CEZ Group Annual Report 2015 N V * ()Ati[]N= the Word INNOVATIONS Has Another Two Words in It —IN + OVATIONS

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CEZ Group Annual Report 2015 N V * ()Ati[]N= the Word INNOVATIONS Has Another Two Words in It —IN + OVATIONS ¡ n * CEZ Group Annual Report 2015 n v * ()ati[]n= The word INNOVATIONS has another two words in it —IN + OVATIONS. For us, being IN means going in the right direction, taking part in the long-term global trend of developing and building smart grids, smart buildings, smart technologies. The word OVATIONS (ovatio in Latin) meant honors received by victorious commanders in the Roman Republic. These honors or acknowledgements of gratitude go to all our enthusiastic and smart colleagues who come up with excellent ideas and work hard for them. It is mainly thanks to them that CEZ Group is what it is today—an energetic leader coming up with new solutions. And so… if we split INNOVATIONS into IN + OVATIONS, we get a precise mathematical formula. If we combine the state of the art in technology and a constant flow of new energy that our employees pour into their projects, we get a formula for our future. n v The future ()ati[]n= of energy * Formula for innovation formula of the future EBITDA Adjusted Net Income Return on Equity, Net (ROE) Operating Revenues CZK 65.1bn CZK 27.7bn 7.8% CZK 210bn 2 CEZ Group’s profilE CEZ Group’s Profile CEZ Group’s CEZ Group Headquartered in the Czech Republic, CEZ Group is an integrated energy conglomerate with operations in a number of Central and Southeastern European countries and Turkey. The Group’s core business is the generation, distribution, trade in and sale of electricity and heat,energetická trade in aktivanda sale of natural gas, and coal extraction. CEZ Group companies employ almost 26,000 people. The largest shareholder of the parent company, ČEZ, a. s., is the Czech Republic with a nearly 70% stake in the Company’s share capital (as at December 31, 2015). ČEZ, a. s. shares are traded on the Prague and Warsaw stock exchanges and included in the PX and WIG-CEE exchange indices. CEZ Group’s mission is to provide safe, reliable, and positive energy to its customers and society as a whole; its goal is to bring innovations for resolving energy needs and to help improve quality of life. Its strategy reflects the major transformation of Europe’s energy market. CEZ Group wants to operate its power assets as efficiently as possible and adapt to the growing share of decentralized and zero-emission generation. Another of its priorities is to offer its customers a wide range of products and services in synergy with the sale of electricity and gas. Its third priority is to invest actively in promising energy assets with a focus on the Central European region and in support for advanced technologies in an early stage of development. CEZ Group’s Presence in the Energy Sector by Territory Warsaw Prague BBratislavaratislava Budapest Bucharest Sofia Ankara Electricity Natural gas Heat Generation Sales to end Generation Distribution customers Distribution Sales to end Sales to end customers customers elektřina zemní plyn teplo výroba prodej koncovým výroba distribuce zákazníkům distribuce prodej koncovým prodej koncovým zákazníkům zákazníkům CEZ Group CEZ Group’s Profile 3 CEZ Group companies in the Czech Republic extract and sell coal, generate and distribute electricity and heat, trade in electricity and other commodities, sell electricity, heat, and natural gas to end customers, and provide other services. Their power generation portfolio consists of nuclear, coal-fired, gas, hydroelectric, photovoltaic, wind, and biogas facilities. CEZ Group’s activities abroad consist mainly of electricity distribution, generation, trading, and sale. CEZ Group is the owner or co-owner of generation and distribution assets in Poland, Romania, Bulgaria, Turkey, and Slovakia. CEZ Group’s subsidiaries in the Netherlands and Ireland are ownership intermediaries and companies providing financing. In many European countries, CEZ Group trades in electricity and other commodities on wholesale markets. Besides the Czech Republic, CEZ Group sells electricity or natural gas to end customers in Romania, Bulgaria, Turkey, Hungary, Poland, and Slovakia, in particular. At the same time, CEZ Group’s business activities are governed by strict ethical standards that include responsible behavior toward employees, society, and the environment. In its business activities, CEZ Group embraces the principles of sustainable development, supports energy efficiency, promotes new technologies, and creates an environment for employees’ professional growth. Its corporate culture emphasizes safety, continuous growth in internal efficiency, support for innovations, and improvement both in its business segments and by employees in order to increase CEZ Group’s value in a changing environment. e+ 4 Table of Contents Table of Contents Table CEZ Group 006 Statutory Declaration by Persons Responsible for the CEZ Group Annual Report 007 Information on the Independent Auditor’s Reports 008 Introduction by the Chairman of the Board of Directors and Chief Executive Officer of ČEZ, a. s. 011 Selected Indicators of CEZ Group 014 Shares 018 Selected Events 020 Developments in Relevant Energy Markets 024 Governing Bodies of ČEZ, a. s. 046 Persons With Executive Authority at ČEZ, a. s. 048 Supplementary Information on Persons With Executive Authority at ČEZ, a. s. 050 Concern Management 051 Corporate Governance Compliance 053 Approach to Risks in Relation to Financial Reporting 054 Summary Report Pursuant to Section 118(8) of the Capital Market Undertakings Act, on Certain Aspects of the Equity of ČEZ, a. s. 057 CEZ Group Strategic Objectives 060 Report on Operations 060 CEZ Group Financial Performance 076 CEZ Group Capital Expenditures 078 CEZ Group Commodities Procured and Sold 080 Financial Performance of ČEZ, a. s. 083 Risk Management at CEZ Group 088 Safety Management in CEZ Group 091 CEZ Group in the Czech Republic 110 CEZ Group in the Republic of Poland 114 CEZ Group in the Republic of Bulgaria 118 CEZ Group in Romania 122 CEZ Group in the Republic of Turkey 125 CEZ Group in Other Countries of Presence 130 Research and Development 133 CEZ Group Donorship 135 Human Resources 140 Developments in the Legislative Framework for the Energy Sector in the Czech Republic 146 Environmental Protection 151 Changes in CEZ Group Ownership Interests 153 Litigation and Other Proceedings Involving CEZ Group Companies CEZ Group Table of Contents 5 160 Basic Organization Chart of ČEZ, a. s. as at April 18, 2016 162 Directory of Fully Consolidated Companies Within CEZ Group 170 Information for Shareholders and Investors 174 Report on Relations Between the Controlling Entity and the Controlled Entity and Between the Controlled Entity and Entities Controlled by the Same Controlling Entity for the Accounting Period of 2015 202 Supplementary Information on CEZ Group Members 212 Independent Auditor’s Report 214 Consolidated Financial Statements of CEZ Group in Accordance With IFRS as of December 31, 2015 214 Consolidated Balance Sheet 215 Consolidated Statement of Income 216 Consolidated Statement of Comprehensive Income 217 Consolidated Statement of Changes in Equity 218 Consolidated Statement of Cash Flows 219 Notes to Consolidated Financial Statements 274 Independent Auditor’s Report 276 Financial Statements of ČEZ, a. s. in Accordance With IFRS as of December 31, 2015 276 Balance Sheet 277 Statement of Income 278 Statement of Comprehensive Income 278 Statement of Changes in Equity 279 Statement of Cash Flows 280 Notes to Financial Statements 324 Identification of ČEZ, a. s. The CEZ Group 2015 Annual Report contains QR codes that link to specific web pages (www), PDF documents (pdf), or e-mail addresses (e-mail) mentioned in the main text or next to the QR code. To read such a code, you need a mobile phone with a camera and “QR code reader” software installed, and to view a web page you also need an Internet connection. Aim the device at the QR code and the reader will decode it and give you access to the information it contains. 6 statutory Declaration by pErsons rEsponsiblE for thE CEZ Group annual rEport Statutory Declaration With the use of all reasonable care, to the best of our knowledge the consolidated Annual Report provides a true and fair description of the financial situation, business activities, and results of operations of the issuer and its consolidated group for the year 2015 and of the outlook for the future development of the financial situation, business activities, and results of operations of Statutory Declaration by Persons Responsible for the CEZ Group Annual Report the CEZ Group for Responsible Persons Declaration by Statutory the issuer and its consolidated group, and no facts have been omitted that could change the meaning of this report. CEZ Group Prague, April 18, 2016 Daniel Beneš Martin Novák Chairman of the Board of Directors, ČEZ, a. s. Vice-Chairman of the Board of Directors, ČEZ, a. s. CEZ Group Information on the Independent Auditor’s Reports 7 information on thE inDEpEnDEnt auDitor’s rEports In connection with the audit of the consolidated and individual financial statements of ČEZ, a. s., the independent auditor acquainted themselves with information contained in the Annual Report and reviewed its consistency with the financial statements and other facts known to them. Due to an amendment made to the Czech Auditors Act, the independent auditor’s opinion on the Annual Report is not given in a separate report, as was the case in the past years, but it is included in the independent auditor’s reports on the financial statements. The Independent Auditor’s Report on the Consolidated Financial Statements can be found on page 212 and the Independent Auditor’s Report on the individual Financial Statements can be found on page 274. CEZ Group Introduction by the Chairman of the Board of Directors and Chief Executive Officer of ČEZ, a. s. 8 CEZ Group Introduction by the Chairman of the Board of Directors and Chief Executive Officer of ČEZ, a.
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