CEZ Group Sees Growth in First Half of 2024, Raises Full-Year Outlook

CEZ Group’s Strong Performance in H1 2024

CEZ Group, the prominent Czech energy firm, delivered impressive results in the first half of 2024, showcasing significant growth in both EBITDA and net income. During a recent earnings call, the company announced an 11% rise in EBITDA, totaling CZK 69.2 billion, alongside a 5% increase in net income, which reached CZK 21.1 billion.

Despite facing a negative operating cash flow, CEZ Group has revised its full-year EBITDA projection, now anticipating a range of CZK 118 billion to CZK 122 billion, with net income expected to fall between CZK 25 billion and CZK 30 billion. The company highlighted its commitment to sustainability, achieving a top 10% ranking in ESG standards, and updated stakeholders on its ongoing arbitration case with Gazprom.

Key Highlights:

• EBITDA increased by CZK 6.8 billion, marking an 11% growth.
• Net income rose to CZK 21.1 billion, reflecting a 5% increase from the previous year.
• Full-year EBITDA forecast adjusted to CZK 118 billion to CZK 122 billion.
• Net income is projected between CZK 25 billion and CZK 30 billion.
• The company is in negotiations with South Korea’s KHNP to construct two new nuclear units at the Dukovany plant.
• Power generation fell by 4%, particularly due to a 31% decline in coal generation in Poland.
• The average price for power in 2024 is estimated to be between €132 and €136 per megawatt hour.
• Distribution revenue rose by 16%, with strong growth in sales segments for retail and energy services.

Company Outlook:

• The full-year EBITDA outlook has been slightly narrowed, now estimated at CZK 118 billion to CZK 122 billion.
• Projected net income stands at CZK 25 billion to CZK 30 billion.
• The nuclear energy sector remains a priority, with plans for new units and discussions about financing structures.
• The windfall tax is expected to persist into 2024 and potentially 2025, with total payments estimated between CZK 27 billion and CZK 34 billion.

Challenges Identified:

• There was a negative operating cash flow influenced by the return of margins paid in 2022.
• A 4% decline in power generation year-on-year, with specific decreases in both nuclear and coal generation.
• A slight drop in the overall customer base as some customers opt for more favorable alternatives.

Positive Developments:

• CEZ Group’s strong ESG ranking highlights its commitment to sustainable practices.
• Notable growth in the sales segment, particularly in retail and energy services, with a 20% increase in energy services revenue.

Areas of Concern:

• Electricity and gas sales volumes decreased by 15%, largely attributed to unseasonably warm winter weather.
• Declines were noted in distributions to residential customers (5%) and small businesses (3%).

Q&A Session Highlights:

• The windfall tax for 2024 is estimated to total between CZK 37 billion and CZK 34 billion, with CZK 15 billion already remitted.
• CEZ Group is exploring options for divesting its Polish units but is open to various outcomes if desired sales cannot be completed.
• New nuclear units are expected to be operational by 2036 and 2038, with any potential delays anticipated to be manageable.

In summary, CEZ Group has exhibited resilience and growth in the first half of 2024, outperforming market expectations. Its focus on nuclear energy expansion and sustainability practices positions the company as a forward-thinking entity in the energy landscape, although it must navigate challenges such as operating cash flow and tax implications in the foreseeable future.