ČEZ Group Annual Report 2003 ČEZ Group: on the Way to Becoming a Leader in Central Europe
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ČEZ Group Annual Report 2003 ČEZ Group: on the way to becoming a leader in Central Europe. Stronger by uniting The integrated ČEZ Power Group The new ČEZ Group logo is a symbol of quality, reliability, environmental stewardship, and prosperity. ČEZ Group is your strong, reliable, and stable partner who will help you to fulfill your plans and expectations in the area of energy supplies. Operating profit (CZK millions) 7,500 4.0 Return on equity, net (%) in 2003 ČEZ Group Electricity sold 68,110 (GWh) Profit after tax 5,932 (CZK millions) ČEZ Group is the largest power group in the region of Central and Eastern Europe, one of the top ten power corporations in Europe, and the strongest player in the domestic power market. In its current form, ČEZ Group was created on 1 April 2003, when ČEZ, a. s. acquired majority stakes in five electricity distribution companies (Severočeská energetika, a.s., Severomoravská energetika, a. s., Středočeská energetická a.s., Východočeská energetika, a.s., and Západočeská energetika, a.s.). In addition to the generation and distribution of electricity, significant businesses in ČEZ Group include mining of raw materials, maintenance of power plant and equipment, telecommunication services, and scientific research. The joint stock company ČEZ (“ČEZ, a. s.” or “ČEZ”) came into existence on 6 May 1992. The majority owner of ČEZ, a. s. is the National Property Fund of the Czech Republic. The core business of ČEZ, a. s. is the sale of electricity, most of which it generates in its own facilities, and the related provision of power system ancillary services. The core 2 ČEZ Group business also includes the production, distribution and sale of heat. A more detailed description of the core business is set forth in the company’s Articles of Association, Article 5. Contents Key Figures 4 Important Events of 2003 and 2004 Up to Annual Report Closing Date 6 Introduction by the Chairman of the Board of Directors 13 Interview with Selected Members of the Board of Directors and Executive Management 14 Directors and Officers 17 ČEZ Group 22 Financial Performance 25 Shareholders and Securities in Issue 34 Sales of Electricity, Heat, and Distribution Services 40 Generation and Supply of Electricity 48 Capital Investments 55 Management of Selected Processes 60 Relation to the Environment 64 Human Resources 67 Corporate Strategy 71 Power Sector Development Forecast 73 Financial Section Report of Independent Auditors 77 ČEZ Group – Consolidated Financial Statements Prepared in Accordance with International Financial Reporting Standards 78 Notes to Consolidated Financial Statements as of December 31, 2003 82 ČEZ, a. s. – Financial Statements Prepared in Accordance with Czech Accounting Standards 105 ČEZ Group Organization Chart as of 31 December 2003 110 ČEZ, a. s. Organization Chart as of 3 June 2004 112 ČEZ, a. s. Directory of Organization Units and Information Centers 114 3 Contents Glossary of Terms and Abbreviations 117 Information for Shareholders and Investors 123 Information on Persons Responsible for the Annual Report 124 Key Figures Selected Indicators Unit 1999 CZECH REPUBLIC Installed capacity as of December 31 MW 15,216 Peak load MW 9,926 Date of peak load 1. 2. Electricity generation GWh 64,368 ČEZ Group Installed capacity as of December 31 MW 10,151 Electricity generation GWh 45,722 Heat generation TJ 13,174 Number of employees as of December 31 persons 9,749 Earnings per share (face value CZK 100) CZK/share 7.3 Current ratio 1 0.92 Debt to equity ratio 1 0.46 Return on equity (net) % 3.57 Consolidated Balance Sheet Assets CZK millions 211,489 Non current assets CZK millions 199,131 of which: Net plant in service CZK millions 94,748 Construction work in progress CZK millions 91,460 Investment in associates CZK millions 5,024 Current assets CZK millions 12,358 of which: Receivables, net CZK millions 3,503 Shareholders’ equity and liabilities CZK millions 211,489 Shareholders’ equity CZK millions 122,205 Stated capital CZK millions 59,209 Retained earnings CZK millions 62,996 Minority interests CZK millions – Long-term liabilities CZK millions 69,541 of which: Long-term debt, net of current portion CZK millions 51,084 4 Key Figures Accumulated provision for nuclear decommissioning and fuel storage CZK millions 18,457 Deffered taxes liability CZK millions 6,265 Current liabilities CZK millions 13,478 of which: Trade and other payables CZK millions 4,552 Consolidated Income Statement Revenues CZK millions 53,528 Sales of electricity CZK millions 50,678 Heat sales and other revenues CZK millions 2,850 Operating expenses CZK millions 43,579 of which: Depreciation and amortization CZK millions 9,039 Income before other expenses (income) and income taxes CZK millions 9,949 Other expenses (income) CZK millions 4,740 Income before income taxes CZK millions 5,209 Income taxes CZK millions 919 Income after income taxes CZK millions 4,290 Minority interests CZK millions – Net income CZK millions 4,290 Consolidated Cash Flow Statement Net cash provided by operating activities CZK millions 20,004 Total cash used in investing activities CZK millions (22,701) Total cash provided by (used in) financing activities CZK millions 6,307 Net effect of currency translation on cash CZK millions (260) Net increase (decrease) in cash and cash equivalents CZK millions 3,350 Cash and cash equivalents at beginning of period CZK millions 1,007 Cash and cash equivalents at end of period CZK millions 4,357 *) Including effect of change in group structure. 2000 2001 2002 2003 Index 03/02 (%) 15,324 15,443 16,311 17,344 106.3 10,128 10,604 11,205 11,163 99.6 26. 1. 13. 12. 12. 12. 9. 1. x 73,466 74,647 76,348 83,227 109.0 10,146 10,146 11,146 12,297 110.3 50,842 52,162 54,118 61,399 113.5 12,868 13,978 13,064 14,575 111.6 9,278 8,011 7,677 18,100 235.8 12.2 15.4 14.3 10.0 69.9 0.74 0.64 0.97 0.47 48.5 0.43 0.36 0.28 0.26 92.9 5.75 6.86 6.01 4.04 67.3 222,260 229,027 231,465 274,143 118.4 211,773 217,511 216,204 254,443 117.7 92,953 87,638 138,983 212,739 153.1 103,591 111,929 56,513 10,204 18.1 5,225 5,518 5,880 10,999 187.1 10,487 11,516 15,261 19,700 129.1 3,952 3,827 4,040 7,063 174.8 222,260 229,027 231,465 274,143 118.4 129,442 136,726 143,675 149,687 104.2 59,209 59,050 59,041 59,152 100.2 70,233 77,676 84,634 90,535 107.0 – – – 7,893 x 70,606 64,477 59,595 59,486 99.8 49,704 43,081 35,729 30,965 86.7 20,902 21,396 23,866 28,164 118.0 5 Key Figures 8,057 9,870 12,541 14,721 117.4 14,155 17,954 15,654 42,356 270.6 5,035 8,651 8,934 20,578 230.3 52,431 56,055 55,578 84,816 152.6 49,675 53,300 52,938 79,548 150.3 2,756 2,755 2,640 5,268 199.5 39,711 41,377 44,324 77,316 174.4 9,377 9,366 11,721 17,611 150.3 12,720 14,678 11,254 7,500 66.6 2,119 1,386 (542) 841 x 10,601 13,292 11,796 6,659 56.5 3,364 4,169 3,375 208 6.2 7,237 9,123 8,421 6,451 76.6 –––519x 7,237 9,123 8,421 5,932 70.4 21,169 22,205 19,001 35,760 188.2 (21,100) (16,386) (9,935) (30,930) 311.3 (1,490) (6,372) (6,902) (5,148) 74.6 (14) (89) (219) (59) 26.9 (1,435) (642) 1,945 (377) (19.4) 4,357 2,922 2,280 4,391 *) 192.6 2,922 2,280 4,225 4,014 95.0 Important Events of 2003 and 2004 Up to Annual Report Closing Date January 2003 Second wave of the electricity market liberalization process – market is opened up to customers with annual consumption of over 9 GWh. Fourteen eligible customers acquired in conjunction with the second wave of market liberalization. February 2003 Extraordinary General Meeting of ČEZ, a. s. March 2003 Antitrust Office decides on ČEZ, a. s. appeal, setting new conditions for alliance among competitors (ČEZ, a. s. and the eight electricity distribution companies) and terminating public support proceedings. Sale of Náchod Heat Plant to Harpen ČR, s.r.o. April 2003 Settlement of transfers of shares in the electricity distribution companies and ČEPS, a.s. in accordance with the contracts entered into among ČEZ, a. s., the National Property Fund of the Czech Republic, OSINEK, a.s., the Ministry of Labor and Social Affairs of the Czech Republic, and Česká konsolidační agentura. Standard & Poor’s reaffirms BBB+ rating with change in outlook from “stable” to “positive”. 6 Important Events of 2003 and 2004 Up to Annual Report Closing Date Unit Two of Temelín Nuclear Power Station begins commercial operation. Signing of a five-year EUR 88 million guarantee for Tranche No. 1 of a loan from the European Investment Bank. Participants in the guarantee include Kreditanstalt für Wiederaufbau, ABN AMRO Bank N.V., Bank Austria Creditanstalt AG, Bayerische Landesbank, Credit Lyonnais S.A., Dresdner Bank AG, Mizino Corporate Bank Ltd., Sanpaolo IMI S.p.a., SMBC, and WestLB AG.