CEZ A.S.

Quarterly Report • Aug 11, 2020

CEZ GROUP

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS OF JUNE 30, 2020

CEZ GROUP CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2020

In CZK Millions

	Note	June 30, 2020	December 31, 2019
ASSETS:
Plant in service Less accumulated depreciation and impairment		871,864 (484,003)	865,106 (469,476)
Net plant in service		387,861	395,630
Nuclear fuel, at amortized cost Construction work in progress, net		13,215 23,186	14,250 18,208
Total property, plant and equipment		424,262	428,088
Investments in associates and joint-ventures Restricted financial assets, net Other non-current financial assets, net Intangible assets, net Deferred tax assets		4,228 22,034 12,470 31,221 1,346	3,283 20,732 10,923 37,429 1,481
Total other non-current assets		71,299	73,848
Total non-current assets		495,561	501,936
Cash and cash equivalents, net Trade receivables, net Income tax receivable Materials and supplies, net Fossil fuel stocks Emission rights Other current financial assets, net Other current assets, net Assets classified as held for sale	5	7,027 53,351 2,004 10,484 1,565 33,329 65,122 13,485 17,953	9,755 65,030 707 8,889 1,764 27,029 61,114 11,070 17,280
Total current assets		204,320	202,638
Total assets		699,881	704,574

CEZ GROUP CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2020

Continued

	Note	June 30, 2020	December 31, 2019
EQUITY AND LIABILITIES:
Stated capital Treasury shares Retained earnings and other reserves		53,799 (2,845) 195,641	53,799 (2,885) 199,847
Total equity attributable to equity holders of the parent		246,595	250,761
Non-controlling interests		4,995	4,603
Total equity		251,590	255,364
Long-term debt, net of current portion Provisions Other long-term financial liabilities Deferred tax liability Other long-term liabilities	7	149,710 89,795 8,366 23,204 41	142,570 89,512 9,700 20,626 31
Total non-current liabilities		271,116	262,439
Short-term loans Current portion of long-term debt Trade payables Income tax payable Provisions Other short-term financial liabilities Other short-term liabilities Liabilities associated with assets classified as held for sale	7 5	4,322 8,229 52,179 636 12,283 86,813 7,519 5,194	4,260 25,063 66,244 628 14,253 63,187 7,544 5,592
Total current liabilities		177,175	186,771
Total equity and liabilities		699,881	704,574

CEZ GROUP CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2020

In CZK Millions

	Note	1-6/2020	1-6/2019 *	4-6/2020	4-6/2019 *
Sales of electricity, heat, gas and coal Sales of services and other revenues Other operating income		69,294 34,928 2,031	64,575 33,422 2,030	31,076 17,113 1,018	29,680 17,334 1,164
Total revenues and other operating income	8	106,253	100,027	49,207	48,178
Gains and losses from commodity derivative trading Purchase of electricity, gas and other		5,964	4,919	28	1,144
energies Fuel and emission rights Services Salaries and wages Material and supplies		(28,392) (11,205) (13,241) (14,401) (4,961)	(27,811) (9,811) (13,017) (13,264) (4,423)	(14,162) (4,600) (7,078) (7,445) (2,455)	(13,402) (4,442) (6,973) (6,953) (2,407)
Capitalization of expenses to the cost of assets and change in own inventories Depreciation and amortization Impairment of property, plant and		1,696 (14,878)	1,588 (14,213)	951 (7,548)	294 (7,224)
equipment and intangible assets Impairment of trade and other receivables Other operating expenses	9	(1,901) (135) (2,839)	(826) (101) (3,227)	(2,157) (149) (1,439)	(314) (119) (1,742)
Income before other income (expenses) and income taxes		21,960	19,841	3,153	6,040
Interest on debt Interest on provisions Interest income Share of profit (loss) from associates and		(2,810) (979) 221	(2,698) (933) 210	(1,439) (491) 91	(1,334) (467) 100
joint-ventures Impairment of financial assets Other financial expenses Other financial income		(128) (34) (823) 842	(88) 31 (388) 401	20 (195) (468) 386	(25) (6) (361) 214
Total other income (expenses)		(3,711)	(3,465)	(2,096)	(1,879)
Income before income taxes		18,249	16,376	1,057	4,161
Income taxes		(3,548)	(2,935)	(518)	(645)
Net income		14,701	13,441	539	3,516
Net income attributable to:
Equity holders of the parent Non-controlling interests		14,437 264	13,353 88	632 (93)	3,529 (13)
Net income per share attributable to equity holders of the parent (CZK per share):
Basic Diluted		27.0 27.0	25.0 24.9	1.2 1.2	6.6 6.6

* The figures for comparative period 1-6/2019 and 4-6/2019 were adjusted compared to figures presented in the interim consolidated financial statements as of June 30, 2019 (Note 2.2.2).

CEZ GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2020

In CZK Millions

	Note	1-6/2020	1-6/2019 *	4-6/2020	4-6/2019 *
Net income		14,701	13,441	539	3,516
Change in fair value of cash flow hedges Cash flow hedges reclassified to		(2,799)	4,918	(4,897)	(2,065)
statement of income Change in fair value of debt instruments Disposal of debt instruments		(596) 730 -	4,265 400 1	750 797 -	2,185 367 -
Translation differences – subsidiaries Translation differences – associates and		2,041	(964)	(1,178)	(494)
joint-ventures Share on other equity movements of		211	20	(23)	(15)
associates and joint-ventures		(13)	4	(7)	8
Deferred tax related to other comprehensive income	10	508	(1,820)	637	(93)
Net other comprehensive income that may be reclassified to statement of income or to assets in subsequent periods		82	6,824	(3,921)	(107)
Re-measurement gains (losses) on defined benefit plans		-	2	-	-
Net other comprehensive income not to be reclassified from equity in subsequent periods		-	2	-	-
Total other comprehensive income, net of tax		82	6,826	(3,921)	(107)
Total comprehensive income, net of tax		14,783	20,267	(3,382)	3,409
Total comprehensive income attributable to:
Equity holders of the parent Non-controlling interests		14,322 461	20,220 47	(3,189) (193)	3,473 (64)

* The figures for comparative period 1-6/2019 and 4-6/2019 were adjusted compared to figures presented in the interim consolidated financial statements as of June 30, 2019 (Note 2.2.2).

CEZ GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2020

In CZK Millions

	Note Attributable to equity holders of the parent
		Stated capital	Treasury shares	Transla tion difference	Cash flow hedge reserve	Debt instru ments	Equity instruments and other reserves	Retained earnings	Total	Non controlling interests	Total equity
Balance as at January 1, 2019		53,799	(3,534)	(11,565)	(18,337)	388	113	213,857	234,721	4,560	239,281
Net income Other comprehensive income		- -	- -	- (903)	- 7,438	- 326	- -	13,353 6	13,353 6,867	88 (41)	13,441 6,826
Total comprehensive income		-	-	(903)	7,438	326	-	13,359	20,220	47	20,267
Dividends Sale of treasury shares Share options Exercised and forfeited share options		- - - -	- 632 - -	- - - -	- - - -	- - - -	- - 16 (15)	(12,850) (388) - 15	(12,850) 244 16 -	(21) - - -	(12,871) 244 16 -
Put options held by non controlling interests		-	-	(3)	-	-	-	109	106	(5)	101
Balance as at June 30, 2019 *		53,799	(2,902)	(12,471)	(10,899)	714	114	214,102	242,457	4,581	247,038

* The figures for comparative period 1-6/2019 were adjusted compared to figures presented in the interim consolidated financial statements as of June 30, 2019 (Note 2.2.2).

CEZ GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2020

Continued

		Attributable to equity holders of the parent
	Stated capital	Treasury shares	Transla tion difference	Cash flow hedge reserve	Debt instru ments	Equity instruments and other reserves	Retained earnings	Total	Non controlling interests	Total equity
Balance as at January 1, 2020	53,799	(2,885)	(12,837)	(2,831)	648	(160)	215,027	250,761	4,603	255,364
Net income Other comprehensive income	- -	- -	- 2,056	- (2,750)	- 592	- -	14,437 (13)	14,437 (115)	264 197	14,701 82
Total comprehensive income	-	-	2,056	(2,750)	592	-	14,424	14,322	461	14,783
Dividends 6 Sale of treasury shares Exercised and forfeited share	- -	- 40	- -	- -	- -	- -	(18,206) (25)	(18,206) 15	(17) -	(18,223) 15
options Contribution from owners of non-controlling interests	- -	- -	- -	- -	- -	(8) -	8 -	- -	- 13	- 13
Acquisition of non-controlling interests 4.3 Put options held by non controlling interests	- -	- -	- 10	- -	- -	- -	(336) 30	(336) 40	(767) 701	(1,103) 741
Balance as at June 30, 2020	53,799	(2,845)	(10,771)	(5,581)	1,240	(168)	210,922	246,596	4,994	251,590

CEZ GROUP CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2020

In CZK Millions

	Note	1-6/2020	1-6/2019 *
OPERATING ACTIVITIES:
Income before income taxes		18,249	16,376
Adjustments of income before income taxes to cash
generated from operations:
Depreciation and amortization		14,878	14,213
Amortization of nuclear fuel		1,993	2,048
(Gains) and losses on non-current asset retirements		(76)	(49)
Foreign exchange rate loss (gain)		(559)	300
Interest expense, interest income and dividend income		2,581	2,331
Change in provisions		(1,969)	(2,856)
Impairment of property, plant and equipment and
intangible assets		1,901	826
Valuation allowances and other non-cash expenses and
income		(3,036)	4,876
Share of (profit) loss from associates and joint-ventures		128	88
Changes in assets and liabilities:
Receivables and contract assets		9,114	3,509
Materials, supplies and fossil fuel stocks		(1,413)	(1,132)
Receivables and payables from derivatives		3,107	(15)
Other assets		3,509	27
Trade payables		(12,463)	(7,899)
Other liabilities		(84)	232
Cash generated from operations		35,860	32,875
Income taxes paid		(1,581)	(1,890)
Interest paid, net of capitalized interest		(3,341)	(3,257)
Interest received		206	213
Dividends received		-	2
Net cash provided by operating activities		31,144	27,943
INVESTING ACTIVITIES:
Acquisition of subsidiaries, associates and joint-ventures,
net of cash acquired	4	(1,027)	(2,494)
Disposal of subsidiaries, associates and joint-ventures,
net of cash disposed of		246	188
Additions to non-current assets, including capitalized
interest		(13,467)	(13,064)
Proceeds from sale of non-current assets		337	2,335
Loans made		(317)	(101)
Repayment of loans		21	22
Change in restricted financial assets		(564)	(1,537)
		,
Total cash used in investing activities		(14,771)	(14,651)

CEZ GROUP CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2020

Continued

	Note	1-6/2020	1-6/2019 *
FINANCING ACTIVITIES:
Proceeds from borrowings Payments of borrowings Lease payments Proceeds from other long-term liabilities Payments of other long-term liabilities Dividends paid to Company's shareholders (Dividends paid to) contributions received from non controlling interests, net Sale of treasury shares Acquisition of non-controlling interests		38,985 (56,469) (416) 168 (31) (30) 13 15 (1,133)	43,221 (54,984) (357) 33 (38) (39) (15) 244 -
Total cash used in financing activities		(18,898)	(11,935)
Net effect of currency translation and allowances in cash		605	(41)
Net increase (decrease) in cash and cash equivalents		(1,920)	1,316
Cash and cash equivalents at beginning of period **		11,906	9,245
Cash and cash equivalents at end of period **		, 9,986	, 10,561
Supplementary cash flow information:
Total cash paid for interest		3,507	3,406

* The figures for comparative period 1-6/2019 were adjusted compared to figures presented in the interim consolidated financial statements as of June 30, 2019 (Note 2.2.2).

** Presented values of cash and cash equivalents contain also cash and cash equivalents included on the balance sheet on the line Assets classified as held for sale.

CEZ GROUP NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2020

1. The Company

ČEZ, a. s. ("ČEZ" or "the Company") is a Czech joint-stock company, owned 69.8% (70.1% of voting rights) at June 30, 2020 by the Czech Republic represented by the Ministry of Finance. The remaining shares of the Company are publicly held. The address of the Company's registered office is Duhová 2/1444, Praha 4, 140 53, Czech Republic.

The Company is a parent company of the CEZ Group ("the Group"). Main business of the Group is the production, distribution, trade and sale of electricity and heat, trade and sale of natural gas, coal mining and providing energy services.

2. Summary of Significant Accounting Policies

2.1. Financial Statements

The interim consolidated financial statements for the six months ended June 30, 2020 have been prepared in accordance with IAS 34 and have not been audited by an independent auditor. The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statement as of December 31, 2019.

2.2. Changes in Accounting Policies

2.2.1. Adoption of New IFRS Standards in 2020

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statement as of December 31, 2019.

As of January 1, 2020, the Group did not adopt any new International Financial Reporting Standard that would have a significant impact on Group's interim consolidated financial statements.

2.2.2. Change of Reported Data for I. and II. Quarters 2019

After the financial results for I. and II. quarters 2019 were published, the accounting was made, which additionally brought more precise presentation of effects of hedging on individual quarters of 2019. The adjustments recorded affected financial results of the company ČEZ, a. s., and they relate to commodity derivatives, which hedge price risks of future sales of generated electricity with supply in 2019.

The Group also adjusted a final recognition of the acquisition of the Hermos Group, specifying the fair values of the identifiable assets, liabilities and costs of the acquisition as at the acquisition date of May 15, 2019.

Quantification of the above-mentioned relevant effects on reported amounts for I. quarter and II. quarter of 2019 is provided by the following tables (in CZK millions):

CONSOLIDATED STATEMENT OF	1-3/2019 adjustment	4-6/2019 adjustment	4-6/2019 adjustment of Hermos's	1-6/2019 total
INCOME:	of hedging	of hedging	acquisition	adjustment
Gains and losses from commodity derivative trading Depreciation and amortization	2,008 -	742 -	- (9)	2,750 (9)
Income before other income (expenses) and income taxes Income before income taxes Income taxes Net income	2,008 2,007 (381) 1,626	741 743 (142) 601	(10) (11) 4 (7)	2,739 2,739 (519) 2,220
Net income attributable to equity holders of the parent Net income per share attributable to equity holders of the parent (CZK per	1,626	601	(7)	2,220
share): Basic Diluted	3.1 3.1	1.1 1.1	0.0 0.0	4.1 4.1
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME:	1-3/2019 adjustment of hedging	4-6/2019 adjustment of hedging	4-6/2019 adjustment of Hermos's acquisition	1-6/2019 total adjustment
Net income	1,626	601	(7)	2,220
Change in fair value of cash flow hedges Deferred tax related to other	(2,008)	(1,382)	-	(3,390)
comprehensive income Net other comprehensive income that may be reclassified to statement of income or to assets in subsequent	382	262	-	644
periods	(1,626)	(1,120)	(1)	(2,747)
Total other comprehensive income, net of tax Total comprehensive income, net of	(1,626)	(1,120)	(1)	(2,747)
tax	-	(519)	(8)	(527)
Total comprehensive income attributable to equity holders of the parent	-	(519)	(8)	(527)

June 30, 2019 original	Adjustment of hedging	Adjustment of Hermos's acquisition	June 30, 2019 adjusted
			384,280
			10,178
32,755	-	192	32,947
			15,074
484,941	-	310	485,251
			8,310
			59,503
			13,216
			193,327
678,804	(641)	415	678,578
192,087	(519)	(8)	191,560
			242,457
			247,038
			124,733
			77,320
			21,222
			234,939
			54,462
			9,707
196,453	-	148	196,601
678,804	(641)	415	678,578
	384,081 10,264 15,060 8,266 60,144 13,167 193,863 242,984 247,565 124,668 77,304 21,150 234,786 54,355 9,682	- - - - (641) - (641) (519) (519) - - (122) (122) - -	199 (86) 14 44 - 49 105 (8) (8) 65 16 194 275 107 25

CONSOLIDATED STATEMENT OF CASH FLOWS:	1-6/2019 adjustment of hedging	1-6/2019 adjustment of Hermos's acquisition	1-6/2019 total adjustment
Income before income taxes	2,750	(11)	2,739
Depreciation and amortization Receivables and payables from	-	9	9
derivatives Acquisition of subsidiaries, associates and joint-ventures, net of cash	(2,750)	-	(2,750)
acquired	-	44	44
Total cash used in investing activities Net increase (decrease) in cash and	-	44	44
cash equivalents Cash and cash equivalents at end of	-	44	44
period	-	44	44

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY as of June 30, 2019:	Adjustment
	Cash flow hedge reserve	Retained earnings	Total equity
Net income	-	2,220	2,220
Other comprehensive income	(2,747)	-	(2,747)
Total comprehensive income	(2,747)	2,220	(527)
Balance as of June 30, 2019	(2,747)	2,220	(527)

3. Seasonality of Operations

The seasonality within the segments Generation – Traditional Energy, Generation – New Energy, Distribution and Sales usually takes effect in such a way that the revenues and operating profits of these segments for the 1st and 4th quarters of a calendar year are slightly higher than the revenues and operating profits achieved in the remaining period.

4. Changes in the Group Structure

The following table summarizes the cash flows related to acquisitions in first six months of 2020 (in CZK millions):

Cash outflow on acquisition of the subsidiaries	116
Cash outflow on investment in joint-ventures	791
Cash contributions to joint-ventures	1
Payments of payables from acquisitions of previous periods	119
Total cash outflows on acquisition	1,027

4.1. Acquisitions of Subsidiaries in the First Six Months of 2020

On April 9, 2020 the Group acquired a 100% interest in Austrian company Moser & Partner Ingenieurbüro GmbH, which focuses on building engineering services and energy saving projects.

The fair values of acquired identifiable assets and liabilities and the purchase considerations have been stated provisionally and could be adjusted in the subsequent period. The following table presents the current best estimate of fair values of acquired identifiable assets and liabilities as of the date of acquisition (in CZK millions):

	Moser
Share of the Group being acquired	100%
Property, plant and equipment, net Intangible assets, net Another non-current assets Cash and cash equivalents Trade receivables, net Contractual assets	46 57 1 - 10 12
Long-term debt, net of current portion Deferred tax liability Current portion of long-term debt Income tax payable Current provisions Another current liabilities	(37) (12) (3) (6) (8) (3)
Total net assets	57
Share of net assets acquired	57
Goodwill	97
Total purchase consideration	154
Liabilities from acquisition of the subsidiary	(38)
Cash outflow on acquisition of the subsidiary in 2020	116
Less: Cash and cash equivalents in the subsidiary acquired	-
Cash outflow in 2020, net	116

If the combinations had taken place at the beginning of the year 2020, net income for CEZ Group as of June 30, 2020 would have been CZK 14,692 million and the revenues and other operating income from continuing operations would have been CZK 106,262 million. The amount of goodwill recognized as a result of the business combination comprises the fair value of expected synergies arising from the acquisition.

From the acquisition date, the newly acquired subsidiary has contributed the following balances to the Group's statement of income (in CZK millions):

	Moser
Revenues and other operating income Income before other income (expense)	28
and income taxes Net income	10 8
Net income attributable to: Equity holders of the parent Non-controlling interests	8 -

4.2. Acquisitions of Joint-ventures in the First Six Months of 2020

On April 27, 2020, the Group acquired a 51% interest in the company GEOMET s.r.o. The intention of the joint-venture, in which the second partner is the company European Metals Holdings Limited, is to develop a project for potential lithium mining in Cínovec. Based on the analysis of the relevant agreements, competencies of the partners in the decision making processes and the relevant activities, the Group assessed the current relationship as a joint control.

The following table provides an overview of the basic financial information associated with this transaction (in CZK millions):

	GEOMET
Share acquired in 2020	51%
Total net assets	610
Share of net assets acquired	311
Goodwill	480
Total purchase consideration	791

The fair values of identifiable assets and liabilities of the joint-venture have been stated provisionally and could be adjusted in the subsequent period.

4.3. Acquisitions of Non-controlling in the First Six Months of 2020

On June 4, 2020, the Group acquired a part of the non-controlling interest representing a 26.68% interest in the company OEM Energy sp. z o.o., which increased Group's interest to 77.68%. The original owners held an option to sell the non-controlling interest to the Group. In such a case, as long as the option is in force, the non-controlling interest is derecognized at the end of the reporting period and the liability is recognized at the present value of the amount payable on exercise. This option partially expired and therefore the relevant part of the liability was derecognized and the noncontrolling interest was accounted for (recognized), however, at the same time it was immediately derecognized due to the purchase of the non-controlling interest.

On June 30, 2020, the Group acquired the remaining non-controlling 49.90% interest in ČEZ Energo, s.r.o. Also in this case there was a put option held by the original partner, which ceased to exist.

The following table provides an overview of the basic financial information associated with these transactions (in CZK millions):

	OEM Energy	ČEZ Energo	Total
Share acquired in 2020	26.68 %	49.90 %
Option liability derecognized from the balance sheet Direct impact on equity from recognition of non	20	733	753
controlling interest after the expiration of the put options	35	(21)	14
Acquired share of net assets derecognized from non-controlling interests Amount directly recognized in equity caused by	55	712	767
acquisition of non-controlling interest	48	288	336
Total purchase consideration	103	1,000	1,103

5. Assets and Associated Liabilities Classified as Held for Sale

As of June 30, 2020 the Group performed an impairment test for any potential impairment loss related to assets and associated liabilities held for sale in the Bulgarian companies CEZ Razpredelenie Bulgaria AD, CEZ ICT Bulgaria EAD, CEZ Trade Bulgaria EAD, CEZ Bulgaria EAD, CEZ Elektro Bulgaria AD, Free Energy Project Oreshets EAD and Bara Group EOOD. The result of this test, reflecting the contractual sales price of EUR 335 million, was a reversal of a part of previously recognized impairment of assets in the amount of CZK 685 million, which was presented in the statement of income on the line Impairment of property, plant and equipment and intangible assets (see Note 9).

If the intention to sell should be abandoned in the future, or the sale should no longer be highly probable in the next twelve months respectively, CEZ Group does not expect material effect on net income caused by the reclassification from assets held for sale.

The assets classified as held for sale and associated liabilities at June 30, 2020 and December 31, 2019 are as follows (in CZK millions):

	June 30, 2020	December 31, 2019
	Bulgarian companies	Bulgarian companies
Property, plant and equipment, net	10,964	10,539
Intangible assets, net	492	461
Other non-current assets	178	145
Cash and cash equivalents	2,959	2,151
Trade receivables, net	2,690	2,875
Other current assets	670	1,109
Assets classified as held for sale	17,953	17,280
Long-term debt, net of current portion	1,424	1,357
Non-current provisions	191	183
Other long-term financial liabilities	168	247
Deferred tax liability	337	247
Short-term loans	359	170
Current portion of long-term debt	136	251
Trade payables	1,820	2,498
Current provisions	448	432
Other current liabilities	311	207
Liabilities associated with assets classified as held for sale	5,194	5,592

The assets and results associated with the assets classified as held for sale are reported in the operating segments Generation – New Energy, Distribution and Sales.

6. Equity

On June 29, 2020 the Annual Shareholders Meeting of ČEZ, a. s. approved the dividends per share before tax of CZK 34.0. The total amount of dividend approved for distribution to shareholders net of treasury shares amounts to CZK 18,206 million.

7. Long-term Debt

Long-term debt at June 30, 2020 and December 31, 2019 is as follows (in CZK millions):

	June 30, 2020	December 31, 2019
3.005% Eurobonds, due 2038 (JPY 12,000 million)	2,675	2,516
2.845% Eurobonds, due 2039 (JPY 8,000 million)	1,785	1,679
5.000% Eurobonds, due 2021 (EUR 750 million)	20,739	19,228
4.875% Eurobonds, due 2025 (EUR 750 million)	20,214	19,671
4.500% Eurobonds, due 2020 (EUR 750 million)	-	19,478
2.160% Eurobonds, due in 2023 (JPY 11,500 million)	2,569	2,416
4.600% Eurobonds, due in 2023 (CZK 1,250 million)	1,258	1,287
2.150%*IR CPI Eurobonds, due 2021 (EUR 100 million) 1)	2,677	2,602
4.102% Eurobonds, due 2021 (EUR 50 million)	1,367	1,273
4.375% Eurobonds, due 2042 (EUR 50 million)	1,368	1,271
4.500% Eurobonds, due 2047 (EUR 50 million)	1,366	1,269
4.383% Eurobonds, due 2047 (EUR 80 million)	2,216	2,062
3.000% Eurobonds, due 2028 (EUR 725 million)	19,817	19,133
0.875% Eurobonds, due 2022 (EUR 500 million)	13,404	12,675
0.875% Eurobonds, due 2026 (EUR 750 million)	19,937	18,847
4.250% U.S. bonds, due 2022 (USD 289 million)	6,948	6,578
5.625% U.S. bonds, due 2042 (USD 300 million)	7,198	6,817
4.500% Registered bonds, due 2030 (EUR 40 million)	1,083	1,006
4.750% Registered bonds, due 2023 (EUR 40 million)	1,087	1,056
4.700% Registered bonds, due 2032 (EUR 40 million)	1,078	1,048
4.270% Registered bonds, due 2047 (EUR 61 million)	1,647	1,531
3.550% Registered bonds, due 2038 (EUR 30 million)	807	780
Total bonds and debentures	131,240	144,223
Less: Current portion	(4,345)	(21,163)
Bonds and debentures, net of current portion	126,895	123,060
Long-term bank loans and lease liabilities:	26,699	23,410
Less: Current portion	(3,884)	(3,900)
Long-term bank loans and lease payables, net of current portion	22,815	19,510
Total long-term debt	157,939	167,633
Less: Current portion	(8,229)	(25,063)
Total long-term debt, net of current portion	149,710	142,570

1) The interest rate is based on inflation realized in Eurozone Countries (Harmonized Index of Consumer Prices – HICP) and is fixed through the closed swap to the rate 4.553% p. a.

8. Revenues and Other Operating Income

The composition of revenues and other operating income for the first six months ended June 30, 2020 and 2019 is as follows (in CZK millions):

	1-6/2020	1-6/2019
Sales of electricity:
Sales of electricity to end customers Sales of electricity through energy exchange Sales of electricity to traders Sales to distribution and transmission companies Other sales of electricity Effect of hedging – presales of electricity Effect of hedging – currency risk hedging	25,652 1,084 19,482 341 12,620 (741) 445	24,036 600 19,713 179 13,392 (5,248) 1,028
Total sales of electricity	58,883	53,700
Sales of gas, coal and heat:
Sales of gas Sales of coal Sales of heat	3,955 1,865 4,591	4,375 2,090 4,410
Total sales of gas, coal and heat	10,411	10,875
Total sales of electricity, heat, gas and coal	69,294	64,575
Sales of services and other revenues:
Distribution services Other services Rental income Revenues from goods sold Other revenues	22,228 11,824 102 431 343	22,247 9,993 99 578 505
Total sales of services and other revenues	34,928	33,422
Other operating income:
Granted green and similar certificates Contractual fines and interest fees for delays Gain on sale of property, plant and equipment Gain on sale of material Other	703 172 49 68 1,039	612 289 41 61 1,027
Total other operating income	2,031	2,030
Total revenues and other operating income	106,253	100,027

Revenues from contracts with customers for the years ended June 30, 2020 and 2019 were CZK 104,416 million and CZK 102,118 million, respectively, and can be linked to the above figures as follows:

	1-6/2020	1-6/2019
Sales of electricity, heat, gas and coal Sales of services and other revenues	69,294 34,928	64,575 33,422
Total revenues	104,222	97,997
Adjustments: Effect of hedging – presales of electricity Effect of hedging – currency risk hedging Rental income	741 (445) (102)	5,248 (1,028) (99)
Revenues from contracts with customers	104,416	102,118

9. Impairment of Property, Plant and Equipment and Intangible assets

At each reporting date, the Group assesses whether there is any indication that an asset may be impaired or that previously recognized impairment loss, excluding goodwill, is no longer justified or should be reduced. The result of the analysis updated as at June 30, 2020 was the conclusion that selected assets of the Group could be impaired. In such a case, the Group reviews that the recoverable amount of these property, plant and equipment and intangible assets is not lower than their carrying amounts, and if so, the Group recognizes an impairment loss in profit or loss on the line Impairment of property, plant and equipment and intangible assets including goodwill.

Based on an updated estimate of recoverable amounts, the Group recognized a total impairment loss of CZK 1,901 million for the period 1-6/2020.

The decrease in the carrying amount of assets in the amount of CZK 798 million relates to the property, plant and equipment of the cash-generating unit of the Romanian wind farms. The decrease in value occurred mainly due to the expected decrease in electricity prices on the market in future compared to the previous long-term assumptions following the decrease in electricity prices in II. quarter. The decrease in the carrying amount of assets of CZK 685 million relates to the assets of the cash-generating unit Bulgarian distribution, whose assets are classified as held for sale (see Note 5). The impairment of assets of CZK 433 million relates to the goodwill of the cash-generating unit CEZ Chorzów S.A. The decrease in value occurred mainly due to a decrease in the expected gross margin from electricity and heat production due to the change in expected market prices of emission rights and electricity.

Although the ongoing COVID-19 pandemic was the indicator of a possible impairment of the Group's assets, according to updated analyses, this was not a crucial factor causing the impairment loss, as evidenced by the above descriptions of reasons that primarily led to the impairment loss. Further information on the effects of the COVID-19 pandemic on the Group's financial performance is provided in Note 12.

The segment information is provided in Note 11.

10. Income Taxes

Tax effects relating to each component of other comprehensive income are the following (in CZK millions):

		1-6/2020			1-6/2019
	Before tax amount	Tax effect	Net of tax amount	Before tax amount	Tax effect	Net of tax amount
Change in fair value of cash flow hedges Cash flow hedges reclassified to	(2,799)	532	(2,267)	4,918	(935)	3,983
statement of income Change in fair value of debt	(596)	113	(483)	4,265	(810)	3,455
instruments	730	(137)	593	400	(75)	325
Disposal of debt instruments Translation differences –	-	-	-	1	-	1
subsidiaries	2,041	-	2,041	(964)	-	(964)
Translation differences – associates and joint-ventures Share on other equity	211	-	211	20	-	20
movements of associates and joint-ventures Re-measurement gains (losses)	(13)	-	(13)	4	-	4
on defined benefit plans	-	-	-	2	-	2
Total	(426)	508	82	8,646	(1,820)	6,826

11. Segment Information

The Group reports its result using six reportable operating segments:

• Generation Traditional Energy
• Generation New Energy
• Distribution
• Sales
• Mining
• Support Services

The segments are defined across the countries that CEZ Group operates. Segment is a functionally autonomous part of CEZ Group that serves a single part of the value chain in the energy sector and is within the purview of individual members of the ČEZ, a. s. Board of Directors.

The Group accounts for intersegment revenues and transfers as if the revenues or transfers were to third parties, that is, at current market prices or where the regulation applies at regulated prices.

In segment reporting, IFRS 16 is applied to external leases from the Group's perspective, but it is not applied to leases between individual operating segments, although in some cases the asset is leased to another segment internally.

The Group evaluates the performance of its segments based on earnings before interest, taxes, depreciation and amortization (EBITDA). The reconciliation of EBITDA to income before other income (expenses) and income taxes summarizes the following table (in CZK millions):

	1-6/2020	1-6/2019 *
Income before other income (expenses) and income
taxes (EBIT)	21,960	19,841
Depreciation and amortization	14,878	14,213
Impairment of property, plant and equipment and
intangible assets	1,901	826
Gains and losses on sale of property, plant and equipment, net **	(48)	(38)
EBITDA	38,691	34,842

* The figures for comparative period 1-6/2019 were adjusted compared to figures presented in the interim consolidated financial statements as of June 30, 2019 (Note 2.2.2).

** Gains on sale of property, plant and equipment are presented in the statement of income as part of the line item Other operating income. Losses on sale of property, plant and equipment are presented in the statement of income as part of the line item Other operating expenses.

The following tables summarize segment information by operating segments for the six months ended June 30, 2020 and 2019 and at December 31, 2019 (in CZK millions):

June 30, 2020:	Gene ration – Traditional Energy	Gene ration – New Energy	Distribu tion	Sales	Mining	Support Services	Combined	Elimination	Consoli dated
Revenues and other operating income – other than intersegment Revenues and other operating	32,523	3,197	21,990	46,008	2,003	532	106,253	-	106,253
income – intersegment	18,184	680	268	3,567	2,388	2,044	27,131	(27,131)	-
Total revenues and other operating income	50,707	3,877	22,258	49,575	4,391	2,576	133,384	(27,131)	106,253
EBITDA	19,739	2,718	10,901	2,862	1,750	719	38,689	2	38,691
Depreciation and amortization Impairment of property, plant and	(7,678)	(1,015)	(3,511)	(709)	(1,361)	(604)	(14,878)	-	(14,878)
equipment and intangible assets	(433)	(803)	(690)	-	12	13	(1,901)	-	(1,901)
EBIT	11,640	901	6,711	2,159	407	140	21,958	2	21,960
Interest on debt and provisions	(3,502)	(115)	(387)	(176)	(104)	(49)	(4,333)	544	(3,789)
Interest income	463	88	46	58	39	71	765	(544)	221
Share of profit (loss) from associates
and joint-ventures	(9)	-	(175)	59	(3)	-	-128	-	-128
Income taxes	(1,841)	(101)	(1,166)	(360)	(82)	2	(3,548)	-	(3,548)
Net income	16,142	862	5,106	1,696	319	486	24,611	(9,910)	14,701
Identifiable assets Investment in associates and joint	244,256	26,753	118,860	6,734	22,196	5,463	424,262	-	424,262
ventures Unallocated assets	2,715	249	-	301	963	-	4,228	-	4,228 271,391
Total assets									699,881
Capital expenditure	4,122	248	6,239	431	928	272	12,240	(75)	12,165

June 30, 2019:	Gene ration – Traditional Energy	Gene ration – New Energy	Distribu tion	Sales	Mining	Support Services	Combined	Elimination	Consoli dated
Revenues and other operating income – other than intersegment Revenues and other operating	29,997	3,397	21,320	42,925	2,239	149	100,027	-	100,027
income – intersegment	19,188	185	313	3,808	3,052	2,109	28,655	(28,655)	-
Total revenues and other operating income	49,185	3,582	21,633	46,733	5,291	2,258	128,682	(28,655)	100,027
EBITDA Depreciation and amortization Impairment of property, plant and	16,856 (7,593)	2,322 (908)	10,398 (3,258)	1,884 (459)	2,525 (1,393)	854 (602)	34,839 (14,213)	3 -	34,842 (14,213)
equipment and intangible assets EBIT Interest on debt and provisions Interest income Share of profit (loss) from associates	(15) 9,260 (3,350) 390	(12) 1,402 (117) 85	(810) 6,339 (387) 85	- 1,428 (152) 81	11 1,148 (108) 55	- 261 (72) 69	(826) 19,838 (4,186) 765	- 3 555 (555)	(826) 19,841 (3,631) 210
and joint-ventures Income taxes Net income	(16) (1,194) 16,397	(1) 13 1,475	(130) (1,199) 4,717	51 (292) 1,095	8 (223) 942	- (40) 759	(88) (2,935) 25,385	- - (11,944)	(88) (2,935) 13,441
Capital expenditure	3,763	486	5,651	622	770	370	11,662	(54)	11,608
December 31, 2019:	Gene ration – Traditional Energy	Gene ration – New Energy	Distribu tion	Sales	Mining	Support Services	Combined	Elimination	Consoli dated
Identifiable assets	249,324	27,712	116,132	6,616	22,612	5,692	428,088	-	428,088
Investment in associates and joint ventures Unallocated assets	2,589	235	-	280	179	-	3,283	-	3,283 273,203
Total assets									704,574

* The figures for comparative period 1-6/2019 were adjusted compared to figures presented in the interim consolidated financial statements as of June 30, 2019 (Note 2.2.2).

12. COVID-19 Pandemic

According to the current evaluation of the impacts of the COVID-19 pandemic on the Group, the existence of no Group company is endangered and, in general, the pandemic has a relatively limited and temporary impact on the Group. However, the reliability of the estimate of the long-term effects of the COVID-19 pandemic on the Group is considerably limited due to the uncertainty of the extent of the effects of the pandemic on the economies of individual countries in Europe and the measures of countries on the economic growth of relevant countries.

The negative impact on the Group's operations is expected mainly for the year 2020 and to a relatively limited extent in the order of percentage units. The Group expects the greatest negative impact of the pandemic on the Sales segment, where we expect a reduction in the margin on the sale of services, a reduction in the margin on the sale of commodities to corporate customers and a potential deterioration in customers' solvency. In the Distribution segment, we expect the overall impact of the pandemic with regard to regulation to a relatively limited extent, however, in 2020 we expect a decrease in the volume of electricity distributed, and thus in the overall profit of distribution companies. The pandemics have a negative effect on the Generation – Traditional Energy and Mining segments, especially as a factor causing a decline in consumption, and thus in market electricity prices. On the other hand, there was a significant increase in market prices of emission rights, which in turn led to an increase in market prices of electricity. Therefore, the pandemic has a negative effect on the lower use of coal-based generation sources, and thus on the decline in demand for coal and on the margin of mining companies. From the point of view of the mediumterm economic outlook of the Generation – Traditional Energy segment, the negative impact of the pandemic is limited due to the high level of cash flow hedging. For 2020, almost all expected production has already been contracted, for 2021 approximately 71% of expected production revenues have been contracted and for 2022 approximately 42% has been contracted.

The COVID-19 pandemic is considered an indicator of a possible impairment of the Group's assets, and therefore recoverable value tests have been updated using the best estimates available. The results of the analyzes do not show that the pandemic caused a decrease in the value of the Group's assets. Primary reasons that led to a decrease in the value of selected assets in II. quarter were different (see Note 9). In the second half of 2020, all relevant assets will be tested based on updated business plans of individual segments. The impact of the pandemic in the coming years will depend mainly on the overall development of the economy in Europe.

The Group has taken adequate measures to eliminate the risks and impacts of the COVID-19 pandemic on key operations and employee health.