CEZ A.S.

Capital/Financing Update • Jul 8, 2022

State to temporarily helpCEZ to finance electricity and gas trade before winter

CEZ has signed a creditagreement with the Ministry of Finance of the Czech Republic for up toEUR 3 billion. This credit agreement allows CEZ to strengthen itsliquidity position. It is now at a record high level, however, due toextreme changes in gas and electricity prices, it is necessary toprepare for further extraordinary growth of funds to secure trades inenergy commodities in the coming months. This is another step taken bythe state and CEZ to strengthen the Czech Republic's energy security.

The Czech government, similarly to the German government, willhelp the energy company finance a possible increase in margins to coverextreme volatility on the energy commodities market, which might occur,for example, in connection with a complete halt in gas flow from Russiato Europe.

"We are witnessing a high increase in energy commodity pricesresulting from reduced supplies from Russia and in anticipation of theoperational shutdown of the Nordstream 1 pipeline. The market is alreadyexpected to become even more sensitive to cuts and closures in gassupply during the summer and autumn, when the demand to fill gas storagefacilities increases across Europe," Daniel Bene_#353;, Chairman of the Boardof Directors and CEO of CEZ, added.

Based on the new contract, CEZ expects to draw EUR 2 billion inthe coming days. CEZ will be able to draw the remaining EUR 1 billionwithin five days of requesting the funds, with a maturity of threemonths. This part of the loan can be drawn repeatedly on the principleof revolving credit.

CEZ had CZK 84.5 billion (EUR 3.4 billion) available in accountsand committed credit lines at the end of March to be able to respondflexibly to changing margin requirements for securing trades on thestock exchange. "We have been strengthening our liquidity since thebeginning of the year. Even though this amount of liquidity isrecord-high in CEZ's entire history, like other European energycompanies, hawse have to prepare for the possibility of a complete haltof gas flow from Russia to Europe. Historically, this situation hasnever yet occurred, but we assume the need for margin financing couldeven double in such a case," Martin Nov_#225;k, CFO of CEZ, explained theneed for a further increase in liquidity.

The Czech State and the CEZ Group have been working togetherintensively on measures that significantly contribute to strengtheningthe energy security of the Czech Republic. In previous weeks, CEZ haspurchased gas for the country and its state material reserves andensured capacity at the LNG gas terminal in the Netherlands. As part oflong-term solutions, contracts have been concluded with Westinghouse andFramatome to supply fuel assemblies for the Temel_#237;n Nuclear Power Plant,which until now has had a Russian supplier. CEZ will acquire control ofthe Russian-owned _#352;koda JS, a key supplier to Czech nuclear power plants.

Commodity margins: Energy producers sells generated energycommodity on the wholesale electricity market, in the case of CEZ on theenergy exchange in Leipzig. On this market, risks are hedged usingmargins, which serve as a form of advance payment, so that the seller orbuyer do not withdraw from the agreed deal when the price of energysignificantly increases or decreases. These margins are calculated asthe difference between the original transaction's selling price and thecurrent market price. Their amount is also influenced by the volatilityof the traded commodity.