CEZ company updated dividend policy

Board of Directors of ČEZ, a.s. decided today on an update of dividend policy. The change lies in the increase of payout ratio to 80 - 100% from consolidated net income adjusted for extraordinary effects. The main reason for the change is an update of CEZ Group strategy, which does not assume significant acquisitions and investments in renewables abroad.

DIVIDEND POLICY OF CEZ GROUP HAS BEEN MODIFIED FOLLOWING SPECIFICATION OF NEW STRATEGY

Previous dividend policy since 2017

Broadened payout ratio of 60 – 100 % of consolidated net income adjusted for extraordinary effects that are generally unrelated to ordinary financial performance in a given year
Published in March 2017 as temporary widening for 2 years until specification of development strategy
Updated dividend policy of CEZ from May 27, 2019
- Pay out ratio of 80 – 100 % of consolidated net income adjusted for extraordinary effects that are generally unrelated to ordinary financial performance in a given year

Justification of change of payout ratio to 80 – 100 % (from previous 60 – 100 %):

Higher share of generated operating cash flow to net income
Specification of new strategy of CEZ Group and submission of proposal for updated business policy to general meeting, which will take place on June 26, 2019
Updated strategy does not assume significant acquisitions and investments in renewables abroad

SUMMARY OF MAIN PARAMETERS OF PREVIOUS AND UPDATED STRATEGY OF CEZ GROUP

Geographic focus

Developed segments

Realized acquisitions

Previous strategy (2012-2018)

Focus on the Czech Republic and markets in Central and Western Europe near the Czech Republic with stable regulatory environment, primarily Germany, France and Poland
New (decentralized) energy, i.e. energy services and renewables (ESCO, RES) in the Czech Republic and abroad
Energy services (ESCO) in Germany, Poland and Romania
Renewables (RES) in Germany and France

Updated strategy (2019 +)

Stronger focus on domestic market
Regional offer in energy services segment (ESCO) (mainly Germany)
Exit from segments and markets with unattractive prospects
Electricity, gas and services with value added in domestic market
Renewables and traditional energy in domestic market
Decentralized energy in the whole region
Planned further acquisition in ESCO segment both in the Czech Republic and abroad

UPDATED STRATEGY OF CEZ GROUP REACTS TO THE DEVELOPMENT OF BUSINESS ENVIRONMENT

Areas of main opportunities for CEZ Group

Strategic priorities of CEZ Group

Strengthening of energy security of the Czech Republic

Efficient operation, optimal utilization and development of generation portfolio

Modernization of Czech energy sector

Modern distribution and a care for customers' energy needs

Fulfilling climate and energy plan of the Czech Republic

Development of new energy in the Czech Republic

Close links of the Czech industry with neighboring countries

Development of energy services in Europe

STRATEGIC PRIORITIES OF THE UPDATED CEZ GROUP STRATEGY