Cez Group 2019 Annual Report Worldreginfo - 2E04da80-7A31-48A5-8F3d-1Fa2c095b18e Coal-Fired Power Plants in the European Union Are Under a Lot of Pressure
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cez group 2019 annual report WorldReginfo - 2e04da80-7a31-48a5-8f3d-1fa2c095b18e Coal-fired power plants in the European Union are under a lot of pressure. Many countries have already made a commitment to shut them down. In Czechia, they will be decommissioned around 2050 mainly because we will run out of coal. Our coal-fired power plants are linked up with mines, which gives them stability and security of supply in face of future uncertainty and makes them able to remain profitable the longest among competitors. As for power plants located outside mining regions, we will continue phasing them out according to environmental limits. We are not planning to make any considerable investments in our conventional generation portfolio. Our nuclear power plants, as zero-emission generating facilities, are certain to remain profitable in the future. Besides ensuring their long-term operation, we will focus on the preparation of a new facility, for the construction and development of which we will provide personnel, among other things. As regards renewables, Czechia currently exceeds the 13% target for using renewable energy in the electricity, heating, and transportation sectors. However, the National Energy and Climate Plan sets a new target of 21% for 2030. Naturally, we want to be a leader in this field. We know our way around renewables and we know how. We now want to transfer our experience to Czechia more intensely to allow domestic consumers take advantage of it. The new energy sector means great opportunities for our country. We will seek new opportunities in the energy services market to remain number one. This will not be possible without technological innovation, new products, and new services. WorldReginfo - 2e04da80-7a31-48a5-8f3d-1fa2c095b18e Distribution is going to undergo a big change—digitization. We will digitize many standard routine activities. This will allow us to handle more customer requests, increase the number of projects built, or install and operate new technologies and other innovations. By digitizing, we will also get data from the network faster and reduce its error rate. This change will allow us to control most network elements remotely. We are also planning big investments in the expansion of optical networks directly on power lines because the future will bring huge amounts of data. A number of small-scale producers as well as consumers connect to the network, consumers will also become producers, and all of this will have an impact on busy online communications. We will offer our new, robust optical networks to mobile phone operators planning to switch to 5G. Besides distribution, digitization will also considerably influence the sales of our products. Our ČEZ Prodej has long been more than just an electricity and gas supplier. Our customers perceive us as a fair provider of thermal comfort, electric mobility, household solutions, and other services. And we want to be even stronger in this. We will also focus on our service. Our goal is to maintain and expand a satisfied customer base. Like distribution, ČEZ Prodej is also going to undergo a huge change—the digitization of our activities. Customers want to do everything online and preferably in a single step. That is why we are now going to concentrate on making customers’ contact with us simpler and on streamlining our internal operations. Czechia, as well as Europe, is moving toward digitization, automation, Industry 4.0, and smart buildings and homes. Municipalities, businesses, and homeowners want to reduce consumption, optimize it throughout the day, take advantage of decentral generation. At the same time, the entire European Union is preparing for very strict targets for energy efficiency and savings. Therefore, businesses and municipalities will invest billions of euros in ESCO solutions. This is a huge opportunity for the whole European ESCO sector, which is forecast to be growing at double-digit rates. ČEZ has already built a strong position in Slovakia, Germany, and Poland, and we want to further reinforce this position. WorldReginfo - 2e04da80-7a31-48a5-8f3d-1fa2c095b18e cez group’S neW StrategY eFFIcIent operatIon, optIMuM generatIon portFolIo utIlIzatIon anD DeVelopMent MoDern DIStrIButIon anD care For cuStoMerS’ energY neeDS neW energY Sector DeVelopMent In czecHIa energY SerVIceS DeVelopMent In europe WorldReginfo - 2e04da80-7a31-48a5-8f3d-1fa2c095b18e Dear reaDerS: europe’S clIMate eFFortS are More anD More aMBItIouS. tHe neXt MIleStone on tHe patH to a carBon-neutral europe IS tHe Year 2030. reDucIng greenHouSe gaS eMISSIonS, IncreaSIng tHe SHare oF reneWaBle energY SourceS In total FInal conSuMptIon, or IncreaSIng energY SaVIngS—all oF tHeSe are opportunItIeS anD cHallengeS to WHIcH We are reSponDIng WItH cez group’S neW StrategY. tHIS annual report WIll SHoW You HoW We are creatIng our Future toDaY. We Hope tHat You WIll FInD It IntereStIng. WorldReginfo - 2e04da80-7a31-48a5-8f3d-1fa2c095b18e CEZ Group / CEZ Group’s Profile CEZ Group’s Profile Headquartered in Czechia, CEZ Group is an integrated energy conglomerate with operations in Western, Central, and Southeastern European countries. Its core business is the generation, distribution, trade in, and sales of electricity, heat, and natural gas and coal extraction. It also provides comprehensive energy services to its customers. CEZ Group companies employed more than 32,000 people at the end of 2019. The largest shareholder of the parent company ČEZ is the Czech Republic with a nearly 70% stake in the company’s stated capital. ČEZ 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 at large. Its long-term vision is to bring innovations for resolving energy needs and to help improve the quality of life. CEZ Group’s strategy consists of four priorities: Efficient Operation, Optimum Generation Portfolio Utilization and Development; Modern Distribution and Care for Customers’ Energy Needs; New Energy Sector Development in Czechia; Energy Services Development in Europe. CEZ Group companies in Czechia generate, distribute, and supply electricity and heat, trade in electricity, natural gas, and other commodities, provide comprehensive energy services, and one company extracts and sells coal. Their generation portfolio consists of nuclear, coal-fired, gas-fired, hydroelectric, photovoltaic, wind, biomass, and biogas facilities. CEZ Group’s ongoing business activities abroad concern energy services and electricity distribution, generation, trading, and sales, as well as natural gas trading and sales and commodity trading in wholesale markets. Foreign countries where CEZ Group is doing business include, most importantly, Germany, Poland, Romania, and Bulgaria, as well as Slovakia, Italy, France, Hungary, and Turkey. 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, and support for innovation in order to increase CEZ Group’s value. 2 WorldReginfo - 2e04da80-7a31-48a5-8f3d-1fa2c095b18e CEZ Group / CEZ Group’s Profile energetická aktiva CEZ Group’s Presence in the Energy Sector by Territory Berlin Warsaw Prague Paris Bratislava Budapest Bucharest Sofia Rome Ankara Generation Distribution and Sales Traditional electricity generation Electricity distribution Renewable electricity generation Heat distribution Heat generation Sales of electricity to end-use customers Sales of natural gas to end-use customers Sales of heat to end-use customers Sales of energy services 3 WorldReginfo - 2e04da80-7a31-48a5-8f3d-1fa2c095b18e elektřina zemní plyn teplo výroba prodej koncovým výroba distribuce zákazníkům distribuce prodej koncovým prodej koncovým zákazníkům zákazníkům CEZ Group / Table of Contents Table of Contents 5 Statutory Declaration by Persons Responsible 158 Basic Organization Chart of ČEZ, a. s., as at March 1, 2020 for the CEZ Group 2019 Annual Report 160 Information for Shareholders and Investors 9 Introduction by the Chairman of the Board of Directors 168 Methods Used to Calculate Indicators Unspecified in IFRS of ČEZ, a. s. 170 Supplementary Information on CEZ Group Members 11 Selected CEZ Group Indicators According to IFRS 12 Shares 18 Selected Events 178 Report on Relations between the Controlling Entity and 20 Developments in Relevant Energy Markets the Controlled Entity and between the Controlled Entity 22 External Conditions in the Energy Sector and Entities Controlled by the Same Controlling Entity 26 CEZ Group Strategy for the Accounting Period of January 1, 2019, 28 CEZ Group Risk Management to December 31, 2019 32 Approach to Risks in Relation to Financial Reporting 33 Summary Report pursuant to Section 118(9) 226 Consolidated Financial Statements of CEZ Group of the Capital Market Undertakings Act in Accordance with IFRS for the Year Ended 38 ČEZ, a. s., Governance Bodies December 31, 2019 57 Persons with Executive Authority 298 Independent Auditor’s Report 59 Supplementary Information on Persons with Executive Authority at ČEZ, a. s. 304 Financial Statements of ČEZ, a. s., 61 Concern Management in Accordance with IFRS for the Year