CEZ achieves record net income of CZK80.7bn in 2022

CEZ achieves record net income of CZK80.7bn in 2022
The Czech government has said it will announce its plans for how to restructure CEZ in the middle of this year, a decision that will be crucial for by far the most important stock on the Prague Stock Exchange. / bne IntelliNews
By Robert Anderson in Prague March 22, 2023

CEZ, the dominant Czech power group, made a record net income of CZK80.7bn (€3.39bn) in 2022, boosted by soaring power prices and commodity trading profits. The group, which is 70% state-owned, said it could issue a record dividend of up to CZK117 a share.

Net income adjusted for one-offs was CZK78.4bn (CZK26.1bn in 2021) and Ebitda doubled to CZK131.6bn on revenues that rose 27% to CZK288.5bn. The company had predicted revenues of CZK115-125bn and adjusted net profits of CZK65-75bn.

CEZ maintained its outlook for this year of an Ebitda of CZK105bn-125bn and an adjusted net income of CZK30bn-40bn.

The power group said it expected to pay more than CZK100bn to the Czech state this year (up from CZK23bn on 2021), including dividends of CZK44bn, CZK26bn-30bn in income tax payments and CZK30bn-40bn in windfall taxes and levies on production sales.

Under the impact of Russia’s invasion of Ukraine, Western sanctions and Moscow’s cut-off of gas to Europe, power prices in Europe have soared. CEZ said the average price of electricity for delivery in 2023 was traded at almost €300/MWh last year, against an average realisation price of ČEZ production for delivery in 2022 of €100 per MWh.

At the end of last year, the company had sold 75% of expected production for this year in the Czech Republic at an average realised price of €117 per MWh. It forecasts that the average realised price from electricity generated in Czechia this year will be between CZK120-160 per MWh.

The high volatility of energy prices on international markets enabled CEZ’s commodity trading division to earn a record CZK18bn, which amounted to almost 1/4 of the group’s consolidated net profit for the entire year.

In his report, CEO Daniel Benes highlighted the efforts that the group had taken in 2022 to make Czechia more independent of Russian energy sources since Moscow’s invasion of Ukraine. The power group booked a total of 59bn cubic metres of capacity over five years at the Dutch LNG terminal in Eemshaven, representing one third of Czech consumption.

CEZ also signed a contract with Westinghouse and Framatome for nuclear fuel for the Temelin plant for 2024 in place of Russian supplies, and was negotiating with the same two companies for a similar contract for its other plant at Dukovany. In addition, it took over Russian-owned Czech company Skoda JS, which maintains its nuclear power plants (NPPs).

Like much of Emerging Europe, the government is planning a huge nuclear power programme to take the place of CEZ’s coal-burning power stations, prepare for higher electricity demand due to the development of e-mobility, and ensure the country remains self-sufficient in power.

The government launched a tender to build a fifth unit at Dukovany in March 2022, with Russia's Rosatom having been excluded in March 2021 because of Moscow's alleged involvement in the sabotage of the Vrbetice ammunition depot. 

Initial offers were received from Westinghouse, EDF and Korea’s Kepco in November 2022, and CEZ anticipates final offers this September, a decision by December and a contract signing by the end of 2024. The first unit is meant to enter production in 2036.

It is also considering building another unit at Temelin and two more at Dukovany, as the existing four units there are reaching the ends of their life.

Before any final go-ahead, the Czech government has indicated it will split CEZ’s nuclear generation off into a separate state-owned company. It has said it will announce its plans for how to do this in the middle of this year, a decision that will be crucial for shares in CEZ, by far the most important stock on the Prague Stock Exchange.

CEZ also plans small modular nuclear reactors (SMRs) of between 200 MW and 400 MW at Temelin and at the coal power stations reaching the end of their lives in Northern Bohemia and Northern Moravia. The first SMR at Temelin could be operational in 2032, according to CEZ, and it could operate 1,000 MW of SMRs after 2040.

Environmentalists argue CEZ should focus more on renewable energy and that the government remains too beholden to the powerful fossil fuel and nuclear energy lobbies. Under its Vision 2030 plan announced in 2021, CEZ intends to build 1.5 GW of renewable capacity by 2025 and 6 GW by 2030, and to operate 800 e-mobility stations by 2025. Some 27% of final energy consumption should be from renewable sources by 2030.

CEZ wants to reduce coal’s share of production from 39% in 2019 to 25% by 2025 and to 12.5% by 2030. The company itself wants to become carbon neutral by 2040.