the same time, because they are likely to be higher, and they are higher these days even on the spot market than in Germany. Overall, the fact that we hedge in Germany and then we convert it to Czech still adds some euros on top. Whether the spread will prevail at the current kind of EUR 3 to EUR 5 or it will be lower, it is to be seen. It's also a new situation for us, but we cannot simply hedge this.

In terms of the output on generation, I think the answer is pretty simple. We are so low on the cost curve that the impact even from the COVID-19 on the asset is very limited. Where we get hit normally is the fact that the low demand -- or lower demand translates into lower prices. So on the unhedged amount, which is kind of low in 2020 but higher 2021 and even higher 2022 if the situation kind of extends, the prices from COVID-19 would extend longer. That's kind of how we get impacted.

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Operator [7]

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The next question is from Arthur Sitbon of Morgan Stanley.

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Arthur Sitbon, Morgan Stanley, Research Division - Equity Analyst [8]

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I have 2. The first one is that there has been quite a significant increase in the net debt in Q1 '20. And I was wondering if you could explain what were the drivers to that increase in net debt, and as well, if it would be possible to have some kind of guidance or indication for the level of net debt at the end of -- for the end of the year. That's my first question.

And the second one is if you could, by any chance, provide an update on the discussions regarding the remuneration framework for electricity distribution in the Czech Republic for the new regulatory cycle.

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Martin Novák, CEZ, a. s. - CFO & Deputy CEO of Operations and Director [9]

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I'll answer the first thing. We had a little decline in operating cash flow, which is kind of a time difference. First, the CZK 3.7 billion is actually coming from the fact that instead of buying forward carbon credit, it was cheaper, more economic to buy them basically on spot. And so we exchanged cash for carbon credit. And it was CZK 3.7 billion. Then, the CZK 2.5 billion is actually an income from trading activities, as we said.

On the other hand, the cash settlement will only happen when -- after actually first quarter of 2020, so when the electricity is delivered. Then, overhedge, again, CZK 1.4 billion. It's very similar. The same thing, it will actually materialize into cash in future years. And then we had CZK 2 billion, actually, margin income on the exchange.

So we don't expect -- there is nothing really significant. There's just a few factors that came together. What we expect actually, our net debt-to-EBITDA level should not exceed 3. This is our threshold that we would like to follow because of rating level. But there is really nothing that would be worrying for us. Just a temporary thing.

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Pavel Cyrani, CEZ, a. s. - Vice Chairman and Deputy CEO of Strategy & Sales [10]

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Okay. And then the second question was related to the price framework for the nuclear or for distribution? I kind of missed the second half of the question.

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Arthur Sitbon, Morgan Stanley, Research Division - Equity Analyst [11]

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It was for...

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Barbara Seidlová, CEZ, a. s. - Head of IR [12]

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For distribution.

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Pavel Cyrani, CEZ, a. s. - Vice Chairman and Deputy CEO of Strategy & Sales [13]

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Distribution, yes.

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Martin Novák, CEZ, a. s. - CFO & Deputy CEO of Operations and Director [14]

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For distribution. Well, for the distribution, I think the consulting -- the public consultation process is in its last phases. So the output is to be seen. We obviously expect, given the extremely low interest rates, that the WACC risk-free, and subsequently, the WACC will be somewhat lower than in the current period. But at the same time, we try to argue that there is a lot of inner trends to be done in the smartification of the grid. So I guess this is the dynamic of the discussion today, and we will have the final results when they are out.

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Operator [15]

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The next question is from Bram Buring of Wood & Company.

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Bram Buring, Wood & Company Financial Services, a.s., Research Division - Equity Analyst [16]

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Two questions, please. First is, is there anything you can say with regarding the regulations for construction of the solar in the country? Any movement forward there?

And the second relates to the question on the distribution side. Yes, I'm understanding that WACC is going to be somewhat lower, looking at the materials that the regulator has put out for discussion. And you mentioned again that you're looking to offset that partly by raising CapEx. And my question is, are those higher CapEx levels for Czech distribution already reflected in the CapEx guidance that you gave in the annual report at the end of April?

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Pavel Cyrani, CEZ, a. s. - Vice Chairman and Deputy CEO of Strategy & Sales [17]

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Well, in terms of solar, the final -- I mean, kind of the final setup is not out because, generally speaking, there is a discussion on the preparation of the new law for the so-called supported generation sources, which expects or includes auctions for tariffs for the renewables. However, auctions for PV are excluded. And we expect that the PV would be financed predominantly from the so-called modernization fund, which is funded from the CO2 sales. And the exact details and the rules for how this investment support would be awarded has not been yet finalized. But as we understand, the preparation of the modernization fund, the renewables and specifically PV, is included in it with a pretty significant fund. So I guess, the COVID-19 only slowed down the discussion on the secondary legislation and decide the rules, how this would be awarded.

In terms of the distribution, yes, you're right. We expect over -- that the lowering of the WACC would be offset by higher CapEx, leading to not only stable, but in a longer run, increasing result from our distribution segment, as we included in our strategy.

Now are you talking about the outlook for this year, specifically? Or are you looking into the longer outlook in the investment presentation -- investor presentation?

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Bram Buring, Wood & Company Financial Services, a.s., Research Division - Equity Analyst [18]

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The 5-year CapEx plan that you traditionally published, which, in fact, is on Page 78 of the annual report. And I'm seeing that in '20...

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Barbara Seidlová, CEZ, a. s. - Head of IR [19]

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Yes. Yes, Bram. As you probably noticed, the CapEx outlook published in the annual report and in the presentation in March is including the CapEx and distribution in the range of CZK 15 billion to CZK 16 billion. While previously, the plans were around CZK 11 billion, CZK 12 billion, if I recall correctly. So the increased CapEx is already included in the overall new CapEx numbers.

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Operator [20]

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The last question is from Piotr Dzieciolowski of Citibank.

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Piotr Dzieciolowski, Citigroup Inc, Research Division - VP [21]

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It's Piotr Dzieciolowski from Citibank. I have 2 questions. Can you please update us on the published assets disposal? What is this process? And second, a little bit looking into the medium term, given the power price decline, will this lower power price level change your overall outlook for your investment plans, given that you will generate lower cash flow and you may have a bit higher leverage ratio?

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Martin Novák, CEZ, a. s. - CFO & Deputy CEO of Operations and Director [22]

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So Polish process, we are planning to start Polish process in the second half of this year, will definitely last until next year for disposal of our coal assets. Of course, everything depends on how quickly COVID situation will be over. And we would expect that second half will be definitely a good time to do that.

Power prices level, so far, it's actually not changing our point of view on investments. We can always adjust it because mainly, looking at our CapEx plan, it's about investing in the current portfolio and distribution, which is standard sustained business CapEx.

New actually things are future -- potentially future renewables in the Czech Republic, mainly photovoltaic and ESCO companies, both in the Czech Republic and abroad. As those are consisting of many smaller transactions, we can also easily adjust should it be necessary. But so far, we don't feel that it will be the case. It's much more comfortable situation versus if you go ahead and do one big shot, buy a big company. It's a yes or no type of situation. But when you are buying smaller businesses, it's much more comfortable from ability to being able to run how to manage the cash flow. And yes, our internal threshold that we communicate also is actually net debt-to-EBITDA of 3, so -- and that's where we are today, comfortably below, actually.

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Operator [23]

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There are no further questions, so I would like to hand back to you.

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Barbara Seidlová, CEZ, a. s. - Head of IR [24]

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Okay. So thank you, everyone, for taking part in today's call. And if you have some follow-up questions, do not hesitate to contact Investor Relations.

Thank you, and bye-bye.

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Martin Novák, CEZ, a. s. - CFO & Deputy CEO of Operations and Director [25]

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Goodbye.

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Pavel Cyrani, CEZ, a. s. - Vice Chairman and Deputy CEO of Strategy & Sales [26]

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Bye-bye.

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Operator [27]

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Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.