CEZ, a. s. (CEZ) Earnings Call Transcript & Summary

Hello, everyone, and welcome to CEZ Group Financial Results 2024 Results Conference Call. It's my pleasure to welcome Martin Novak, Chief Financial Officer; and Pavel Cyrani, Chief Sales and Strategy Officer, who will walk you through the presentation, and then we will have time for question and answers. I'm now handing over to Martin.

Thank you. Good afternoon and good morning, everybody. I will go through first 2 sections of the presentation. So when you look at Slide 3, you can see actually, our EBITDA and net income results for 2024, there compares to our guidance from November 12, we actually increased real numbers significantly. So we achieved CZK 137.5 billion EBITDA and CZK 38.1 billion (sic) [ CZK 31.8 billion ] adjusted net income. The reasons that actually led to higher EBITDA than originally expected in November are coming [indiscernible]. One is actually GENERATION segment, which is plus CZK 5 billion. The main reasons are actually listed on the slide. Reevaluation of derivatives, higher prices than originally anticipated update of provisions and lower cost. And higher operational availability of our nuclear and hydroelectric plants. In other segments, we had lower purchase cost of commodities and also higher revenues from connection of the customers in the DISTRIBUTION segment. So very simply taking our adjusted net income and applying our payout ratio of 60% to 80% of this adjusted income, you would come to a potential dividend of CZK 19 billion to CZK 25 billion or CZK 35 to CZK 47 per share. On the next slide, we have more information about our acquisition of GasNet. We acquired Czech gas distribution that covers the vast majority of the territory. You can see actually on the little map, with the exception of Southern Bohemia and capital city of Prague, we cover entire Czech Republic. And actually, the numbers are consolidated since September 1. We acquired a 55.21% stake, remaining 45% is held by two financial investors. There are main indicators, financial and also volumetric data, those that are actually worth highlighting is the size of the distribution of 59 terawatt hours are actually transported of natural gas a year, 6,000 kilometers of gas distribution network, almost 3 quarters are actually hydrogen ready. 2.2 million connection points in the country. EBITDA around CZK 11 billion annually and net income of about CZK 4 billion annually. And this asset is not only very interesting investment from a financial point of view, but also would help us to achieve our goals in converting our heat plants to CCGT, where more gas will be needed and also in the future, also power plants, having better access to infrastructure and of course, gas as a result of our trading operations. On next slide, you can see actually a few highlights of our nuclear assets. A bit more details provided. I would just maybe stress that we are increasing the generation volume in existing power plants. And our ambition is to achieve 32 terawatt hours per year. We are actually getting close. In 2025, 31.8 terawatt hours that you would like to produce, as you will see later. The details of how this should be achieved are provided in the text. We also ensured our contracted non-Russian nuclear fuel from Westinghouse, with the first deliveries to be provided this year. We selected a preferred supplier in a tender for construction of nuclear units in Dukovany. It is KHNP, Korea Hydro & Nuclear Power Company of South Korea. It was actually selected as a preferred bidder in July 2024. Negotiations on the contract actually are ongoing. And withstanding the contract should be happening sometimes during the second quarter of this year. We also became a strategic shareholder of Rolls-Royce SMR and continue to prepare SMRs in our country. South Korea, on next slide, actually, KHNP information is provided with more details. So basically, one more thing is worth mentioning also, the paperwork actually and approval of our processes are running according to schedule. So on February 27, we received the zoning permit for Dukovany side, and we also negotiate not only Dukovany II extension, but also having option on to nuclear units in Temelin. On next slide, you can see details on our partnership with Rolls-Royce. We acquired approximately 20% stake on March 4. And the logic is, as we already set out last time in November, that we would like not to be only customer of future SMR providers, but also participate through our chain of suppliers on construction of those units, not only for us, but for other customers as well, and be able to utilize actually our expertise and supply chain in those projects. Again, more detail is provided on the slide. On the next slide, you can see how we are doing in ESG. In ESG agenda, in 2021, when we started officially communicated ESG agenda, we set a goal to be among 20% best companies worldwide, measured by CSRHub. And we are actually now -- we have got actually -- gotten between -- or among 6% best companies. So we already overachieved our original target, as you can see on the chart. And on the left side, with, again, more details provided. So we are happy that we are on the right track. Financial outlook for 2025 on Slide #9. This is important slide. Actually, we are aiming at CZK 125 billion to CZK 130 billion EBITDA and CZK 25 billion to CZK 29 billion of net income. The main changes year-over-year are lower prices, power prices that are declining in the future and also lower revenues from ancillary and regulation services and lower revenues from coal sales. Positive effects might be coming from -- or will be coming from us acquiring GasNet, which should bring about CZK 7 billion into our EBITDA. And higher utilization of nuclear plants where we should increase year-on-year utilization pretty significantly. Selected assumptions of the current forecast, we aim to produce 43 to 45 terawatt hours in the Czech Republic. Average realized prices of electricity generated in the Czech Republic are EUR 120 to EUR 125 per megawatt hour, total depreciation and amortization of around CZK 50 billion, CZK 6 billion of which is attributable to GasNet and then CZK 7 billion is attributable to accelerated depreciation on coal assets. Windfall tax of CZK 26 billion to CZK 30 billion to be expected on 2025 numbers. So those are the main highlights of the year. Now I would continue with financial results and detailed discussion on EBITDA and net income. Mainly in comparison with 2023, which is on Slide #11, you can see that our operating revenue has grown slightly by 1% to almost CZK 345 billion. Our EBITDA, as already mentioned, is 10% higher year-on-year, achieving CZK 137.5 billion, operating income of CZK 93.4 billion or 11% better. Income taxes are actually a function of pretax profit, which means it's growing as well as our EBITDA is growing. So in total, almost CZK 53 billion, CZK 32 billion out of which is attributable to the windfall tax. Our net income is actually CZK 30.5 billion, which is 3% better over 2023. Adjusted net income is actually 9% lower. Adjusted net income has achieved CZK 31.8 billion, and I will cover the adjustments on the further slides. Operating cash flow is somewhat lower, mainly due to significant amounts of cash coming back from margins in 2023. And it achieved CZK 124.4 billion. CapEx, almost a quarter or 25% -- 24% higher than in 2023, achieving almost CZK 57 billion. Our net debt as of 31st of December has grown to [ CZK 102 billion ] -- or CZK 203 billion, increase of 34%, and net debt-to-EBITDA ratio is well below our target, and it is actually on 1.5. On next slide, you can see actually split of our breakdown of EBITDA. On the right side, actually on the right picture, you can see the breakdown of CZK 137.5 billion split among various segments of our business. GENERATION from nuclear is almost half of our EBITDA, CZK 65.3 billion. GENERATION from renewables, CZK 8.6 billion. Trading, CZK 5 billion; Sales segment, CZK 9 billion. DISTRIBUTION, which is the second strongest segment, CZK 27.2 billion, which also includes GasNet for the last 3 months -- last 4 months of 2024. And then we have actually fossil generation and mining, CZK 13.7 billion and CZK 8.8 billion. Those actually emission-free activities in our EBITDA are now achieving 84%, which is a significant improvement over 2023. And our emission-based EBITDA is now only 16%. So again, it's moving us closer to our targets in the future. Next slide, you can see actually a comparison or waterfall chart, getting us from 2023 EBITDA of almost CZK 125 billion to 2024 EBITDA of CZK 137.5 billion. There are a few items that move it upwards and 2 items that move it downwards. CZK 7.1 billion improvement on Generation segment, Generation facilities, out of which CZK 10 billion is actually a lack of cap on the revenues that was only in place in 2023, and it was CZK 10 billion. So this were the main variants, actually something that we did not have to pay in 2024. Trading, although it's showing negative variance, trading has achieved CZK 3.6 billion result, which is way above usual average, but it is below last few year as the volatility was significantly lower in 2024 than in 2023 and mainly 2022. So we are getting back to normal, I would say. Mining activities, minus CZK 3.4 billion, mainly due to lower prices of coal that we supply to our coal plants and lower amount of coal to be supplied to third parties due to lower demand for coal due to market conditions. On the other hand, we compensate this by lower operating cost of CZK 1.6 billion. DISTRIBUTION segment is now comprised of 2 entities. It is just distribution, which is CEZ Distribuce, which is actually power generation or power distribution, and GasNet, which is gas distribution. GasNet is a new segment which we did not have before. So for EBITDA for 4 months of 2024 is actually included, and there was nothing in 2023, so it's all actually positive impact. In our Czech Power Distribution, we had significant improvement versus 2023, but vast majority of it is actually coming from so-called correction factors. CZK 3 billion of which we will have to return actually in 2026 after it is audited in 2025. Our Sales segment, CZK 2.7 billion of better results. Retail segment, CZK 1.8 billion improvement, mainly due to declining purchase prices of commodities. And ESCO, or Energy Services, is helping us with CZK 700 million. On next slide, you can actually see the year-on-year changes in net income. So we are starting with EBITDA, that is 10% higher. Depreciation and amortization is actually CZK 6.4 billion or 18% higher mainly due to -- including actually GasNet depreciation, which was CZK 2 billion for 1/3 of 2024. We have higher depreciation on coal assets because we decided to accelerate depreciation of coal assets in October 12, 2024. So this is an effect of 1 quarter of a year. And we also have higher depreciation in other segments, mainly just DISTRIBUTION. Then asset impairments, CZK 2.3 billion. Part of it or a significant part of it is actually being reversed back into adjusted net income, as you will see later. So those impairments are mainly related to impairment on our mining assets. Other income and expenses, the largest variation is coming from interest income and expenses, which interestingly enough, was 0 in 2023, where we had a lot of cash coming from margin in actually from power exchanges being deposited at relatively high interest rates, leading to the fact that our situation that basically, our interest received and interest paid was equal. However, this is not the usual situation. So now we are, again, back to normal where our interest paid is higher than interest received by CZK 3 billion. I already commented on income taxes. So we are coming to net income of CZK 70.5 billion and adjusted net income is CZK 31.8 billion. There are 2 adjustments. One is actually CZK 1.9 billion of noncash charge into income that we actually returned back, which is actual impairment of a mining company. So we increased actually net income by CZK 1.9 billion, and we decreased it by CZK 0.6 billion, and this is actually noncontrolling interest in GasNet. So this is actually a net income that is attributable to minority shareholders that we, according to accounting rule, fully consolidate, but for purposes of adjusted income substract from the net income. So this is how we get to CZK 31.8 billion. On the next page, you can see nuclear and renewable generation. Well, we achieved CZK 29.7 billion -- 29.7 terawatt hours of power generation in nuclear plants, which is 2% lower than in 2023. Mainly, it is due to lower plant availability of Temelin. This will significantly change in 2025 when we assume a 7% increase. This is mainly due to shorter scheduled outages of Temelin and we should be getting closer to 32 terawatt hours, actually, 31.8% precisely. On renewables, we had a good year. Actually, renewables, we had better results in Czech Republic due to better hydro electric plants output in 2024. On the other hand, we don't expect it to -- 2023, I'm sorry, we don't expect it in -- or '24 -- '24, I don't expect it in '25. So again, there should be a decrease in hydro electric by 0.1 terawatt hours. And in total, we would expect to produce the same amount of power from renewables, 3.7 terawatt hours in 2025. So overall increase of nuclear and renewable generation should be 6%. On next slide, you can see our generation coming from fossil fuels. We have identical generation from Czech-based power plants, 14.1 terawatt hours in 2023, '24 and the same expectation for '25. Well, we had a decrease actually between '23 and '24 on Polish plants of about 18%. And as you know, we actually disposed Polish plants on February 6. They were actually transferred -- the ownership was transferred to the buyer. So we have only 0.2 terawatt hours produced actually in Poland, and that will be -- there will be nothing more coming from Polish plants further this year. On natural gas generation, we had practically no change between '23 and '24, and we expect actually, 29% decline in '25 due to lower -- expected lower deployment of Pocerady CCGT due to market conditions. Next slide is very important. You can actually see how much power is hedged, how much power we actually sold. This also provides information about 2024. And -- which is 100% clearly delivered. And in the orange bubbles, you can see actually average achieved prices. And in the table below, actually what portion of power it is. So for example, for 2025, we were 90% hedged on December 31, 2024. The same chart on the right side is actually showing the information for the carbon credits that we purchase as well in the moment when we sell actually, coal-based power. And on the last slide from this section, you can see selected events of Q4. We actually sold Polish assets to ResInvest Group Company. As I said, on sixth of February, a very successful transaction from our point of view, part of our decarbonization strategy. We would like to stay in Poland. We are very active in Poland in ESCO services, but we decided to leave power generation coal market. Temelin and Dukovany meet the requirements of the new -- other international standards for environmental management, we again actually received certificates proving that. And we also sold 15% stake in the company, Veolia Energie, Czech Republic. We historically had a [ 50% ] stake, which was a result of the larger transactions when we got actually a stake in heat plants in the Czech Republic. So now we decided actually to dispose after many years of holding this financial investment, basically, this stake back to Veolia Energie International. So this is all for me, and now I will hand over to Pavel Cyrani to go through customer segments and implementation of Vision 2030.

Thank you, Martin. So flipping to Page #20, just a quick overview. The customer segments contributed CZK 36.1 billion of EBITDA, with CZK 23.2 billion coming from distribution, as already mentioned. On the distribution, it's about 33% year-on-year growth. Electricity distribution now, gas distribution, obviously, is the addition of GasNet here, with only the 4 months where we actually consolidated GasNet out of about roughly CZK 11 billion, which was the full year EBITDA. The sales segments contributed roughly CZK 9 billion, and those were about 42% year-on-year growth. So overall, all of the customer segments fared nicely in 2024. And obviously, we expect the same or better even in '25. Now in terms of some of the other numbers, in terms of electricity distribution, which means basically consumption. We see a flat development year-on-year after the decreases since 2020, we basically see stabilization. And looking forward, we see the opportunity for growth. And a similar situation in gas, again, year-on-year, basically flat with a very slight growth. But again, we perceive this as being kind of the local minimum, with the outlook being of consumption growth. Now why the consumption should grow on both of these is as electricity and gas replace coal in all the aspects of coal being used either in electricity and heat that will be mostly gas or also in a household heating and an industry which will be more on the electricity side. Going forward, the demand for -- looking at the retail segment. I will start with the number of customers. We basically see a flat development, 1% decrease. Again, we see the situation stabilized. We have acquired roughly 400,000 customers since 2020, as a number of customers basically return to like a very reliable partner, which CEZ is. And there's now a slight correction with some of them going and looking for other options. At the same time, the number of customers which we started off in 2020 was 2.85 million. So we still see a very significant growth compared to the pre-crisis situation. In terms of the volume, the volume in retail might look a little bit misleading. As during the crisis, there are also some SME customers coming to CEZ Prodej, which normally is a household-only supplier. There was a window of opportunity for them to get better prices by the switch. Now there are typically 3-year contracts expired, and they are coming back to just CEZ ESCO, so a large part of this volume drop is actually a migration to CEZ ESCO. In terms of the energy services, we see the growth both in revenues as well as the actual profits to continue. We experienced 14% growth year-on-year, and we expect 7% forward-looking. What we recognize and what we see in the market is that regardless of the discussions in the public arena in terms of further development, green deal and so forth and so on in Europe, the mostly industrial customers are still looking for ways of save energy, save money and with this also, reduce emissions, and that is causing the demand for our energy services companies being just as [indiscernible] in the other parts of Europe. Now a quick overview of -- from the customer segments of selected events in Q4. You all heard that we have worked to develop our LNG business to bringing gas through LNG cargoes through Netherlands and in the future, also from Germany. Our teams also worked on developing other routes of gas, and one of them is importing gas to Europe from Algeria through under sea pipe into Italy and then from Italy further into Europe. And we have concluded the first contract starting in October last year with SONATRACH, which is the national Algerian company, gas company. The other piece of information is a long-term cooperation agreement with the city of Usti nad Labem, one of the regional capitals where we agreed to supply them with heat in the long term that would be from the Trmice site, where we intend to build a combination of gas-fired and biomass-fired heating and CHP stations. This follows the same development for [indiscernible] coming from other [indiscernible] site as well as Northern Moravia coming from the Detmarovice site. And last but not least, just to highlight, we have achieved 100 high-performance public charging stations number, with 55 being built in 2024. I think the density of the charging network is quite high in Czech and especially the share of the high-performance charging stations is way above European average. And the good news is, again, that we see also growth in the usage. So also the volumes of electricity charge through our charging networks are going up by tens of percent year-on-year. Now a quick recap of how this all fits into our VISION 2030, Clean Energy of Tomorrow. Just a reminder, we are working on our strategic initiatives under 2 pillars. One is transforming our generation portfolio. The second is providing the energy solutions to also -- to our customers so they can also transform their energy usage. Now we get asked to what degree this is or this is not -- and will be or will not be impacted by the public discussion on the Green Deal goals targets, developments. And we are sure. We are confident that it will not impact our strategy significantly. Our strategy has always been aimed at achieving all 3 goals of the energy trilemma and that is energy security, energy competitiveness and energy sustainability. Now sustainability is the part that is being kind of discussed now, obviously, in terms of security and competitiveness. These are goals that nobody questions and all our activities that we are doing are targeting all 3 of these. So we definitely aim to continue in delivering our strategy. Now Pages 26 and 27 highlight some of the achievements. Many have been already mentioned by Martin, in the era of nuclear. Let me mention just a couple more. The construction of the second LNG terminal we have contracted starting 2027 in Stade has started, has been launched. And then I already mentioned, we are working on achieving our targets to convert our heating station portfolio to gas and biomass by 2030. So there's construction going in a number of sites. And last but not least, we are also working on expanding our renewables portfolio. We have added roughly 40 megawatts of new renewables just last year, being supported from the modernization fund. And we have just a little less than 160 megawatts of solar power plants under construction and more in the pipeline. In terms of the customer activities, again, a number of things already mentioned, I just put some highlights. I think our colleagues in CEZ Distribution, the electrical grid have been successful in answering the demand from our customers to connect new solar photovoltaic balance, typical rooftop. By now, we have connected almost 30,000 of those with a record investment of CZK 20 billion last year. We're also working on digitalization, both in distribution and supply. So I think overall, we are meeting all of the targets we have set forth within our vision, and we also see demand for these services still continuing from our customers. In terms of the priorities for '25, again, basically along the 2 main pillars, sustainability or ESG, we will work on operating our nuclear power plants at maximum capacity. We expect the generation to grow quite a lot. Obviously, a number of milestones are ahead of us on both the large and the small modular reactor programs. We'll continue, again, in our program for renewables buildup and heating station transformation. Now last but not least, the law, which for the Czech speakers, [Foreign Language], which is now in the final stages of approval, contains a paragraph which allows the Ministry of Industry to introduce a capacity market. So that would be the last piece in the generation portfolio puzzle for the Czech Republic. And we hope that once the law is passed, the Ministry of Industry will start working on introducing capacity market or also like [ plain vanilla ] gas-fired backup power. In terms of the Energy Solutions and our end customers, customer segments, again, basically alongside digitalization investment into new connections. And 2025 will be the year when we will see a much more flexibility-based products being available for our customers. There is a rollout of smart electricity meters, starting this year. And with this, our supply companies will offer more products for customers to participate also in the spot market and be able to get involved in demand side management and so forth and so on. And obviously, in the sustainability, I think we have done -- and as already mentioned, a lot of work in improving our ESG score, and this is something we want to maintain and work on further. I think -- and with this, I'd like to conclude and hand over to Barbara.

Yes. Thank you. We are now open to questions. I can see that Arthur Sitbon from Morgan Stanley raised his hand. Arthur, you can unmute yourself and ask your question.

Can you hear me?

Yes.

Great. The first one is on the evolution of the dividend because the '25 net income guidance is lower than your '24 profits. I was wondering how do you think about dividend evolution in that context? Will you try to smooth the dividend decline by maybe paying a lower payout this year and increase it next year or maybe paying above the guidance range on payout next year? Or is the dividend volatility not really a key issue, a key concern for you? And you won't necessarily change your payout ratio for that? So that's the first question. The second one on electricity, on networks, actually, electricity and gas, I think, if I'm not mistaken, that the regulator has confirmed the initial proposal of [indiscernible] at 6.9% a few days ago. First, is that correct? And should we have in mind any important change in the final document compared to the initial proposal. And if it's correct, is that a good enough return for you to invest further in electricity networks? And maybe one last question on the windfall tax, if there's been any update on discussions whether or not it will indeed end at the end of 2025?

I'll answer first and third question, dividend. What we proposed is actually in line with our dividend payout ratio that was adopted, I guess, 2 years ago, if I am not mistaken. And that's what it is. So technically speaking, if the profits are lower, the mathematically calculated ratio will also be, in nominal terms, lower. I think it's too -- little really discussed dividend of 2025 and 2026, way too early. And we will be announcing our proposal as a management of further dividend for 2024 in the spring of this year. And also that's probably as much as we can say. Windfall tax, according to rule, [indiscernible] valid till the end of 2025. So we don't hear really about abolishing it for 2025. There is no initiative on canceling the tax for 2025, but there is also no initiative of prolonging it. This was reinstate for 3 years by rule. So there is an end to it. And we would assume that this is what it will be. And now maybe Pavel, on the distribution?

On the distribution, you are correct that the base WACC for both electricity and gas distribution is 6.9%, pretax. However, there is a bonus WACC of up to 1.5%. So combined, we are looking at 8.4% pretax. And the KPIs to achieve this bonus is mostly driven by investing in excess of the depreciation. It differs for gas and electricity. For electricity, it's 1.6x CapEx over depreciation to achieve the maximum bonus. And there's a number of other KPIs, but there's quite a lot of details that we can share offline. And just concluding, looking at the KPIs, looking at the cost of capital and looking at our plans, we believe that we should achieve the full bonus. So we are looking at 8.4% pretax WACC.

Okay. The next question comes from Piotr Dzieciolowski from Citi.

I have 3 questions, please. So the first one on the nuclear production, you are guiding to almost 32 terawatt hours. Is this the number we should assume going forward? So you will have around 32. Because I remember historically, you had the target to achieve higher production and it never materialized. And so, how should we think about this number in the future? So that's the question number one. Second, can you please provide an update on this, whatever you can say on the negotiations regarding this construction of the 2 reactors? It was meant to be closed, the financing for it, and potentially disposal of your SPV at the end of first quarter. Now we're talking about the first half, and you have an election coming up later this year. So is there any risk that it slips post election and how advanced you are? So any update would be helpful. And then on -- finally, on the realized prices. To -- can you maybe break down the realized price for the nuclear versus lignite, like how that's compared? Because you still combine the 2 assets together, but they seem to have a very different production profiles, one working base load, the other more like seasonally in winter. So if you can say anything, how much of a premium lignite gets?

So. I will answer the first and third question, 2 terawatt hours is something that is a result of basically our ability to exchange fuel in the units once in 18 months. So not necessarily every year. And that was one of the reasons why the power generation was relatively low in 2024 compared to 2025, where we will be getting close to 32 terawatt hours. So I would not necessarily say that in 2026 actually will be again on the same number. It might be again lower actually than 2025 because we will be replacing fuel in those units, where we will not be replacing fuel actually this year. And also, 2030 goal is to achieve 32 terawatt hours. But it's not that it will be automatically from now on, every year like that. So that's the first question. The second question, realized prices. What we do, we actually sell our power output both for nuclear and lignite plants in a straight line method 3 years ahead. And in terms of selling base load, there is no difference between nuclear plants and lignite plants. However, we keep about 10% position open, as you could see actually on our numbers on the chart where it shows how much power was sold and which years ahead. So I think we have like 10% open position at the beginning of January for 2025, which takes into consideration various peaks and opportunities in the market, which clearly are not coming from nuclear because nuclear is running in a steady way, and this is coming more from gas, where we actually don't hedge it at all. And coal. So that's the answer, basically, coal and gas are used to cover the peaks, stable nuclear output isn't. But when we actually do hedges that you can see actually on those slides, they are the same price for all units. So then now the KHNP or government negotiations.

Look, I think what we understand is that the commitment to finish this process is still there. It's still valid. And I think here, we are talking about a delay to -- a potential delay of a couple of weeks, which would be used to really make sure that all the contracts are negotiated to the best possible situation or the best possible form. And I think it's kind of well invested a couple of weeks if it's aimed at improving the contracts. And I don't think there should be anything beyond that, that you should kind of get from it or look into.

Next question from Bram Buring, Wood and Company.

Hello. With regards to your CapEx, you published in the report, the new update. It looks like now, you're expecting CapEx to peak in 2027 at somewhere around CZK 83 billion. And then to drop off fairly...

[indiscernible].

Hello?

Yes. We can hear you.

Yes. Okay. Cheers. Then drop off in '29-'30. My question is to do with the renewables portion of that because it's been frankly quite low. So I'm curious about what you're including for renewables in '26 -- to '25 to '27, please. And then if you are -- and then to ask about the long-term 2020 CapEx -- the long-term solar capacity in the Czech Republic, 6 gigawatts, I believe it was. Should I understand that your CapEx in '28-'30 is sufficient as it were to allow you to reach that 6 gigawatts?

Look, on the renewables, the way we decided to plan the investments is basically on the -- based on the programs that are now available, to put it. So from this perspective, obviously, the CZK 25 billion or CZK 23 billion of renewables with the peak of 27 would not be enough to build 6 gigawatts. And we are ready to expand the renewable program beyond what is now being in -- what is in the plan as soon as we see better conditions for the renewable project. We have asked for a number of projects to be supported from the modernization fund. But with the capture solar prices decreasing and also the conditions of the modernization fund being more strict, we don't see that much opportunity beyond what we've already either launched in terms of construction or what we've applied for. And we'll be kind of following closely with other programs and, let's say, markets would be created for further renewables. So obviously, the government now approved and a law which introduces the so-called Acceleration Zones in the Czech Republic. Obviously, there is still some legislation process between the government approval and the actual law. So we'll see how quickly will that be put in place. Obviously, if this starts, there could be quite a big opportunity for wind to be constructed. And that wind would come on top of it, and we would then update you on our CapEx plans as we will see that this kind of has been put in legislation and then there is this window of opportunity for wind. So this is how we eventually decided to approach renewables because the situation simply changes too quickly and the programs are changed year-on-year and it's difficult to give like a long-term plan. Obviously, we have -- our balance sheet allows for more investments into renewables than what you see right now in the plan.

Okay. So right now, the sort of, let's call it, the long run CapEx of around CZK 66 billion isn't compatible with a target of 6 giga of PV in the Czech Republic? And we have to think about a lower number. Do you have an idea of what that number? Let me ask you this. You told us what's under construction. What was operational at the end of 2024, please, for CEZ PV?

I think we are looking at roughly 160 megawatts of operational.

This year.

Just not to confuse it, these are similar numbers. There's like a little over 160, a little less than 170 operational, and at the same time, a very similar number, around 160 is under construction. Similar numbers, but different things that they described. With the money you see, we'll get more than this for the money you've seen there.

You'll get more than that for the money you see there. Okay. And then well, to help me unpick that puzzle, could you just give me an all-in number CapEx, '25 to, say, '28, all-in number for coal to gas switching?

The coal-to-gas switching is roughly -- like the numbers that we have included is roughly CZK 68 billion in the presentation that was published.

We have a follow-up question from Arthur.

Before we go in the question, like, also on this one, I would like to explain it, like we don't know how exactly the capacity markets will look like. So what is included in those CZK 68 billion is the coal-to-gas switching in combined heat and power because there, we know what's happening. We get the support from modernization fund, and we also get like a special support for combined power production. Now similar with the situation in renewables, we will present the exact plan on how much backup gas capacity we intend to build once we understand what the market looks like when it starts and all other conditions. We have a number of projects in the pipeline. So this would also come on top of this CZK 68 billion, the kind of backup -- gas backup power that we will build against the new capacity market if it's introduced.

And assuming that it's introduced, that spending on new CCGTs and similar would start roughly when? 2029? Later?

Roughly. '28, probably earliest, '29, '30, '31.

Okay. We can take the next question from Petr Bartek.

Two quick questions. First, maybe if you can share your view on the carbon prices going forward, say midterm, not only for this year, what do you see in terms of regulation, the impact from the situation in the U.S.A. and [indiscernible] whether you would expect any change in the outlook? And second, when you speak about the CHPs, gas-fired CHPs for heating. If you also -- if you are also looking at, for example, power to heat solutions. So we would use the solar production for heating?

I'll start with the second. I mean, we do pilots and testing of like a combination of solar and heat pump. But honestly, just the solar production and the heat consumption are as misaligned as it gets. So we are not getting beyond pilots. So that's on this one. And the first question -- oh, carbon price. Look, honestly, we don't know. We don't know any more than you do. We see the discussion. We see the discussion, what we understand is that there's a lot of discussion on like the combustion engines. There's a discussion on EU ETS2. I haven't heard much on ever discussing about EU ETS1. I don't know if you have heard. So this is what we are kind of seeing. This obviously predates EU ETS1 predates the so-called Green Deal. At the same time, can something very unexpected to happen these days. Yes. Anything can happen. So we are really kind of just kind of waiting to see what will -- how this discussion will develop.

And basically behave the same way as always. So whenever we sell actually coal-fired electricity, we buy carbon credits to look in the margin, and that's all we can do.

Okay. Maybe if you can share a little bit about the spot margins on the natural gas-fired power plants. I saw quite a high production in Q4, if I'm not mistaken. So whether you see any development in the market, which you could comment on?

Look, any time there is not enough sun and no wind, it's the bonanza for gas powered, right? So that was the Q4 last year.

In winter.

And then we do expect that the situation will be happening in the winter. And that's when the gas stations come in.

Okay. It seems we do not have any further questions. So thank you, everyone, for participating. If some further questions come up to your mind, just contact Investor Relations. Thank you very much, and goodbye.

Goodbye.

Goodbye.