CEZ GROUP

CONSOLIDATED FINANCIAL STATEMENTS

PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS OF DECEMBER 31, 2015

PRELIMINARY UNAUDITED ACCOUNTS Prepared as of March 14, 2016

CEZ GROUP CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2015

in CZK Millions

	Note	2015	2014 *	Jan 1, 2014 *
Assets
Property, plant and equipment:
Plant in service Less accumulated depreciation and impairment		719,633 (399,608)	701,316 (371,515)	665,354 (340,888)
Net plant in service	3	320,025	329,801	324,466
Nuclear fuel, at amortized cost Construction work in progress, net	2.10 3	12,997 88,342	10,953 85,788	10,688 90,508
Total property, plant and equipment		421,364	426,542	425,662
Other non-current assets:
Investment in joint-ventures Restricted financial assets Investments and other financial assets, net Intangible assets, net Deferred tax assets	9 4 5 6 31	9,239 18,059 22,598 20,164 1,631	12,277 17,471 18,877 20,611 1,738	12,999 15,498 10,248 20,701 824
Total other non-current assets		71,691	70,974	60,270
Total non-current assets		493,055	497,516	485,932
Current assets:
Cash and cash equivalents Receivables, net Income tax receivable Materials and supplies, net Fossil fuel stocks Emission rights Other financial assets, net Other current assets Total current assets	10 11 12 13 14	13,482 46,003 436 8,577 1,554 3,456 32,728 3,395 109,631	20,095 50,864 1,618 8,462 1,481 5,097 39,438 3,299 130,354	25,003 67,485 1,065 8,054 2,552 8,505 38,400 3,398 154,462
Total assets		602,686	627,870	640,394

* The way of presentation was changed in 2015 (see Note 2.3.c). The prior year figures were changed accordingly to provide comparative information on the same basis and they do not fully correspond to the consolidated financial statements as of December 31, 2014.

CEZ GROUP CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2015

continued

	Note	2015	2014 *	Jan 1, 2014 *
Equity and liabilities
Equity:
Equity attributable to equity holders of the parent:
Stated capital Treasury shares Retained earnings and other reserves		53,799 (4,246) 218,340	53,799 (4,382) 211,891	53,799 (4,382) 208,659
Total equity attributable to equity holders of the parent	15	267,893	261,308	258,076
Non-controlling interests	9	4,262	4,543	4,690
Total equity		272,155	265,851	262,766
Non-current liabilities:
Long-term debt, net of current portion Provisions Deferred tax liability Other long-term liabilities	16 19 31 20	145,575 60,525 22,053 8,679	160,852 57,303 20,609 13,425	168,196 53,347 19,201 14,889
Total non-current liabilities		236,832	252,189	255,633
Current liabilities:
Short-term loans Current portion of long-term debt Trade and other payables Income tax payable Provisions Accrued liabilities	21 16 22 19 23	223 11,696 58,010 1,606 8,219 13,945	7,608 15,674 60,126 830 9,758 15,834	2,716 28,104 63,025 1,719 8,647 17,784
Total current liabilities		93,699	109,830	121,995
Total equity and liabilities		602,686	627,870	640,394

CEZ GROUP CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2015

in CZK Millions

	Note	2015	2014 *
Sales of electricity and related services Sales of gas, coal, heat and other revenues Other operating income		182,105 24,569 3,493	173,819 21,626 6,306
Total revenues and other operating income	24	210,167	201,751
Gains and losses from commodity derivative trading, net Fuel Purchased power and related services Repairs and maintenance	25	(540) (13,053) (90,905) (4,619)	2,861 (12,686) (75,777) (4,991)
Depreciation and amortization Impairment of property, plant and equipment and intangible assets including goodwill Salaries and wages Materials and supplies Emission rights, net Other operating expenses	3, 6 7 26 12 27	(28,619) (7,685) (17,758) (4,062) (1,711) (12,254)	(27,705) (8,025) (18,852) (4,334) (1,959) (13,337)
Income before other income (expenses) and income taxes		28,961	36,946
Interest on debt, net of capitalized interest Interest on provisions Interest income Foreign exchange rate gains (losses), net Gain on sale of subsidiaries and joint-ventures Other financial expenses Other financial income Share of profit (loss) from joint-ventures	2.8 19 28 29 30 2.2, 9	(2,853) (1,681) 388 (811) - (1,110) 5,656 (1,655)	(3,650) (1,834) 608 (297) 73 (3,157) 1,190 (1,223)
Total other income (expenses)		(2,066)	(8,290)
Income before income taxes		26,895	28,656
Income taxes	31	(6,348)	(6,224)
Net income		20,547	22,432
Net income attributable to:
Equity holders of the parent Non-controlling interests		20,739 (192)	22,403 29
Net income per share attributable to equity holders of the parent (CZK per share)	34
Basic Diluted		38.8 38.8	41.9 41.9

The accompanying notes are an integral part of these consolidated financial statements.

CEZ GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2015

in CZK Millions

	Note	2015	2014 *
Net income		20,547	22,432
Other comprehensive income - items that may be reclassified subsequently to statement of income or to assets:
Change in fair value of cash flow hedges recognized in equity Cash flow hedges reclassified to statement of income Cash flow hedges reclassified to assets Change in fair value of available-for-sale financial assets recognized in equity Available-for-sale financial assets reclassified from equity Translation differences - subsidiaries Translation differences - joint-ventures Translation differences reclassified from equity Share on other equity movements of joint-ventures Deferred tax related to other comprehensive income	31	11,919 (1,954) (230) 1,440 (103) (1,046) (1,218) 1 (38) (1,761)	4,891 (3,933) (95) (865) 1,783 265 610 14 (121) (389)
Net other comprehensive income that may be reclassified to statement of income or to assets in subsequent periods		7,010	2,160
Other comprehensive income - items not to be reclassified subsequently from equity:
Re-measurement losses on defined benefit plans Deferred tax related to other comprehensive income	31	(28) (3)	(26) 3
Net other comprehensive income not to be reclassified from equity in subsequent periods		(31)	(23)
Other comprehensive income, net of tax		6,979	2,137
Total comprehensive income, net of tax		27,526	24,569
Total comprehensive income attributable to:
Equity holders of the parent Non-controlling interests		27,811 (285)	24,498 71

CEZ GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2015

in CZK Millions

	Note					Attributable to equity holders of the parent
		Stated capital	Treasury shares	Transla tion difference	Cash flow hedge reserve	Available for-sale and other reserves	Retained earnings	Total	Non controlling interests	Total equity
December 31, 2013		53,799	(4,382)	(8,198)	(8,671)	1,201	224,327	258,076	4,690	262,766
Net income Other comprehensive income		- -	- -	- 848	- 699	- 692	22,403 (144)	22,403 2,095	29 42	22,432 2,137
Total comprehensive income		-	-	848	699	692	22,259	24,498	71	24,569
Dividends Share options Transfer of forfeited share options	26	- -	- -	- -	- -	- 26	(21,301) -	(21,301) 26	(228) -	(21,529) 26
within equity Acquisition of subsidiaries	8	- -	- -	- -	- -	(70) -	70 -	- -	- 15	- 15
Acquisition of non-controlling interests Sale of subsidiaries Put options held by non-controlling	8	- -	- -	- -	- -	- -	(2) -	(2) -	(31) (7)	(33) (7)
interest		-	-	-	-	-	11	11	33	44
December 31, 2014		53,799	(4,382)	(7,350)	(7,972)	1,849	225,364	261,308	4,543	265,851

CEZ GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2015

continued

	Note	Attributable to equity holders of the parent
		Stated capital	Treasury shares	Transla tion difference	Cash flow hedge reserve	Available for-sale and other reserves	Retained earnings	Total	Non controlling Total interests equity
December 31, 2014		53,799	(4,382)	(7,350)	(7,972)	1,849	225,364	261,308	4,543	265,851
Net income Other comprehensive income		- -	- -	- (2,169)	- 7,886	- 1,425	20,739 (70)	20,739 7,072	(192) (93)	20,547 6,979
Total comprehensive income		-	-	(2,169)	7,886	1,425	20,669	27,811	(285)	27,526
Dividends Sale of treasury shares Share options Transfer of exercised and forfeited	26	- - -	- 136 -	- - -	- - -	- - 31	(21,317) (68) -	(21,317) 68 31	(4) - -	(21,321) 68 31
share options within equity Acquisition of non-controlling interests Put options held by non-controlling interest	8	- - -	- - -	- 19 -	- - -	(63) - -	63 (166) 139	- (147) 139	- (145) 153	- (292) 292
December 31, 2015		53,799	(4,246)	(9,500)	(86)	3,242	224,684	267,893	4,262	272,155

CEZ GROUP CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2015

in CZK Millions

	Note	2015	2014 *
Operating activities:
Income before income taxes		26,895	28,656
Adjustments to reconcile income before income taxes to net cash provided by operating activities:
Depreciation and amortization		28,619	27,705
Amortization of nuclear fuel		3,416	3,356
Gain on non-current asset retirements, net		(562)	(326)
Foreign exchange rate losses (gains), net		811	297
Interest expense, interest income and dividend income, net		1,780	2,240
Provisions Impairment of property, plant and equipment and intangible		(2,374)	694
assets including goodwill	7	7,685	8,025
Valuation allowances and other adjustments		(1)	(1,882)
Share of (profit) loss from joint-ventures	9	1,655	1,223
Changes in assets and liabilities:
Receivables		3,614	2,348
Materials, supplies and fossil fuel stocks		(169)	581
Receivables and payables from derivatives		5,833	4,973
Other current assets		5,469	2,581
Trade and other payables		(2,574)	1,292
Accrued liabilities		(1,450)	(1,195)
Cash generated from operations		78,647	80,568
Income taxes paid		(4,569)	(7,538)
Interest paid, net of capitalized interest		(2,728)	(3,677)
Interest received		416	516
Dividends received		813	806
Net cash provided by operating activities		72,579	70,675
Investing activities:
Acquisition of subsidiaries and joint-ventures, net of cash
acquired Disposal of subsidiaries and joint-ventures,	8	-	(35)
net of cash disposed of		310	101
Additions to non-current assets, including capitalized interest		(31,909)	(35,798)
Proceeds from sale of non-current assets		435	1,381
Loans made		(29)	(33)
Repayment of loans		123	362
Change in restricted financial assets		(500)	(625)
Total cash used in investing activities		(31,570)	(34,647)

CEZ GROUP CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2015

continued

	2015	2014 *
Financing activities:
Proceeds from borrowings Payments of borrowings Proceeds from other long-term liabilities Payments of other long-term liabilities Dividends paid to Company's shareholders Dividends paid to non-controlling interests Sale of treasury shares Acquisition of non-controlling interests	88,301 (114,363) 63 (130) (21,309) (4) 68 -	80,769 (100,076) 129 (133) (21,320) (229) - (33)
Total cash used in financing activities	(47,374)	(40,893)
Net effect of currency translation in cash	(248)	(43)
Net decrease in cash and cash equivalents	(6,613)	(4,908)
Cash and cash equivalents at beginning of period	20,095	25,003
Cash and cash equivalents at end of period	, 13,482	20,095

Supplementary cash flow information

Total cash paid for interest	6,680	8,165

1.	The Company 2
2.	Summary of Significant Accounting Policies 2
3.	Property, Plant and Equipment 22
4.	Restricted Financial Assets 23
5.	Investments and Other Financial Assets, Net 23
6.	Intangible Assets, Net 25
7.	Impairment of Property, Plant and Equipment and Intangible Assets including Goodwill 26
8.	Changes in the Group Structure 31
9.	Investments in Subsidiaries and Joint-ventures 33
10.	Cash and Cash Equivalents 44
11.	Receivables, Net 44
12.	Emission Rights 45
13.	Other Financial Assets, Net 46
14.	Other Current Assets 47
15.	Equity 47
16.	Long-term Debt 49
17.	Fair Value of Financial Instruments 51
18.	Financial Risk Management 56
19.	Provisions 61
20.	Other Long-term Liabilities 63
21.	Short-term Loans 64
22.	Trade and Other Payables 64
23.	Accrued Liabilities 64
24.	Revenues and Other Operating Income 65
25.	Gains and Losses from Commodity Derivative Trading, Net 66
26.	Salaries and Wages 66
27.	Other Operating Expenses 68
28.	Interest Income 68
29.	Other Financial Expenses 69
30.	Other Financial Income 69
31.	Income Taxes 69
32.	Related Parties 73
33.	Segment Information 74
34.	Net Income per Share 77
35.	Commitment and Contingencies 78
36.	Events after the Balance Sheet Date 78

CEZ GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2015

1. The Company

ČEZ, a. s. ("ČEZ" or "the Company") is a Czech Republic joint-stock company, owned 69.8% (70.3% of voting rights) at December 31, 2015 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 and coal mining (see Note 9). ČEZ is an electricity generation company, which in 2015 produced approximately 56% of the electricity and a portion of the district heating in the Czech Republic. In the Czech Republic the Company operates twelve fossil fuel plants, sixteen hydroelectric plants, one solar plant, one combined cycle gas turbine plant and two nuclear plants. The Company also operates through its subsidiaries several power plants (fossil fuel, hydro, wind, solar, biogas ,biomass) in the Czech Republic, two fossil fuel plants and two hydroelectric plants in Poland, one solar plant and one biomass plant in Bulgaria and a wind farm and a complex of hydroelectric plants in Romania. Further the Group also controls certain electricity distribution companies in the Czech Republic, Bulgaria and Romania. The average number of employees of the Company and its consolidated subsidiaries was 25,826 and 26,248 in 2015 and 2014, respectively.

Responsibility for public administration in the energy sector is exercised by the Ministry of Industry and Trade (the "Ministry"), the Energy Regulatory Office and the State Energy Inspection Board.

The Ministry, as the central public administration body for the energy sector, issues state approval to construct new energy facilities in accordance with specified conditions, develops the energy policy of the state and ensures fulfillment of obligations resulting from international treaties binding on the Czech Republic or obligations resulting from membership in international organizations.

The Energy Regulatory Office was established as the administrative office to exercise regulation in the energy sector of the Czech Republic, to support economic competition and to protect consumers' interests in sectors where competition is not possible. The Energy Regulatory Office decides on the granting of a license, imposition of the supply obligation beyond the scope of the license, imposition of the obligation to let another license holder use energy facilities in cases of emergency, to exercise the supply obligation beyond the scope of the license and price regulation based on special legal regulations. The State Energy Inspection Board is the inspection body supervising the activities in the energy sector. All customers can select their suppliers of electricity.

2. Summary of Significant Accounting Policies

2.1. Financial Statements

These consolidated financial statements of the Group were prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU. These consolidated financial statements are preliminary and have not been audited.

The financial statements are prepared under the historical cost convention, except when IFRS require other measurement basis as disclosed in the accounting policies below.

2.2. Group Accounting

a. Group Structure

The financial statements of CEZ Group include the accounts of ČEZ, a. s., its subsidiaries and jointventures, which are shown in the Note 9.

b. Subsidiaries

Subsidiaries are those entities which the Group controls. Specifically, the Group controls an investee if, and only if, the Group has:

Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)
Exposure, or rights, to variable returns from its involvement with the investee
The ability to use its power over the investee to affect its returns

Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

The contractual arrangement with the other vote holders of the investee

Rights arising from other contractual arrangements
The Group's voting rights and potential voting rights

Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases.

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are recognized in profit or loss as incurred.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability are recognized in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Changes in the fair value of contingent consideration classified as equity are not recognized.

Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired ("negative goodwill"), then the Group first reassesses the identification and measurement of the acquiree's identifiable assets, liabilities and contingent liabilities and the measurement of the cost of the combination. Any excess remaining after the reassessment is recognized immediately in profit or loss.

A change in the ownership interest of a subsidiary, without loss of control, is accounted as an equity transaction.

Losses within a subsidiary incurred are attributed to the non-controlling interest even if that results in a deficit balance.

Put options held by non-controlling interests are recorded as a derecognition of non-controlling interest and recognition of a liability at the end of the reporting period. The liability is recognized at the present value of the amount payable on exercise, and any difference between the amount of non-controlling interest derecognized and this liability is accounted for within equity. Subsequent changes to the present value of the amount payable on exercise are recorded directly in equity.

Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated; unrealized losses are also eliminated unless cost cannot be recovered. Accounting policies of subsidiaries have been changed, where necessary, to ensure consistency with the policies adopted by the Group.

c. Associates

Associates are entities over which the Group generally has between 20% and 50% of the voting rights, or over which the Group has significant influence, but which it does not control. Investments in associates are accounted for by the equity method of accounting. Under this method the Group's share of the postacquisition profits or losses of associates is recognized in the income statement and its share of other postacquisition movements in equity of associates is recognized in other comprehensive income. The cumulative post-acquisition movements are adjusted against the cost of the investment. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group's investment in associates includes goodwill (net of accumulated impairment losses) on acquisition. When the Group's share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognize further losses, unless the Group has incurred obligations or made payments on behalf of the associates.

d. Joint-ventures

A joint-venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint-venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary considerations to determine control over subsidiaries. The Group recognizes its interest in the joint-venture using the equity method of accounting (see Note 2.2.c).

The financial statements of the joint-venture are prepared for the same reporting period as the parent company. Adjustments are made where necessary to bring the accounting policies into line with those of the Group. Adjustments are made in the Group's financial statements to eliminate the Group's share of unrealized gains and losses on transactions between the Group and its jointly controlled entity. Losses on transactions are recognized immediately if the loss provides evidence of a reduction in the net realizable value of current assets or an impairment loss.

e. Transactions Involving Entities under Common Control

Acquisitions of subsidiaries from entities under common control are recorded using a method similar to pooling of interests.

The assets and liabilities of the acquired subsidiaries are included in the consolidated financial statements at their book values. The difference between the cost of acquisition of subsidiaries from entities under common control and the share of net assets acquired in book values is recorded directly in equity.

2.3. Changes in Accounting Policies

a. Adoption of New IFRS Standards in 2015

The accounting policies adopted are consistent with those of the previous financial year, except for as follows. The Group has adopted the following new or amended and endorsed by EU IFRS and IFRIC interpretations as of January 1, 2015:

Annual Improvements to IFRSs 2011 - 2013

In December 2013 the IASB issued a collection of amendments to IAS and IFRS in which they focused on areas of inconsistency in IFRSs and IASs or where the clarification of wording was required. The following standards were amended:

IFRS 1 First-time Adoption of International Financial Reporting Standards
IFRS 3 Business Combinations
IFRS 13 Fair Value Measurement
IAS 40 Investment Property

These changes did not have significant impact on the Group's financial statements.

b. New IFRS Standards and IFRIC Interpretations either not yet Effective or not yet Adopted by the EU

The Group is currently assessing the potential impacts of the new and revised standards and interpretations that will be effective or adopted by the EU from January 1, 2016 or later. Standards and interpretations most relevant to the Group's activities are detailed below:

IFRS 9 Financial Instruments – Classification and measurement. The IFRS 9 was originally issued in November 2009 and is intended to replace IAS 39 Financial Instruments: Recognition and measurement. The standard introduces new requirements for classifying and measuring financial assets and liabilities. In October 2010 the IASB added to IFRS 9 the requirements for classification and measurement of financial liabilities and derecognition of financial assets and liabilities. Most of the requirements in IAS 39 for classification and measurement of financial liabilities and derecognition of financial assets and liabilities were carried forward unchanged to IFRS 9. The standard eliminates categories of financial instruments currently existing in IAS 39: available-for-sale and held-to-maturity. According to IFRS 9 all financial assets and liabilities are initially recognized at fair value plus transaction costs.

Financial assets

Debt instruments may, if the fair value option (FVO) is not applied, be subsequently measured at amortized cost if the following both conditions are met:

the asset is held within a business model that has the objective to hold the assets to collect the contractual cash flows;
the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal outstanding.

All other debt instruments, where the above mentioned conditions are not met, are subsequently measured at fair value.

All equity investment financial assets are measured at fair value either through other comprehensive income (OCI) or profit or loss. Equity instruments held for trading must be measured at fair value through profit or loss. Entities have an irrevocable choice of recognizing changes in fair value either in OCI or profit or loss by instrument for all other equity investment financial assets.

Financial liabilities

For FVO liabilities, the amount of change in the fair value of a liability that is attributable to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless presentation of the fair value change in respect of the liability's credit risk in OCI would create or enlarge an accounting mismatch in profit or loss.

Impairment

The impairment requirements are based on an expected credit loss (ECL) model that replaces the IAS 39 incurred loss model. The ECL model applies to: debt instruments accounted for at amortized cost or at FVOCI; most loan commitments; financial guarantee contracts; contract assets under IFRS 15; and lease receivables under IAS 17 Leases.

Entities are generally required to recognize either 12-months or lifetime ECL, depending on whether there has been a significant increase in credit risk since initial recognition (or when the commitment or guarantee was entered into). For some trade receivables, the simplified approach may be applied whereby the lifetime expected credit losses are always recognized.

Hedge accounting

New chapter on hedge accounting has been added to IFRS 9. This represents a major overhaul of hedge accounting and puts in place a new model that introduces significant improvements principally by aligning the accounting more closely with risk management. There are also improvements to the disclosures about hedge accounting and risk management.

IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. The standard has not yet been endorsed by EU. Retrospective application is required, but comparative information is not compulsory. The adoption of IFRS 9 will have an effect on the classification and measurement of the Group's financial assets and liabilities.

IFRS 14 Regulatory Deferral Accounts

IFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first-time adoption of IFRS. Entities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the balance sheet and present movements in these account balances as separate line items in the statement of profit or loss and other comprehensive income. The standard requires disclosures on the nature of, and risks associated with, the entity's rate-regulation and the effects of that rate-regulation on its financial statements. IFRS 14 is effective for annual periods beginning on or after January 1, 2016 but was not endorsed by EU yet. This new standard will have no impact on the Group's financial statements.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 was issued in May 2014. The standard outlines the principles an entity must apply to measure and recognize revenue. The core principle is that an entity will recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer.

The principles in IFRS 15 will be applied using a five-step model:

1. Identify the contract(s) with a customer
1. Identify the performance obligations in the contract
1. Determine the transaction price
1. Allocate the transaction price to the performance obligations in the contract
1. Recognize revenue when (or as) the entity satisfies a performance obligation

The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after January 1, 2018 with early adoption permitted. The standard has not yet been endorsed by EU. The Group is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date.

IFRS 16 Leases

The IASB issued in January 2016 new standard, IFRS 16 Leases, which replaces existing IFRS leases requirements and requires lessees to recognize most leases on their balance sheets while lessor accounting is substantially unchanged. Group is currently assessing the impact of this new standard on its financial statements.

The new standard will be effective for annual periods beginning on or after 1 January 2019. Early application is permitted, provided the new revenue standard, IFRS 15 Revenue from Contracts with Customers, has been applied or is applied at the same date as IFRS 16. The standard has not yet been endorsed by EU. The Group is currently assessing the impact of IFRS 16 and plans to adopt the new standard on the required effective date.

Amendments to IAS 1 Disclosure Initiative

The amendments to IAS 1 Presentation of Financial Statements clarify, rather than significantly change, existing IAS 1 requirements.

The amendments clarify:

the materiality requirements in IAS 1;
that specific line items in the statement(s) of profit or loss and OCI and the balance sheet may be disaggregated;
that entities have flexibility as to the order in which they present the notes to financial statements;
that the share of OCI of associates and joint-ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss.

The amendments are effective for annual periods beginning on or after January 1, 2016, with early adoption permitted. The standard has not yet been endorsed by EU. These amendments are not expected to have a significant impact to the Group, but will assist in applying judgment when meeting the presentation and disclosure requirements.

Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortization The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortize intangible assets. The amendments are effective prospectively for annual periods beginning on or after January 1, 2016, with early adoption permitted. These amendments are not expected to have any impact to the Group given that the Group has not used a revenue-based method to depreciate its noncurrent assets.

Amendments to IAS 16 and IAS 41: Bearer Plants

The amendments change the accounting requirements for biological assets that meet the definition of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants will no longer be within the scope of IAS 41. Instead, IAS 16 will apply. After initial recognition, bearer plants will be measured under IAS 16 at accumulated cost (before maturity) and using either the cost model or revaluation model (after maturity). The amendments also require that produce that grows on bearer plants will remain in the scope of IAS 41 measured at fair value less costs to sell. For government grants related to bearer plants, IAS 20 Accounting for Government Grants and Disclosure of Government Assistance will apply. The amendments are retrospectively effective for annual periods beginning on or after January 1, 2016, with early adoption permitted. These amendments are not expected to have any impact to the Group as the Group does not have any bearer plants.

Amendments to IAS 19 Defined Benefit Plans: Employee Contributions

The amendments to IAS 19 are intended to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. The amendment is effective prospectively for annual periods beginning on or after February 1, 2015 and the Group does not expect the amendment will have a significant impact on its financial statements.

Amendments to IAS 27: Equity Method in Separate Financial Statements

The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint-ventures and associates in their separate financial statements. Entities already applying IFRS and electing to change to the equity method in its separate financial statements will have to apply that change retrospectively. For first-time adopters of IFRS electing to use the equity method in its separate financial statements, they will be required to apply this method from the date of transition to IFRS. The amendments are effective for annual periods beginning on or after January 1, 2016, with early adoption permitted. These amendments will not have any impact on the Group's financial statements.

Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests in joint operation The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the activity of the joint operation constitutes a business must apply the relevant IFRS 3 principles for business combinations accounting. The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, a scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation and are prospectively effective for annual periods beginning on or after January 1, 2016, with early adoption permitted. These amendments are not expected to have any impact to the Group.

Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception The amendments to IFRS 10 clarify that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value. Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment

entity are measured at fair value. The amendments to IAS 28 allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint-venture to its interests in subsidiaries. The amendments are effective for annual periods beginning on or after January 1, 2016. These amendments were not endorsed by EU yet and are not expected to have significant impact to the Group.

Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint-Venture

The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint-venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3 Business Combinations, between an investor and its associate or joint-venture, is recognized in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognized only to the extent of unrelated investors' interests in the associate or joint-venture. The amendments are effective for annual periods beginning on or after January 1, 2016. These amendments were not endorsed by EU yet and are not expected to have significant impact to the Group.

Annual Improvements to IFRSs 2010 - 2012

IFRS 2 Share-based Payment
IFRS 3 Business Combinations
IFRS 8 Operating Segments
IFRS 13 Fair Value Measurement
IAS 16 Property, Plant and Equipment
IAS 24 Related Party Disclosures
IAS 38 Intangible Assets

The Group will apply these improvements from January 1, 2016.

Annual Improvements to IFRSs 2012 - 2014

In September 2014 the IASB issued a collection of amendments to IAS and IFRS in which they focused on areas of inconsistency in IFRSs and IASs or where the clarification of wording was required. The following standards were amended:

IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations
IFRS 7 Financial Instruments: Disclosures
IAS 19 Employee Benefits
IAS 34 Interim Financial Reporting

The Group will apply these improvements from January 1, 2016.

These changes will have no significant impact on the Group's financial statements.

The Group does not expect early adoption of any of the above mentioned standards, improvements or amendments.

c. Changes in the Presentation of the Financial Statements

The way of presentation of the financial statements was changed in 2015. The main goal of the changes was to enhance relevancy of information contained on the face of the financial statements and reflect the developments in the best practice of financial reporting in the industry with regard to all IFRS requirements. The changes have been made to the balance sheet, statement of income, statement of comprehensive income and the statement of cash flows. As a result, reclassifications for the prior period have been made to provide fully comparative information on the same basis. The reclassifications have also been made to the balance sheet at the beginning of the earliest comparative period, i.e. at January 1, 2014.

The following tables summarize the effect of reclassifications on prior period presented (in CZK millions):

	Reclassifications 2014	Reclassifications Jan 1, 2014
Consolidated balance sheet:
Restricted financial assets Investments and other financial assets, net	17,741 (17,741)	15,498 (15,498)
Total other non-current assets	-	-
Provisions 1) Deferred tax liability 2) Other long-term liabilities	10,001 20,609 (12,492)	9,520 19,201 (11,951)
Total non-current liabilities 2)	18,118	16,770
Deferred tax liability 2)	(20,609)	(19,201)
Trade and other payables Provisions Accrued liabilities	(205) 9,758 (7,062)	(272) 8,647 (5,944)
Total current liabilities	2,491	2,431
Total equity and liabilities	-	-

1) This line with the former headline Accumulated provision for nuclear decommissioning and fuel storage contained only nuclear provisions in the consolidated financial statements as of December 31, 2014. Now this line contains all non-current provisions.

2) The line Deferred tax liability was not presented within non-current liabilities in the consolidated financial statements as of December 31, 2014. Now it is part of non-current liabilities.

	Reclassifications 2014
Consolidated statement of income:
Gains and losses from electricity, coal and gas derivative trading, net 3) Sales of gas, coal, heat and other revenues Other operating income	(2,861) (2,351) 6,306
Total revenues and other operating income	1,094
Gains and losses from commodity derivative trading, net 3) Purchased power and related services Other operating expenses	2,861 228 (4,183)
Income before other income (expenses) and income taxes	-
Other income (expenses), net Other financial expenses Other financial income	1,967 (3,157) 1,190
Total other income (expenses)	-
Net income	-
EBITDA	-
Consolidated statement of comprehensive income:
Cash flow hedges reclassified from equity Cash flow hedges reclassified to statement of income Cash flow hedges reclassified to assets Translation differences Translation differences - subsidiaries Translation differences - joint-ventures	4,028 (3,933) (95) (875) 265 610
Other comprehensive income, net of tax	-
Total comprehensive income, net of tax	-
Consolidated statement of cash flows:
Net cash provided by operating activities	(245)
Total cash used in investing activities	33
Total cash used in financing activities	212
Net decrease in cash and cash equivalents	-

3) The headline of the line Gains and losses from commodity derivative trading, net was changed in 2015 (formerly Gains and losses from electricity, coal and gas derivative trading, net). This line is not presented as part of Total revenues and other operating income in 2015.

2.4. Estimates

The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates. Explanation of key assumptions is included in relevant sections of notes where significant estimates are being described. Significant estimates are made by the Group while determining recoverable amounts for property, plant and equipment and intangible assets (see Note 7), accounting for the nuclear provisions (see Note 19.1), provisions for reclamation of mines, mining damages and waste storage reclamation (see Note 19.2), unbilled electricity (see Note 2.6), fair value of commodity contracts (see Notes 2.21 and 17) and financial derivatives (see Notes 2.20 and 17).

2.5. Revenues

The Group recognizes revenue from supplies of electricity and related services based on contract terms. Differences between contracted amounts and actual supplies are settled through the market operator.

Revenues are recognized, when it is probable that the economic benefits associated with the transaction will flow to the entity and the revenue can be reliably measured. Sales are recognized net of value added tax and discounts, if any.

Revenue from sale of goods is recognized when the goods are delivered and significant risks and rewards of ownership of the goods have passed to the buyer.

Revenue from services provided to third parties is recognized when the services are rendered.

Connection fees received from customers are recognized in income in the period when the fees are received. Connection fees received from customers prior 2009 are presented as deferred revenues in the line Other long-term liabilities.

2.6. Unbilled Electricity

Electricity supplied to customers, which is not yet billed, is recognized in revenues at estimated amounts. The estimate of monthly change in unbilled electricity is derived from the measured delivery of electricity after deduction of invoiced consumption and estimated grid losses. The estimate of total unbilled electricity balance is also supported by extrapolation of consumption in the last measured period for individual locations. The ending balance of unbilled electricity is disclosed net in the balance sheet after deduction of advances received from customers and is included in the line item of Receivables, net or Trade and other payables.

2.7. Fuel Costs

Fuel costs are expensed as fuel is consumed. Fuel expense includes the amortization of the cost of nuclear fuel (see Note 2.10).

2.8. Interest

The Group capitalizes all interest incurred in connection with its construction program that theoretically could have been avoided if expenditures for the qualifying assets had not been made. The qualifying assets include assets, for which the construction represents a substantial period of time. Capitalized interest costs amounted to CZK 3,623 million and CZK 4,056 million and the interest capitalization rate was 4.3% and 4.5% in 2015 and 2014, respectively.

2.9. Property, Plant and Equipment

Property, plant and equipment are recorded at cost, net of accumulated depreciation and impairment in value. Cost of plant in service includes materials, labor, payroll-related costs and the cost of debt financing used during construction. The cost also includes the estimated cost of dismantling and removing the asset and restoring the site, to the extent that is recognized as a provision under IAS 37, Provisions, Contingent Liabilities and Contingent Assets. Government grants received for construction of certain items of property, plant and equipment decrease the acquisition cost of the respective items.

Internally developed property, plant and equipment are recorded at their accumulated cost. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense

when incurred. Renewals and improvements are capitalized. Upon sale, retirement or replacement of part of an item of property, plant and equipment, the cost and related accumulated depreciation of the disposed item or its replaced part are derecognized from the balance sheet. Any resulting gains or losses are included in profit or loss.

At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group reviews the recoverable amounts of its property, plant and equipment to determine whether such amounts continue to exceed the assets' carrying values. The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use. Identified impairment of property, plant and equipment is recognized directly in profit or loss in the line item Impairment of property, plant and equipment and intangible assets including goodwill.

At each reporting date, an assessment is made whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss in the line item Impairment of property, plant and equipment and intangible assets including goodwill.

The Group depreciates the original cost of property, plant and equipment less its residual value by using the straight-line method over the estimated economic lives. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. The depreciable useful lives used for property, plant and equipment are as follows:

	Useful lives (years)
Buildings and structures	20 – 50
Machinery and equipment	4 – 25
Vehicles	8 – 25
Furniture and fixtures	8 – 15

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end.

Depreciation of plant in service was CZK 27,146 million and CZK 26,038 million for the years ended December 31, 2015 and 2014, which was equivalent to a composite depreciation rate of 3.9% and 3.8%, respectively.

2.10. Nuclear Fuel

Nuclear fuel is stated at original cost, net of accumulated amortization and presented as part of property, plant and equipment. Amortization of fuel in the reactor is based on the amount of power generated. Amortization of nuclear fuel charged to fuel expense was CZK 3,416 million and CZK 3,356 million for the years ended December 31, 2015 and 2014, respectively. The amortization of nuclear fuel includes charges in respect of additions to the accumulated provision for interim storage of spent nuclear fuel in the amount of CZK 328 million and CZK 275 million in 2015 and 2014, respectively. Additions to nuclear fuel were CZK 5,067 million and CZK 3,345 million in 2015 and 2014, respectively. In 2015 balance of nuclear fuel was increased by the capitalized portion of the provision for interim storage of nuclear fuel in the amount of CZK 64 million in relation with change in estimate.

2.11. Intangible Assets

Intangible assets are valued at their acquisition costs and related expenses. Intangible assets are amortized over their useful lives using the straight-line method. The estimated useful life of intangible assets ranges from 3 to 25 years. The assets' residual values, useful lives and methods of amortization are reviewed, and adjusted if appropriate, at each financial year end. Improvements are capitalized.

Research and development costs, net of grants and subsidies received, that are not eligible for capitalization have been expensed in the period incurred and amounted to CZK 351 million in 2015 and CZK 531 million in 2014.

Intangible assets are tested for impairment (for goodwill see Note 2.12) whenever facts or changes in circumstances indicate that the carrying amount could be impaired. The recoverable amount of an intangible asset not yet available for use is tested for impairment annually, irrespective of whether there is any indication that it may be impaired. Identified impairment of intangible assets is recognized directly in profit or loss in the line item Impairment of property, plant and equipment and intangible assets including goodwill.

For assets excluding goodwill an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss in the line item Impairment of property, plant and equipment and intangible assets including goodwill.

2.12. Goodwill

Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest over the net identifiable assets acquired and liabilities assumed (see Note 2.2). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates and joint-ventures is included in investments in associates and jointventures. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination's synergies. Impairment is determined by assessing the recoverable amount of the cash-generating unit, to which the goodwill relates. Where recoverable amount of the cashgenerating unit is lower than the carrying amount, an impairment loss is recognized. Impairment losses of goodwill cannot be reversed in subsequent periods. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in these circumstances is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

2.13. Emission Rights

Emission right represents the right of the owner of a facility, which in the course of its operation emits greenhouse gases, to emit during the calendar year equivalent of one ton of carbon dioxide. Based on the National Allocation Plans certain companies of the Group have been granted emission rights free of charge. These companies are responsible for determining and reporting the amount of greenhouse gases produced by its facilities in the calendar year and this amount has to be audited by an authorized person.

On April, 30 of the following year, at the latest, these companies are required to remit a number of allowances representing the number of tones of CO² actually emitted in previous year.

The emission rights which were granted free of charge are stated at their nominal value, i.e. at zero. In the Czech Republic the allocation of emission rights granted free of charge to an entity operating certain electricity generation facilities specified by the law was the subject to a gift tax in 2011 and 2012. As a result, granted emission rights, which were subject to the gift tax, are initially recognized at the amount of related gift tax as of the grant date. Purchased emission rights are carried at cost (except for emission rights for trading). Emission rights acquired in a business combination are initially recognized at their fair value at the date of acquisition and subsequently treated similarly to purchased emission rights. The Group recognizes a provision to cover emissions made. This provision is measured firstly with regard to the cost of emission rights resulting from hedging strategy, and then considering granted and purchased emission rights and credits up to the level of granted and purchased emission rights and credits held and then at the market price ruling at the balance sheet date. The amount of the gift tax on granted emission rights, which is charged to profit or loss as part of the charge of the provision, the eventual cost of emission rights sold or as part of the consumption of emission rights when the allowances are remitted from the register, is included in the line Other financial expenses.

The Group also holds emission rights for trading purposes. The portfolio of emission rights held for trading is measured at fair value. The changes in fair value of the emission rights held for trading are recognized directly in profit or loss.

At each reporting date, the Group assesses whether there is any indication that emission rights may be impaired. Where an indicator of impairment exists, the Group reviews the recoverable amounts of the cash- generating units, to which the emission rights were allocated, to determine whether such amounts continue to exceed the assets' carrying values. Any identified impairment of emission rights is recognized directly in profit or loss in the line item of Emission rights, net.

Sale and repurchase agreements with emission rights are accounted for as collateralized borrowing.

The swaps of European emission rights (EUA) and certified emission reductions (CER) or credits are treated as derivatives in the period from the trade date to the maturity date. The swap is measured at fair value with any fair value changes being recognized in profit and loss. Any cash received before the EUA/CER swap matures would result in an offsetting change in the fair value of the swap. Upon the delivery of EUAs and CERs the difference between the total of cash received and the fair value of the CER received on one hand and the total of the carrying value of the EUA given up and the fair value of the EUA/CER-swap given up is recognized as a gain or loss.

Green and similar certificates are initially recognized at fair value and subsequently treated similarly to purchased emission rights.

2.14. Investments

Investments are classified into the following categories: held-to-maturity, loans and receivables, held for trading and available-for-sale. Investments with fixed or determinable payments and fixed maturity that the Group has the positive intent and ability to hold to maturity other than loans and receivables originated by the Group are classified as held-to-maturity investments. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

Investments acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as held for trading. All other investments, other than loans and receivables originated by the Group, are classified as available-for-sale.

Held-to-maturity investments, loans and receivables are included in non-current assets unless they mature within 12 months of the balance sheet date. Investments held for trading are included in current assets. Available-for-sale investments are classified as current assets if the Group intends to realize them within 12 months of the balance sheet date.

All purchases and sales of investments are recognized on the settlement date.

When financial assets are recognized initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

Available-for-sale and trading investments are subsequently carried at fair value without any deduction for transaction costs by reference to their quoted market price at the balance sheet date.

Gains or losses on remeasurement to fair value of available-for-sale investments are recognized directly in other comprehensive income, until the investment is sold or otherwise disposed of, or until it is determined to be impaired. Equity securities classified as available-for-sale investments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are measured at cost.

The carrying amounts of available-for-sale investments are reviewed at each balance sheet date whether there is objective evidence for impairment. In the case of equity investments classified as available-forsale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. 'Significant' is evaluated against the original cost of the investment and 'prolonged' against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in the income statement – is removed from other comprehensive income and recognized in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in their fair value after impairment are recognized directly in other comprehensive income. In the case of debt instruments classified as available-for-sale, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in the income statement. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impairment loss is reversed through the income statement.

Changes in the fair values of trading investments are included in Other financial expenses or Other financial income.

Held-to-maturity investments and loans and receivables are carried at amortized cost using the effective interest rate method.

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.

2.15. Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, current accounts with banks and short-term bank notes with a maturity of 6 months or less. Foreign currency deposits are translated using the exchange rates published as at the balance sheet date.

2.16. Financial Assets Restricted in Use

Restricted balances of cash and other financial assets, which are shown as restricted funds (see Note 4), relate to mining reclamation and damages, deposits for waste storage reclamation, funding of nuclear decommissioning liabilities and cash guarantees given to transaction partners. The non-current classification is based on the expected timing of the release of the funds to the Group.

2.17. Receivables, Payables and Accruals

Receivables are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. An impairment analysis of receivables is performed by the Group at each reporting date on an individual basis for significant clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively where the individual approach is not applicable. The calculation is based on actual incurred historical data of these groups.

Payables are recorded at invoiced values and accruals are reported at expected settlement values.

2.18. Materials and Supplies

Purchased inventories are valued at actual cost, using the weighted average method. Costs of purchased inventories comprise expenses which have been incurred in respect of the acquisition of materials and supplies including transportation costs. When consumed, inventories are charged to income or capitalized as part of property, plant and equipment. Work-in-progress is valued at actual cost. Costs of inventories produced internally include direct material and labor costs. Obsolete inventories are reduced to their realizable value by a provision charged to the income statement. At December 31, 2015 and 2014 the provision for obsolescence amounted to CZK 516 million and CZK 524 million, respectively.

2.19. Fossil Fuel Stocks

Fossil fuel stocks are stated at actual cost using weighted average cost method.

2.20. Derivative Financial Instruments

The Group uses derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge its risks associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are stated at fair value. In the balance sheet such derivatives are presented as part of Investments and other financial assets, net, Other financial assets, net, Other long-term liabilities and Trade and other payables.

The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

For the purpose of hedge accounting, hedges are classified as either fair value hedges when they hedge the exposure to changes in the fair value of a recognized asset or liability; or cash flow hedges when they hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction.

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

a. Fair value hedge

Gain or loss from re-measuring the hedging instrument at fair value is recognized immediately in the income statement. Any gain or loss on the hedged item attributable to the hedged risk is adjusted against the carrying amount of the hedged item and recognized in the income statement. Where the adjustment is to the carrying amount of a hedged interest-bearing financial instrument, the adjustment is amortized to profit or loss over the remaining term to maturity.

b. Cash flow hedge

Changes in the fair value of derivatives that are designated and qualify as cash flow hedges are initially recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized in the income statement in the line item Other financial expenses or Other financial income.

Amounts accumulated in equity are transferred to the income statement in the periods when the hedged item affects profit or loss.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recorded to the income statement when the forecast transaction is ultimately recognized. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

c. Other derivatives

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognized immediately in the income statement.

2.21. Commodity Contracts

According to IAS 39, certain commodity contracts are treated as financial instruments and fall into the scope of the standard. Most commodity purchase and sales contracts entered into by the Group provide for physical delivery of quantities intended to be consumed or sold as part of its ordinary business; such contracts are thus excluded from the scope of IAS 39.

In particular, forward purchases and sales for physical delivery of energy are considered to fall outside the scope of application of IAS 39, when the contract concerned is considered to have been entered into as part of the Group's normal business activity. This is demonstrated to be the case when all the following conditions are fulfilled:

A physical delivery takes place under such contracts;
The volumes purchased or sold under the contracts correspond to the Group's operating requirements;
The contract cannot be considered as a written option as defined by the standard IAS 39. In the specific case of electricity sales contracts, the contract is substantially equivalent to a firm forward sale or can be considered as a capacity sale.

The Group thus considers that transactions negotiated with a view to balancing the volumes between electricity purchases and sale commitments are part of its ordinary business as an integrated electric utility company and do not therefore come under the scope of IAS 39.

Commodity contracts which fall under the scope of IAS 39 are carried at fair value with changes in the fair value recognized in the income statement. The Group presents revenues and expenses related to commodity trading net in the line Gains and losses from commodity derivative trading, net.

2.22. Income Taxes

The provision for corporate tax is calculated in accordance with the tax regulations of the states of residence of the Group companies and is based on the income or loss reported under local accounting regulations, adjusted for appropriate permanent and temporary differences from taxable income. Income taxes are calculated on an individual company basis as the Czech tax laws do not permit consolidated tax returns. For companies located in the Czech Republic income taxes are provided at a rate of 19% for the years ended December 31, 2015 and 2014, respectively, from income before income taxes after adjustments for certain items which are not deductible, or taxable, for taxation purposes. The Czech corporate income tax rate enacted for 2016 and on is 19%.

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax is determined using tax rates (and laws) that have been enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred tax assets and liabilities are recognized regardless of when the temporary difference is likely to reverse. Deferred tax assets and liabilities are not discounted. A deferred tax liability is recognized for all taxable temporary differences, except:

where the deferred tax liability arises from initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized, except:

when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the reported net income nor taxable profit or loss
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint-ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.

Deferred tax assets and liabilities of Group companies are not offset in the balance sheet.

Current tax and deferred tax are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly to equity.

Change in the carrying amount of deferred tax assets and liabilities due to change in tax rate is recognized in the income statement, except to the extent that it relates to items previously charged or credited to equity.

2.23. Long-term Debt

Borrowings are initially recognized at the amount of the proceeds received, net of transaction costs. They are subsequently carried at amortized cost using the effective interest rate method, the difference between net proceeds and redemption value is being recognized in the net income over the life of the borrowings as interest expense.

Transaction costs include fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges.

The carrying amount of long-term debt, which is hedged against the changes in its fair value, is adjusted by the changes in the fair value attributable to the hedged risk. The changes in the fair value of the hedged long-term debt are recognized in profit or loss and are included in the income statement line Other financial expenses or Other financial income. The adjustment to the carrying amount of the hedged long-term debt in a fair value hedge is subsequently amortized to profit or loss using the effective interest rate method.

2.24. Nuclear Provisions

The Group has recognized provisions for its obligations to decommission its nuclear power plants at the end of their operating lives, to store the related spent nuclear fuel and other radioactive waste initially on an interim basis and provision for its obligation to provide financing for subsequent permanent storage of spent fuel and irradiated parts of reactors (see Note 19.1).

The provisions recognized represent the best estimate of the expenditures required to settle the present obligation at the current balance sheet date. Such cost estimates, expressed at current price levels at the date of the estimate, are discounted at December 31, 2015 and 2014 using a long-term real rate of interest of 1.5% per annum and 1.75% per annum, respectively, to take into account the timing of payments. The initial discounted cost amounts are capitalized as part of property, plant and equipment and are depreciated over the lives of the nuclear plants. Each year, the provisions are increased to reflect the accretion of discount and to accrue an estimate for the effects of inflation, with the charges being recognized as a component of interest expense. At December 31, 2015 and 2014 the estimate for the effect of inflation is 1% and 1.25%, respectively.

The decommissioning process is expected to continue for approximately a fifty-year period for Temelín power plant and sixty-year period for Dukovany power plant subsequent to the final operation of the plants. It is currently anticipated that the permanent storage facility will become available in 2065 and the process of final disposal of the spent nuclear fuel will then continue until approximately 2084 when the process should be finished. While the Group has made its best estimate in establishing its nuclear provisions, because of potential changes in technology as well as safety and environmental requirements, plus the actual time scale to complete decommissioning and fuel storage activities, the ultimate provision requirements could vary significantly from the Group's current estimates.

Changes in a decommissioning liability and in liability for final storage of spent nuclear fuel that result from a change in the current best estimate of timing and/or amount of cash flows required to settle the obligation or from a change in the discount rate are added to (or deducted from) the amount recognized as the related asset. However, to the extent that such a treatment would result in a negative asset, the effect of the change is recognized in the income for the current period.

2.25. Provisions for Decommissioning and Reclamation of Mines and Mining Damages

The Group has recognized provisions for obligations to decommission and reclaim mines at the end of their operating lives (see Note 19.2). The provisions recognized represent the best estimate of the expenditures required to settle the present obligation at the current balance sheet date. Such cost estimates, expressed at current price levels, are discounted at December 31, 2015 and 2014 using a long-term real rate of interest of 1.5% per annum and 1.75% per annum, respectively, to take into account the timing of payments. The initial discounted cost amounts are capitalized as part of property, plant and equipment and are depreciated over the lives of the mines. Each year, the provisions are increased to reflect the accretion of discount and to accrue an estimate for the effects of inflation, with the charges being recognized as a component of interest expense. At December 31, 2015 and 2014 the estimate for the effect of inflation is 1% and 1.25%, respectively.

Changes in a decommissioning liability that result from a change in the current best estimate of timing and/or amount of cash flows required to settle the obligation or from a change in the discount rate are added to (or deducted from) the amount recognized as the related asset. However, to the extent that such a treatment would result in a negative asset, the effect of the change is recognized in the income for the current period.

2.26. Exploration for and Evaluation of Mineral Resources

Expenditures on exploration for and evaluation of mineral resources are charged to expense when incurred.

2.27. Leases

The determination of whether an arrangements is, or contains a lease is based on the substance of the arrangement at inception date or whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys the right to use the asset. A reassessment is made after inception of the lease only if one of the following conditions applies:

There is a change in contractual terms, other than a renewal or extension of the arrangement;
A renewal option is exercised or extension granted, unless the term of the renewal or extension was initially included in the lease term;
There is a change in determination of whether fulfillment is dependent on a specified asset; or
There is a substantial change to the asset.

Where reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gave rise to the reassessment.

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.

Capitalized leased assets are depreciated over the estimated useful life of the asset. If there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term or its useful life.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in the income statement on a straight-line basis over the lease term.

2.28. Treasury Shares

Treasury shares are presented in the balance sheet as a deduction from equity. The acquisition of treasury shares is presented in the statement of equity as a reduction in equity. No gain or loss is recognized in the income statement on the sale, issuance, or cancellation of treasury shares. Consideration received is presented in the financial statements as an addition to equity.

2.29. Share Options

Members of Board of Directors and selected managers have been granted options to purchase common shares of the Company. Expense related to the share option plan is measured on the date of the grant by reference to the fair value of the share options granted. In case of options, which vest immediately, the expense is recognized directly in profit or loss with a corresponding increase in equity. In all other cases the expense is accrued over the vesting period of the equity instruments granted. The expense recognized reflects the best estimate of the number of share options, which will ultimately vest. In 2015 and 2014 the expense recognized in respect of the share option plan amounted to CZK 31 million and CZK 26 million, respectively.

2.30. Translation of Foreign Currencies

The consolidated financial statements are presented in Czech crowns (CZK), which is the Company's functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except when deferred in equity for qualifying cash flow hedges.

Translation differences on debt securities and other monetary financial assets measured at fair value are included in foreign exchange gains and losses. Translation differences on non-monetary items such as equity instruments held for trading are reported as part of the fair value gain or loss. Translation differences on available-for-sale equity securities are included in equity.

The assets and liabilities of foreign subsidiaries are translated at the rate of exchange ruling at the balance sheet date. The income statements items of foreign subsidiaries are translated at average exchange rates for the year. The exchange differences arising on the retranslation are taken directly to other comprehensive income. On disposal of a foreign entity, accumulated exchange differences are recognized in the income statement as a component of the gain or loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign operation and are translated at the closing exchange rate.

Exchange rates used as at December 31, 2015 and 2014 for the translation of assets and liabilities denominated in foreign currencies were as follows:

	2015	2014
CZK per 1 EUR	27.025	27.725
CZK per 1 USD	24.824	22.834
CZK per 1 PLN	6.340	6.492
CZK per 1 BGN	13.819	14.193
CZK per 1 RON	5.976	6.185
CZK per 100 JPY	20.619	19.090
CZK per 1 TRY	8.509	9.789

2.31. Non-current Assets Held for Sale

Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Property, plant and equipment and intangible assets classified as held for sale are not depreciated or amortized.

3. Property, Plant and Equipment

Net plant in service at December 31, 2015 and 2014 is as follows (in CZK millions):

	Buildings	Plant and Equipment	Land and Other	Total
Cost at January 1, 2014	254,364	404,090	6,900	665,354
Additions Disposals Acquisition of subsidiaries Sale of subsidiaries Change in capitalized part of provisions Reclassification and other Currency translation differences	12,792 (2,976) 16 - 289 (33) 262	24,304 (2,749) 9 - 3,542 23 233	123 (54) 9 (1) 170 (2) 5	37,219 (5,779) 34 (1) 4,001 (12) 500
Cost at December 31, 2014	264,714	429,452	7,150	701,316
Additions Disposals Change in capitalized part of provisions Reclassification and other Currency translation differences	9,093 (937) 10 (5) (1,246)	13,121 (3,992) 2,829 7 (1,599)	231 (33) 860 (2) (20)	22,445 (4,962) 3,699 - (2,865)
Cost at December 31, 2015	271,629	439,818	8,186	719,633
Accumulated depreciation and impairment at January 1, 2014 Depreciation	(105,157) (6,982)	(234,736) (19,043)	(995) (13)	(340,888) (26,038)
Net book value of assets disposed Disposals Reclassification and other * Impairment losses recognized Impairment losses reversed Currency translation differences	(605) 2,976 (389) (1,992) 104 (101)	(62) 2,749 (1,532) (5,646) 3 (87)	(1) 7 - (22) 11 (2)	(668) 5,732 (1,921) (7,660) 118 (190)
Accumulated depreciation and impairment at December 31, 2014	(112,146)	(258,354)	(1,015)	(371,515)
Depreciation Net book value of assets disposed Disposals Reclassification and other Impairment losses recognized Impairment losses reversed Currency translation differences	(7,249) (355) 937 (30) (2,824) 62 507	(19,876) (108) 3,992 (6) (3,970) 15 875	(21) (2) 6 - (55) 3 6	(27,146) (465) 4,935 (36) (6,849) 80 1,388
Accumulated depreciation and impairment at December 31, 2015	(121,098)	(277,432)	(1,078)	(399,608)
Net plant in service at December 31, 2014	152,568	171,098	6,135	329,801
Net plant in service at December 31, 2015	150,531	162,386	7,108	320,025

* CZK 1,905 million relates to impairment provision for Počerady gas power plant that was transferred from construction work in progress due to the plant's put into operation in 2014.

Group's plant in service pledged as security for liabilities at December 31, 2015 and 2014 is CZK 6,445 million and CZK 173 million, respectively.

Construction work in progress contains mainly refurbishments performed on Ledvice and Prunéřov and the electricity distribution network of subsidiaries ČEZ Distribuce, a. s. and CEZ Razpredelenie Bulgaria AD. It also contains costs of CZK 2,243 million for the preparation of new nuclear power sources.

4. Restricted Financial Assets

Restricted financial assets at December 31, 2015 and 2014 consist of the following (in CZK millions):

	2015	2014
Restricted debt securities available-for-sale Restricted cash	14,320 3,739	14,820 2,651
Total restricted financial assets	18,059	17,471

5. Investments and Other Financial Assets, Net

Investments and other financial assets, net at December 31, 2015 and 2014 consist of the following (in CZK millions):

	2015	2014
Financial assets in progress, net	-	4
Term deposits	-	10
Debt securities available-for-sale	676	-
Equity securities available-for-sale	887	611
Investment in Veolia Energie ČR	2,732	3,166
Investment in MOL	9,360	7,788
Derivatives	7,006	5,456
Long-term receivable from settlement with
Albania	1,111	1,705
Other long-term receivables, net	826	137
Total	22,598	18,877

In January 2008 the Group acquired a 7% share in MOL. At that time the Group granted to MOL a call option, which enabled MOL to reacquire the shares in the following 3 years for the price HUF 20,000 per share and in 2009 the period over which MOL could reacquire the shares was extended until January 2014. The amount originally paid to MOL after deduction of option premium received was EUR 560 million. The transaction was recorded as a receivable (presented as Receivables, net as at December 31, 2013) together with a written put option (presented as Trade and other payables as at December 31, 2013). The call option to buy the MOL's shares was not exercised by MOL and the option period lapsed on January 23, 2014. Since this date, the investment in MOL is classified as available-for-sale investment with changes in fair value recorded in other comprehensive income. In 2014 the Group identified an impairment of CZK 1,828 million and the cumulative loss was reclassified from other comprehensive income and was recognized in the income statement in line item Other financial expenses.

On February 4, 2014 the Group issued EUR 470.2 million exchangeable bonds due 2017 exchangeable for existing ordinary shares of MOL. The deal has been priced on January 28, 2014 with a coupon of 0.00% and initial exchange price has been set at EUR 61.25 per share, reflecting a premium of 35%. Bondholders will have the right to exchange the bonds for shares from January 25, 2017, subject to the issuer's right to elect to deliver an equivalent amount in cash for all or part of the shares. Embedded conversion option was separated and is shown as a separate liability from derivatives in Trade and other payables.

In 2014 Settlement Agreement was signed with the Albanian state in the presence of a mediator from the Energy Community Secretariat in Vienna. The total amount of compensation for receivables and shares is EUR 95 million in favor of CEZ Group. Its discounted value of CZK 2,562 million was recorded in statement of income in 2014 (see Note 24). In 2015 and 2014 the Company received EUR 22 million and EUR 10 million, respectively, and the remaining amount will be received in annual installments until 2018 and is guaranteed by reputable European bank. Upon the effective date of the Settlement Agreement, the Company transferred 76% share in Operatori i Shpërndarjes së Energjisë Elektrike Sh.A. back to Albanian state. At the same time, the arbitration proceedings were closed.

Movements in impairment provisions (in CZK millions):

	2015	2014
	Available-for-sale financial assets	Available-for-sale financial assets	Long-term receivables
Opening balance	53	44	768
Additions	-	9	-
Derecognition of impaired fin. assets	(9)	-	(768)
Closing balance	44	53	-

Debt instruments at December 31, 2015 are contracted to mature in the following periods after the balance sheet date (in CZK millions):

	Long-term receivables	Debt securities available-for-sale
Due in 2017	630	-
Due in 2018	576	676
Due in 2019	15	-
Due in 2020	591	-
Thereafter	125	-
Total	1,937	676

Debt instruments at December 31, 2014 are contracted to mature in the following periods after the balance sheet date (in CZK millions):

	Long-term receivables
Due in 2016	660
Due in 2017	585
Due in 2018	581
Due in 2019	3
Thereafter	13
Total	1,842

Debt instruments at December 31, 2015 and 2014 have following effective interest rate structure (in CZK millions):

	2015	2014
	Long-term receivables	Debt securities available-for-sale	Long-term receivables
Less than 2.00%	1,444	676	1,842
From 2,00 % to 2,99 %	493	-	-
Total	1,937	676	1,842

The following table analyses the debt instruments at December 31, 2015 and 2014 by currency (in CZK millions):

	2015	2014
	Long-term	Debt securities	Long-term
	receivables	available-for-sale	receivables
CZK	235	-	117
EUR	1,700	676	1,721
Other	2	-	4
Total	1,937	676	1,842

6. Intangible Assets, Net

Intangible assets, net, at December 31, 2015 and 2014 are as follows (in CZK millions):

	Software	Rights and Other	Goodwill	Total 2015	Total 2014
Cost at January 1	12,255	12,237	9,412	33,904	32,363
Additions Disposals Acquisition of subsidiaries Sale of subsidiaries Impairment of goodwill Reclassification and other Currency translation differences	813 (286) - - - 12 (13)	570 (141) - - - - (141)	- - - - (7) - (130)	1,383 (427) - - (7) 12 (284)	1,882 (204) 33 (7) (135) 1 (29)
Cost at December 31	12,781	12,525	9,275	34,581	33,904
Accumulated amortization and impairment at January 1	(9,818)	(4,076)	-	(13,894)	(12,368)
Amortization Net book value of assets disposed Disposals Reclassification and other Impairment losses recognized Currency translation differences	(1,042) (2) 286 (11) (14) 9	(431) (25) 141 - (46) 58	- - - - - -	(1,473) (27) 427 (11) (60) 67	(1,667) (48) 204 - (28) 13
Accumulated amortization and impairment at December 31	(10,592)	(4,379)	-	(14,971)	(13,894)
Net intangible assets at December 31	2,189	8,146	9,275	19,610	20,010

At December 31, 2015 and 2014, intangible assets presented in the balance sheet include intangible assets in progress of CZK 554 million and CZK 601 million, respectively.

At December 31, 2015 and 2014 goodwill allocated to cash-generating units is as follows (in CZK millions):

	2015	2014
Romanian distribution and sale	2,532	2,621
Czech distribution and sale	2,210	2,210
Energotrans	1,675	1,675
Polish power plants (Chorzów, Skawina)	1,244	1,273
ČEZ Teplárenská	727	727
Energetické centrum	261	261
TMK Hydroenergy Power	292	303
Other	334	342
Total	9,275	9,412

7. Impairment of Property, Plant and Equipment and Intangible Assets including Goodwill

The following table summarizes the impairments of property, plant and equipment and intangible assets by cash-generating units in 2015 (in CZK millions):

		Impairment losses			Impairment reversals
	Goodwill	Other intangible assets	Property, plant and equipment	Total	Property, plant and equipment	Total impairment, net
Romanian distribution
and sale	-	-	27	27	(35)	(8)
Bulgarian distribution
and sale	-	46	1,395	1,441	-	1,441
Czech distribution and
sale	-	-	16	16	(2)	14
Romanian wind power
farms	-	10	2,285	2,295	-	2,295
TEC Varna	-	12	37	49	-	49
Polish power plants
(Chorzów, Skawina)	-	-	1,195	1,195	-	1,195
Dětmarovice power
plant	-	-	986	986	-	986
Tisová power plant	-	-	605	605	-	605
ČEZ Korporátní služby	-	-	14	14	(37)	(23)
Bara Group	-	-	181	181	-	181
Areál Třeboradice	7	-	120	127	-	127
Other	-	6	833	839	(16)	823
Total	7	74	7,694	7,775	(90)	7,685

The following table summarizes the impairments of property, plant and equipment and intangible assets by cash-generating units in 2014 (in CZK millions):

	Impairment losses			Impairment reversals
	Goodwill	Other intangible assets	Property, plant and equipment	Total	Property, plant and equipment	Total impairment, net
Romanian distribution and sale	-	-	23	23	(13)	10
Bulgarian distribution and sale	-	26	713	739	-	739
Czech distribution and sale	-	-	1	1	(1)	-
Energetické centrum Romanian wind power	135	-	-	135	-	135
farms TEC Varna	- -	2 -	6,591 199	6,593 199	- -	6,593 199
Polish power plants (Chorzów, Skawina)	-	-	9	9	-	9
Severočeské doly ČEZ Korporátní služby	- -	- -	11 110	11 110	(10) (73)	1 37
Other Total	- 135	- 28	337 7,994	337 8,157	(35) (132)	302 8,025

In 2015 and 2014 the Group performed impairment tests of goodwill and tests of other non-current assets where there was an indication that the carrying amounts could be impaired. Recognized impairment of property, plant and equipment of cash-generating unit Romanian wind power farms in 2015 was caused mainly by the drop in market prices. Recognized impairment of cash-generating unit Bulgarian distribution and sale in 2015 was caused mainly by updated outlook of electricity distribution regulation and subsequent decrease in expected revenues. Recognized impairment of Skawina power plant in 2015 was caused mainly by drop in market prices of electricity, decrease in prices of green and similar certificates and also caused by increase in prices of emission rights. The subsequent impairment test of the cashgenerating unit Polish power plants including allocated goodwill did not result in an impairment loss. Recognized impairment of cash-generating unit Dětmarovice power plant in 2015 was caused mainly by drop in market prices of electricity and also by increase in prices of emission rights. Recognized impairment of cash-generating unit Tisová power plant in 2015 resulted from external expert appraisal performed for the sake of the contribution in-kind of the whole power plant to a separate entity. The driver of impairment for Tisová power plant was mainly decrease in market prices of electricity. Recognized impairment of cash-generating unit Bara Group in 2015 was caused mainly by updated outlook of regulation and subsequent decrease in expected revenues.

Recognized impairment of property, plant and equipment of cash-generating unit Romanian wind power farms in 2014 was caused mainly by the drop in market prices of green certificates while considering the outlook of the market of green certificates and with regard to new legislation of the construction tax in Romania. Recognized impairment of cash-generating unit Bulgarian distribution and sale in 2014 was caused mainly by updated outlook of electricity distribution regulation and subsequent decrease in expected revenues.

The impairment test involves determining the recoverable amount of the cash-generating unit, which corresponds to the value in use. Value in use is the present value of the future cash flows expected to be derived from a cash-generating unit. Value in use is determined on the basis of an enterprise valuation model and is assessed from a company internal perspective. Values in use are determined based on cash flow budgets, which are based on the medium-term budget for a period of 5 years, which has been approved by the management and which is valid when the impairment test is performed. These budgets are based on the past experience, as well as on future market trends.

The medium-term budget is based on general economic data derived from macroeconomic and financial studies and makes assumptions primarily on the development of gross domestic product, consumer prices, interest rates and nominal wages.

ČEZ, a. s. production assets are tested for any possible impairment as a single cash-generating unit with the exception of specific assets, e.g. the gas fired power plant in Počerady. ČEZ cash-generating unit of production assets is characterized by portfolio management in the deployment and maintenance of various production resources and the cash flows generated from these activities.

As part of testing the recoverable value of fixed assets of the cash generating unit of ČEZ, a. s. (hereinafter the "ČEZ Value"), we performed a sensitivity analysis of the test results to changes in certain key parameters of the used model – changes in wholesale electricity prices (hereinafter the "EE Prices"), changes in the discount rate used in the calculation of the present value of future cash flows and changes in CZK/EUR exchange rate.

The development of commodity prices and, in particular, the development of wholesale electricity prices in Germany (as German electricity prices have a major impact on the development of wholesale electricity prices in the Czech Republic) are the key assumptions used for the ČEZ Value model. The developments of wholesale prices are primarily determined by the EU political decisions, the development of global demand and supply of commodities and the technological progress.

The impact of EE price changes on the results of the ČEZ Value test is further influenced by a number of external factors, including, in particular, changes in the structure and availability of production resources in the Czech Republic and neighboring countries, the macroeconomic development of the Central European region and the regulation of the energy sector in the EU and Germany, including the future Market design and fundamental impact of nuclear sources attenuation in 2020-2021, the impact of the EU approved 2030 climate and energy targets and the impact of the Czech Republic State Energy Concept. The model was constructed for a period adequate to the useful life of the production resources, i.e. for a period that significantly exceeds the period for which commodities, including wholesale electricity price contracts, are traded on public liquid markets. In addition, the electricity market is subject to structural changes and major industry regulation; consequently, complete abandonment of market-based pricing mechanisms and implementation of alternative, centrally regulated payments for the availability and supply of production resources within the period of useful life of the production resources is actually possible.

With respect to the fact that we are using a long-term model, there are certain internal factors and assumptions that affect the ČEZ Value sensitivity to the development of electricity prices, such as varying deployment of the production portfolio depending on the development of electricity market prices, emission allowances and variable production costs and, in a longer perspective, also the development of fixed costs reflecting the development of the production resources gross margin.

The sensitivity test results reflect expert estimates of the status and development of the above factors in the period of the model and the status of commercial securing of the production portfolio as at December 31, 2015. The borderline values of the interval of all three main tested factors represent test results arising from the use of two price scenarios.

The basic scenario considers long-term EE prices at the level used to prepare ČEZ business plan for 2016- 2020. The plan was prepared in the fourth quarter 2015 whereas the plan was based on the active market parameters observed in August and September (electricity prices on EEX energy exchange in Germany, prices on PXE energy exchange in the Czech Republic, price of CO² emission rights, FX rate CZK/EUR, interest rates etc.). There is a liquidity for electricity contracts traded on EEX for the period covering the horizon of the business plan and with regard to links between German and Czech electricity transmission network, the EEX prices are basic market price indicator for EE prices in the Czech Republic. For the purposes of the sensitivity analysis, the input EE prices, emission rights prices and foreign exchange rates were applied to the relevant opened positions of ČEZ, a. s. The second basic price scenario assumes EE prices lower by about 30% compared to the basic scenario and also contains decrease of relevant expenses.

A change of the assumed EE prices as per the models by 1%, with other parameters remaining unchanged, would have an impact of approximately CZK 3.0 – 4.5 billion on the ČEZ Value test results. Future cash flows of the model were discounted using a 4.2% rate. A change of 0.1 percentage point in the discount rate, with other parameters remaining unchanged, would change the ČEZ Value by CZK 3.5 – 5.4 billion. A change of 1% in the CZK/EUR exchange rate, with other parameters remaining unchanged,

would result in a change of approximately CZK 3.7 – 5.3 billion in the ČEZ Value. The recoverable amount of Polish power plants has been determined based on a value in use calculation. Those cash flow projections are based on financial budgets approved by management covering a period until the end of useful life of power plants and discount rate of 5.6%.

The value in use calculation was also used to calculate the recoverable amount of Czech distribution and sale cash-generating unit. Those cash flow projections are based on financial budgets approved by management covering a five-year period and discount rate of 3.8%. Cash flows beyond the five-year period for Czech distribution and sale is based on the terminal value of regulatory asset base. Management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

The value in use calculation was also used to calculate the recoverable amount of Energotrans and ČEZ Teplárenská. The cash flow projections are based on financial budgets approved by management covering a five-year period and discount rate of 3.9%. No growth rate is considered for cash flows beyond five-year period for Energotrans and ČEZ Teplárenská. Management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

The value in use calculation was also used to calculate the recoverable amount of Areál Třeboradice. The cash flow projections are based on financial budgets approved by management covering a five-year period and discount rate of 3.9%. No growth rate is considered for cash flows beyond five-year period.

The value in use calculation was also used to calculate the recoverable amount of Dětmarovice power plant and Tisová power plant. The cash flow projections are based on financial budgets approved by management covering a five-year period and discount rate of 4.2%. No growth rate is considered for cash flows beyond five-year period.

The value in use calculation was also used to calculate the recoverable amount of Energetické centrum. Those cash flow projections are based on financial budgets approved by management covering a five-year period and discount rate of 3.9%. Cash flows beyond the five-year period are extrapolated using 2.0% growth rate. This growth rate represents the predicted long-term average growth rate of cash flows under currently known circumstances.

The value in use calculation was also used to calculate the recoverable amount of Romanian distribution and sale. Those cash flow projections are based on financial budgets approved by management covering a five-year period and discount rate of 6.6%. Cash flows beyond the five-year period are based on the terminal value of regulatory asset base.

The recoverable amount of TMK Hydroenergy Power has been determined based on a value in use calculation. Those cash flow projections are based on financial budgets approved by management covering a five-year period and discount rate of 6.1%. There is no growth rate considered for cash flows beyond five-year period. Management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

The value in use calculation was also used to calculate the recoverable amount of Romanian wind power farms. Those cash flow projections are based on financial budgets approved by management covering the period of expected useful life of wind farms, considering approved renewable energy support in the form of granted green certificates and a discount rate of 6.1%. The projection of the cash flows includes assumption of receiving two green certificates. Receiving of two green certificates is subject to approval of accreditation by Romanian government and subsequently by European Commission. The issuance of one of the two green certificates in the expected amount of 4.2 million pieces is postponed until March 2017. The recovery of these deferred green certificates is expected in the period from 2018 to 2020. One of the main factors influencing the value of future cash flows is the price of green certificates. Current value of the green certificate in the model is EUR 29.7 and expected growth rate is 1.6%. Change in the price of green certificate by 1% every year, all other variables held constant, would result in change of value in use by approximately CZK 700 million. Change of the discount rate by 1 percentage point, all other variables held constant, would result in change of value in use by approximately CZK 1,000 million.

The value in use calculation was also used to calculate the recoverable amount of Bulgarian distribution and sale. Those cash flow projections are based on financial budgets approved by management covering a five-year period and discount rate of 6.6%. Cash flows beyond the five-year period do not consider any growth rate. Change of discount rate by 1 percentage point, all other variables held constant, would result in change of value in use by approximately CZK 1,600 million.

The calculations of value in use for all cash-generating units are most sensitive to the following assumptions:

Gross margins – Gross margins are based on experience from historical trends in the preceding periods, current outlook of market and non-market parameters, eventually with regard to operational efficiency improvements. Gross margins are affected especially by wholesale electricity prices, prices of emission rights and prices of green and similar certificates.

Raw materials price inflation – Estimates are obtained from published indices for the countries from which materials are sourced, as well as data relating to specific commodities. Forecast figures are used if data is available, otherwise past actual raw material price movements have been used as an indicator of future price movements.

Discount rate – Discount rates reflect management's estimate of the risk specific to each unit. The basis used to determine the value assigned is weighted average cost of capital (WACC) of the related subsidiaries.

Estimated growth rate – The basis used to determine the value assigned to estimated growth rate is the forecast of market and regulatory environment, where subsidiaries conduct the business.

8. Changes in the Group Structure

Acquisitions of non-controlling interests from third parties in 2015

On April 15, 2015 the Group increased the ownership interest from 75% to 100% in company Eco-Wind Construction S.A. by calling the option to acquire the non-controlling interest.

The following table summarizes the critical terms of this transaction (in CZK millions):

Acquired share of net assets derecognized from
non-controlling interests	145
Amount directly recognized in equity	147
Total purchase consideration	292

Acquisitions of subsidiaries from third parties in 2014

On December 19, 2014, the Group acquired 75% interest in EVČ s.r.o., which specializes in engineering and construction of energy facilities including energy performance projects.

The fair values of acquired identifiable assets and liabilities as of the date of acquisition were as follows (in CZK millions):

	EVČ
Share acquired in 2014	75%
Property, plant and equipment Investments and other financial assets, net Cash and cash equivalents Receivables, net Income tax receivable Materials and supplies, net Other financial assets, net Other current assets	35 38 11 74 2 7 6 27
Other long-term liabilities Deferred tax liability Short-term loans Trade and other payables Accrued liabilities	(32) (1) (34) (41) (31)
Total net assets	61
Share of net assets acquired Goodwill	46 33
Total purchase consideration	79
Less:
Cash and cash equivalents in the subsidiary acquired	(11)
Cash outflow on acquisition of the subsidiary	68

If the combination had taken place at the beginning of the year 2014, the profit for CEZ Group as of December 31, 2014 would have been CZK 22,439 million and revenues from continuing operations would have been CZK 202,001 million. The amount of goodwill recognized as a result of the business combination comprises the value of expected synergies arising from the acquisition.

The following table summarizes the cash flows related to acquisitions during 2014 (in CZK millions):

Investment in subsidiaries	79
Change in payables from acquisitions	(33)
Less cash acquired	(11)
Total cash outflows on acquisitions	35

Acquisitions of non-controlling interests from third parties in 2014

On July 30, 2014 the Group increased the ownership interest from 85% to 95% in the company Areál Třeboradice, a.s. by calling the option to acquire the non-controlling interest.

The following table summarizes the critical terms of this transaction (in CZK millions):

Acquired share of net assets derecognized from
non-controlling interests	31
Amount directly recognized in equity	2
Total purchase consideration	33

9. Investments in Subsidiaries and Joint-ventures

The consolidated financial statements include the financial figures of ČEZ, a. s. and its subsidiaries and joint-ventures listed in the following table:

	Country of	% equity interest *		% voting interest
Subsidiaries	incorporation	2015	2014	2015	2014
Areál Třeboradice, a.s.	Czech Republic	95.00%	95.00%	95.00%	95.00%
A.E. Wind sp. z o.o.	Poland	100.00%	75.00%	100.00%	100.00%
Baltic Green Construction sp. z o.o.1)	Poland	100.00%	-	100.00%	-
Baltic Green I sp. z o.o.	Poland	100.00%	75.00%	100.00%	100.00%
Baltic Green II sp. z o.o.	Poland	100.00%	75.00%	100.00%	100.00%
Baltic Green III sp. z o.o.	Poland	100.00%	75.00%	100.00%	100.00%
Baltic Green IV sp. z o.o.	Poland	100.00%	75.00%	100.00%	100.00%
Baltic Green V sp. z o.o.	Poland	100.00%	75.00%	100.00%	100.00%
Baltic Green VI sp. z o.o.	Poland	100.00%	75.00%	100.00%	100.00%
Baltic Green VII sp. z o.o.	Poland	100.00%	75.00%	100.00%	100.00%
Baltic Green VIII sp. z o.o.	Poland	100.00%	75.00%	100.00%	100.00%
Bara Group EOOD	Bulgaria	100.00%	100.00%	100.00%	100.00%
Centrum výzkumu Řež s.r.o.	Czech Republic	52.46%	52.46%	100.00%	100.00%
CEZ Bosna i Hercegovina d.o.o.2)	Bosnia and Herzegovina	-	100.00%	-	100.00%
CEZ Bulgaria EAD	Bulgaria	100.00%	100.00%	100.00%	100.00%
CEZ Bulgarian Investments B.V.	Netherlands	100.00%	100.00%	100.00%	100.00%
CEZ Deutschland GmbH	Germany	100.00%	100.00%	100.00%	100.00%
CEZ Distributie S.A.	Romania	100.00%	100.00%	100.00%	100.00%
CEZ Elektro Bulgaria AD	Bulgaria	67.00%	67.00%	67.00%	67.00%
CEZ Finance Ireland Ltd.	Ireland	100.00%	100.00%	100.00%	100.00%
CEZ Hungary Ltd.	Hungary	100.00%	100.00%	100.00%	100.00%
CEZ Chorzow B.V.3)	Netherlands	-	100.00%	-	100.00%
CEZ Chorzów S.A.4)	Poland	100.00%	100.00%	100.00%	100.00%
CEZ ICT Bulgaria EAD1)	Bulgaria	67.00%	-	67.00%	-
CEZ International Finance B.V.	Netherlands	100.00%	100.00%	100.00%	100.00%
CEZ International Finance Ireland Ltd.	Ireland	100.00%	100.00%	100.00%	100.00%
CEZ MH B.V.	Netherlands	100.00%	100.00%	100.00%	100.00%
CEZ Poland Distribution B.V.	Netherlands	100.00%	100.00%	100.00%	100.00%
CEZ Polska sp. z o.o.	Poland	100.00%	100.00%	100.00%	100.00%
CEZ Produkty Energetyczne Polska
sp. z o.o.	Poland	100.00%	100.00%	100.00%	100.00%
CEZ Razpredelenie Bulgaria AD	Bulgaria	67.00%	67.00%	67.00%	67.00%
CEZ Romania S.A.	Romania	100.00%	100.00%	100.00%	100.00%
CEZ Silesia B.V.	Netherlands	100.00%	100.00%	100.00%	100.00%
CEZ Skawina S.A.5)	Poland	100.00%	100.00%	100.00%	100.00%
CEZ Slovensko, s.r.o.	Slovakia	100.00%	100.00%	100.00%	100.00%
CEZ Srbija d.o.o.	Serbia	100.00%	100.00%	100.00%	100.00%
CEZ Towarowy Dom Maklerski
sp. z o.o.	Poland	100.00%	100.00%	100.00%	100.00%
CEZ Trade Albania Sh.P.K.6)	Albania	-	100.00%	-	100.00%
CEZ Trade Bulgaria EAD	Bulgaria	100.00%	100.00%	100.00%	100.00%

1) The company was newly established in 2015.

2) The company CEZ Bosna i Hercegovina d.o.o. was liquidated on February 5, 2015.

6) The company was liquidated on November 11, 2015.

³⁾ The company merged with the succession company CEZ Silesia B.V.

⁴⁾ In 2015 the company Elektrociepłownia Chorzów ELCHO sp. z o.o. changed its legal form to a joint-stock company and was renamed to CEZ Chorzów S.A.

⁵⁾ The company name Elektrownia Skawina S.A. was changed to CEZ Skawina S.A. in April 2015.

	Country of	% equity interest *		% voting interest
Subsidiaries	incorporation	2015	2014	2015	2014
CEZ Trade Polska sp. z o.o.	Poland	100.00%	100.00%	100.00%	100.00%
CEZ Trade Romania S.R.L.	Romania	100.00%	100.00%	100.00%	100.00%
CEZ Ukraine LLC	Ukraine	100.00%	100.00%	100.00%	100.00%
CEZ Vanzare S.A.	Romania	100.00%	100.00%	100.00%	100.00%
ČEZ Bohunice a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ Distribuce, a. s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ Distribuční služby, s.r.o.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ Energetické produkty, s.r.o.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ Energetické služby, s.r.o.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ ENERGOSERVIS spol. s r.o.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ ESCO, a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ ICT Services, a. s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ Inženýring, s.r.o.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ Korporátní služby, s.r.o.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ Nová energetika, a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ Obnovitelné zdroje, s.r.o.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ OZ uzavřený investiční fond a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ Prodej, s.r.o.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ Recyklace, s.r.o.	Czech Republic	100.00%	99.00%	100.00%	99.00%
ČEZ Teplárenská, a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ČEZ Zákaznické služby, s.r.o.	Czech Republic	100.00%	100.00%	100.00%	100.00%
Eco-Wind Construction S.A.	Poland	100.00%	75.00%	100.00%	75.00%
EGP INVEST, spol. s r.o.	Czech Republic	52.46%	52.46%	100.00%	100.00%
Elektrárna Dětmarovice, a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
Elektrárna Dukovany II, a. s.1)	Czech Republic	100.00%	-	100.00%	-
Elektrárna Mělník III, a. s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
Elektrárna Počerady, a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
Elektrárna Temelín II, a. s.1)	Czech Republic	100.00%	-	100.00%	-
Elektrárna Tisová, a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
Elektrownie Wiatrowe Lubiechowo
sp. z o.o.	Poland	100.00%	75.00%	100.00%	100.00%
Energetické centrum s.r.o.	Czech Republic	100.00%	100.00%	100.00%	100.00%
Energocentrum Vítkovice, a. s.1)	Czech Republic	100.00%	-	100.00%	-
Energotrans, a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
EVČ s.r.o.	Czech Republic	75.00%	75.00%	75.00%	75.00%
Farma Wiatrowa Leśce sp. z o.o. Farma Wiatrowa Wilkolaz-Bychawa	Poland	100.00%	75.00%	100.00%	100.00%
sp. z o.o.	Poland	100.00%	75.00%	100.00%	100.00%
Free Energy Project Oreshets EAD	Bulgaria	100.00%	100.00%	100.00%	100.00%
MARTIA a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
Mega Energy sp. z o.o.	Poland	100.00%	75.00%	100.00%	100.00%
M.W. Team Invest S.R.L.	Romania	100.00%	100.00%	100.00%	100.00%
Ovidiu Development S.R.L.	Romania	100.00%	100.00%	100.00%	100.00%
PRODECO, a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
Revitrans, a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
SD - Kolejová doprava, a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
Severočeské doly a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
Shared Services Albania Sh.A.	Albania	100.00%	100.00%	100.00%	100.00%
ŠKODA PRAHA a.s.	Czech Republic	100.00%	100.00%	100.00%	100.00%
ŠKODA PRAHA Invest s.r.o.	Czech Republic	100.00%	100.00%	100.00%	100.00%
Taidana Limited	Cyprus	100.00%	100.00%	100.00%	100.00%
TEC Varna EAD	Bulgaria	100.00%	100.00%	100.00%	100.00%
Telco Pro Services, a. s.	Czech Republic	100.00%	100.00%	100.00%	100.00%

	Country of	% equity interest *		% voting interest
Subsidiaries	incorporation	2015	2014	2015	2014
Tepelné hospodářství města Ústí nad
Labem s.r.o.	Czech Republic	55.83%	55.83%	55.83%	55.83%
TMK Hydroenergy Power S.R.L.	Romania	100.00%	100.00%	100.00%	100.00%
Tomis Team S.A.	Romania	100.00%	100.00%	100.00%	100.00%
ÚJV Řež, a. s.	Czech Republic	52.46%	52.46%	52.46%	52.46%
	Country of	% equity interest *		% voting interest
Joint-ventures	incorporation	2015	2014	2015	2014
Akcez Enerji A.S. Akenerji Dogal Gaz Ithalat Ihracat ve	Turkey	50.00%	50.00%	50.00%	50.00%
Toptan Ticaret A.S. Akenerji Elektrik Enerjisi Ithalat Ihracat	Turkey	37.36%	37.36%	50.00%	50.00%
ve Toptan Ticaret A.S.	Turkey	37.36%	37.36%	50.00%	50.00%
Akenerji Elektrik Üretim A.S.	Turkey	37.36%	37.36%	37.36%	37.36%
Akkur Enerji Üretim Ticaret ve Sanayi A.S.7)	Turkey	-	37.36%	-	50.00%
AK-EL Kemah Elektrik Üretim ve
Ticaret A.S.	Turkey	37.36%	37.36%	50.00%	50.00%
AK-EL Yalova Elektrik Üretim A.S. CM European Power International	Turkey	37.36%	37.36%	50.00%	50.00%
B.V.	Netherlands	50.00%	50.00%	50.00%	50.00%
CM European Power Slovakia s.r.o.	Slovakia	50.00%	50.00%	50.00%	50.00%
ČEZ Energo, s.r.o.	Czech Republic	50.10%	50.10%	50.10%	50.10%
Egemer Elektrik Üretim A.S. Jadrová energetická spoločnosť	Turkey	37.36%	37.36%	50.00%	50.00%
Slovenska, a. s.	Slovakia	49.00%	49.00%	50.00%	50.00%
JESS Invest, s. r. o.	Slovakia	49.00%	49.00%	50.00%	50.00%
LOMY MOŘINA spol. s r.o.	Czech Republic	51.05%	51.05%	51.05%	51.05%
Mem Enerji Elektrik Üretim Sanayi ve
Ticaret A.S.7)	Turkey	-	37.36%	-	50.00%
Sakarya Elektrik Dagitim A.S.	Turkey	50.00%	50.00%	50.00%	50.00%
Sakarya Elektrik Perakende Satis A.S.	Turkey	50.00%	50.00%	50.00%	50.00%

* The equity interest represents effective ownership interest of the Group.

⁷⁾ The company merged with the succession company Akenerji Elektrik Üretim A. S. with the effective date of January 1, 2015.

Subsidiaries with non-controlling interests

The following table shows the composition of Group's non-controlling interests and dividends paid to noncontrolling interests by respective subsidiaries (in CZK millions):

		2015	2014
	Non controlling interests		Non controlling interests	Dividends paid
CEZ Razpredelenie Bulgaria AD	2,997	-	3,367	223
ÚJV Řež, a. s. CEZ Elektro Bulgaria AD	730 404	- -	692 374	- -
Other	131	4	110	6
Total	4,262	4	4,543	229

The following table shows summarized financial information of subsidiaries that have material noncontrolling interests for the year ended December 31, 2015 (in CZK millions):

	CEZ Razpredelenie Bulgaria AD	ÚJV Řež, a. s.	CEZ Elektro Bulgaria AD
Ownership share of non-controlling interests	33.00 %	47.54 %	33.00 %
Current assets Non-current assets Current liabilities Non-current liabilities	1,404 9,847 (1,794) (709)	851 1,687 (482) (512)	4,174 51 (2,878) (124)
Equity Attributable to: Equity holders of parent Non-controlling interests	8,748 5,751 2,997	1,544 814 730	1,223 819 404
Revenues and other operating income Income before other income (expenses) and income taxes	5,077 (959)	1,263 130	19,538 136
Income before income taxes Income taxes	(969) 110	117 (28)	136 (15)
Net income (loss) Attributable to: Equity holders of parent Non-controlling interests	(859) (575) (284)	89 46 43	121 81 40
Total comprehensive income Attributable to: Equity holders of parent Non-controlling interests	(1,120) (750) (370)	80 44 36	89 59 30
Operating cash flow Investing cash flow Financing cash flow Net effect of currency translation in cash	1,407 (1,058) (206) (9)	(38) (14) 25 3	42 (1) (2) (21)
Net increase (decrease) in cash and cash equivalents	134	(24)	18

The following table shows summarized financial information of subsidiaries that have material noncontrolling interests for the year ended December 31, 2014 (in CZK millions):

	CEZ Razpredelenie Bulgaria AD	ÚJV Řež, a. s.	CEZ Elektro Bulgaria AD
Ownership share of non-controlling interests	33.00%	47.54%	33.00%
Current assets Non-current assets Current liabilities Non-current liabilities	1,354 11,240 (708) (1,634)	814 1,662 (445) (578)	4,467 56 (128) (3,261)
Equity Attributable to: Equity holders of parent Non-controlling interests	10,252 6,885 3,367	1,453 761 692	1,134 760 374
Revenues and other operating income Income before other income (expenses) and income taxes	5,081 (426)	1,232 59	20,219 382
Income before income taxes Income taxes	(434) 84	45 (2)	386 (37)
Net income (loss) Attributable to: Equity holders of parent Non-controlling interests	(350) (234) (116)	43 23 20	349 234 115
Total comprehensive income Attributable to: Equity holders of parent Non-controlling interests	(228) (151) (77)	42 22 20	361 242 119
Operating cash flow Investing cash flow Financing cash flow Net effect of currency translation in cash	300 (639) (783) 8	130 (141) 10 2	283 - (7) 9
Net increase (decrease) in cash and cash equivalents	(1,114)	1	285

Interests in joint-ventures

The following table shows the composition of Group's investment in joint-ventures and share of main financial results from joint-ventures for the year ended December 31, 2015 (in CZK millions):

				Group's share of joint-venture's:
	Carrying amount of investment	Dividends received	Net income (loss)	Other compre hensive income	Total compre hensive income
Akcez Enerji A.S. Sakarya Elektrik Dagitim A.S. Sakarya Elektrik Perakende Satis A.S.	1,938 273 (211)	- - -	(852) 80 162	(330) 128 (111)	(1,182) 208 51
Total Akcez Group	2,000	-	(610)	(313)	(923)
Akenerji Elektrik Üretim A.S. Egemer Elektrik Üretim A.S. Other subsidiaries of Akenerji Group	4,509 (2,289) (70)	- - -	(121) (1,160) 88	(785) (1) (31)	(906) (1,161) 57
Total Akenerji Group	2,150	-	, (1,193)	, (817)	, (2,010)
CM European Power International B.V. CM European Power Slovakia s.r.o. Jadrová energetická spoločnosť	745 730	- 108	6 105	(17) (29)	(11) 76
Slovenska, a. s. ČEZ Energo, s.r.o. Other	2,898 527 189	- - 20	(8) 32 13	(75) - (5)	(83) 32 8
Total	9,239	128	(1,655)	(1,256)	(2,911)

The following table shows the composition of Group's investment in joint-ventures and share of main financial results from joint-ventures for the year ended December 31, 2014 (in CZK millions):

			Group's share of joint-venture's:
	Carrying amount of investment	Dividends received	Net income (loss)	Other compre hensive income	Total compre hensive income
Akcez Enerji A.S. Sakarya Elektrik Dagitim A.S. Sakarya Elektrik Perakende Satis A.S.	2,778 65 80	- - -	(367) 67 281	108 (28) 50	(259) 39 331
Total Akcez Group	2,923	-	(19)	130	111
Akenerji Elektrik Üretim A.S. Akkur Enerji Üretim Ticaret ve Sanayi	6,012	-	(315)	249	(66)
A.S. *	(349)	-	(24)	52	28
Egemer Elektrik Üretim A.S. Mem Enerji Elektrik Üretim Sanayi ve	(1,128)	-	(678)	(95)	(773)
Ticaret A.S. *	(260)	-	(59)	30	(29)
Other subsidiaries of Akenerji Group	(116)	-	(119)	14	(105)
Total Akenerji Group	4,159	-	(1,195)	250	(945)
CM European Power International B.V.	646	-	(24)	27	3
CM European Power Slovakia s.r.o. Jadrová energetická spoločnosť	873	2	50	(9)	41
Slovenska, a. s.	2,981	-	(63)	14	(49)
ČEZ Energo, s.r.o.	494	-	34	4	38
Other	201	3	(6)	6	-
Total	12,277	5	(1,223)	422	(801)

* The company merged with the succession company Akenerji Elektrik Üretim A. S. with the effective date of January 1, 2015.

The joint-ventures Akcez Enerji A.S.and Akenerji Elektrik Üretim A.S. are formed by partnership of CEZ Group and Akkök Group in Turkey to invest mainly into power generation and electricity distribution projects. The joint-venture Jadrová energetická spoločnosť Slovenska, a. s. is a joint-venture formed by CEZ Group and the Slovak Government to prepare the project of building a new nuclear power source in Slovakia.

The following tables present summarized financial information of material joint-ventures for the year ended December 31, 2015 (in CZK millions):

		Out of								Total
		which: Cash and					Contri bution to			carrying amount
		cash	Non Non			JV's		of the
	Current	equiva	current	Current	current		group	the		invest
	assets	lents	assets	liabilities	liabilities	Equity	equity	Group	Goodwill	ment
Akcez Enerji A.S.	208	69	8,205	925	5,085	2,403	2,403	1,201	737	1,938
Sakarya Elektrik Dagitim A.S.	1,341	13	6,216	3,693	1,055	2,809	546	273	-	273
Sakarya Elektrik Perakende Satis A.S.	4,697	1,049	242	3,632	2	1,305	(422)	(211)	-	(211)
Total Akcez Group							2,527	1,263	737	2,000
Akenerji Elektrik Üretim A.S.	5,598	2,546	17,448	1,583	11,963	9,500	9,500	3,549	960	4,509
Egemer Elektrik Üretim A.S.	2,584	1,222	12,876	2,199	14,743	(1,482)	(6,127)	(2,289)	-	(2,289)
Other subsidiaries of Akenerji Group							(188)	(70)	-	(70)
Total Akenerji Group							3,185	1,190	960	2,150
CM European Power International B.V.	12	6	1,651	1	172	1,490	1,490	745	-	745
CM European Power Slovakia s.r.o. Jadrová energetická spoločnosť	4,742	122	127	571	2,219	2,079	1,460	730	-	730
Slovenska, a. s.	1,943	1,923	3,990	16	2	5,915	5,915	2,898	-	2,898
ČEZ Energo, s.r.o.	210	64	1,498	241	607	860	860	431	96	527

	Revenues and other operating income	Depre ciation and amorti zation	Interest income	Interest expense	Income taxes	Net income (loss)	Other compre hensive income	Total compre hensive income
Akcez Enerji A.S.	220	-	46	(387)	(1)	(1,019)	(439)	(1,458)
Sakarya Elektrik Dagitim A.S.	4,115	(169)	13	(186)	(97)	159	(384)	(225)
Sakarya Elektrik Perakende Satis A.S.	18,318	-	161	(1)	(77)	324	(222)	102
Akenerji Elektrik Üretim A.S.	2,817	(565)	107	(937)	55	(293)	(2,282)	(2,575)
Egemer Elektrik Üretim A.S.	11,399	(860)	44	(1,163)	1,057	(3,106)	(153)	(3,259)
CM European Power International B.V.	-	-	29	(12)	(3)	233	(35)	198
CM European Power Slovakia s.r.o. Jadrová energetická spoločnosť Slovenska,	1,516	-	363	(53)	(58)	210	(58)	152
a. s.	20	(20)	18	-	(3)	(16)	(154)	(170)
ČEZ Energo, s.r.o.	853	(119)	1	(10)	(10)	65	-	65

The following tables present summarized financial information of material joint-ventures for the year ended December 31, 2014 (in CZK millions):

	Current assets	Out of which: Cash and cash equiva lents	Non current assets	Current liabilities	Non current liabilities	Equity	Contri bution to JV's group equity	Share of the Group	Goodwill	Total carrying amount of the invest ment
Akcez Enerji A.S.	819	236	9,440	1,041	5,357	3,861	3,861	1,931	847	2,778
Sakarya Elektrik Dagitim A.S.	1,147	30	6,670	3,157	1,626	3,034	130	65	-	65
Sakarya Elektrik Perakende Satis A.S.	5,295	1,644	161	2,523	1,047	1,886	160	80	-	80
Total Akcez Group							4,151	2,076	847	2,923
Akenerji Elektrik Üretim A.S. Akkur Enerji Üretim Ticaret ve Sanayi	1,249	728	22,490	3,649	7,245	12,845	12,845	4,799	1,213	6,012
A.S.	516	4	4,547	521	1,541	3,001	(934)	(349)	-	(349)
Egemer Elektrik Üretim A.S. Mem Enerji Elektrik Üretim Sanayi ve	2,609	549	14,181	1,940	13,052	1,798	(3,019)	(1,128)	-	(1,128)
Ticaret A.S. Other subsidiaries of Akenerji Group	471	27	2,635	473	916	1,717	(696) (311)	(260) (116)	- -	(260) (116)
Total Akenerji Group							7,885	2,946	1,213	4,159
CM European Power International B.V.	1,070	13	640	418	-	1,292	1,292	646	-	646
CM European Power Slovakia s.r.o. Jadrová energetická spoločnosť	5,095	121	147	627	2,251	2,364	1,746	873	-	873
Slovenska, a. s.	2,190	2,171	3,914	18	2	6,084	6,084	2,981	-	2,981
ČEZ Energo, s.r.o.	205	44	1,178	206	381	796	796	398	96	494

	Revenues and other	Depre ciation and					Other compre	Total compre
	operating	amorti	Interest	Interest	Income	Net income	hensive	hensive
	income	zation	income	expense	taxes	(loss)	income	income
Akcez Enerji A.S.	241	-	88	(295)	-	(476)	217	(259)
Sakarya Elektrik Dagitim A.S.	3,975	(168)	52	(132)	(97)	134	200	334
Sakarya Elektrik Perakende Satis A.S.	14,659	-	226	(52)	(134)	561	101	662
Akenerji Elektrik Üretim A.S.	3,220	(381)	93	(730)	(51)	(772)	674	(98)
Akkur Enerji Üretim Ticaret ve Sanayi A.S.	275	(160)	6	(51)	12	(63)	162	99
Egemer Elektrik Üretim A.S.	3,416	(490)	11	(432)	160	(1,814)	96	(1,718)
Mem Enerji Elektrik Üretim Sanayi ve
Ticaret A.S.	175	(88)	15	(88)	(16)	(158)	92	(66)
CM European Power International B.V.	-	-	24	-	(5)	(475)	16	(459)
CM European Power Slovakia s.r.o.	2,371	-	389	(67)	(100)	99	25	124
Jadrová energetická spoločnosť Slovenska,
a. s.	21	(31)	23	(16)	(5)	(128)	66	(62)
ČEZ Energo, s.r.o.	704	(77)	2	(8)	(10)	67	10	77

10. Cash and Cash Equivalents

The composition of cash and cash equivalents at December 31, 2015 and 2014 is as follows (in CZK millions):

	2015	2014
Cash on hand and current accounts with banks	6,974	13,015
Short-term securities Term deposits	1,540 4,968	907 6,173
Total	13,482	20,095

At December 31, 2015 and 2014, cash and cash equivalents included foreign currency deposits of CZK 2,647 million and CZK 2,423 million, respectively.

The weighted average interest rate on short-term securities and term deposits at December 31, 2015 and 2014 was 0.4% and 0.5%, respectively. For the years 2015 and 2014 the weighted average interest rate was 0.4% and 0.6%, respectively.

11. Receivables, Net

The composition of receivables, net, at December 31, 2015 and 2014 is as follows (in CZK millions):

	2015	2014
Unbilled electricity supplied to retail customers Received advances from retail customers	1,209 -	6,328 (4,256)
Unbilled supplies to retail customers, net	1,209	2,072
Trade receivables	44,329	44,819
Taxes and fees, excluding income taxes	2,172	2,097
Other receivables	5,024	7,873
Allowance for doubtful receivables	(6,731)	(5,997)
Total	46,003	50,864

The information about receivables from related parties is included in Note 32.

Group's receivables pledged as security for liabilities at December 31, 2015 and 2014 are CZK 428 million and CZK 104 million, respectively.

At December 31, 2015 and 2014, the ageing analysis of receivables, net is as follows (in CZK millions):

	2015	2014
Not past due Past due but not impaired 1):	44,565	49,318
Less than 3 months	904	864
3 – 6 months 6 – 12 months	168 154	145 282
more than 12 months	212	255
Total	46,003	50,864

1) Past due but not impaired receivables include net receivables, for which the Group recorded an impairment allowance based on the collective assessment of impairment of receivables that are not individually significant. Movements in allowance for doubtful receivables (in CZK millions):

	2015	2014
Opening balance	5,997	7,219
Additions Reversals	2,009 (1,216)	2,205 (3,475)
Acquisition of subsidiaries Sale of subsidiaries	- -	18 (1)
Currency translation differences	(59)	31
Closing balance	6,731	5,997

12. Emission Rights

The following table summarizes the movements in the quantity (in thousand tons) and book value of emission rights and credits held by the Group during 2015 and 2014 (in CZK millions):

		2015		2014
	in thousands tons	in millions CZK	in thousands tons	in millions CZK
Emission rights and credits granted and purchased for own use:
Granted and purchased emission rights and credits at January 1 Emission rights granted Settlement of prior year actual emissions with	31,567 13,970	3,704 -	24,371 35,532	6,584 -
register Emission rights purchased Emission rights sold Emission credits purchased Currency translation differences	(26,328) 11,398 - 70 -	(3,707) 2,225 - - (10)	(29,010) 3,650 (5,403) 2,427 -	(3,422) 644 (99) 3 (6)
Granted and purchased emission rights and credits at December 31	30,677	2,212	31,567	3,704
Emission rights and credits held for trading:
Emission rights and credits held for trading at January 1 Settlement of prior year actual emissions with	5,042	1,017	4,045	424
register	(1,813)	(344)	-	-
Emission rights purchased	9,232	1,969	1,002	141
Emission rights sold	(9,672)	(2,086)	-	-
Emission credits purchased	389	3	517	2
Emission credits sold	(378)	(3)	(522)	(2)
Fair value adjustment	-	68	-	452
Emission rights and credits held for trading at December 31	2,800	624	5,042	1,017

During 2015 and 2014 total emissions of greenhouse gases made by the Group companies amounted to an equivalent of 29,097 thousand tons and 28,141 thousand tons of CO2, respectively. At December 31, 2015 and 2014 the Group recognized a provision for CO² emissions in total amount of CZK 2,709 million and CZK 4,525 million, respectively (see Notes 2.13 and 19).

At December 31, 2015 and 2014 the item Emission rights in the balance sheet includes also green and similar certificates in total amount CZK 620 million and CZK 376 million, respectively.

The following table shows the impact of transactions with emission rights and credits, green and similar certificates on income for the years ended December 31, 2015 and 2014 (in CZK millions):

	2015	2014
Gain on sales of granted emission rights	-	1,067
Net gain from trading with emission rights and credits	16	-
Gain on green and similar certificates	513	934
Net loss from derivatives	(56)	(388)
Creation of provision for CO2 emissions	(2,643)	(4,459)
Settlement of provision for CO2 emissions	4,444	3,857
Remitted emission rights and credits	(4,051)	(3,422)
Fair value adjustment	66	452
Net loss related to emission rights, emission credits
and green and similar certificates	(1,711)	(1,959)

The expense related to the gift tax on granted emission rights is included in the line Other financial expenses (see Notes 2.13 and 29).

13. Other Financial Assets, Net

Other financial assets, net, at December 31, 2015 and 2014 were as follows (in CZK millions):

	2015	2014
Debt securities held-to-maturity	3,852	6,299
Term deposits	7,315	8,373
Equity securities available-for-sale	946	2,112
Equity securities held for trading	6	6
Derivatives	20,609	22,648
Total	32,728	39,438

Derivatives balance comprises mainly the positive fair values of commodity trading contracts. Equity securities available-for-sale balance includes investments in money market fund.

Short-term debt securities held-to-maturity at December 31, 2015 and 2014 have the following effective interest rate structure (in CZK millions):

	2015	2014
Less than 2.00%	3,852	6,299
Total	3,852	6,299

ČEZ, a. s. concluded two put option agreements with Vršanská uhelná a.s. in March 2013. Under these contracts the Company has the right to transfer 100% of the shares of its subsidiary Elektrárna Počerady, a.s. to Vršanská uhelná a.s. First option for the year 2016 was not exercised, second option can be exercised in 2024 for cash consideration of CZK 2 billion. The option agreement can be inactivated to December 31, 2019. The contracts represent derivatives that will be settled by the delivery of unquoted equity instrument. Elektrárna Počerady, a.s. is not quoted on any market, there is no similar power plant in the Czech Republic for sale and also no similar transaction took place. There is also significant variability in the range of reasonable fair values for this equity instrument and it is difficult to reasonably assess the probabilities of various estimates. As a result the fair value cannot be reliably measured. Consequently, the put option is measured at cost. There was no option premium paid on the options and therefore the cost of these instruments is zero.

14. Other Current Assets

The composition of other current assets at December 31, 2015 and 2014 is as follows (in CZK millions):

	2015	2014
Advances paid Prepayments	2,098 1,297	2,026 1,273
Total	3,395	3,299

15. Equity

As at December 31, 2015 and 2014, the share capital of the Company registered in the Commercial Register totaled CZK 53,798,975,900 and consisted of 537,989,759 shares with a nominal value of CZK 100 per share. All shares are bearer common shares that are fully paid and listed and do not convey any special rights.

Movements of treasury shares in 2015 and 2014 (in pieces):

	2015	2014
Number of treasury shares at beginning of period Sales of treasury shares	3,875,021 (120,000)	3,875,021 -
Number of treasury shares at end of period	3,755,021	3,875,021

Treasury shares remaining at end of period are presented at cost as a deduction from equity.

Declared dividends per share were CZK 40 in 2015 and CZK 40 in 2014. Dividends from 2015 profit will be declared on the general meeting, which will be held in the first half of 2016.

Capital management

The primary objective of the Group's capital management is to keep its credit rating on the investment grade and on the level that is common in the industry and to maintain healthy capital ratios in order to support its business and maximize value for shareholders. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions.

The Group primarily monitors capital using the ratio of net debt to EBITDA. Considering the current structure and stability of cash flow and the development strategy, the goal of the Group is the level of this ratio in range 2.5 to 3.0. In addition, the Group also monitors capital using a total debt to total capital ratio. The Group's policy is to keep the total debt to total capital ratio below 50% in the long term.

EBITDA consists of income before income taxes and other income (expenses) plus depreciation and amortization, plus impairment of property, plant and equipment and intangible assets including goodwill and less gain (or loss) on sale of property, plant and equipment. The Group includes within total debt the long-term and short-term interest bearing loans and borrowings. Net debt is defined as total debt less cash and cash equivalents and highly liquid financial assets. Highly liquid financial assets consist for capital management purposes of short-term equity and debt securities available-for-sale, short-term debt securities held-to-maturity, long-term debt securities available-for-sale and both short-term and long-term deposits. Total capital is total equity attributable to equity holders of the parent plus total debt.

The calculation and evaluation of the ratios is done using consolidated figures (in CZK millions):

	2015	2014
Total long-term debt Total short-term loans	157,271 223	176,526 7,608
Total debt	157,494	184,134
Less: Cash and cash equivalents Highly liquid financial assets: Short-term equity securities available-for-sale (Note 13) Short-term debt securities held-to-maturity (Note 13) Short-term deposits (Note 13) Long-term deposits (Note 5) Long-term debt securities available-for-sale (Note 5)	(13,482) (946) (3,852) (7,315) - (676)	(20,095) (2,112) (6,299) (8,373) (10) -
Total net debt	131,223	147,245
Income before income taxes and other income (expenses) Depreciation and amortization Impairment of property, plant and equipment and intangible assets	28,961 28,619	36,946 27,705
including goodwill Gains and losses on sale of property, plant and equipment (Note 24 and 27)	7,685 (161)	8,025 (178)
EBITDA	65,104	72,498
Total equity attributable to equity holders of the parent Total debt	267,893 157,494	261,308 184,134
Total capital	425,387	445,442
Net debt to EBITDA ratio	2.02	2.03
Total debt to total capital ratio	37.0%	41.3%

16. Long-term Debt

Long-term debt at December 31, 2015 and 2014 is as follows (in CZK millions):

	2015	2014
3.005% Eurobonds, due 2038 (JPY 12,000 million)	2,466	2,283
5.825% Zero Coupon Eurobonds, due 2038 (EUR 6 million) 1)	-	42
5.750% Eurobonds, due 2015 (EUR 460 million)	-	12,749
2.845% Eurobonds, due 2039 (JPY 8,000 million)	1,645	1,523
5.000% Eurobonds, due 2021 (EUR 750 million)	20,203	20,715
6M Euribor + 1.25% Eurobonds, due 2019 (EUR 50 million)	1,347	1,380
3M Euribor + 0.35% Eurobonds, due 2017 (EUR 45 million)	1,198	1,219
4.875% Eurobonds, due 2025 (EUR 750 million)	20,188	20,701
4.500% Eurobonds, due 2020 (EUR 750 million)	20,140	20,633
2.160% Eurobonds, due 2023 (JPY 11,500 million)	2,372	2,195
4.600% Eurobonds, due 2023 (CZK 1,250 million)	1,248	1,248
3.625% Eurobonds, due 2016 (EUR 340 million)	9,176	9,397
2.150%*IR CPI Eurobonds, due 2021 (EUR 100 million) 2)	2,702	2,773
4.102% Eurobonds, due 2021 (EUR 50 million)	1,347	1,382
4.250% U.S. bonds, due 2022 (USD 289 million) 3)	7,111	15,847
5.625% U.S. bonds, due 2042 (USD 300 million)	7,368	6,775
4.375% Eurobonds, due 2042 (EUR 50 million)	1,325	1,358
4.500% Eurobonds, due 2047 (EUR 50 million)	1,325	1,358
4.383% Eurobonds, due 2047 (EUR 80 million)	2,162	2,218
3.000% Eurobonds, due 2028 (EUR 500 million)	13,325	13,655
4.500% registered bonds, due 2030 (EUR 40 million)	1,060	1,086
4.750% registered bonds, due 2023 (EUR 40 million)	1,070	1,096
4.700% registered bonds, due 2032 (EUR 40 million)	1,075	1,102
4.270% registered bonds, due 2047 (EUR 61 million)	1,621	1,662
3.550% registered bonds, due 2038 (EUR 30 million)	807	828
Exchangeable bonds, due 2017 (EUR 470.2 million) 4)	12,420	12,560
Total bonds and debentures	134,701	157,785
Less: Current portion	(9,176)	(12,749)
Bonds and debentures, net of current portion	125,525	145,036
Long-term bank loans:
Less than 2.00% p. a.	18,040	18,266
2.00% to 2.99% p. a.	4,530	471
3.00% to 3.99% p. a.	-	4
Total long-term bank loans	22,570	18,741
Less: Current portion	(2,520)	(2,925)
Long-term bank loans, net of current portion	20,050	15,816

Total long-term debt	157,271	176,526
Less: Current portion	(11,696)	(15,674)
Total long-term debt, net of current portion	145,575	160,852

1) In December 2015, the Group bought back the bonds in full amount.

2) 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.

3) In November 2015, the original nominal value of the issue (EUR 700 million) was reduced by bought back of the bonds in a nominal value of EUR 411 million.

4) Bonds are exchangeable for ordinary shares of MOL Hungarian Oil and Gas PLC (see Note 5). The bonds carry no interest and the separation of embedded conversion option resulted in effective interest rate of 1.43% p. a.

The interest rates indicated above are historical rates for fixed rate debt and current market rates for floating rate debt. The actual interest payments are affected by interest rate risk hedging carried out by the Group.

All long-term debt is recognized in original currencies while the related hedging derivatives are recognized using the method described in Note 2.20.

The future maturities of long-term debt are as follows (in CZK millions):

	2015	2014
Current portion	11,696	15,674
Between 1 and 2 years	16,503	11,518
Between 2 and 3 years	2,840	15,845
Between 3 and 4 years	4,186	2,010
Between 4 and 5 years	22,926	3,390
Thereafter	99,120	128,089
Total long-term debt	157,271	176,526

The following table analyses the long-term debt by currency (in millions):

	2015		2014
	Foreign currency	CZK	Foreign currency	CZK
EUR	4,827	130,457	5,271	146,134
USD	583	14,479	991	22,622
JPY	31,440	6,483	31,435	6,001
BGN	24	330	33	471
PLN	662	4,199	-	-
CZK	-	1,323	-	1,298
Total long-term debt		157,271		176,526

Long-term debt with floating interest rates exposes the Group to interest rate risk. The following table summarizes long-term debt with floating rates of interest by contractual reprising dates at December 31, 2015 and 2014 without considering interest rate hedging (in CZK millions):

	2015	2014
Floating rate long-term debt with interest rate fixed from 1 to 3 months	5,472	1,265
with interest rate fixed from 3 months to 1 year with interest rate fixed more than 1 year	19,147 330	19,567 471
Total floating rate long-term debt	24,949	21,303
Fixed rate long-term debt	132,322	155,223
Total long-term debt	157,271	176,526

Fixed rate long-term debt exposes the Group to the risk of changes in fair values of these financial instruments. For related fair value information and risk management policies of all financial instruments see Note 17 and Note 18.

17. Fair Value of Financial Instruments

Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm's length transaction, other than in a forced or liquidation sale. Fair values are obtained from quoted market prices, discounted cash flow models and option pricing models, as appropriate.

The following methods and assumptions are used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents, current investments

The carrying amount of cash and other current financial assets approximates fair value due to the relatively short-term maturity of these financial instruments.

Securities held for trading

The fair values of equity and debt securities that are held for trading are estimated based on quoted market prices.

Investments

The fair values of instruments, which are publicly traded on active markets, are determined based on quoted market prices. For unquoted equity instruments the Group considered the use of valuation models and concluded that the range of reasonable fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed. Therefore unquoted equity instruments are carried at cost and the fair value information is not disclosed.

Short-term receivables and payables

The carrying amount of receivables and payables approximates fair value due to the short-term maturity of these financial instruments.

Short-term loans

The carrying amount approximates fair value because of the short period to maturity of those instruments.

Long-term debt

The fair value of long-term debt is based on the quoted market price for the same or similar issues or on the current rates available for debt with the same maturity profile. The carrying amount of long-term debt and other payables with variable interest rates approximates their fair values.

Derivatives

The fair value of derivatives is based upon mark to market valuations.

Carrying amounts and the estimated fair values of financial instruments at December 31, 2015 and 2014 are as follows (in CZK millions):

		2015		2014
	Cate gory	Carrying amount	Fair value	Carrying amount	Fair value
Assets:
Investments:
Restricted debt securities available-for-sale Restricted cash Financial assets in progress Term deposits Debt securities available-for-sale Equity securities available-for sale * Long-term receivables	AFS LaR LaR LaR AFS AFS LaR	14,320 3,739 - - 676 12,979 1,937	14,320 3,739 - - 676 12,979 1,937	14,820 2,651 4 10 - 11,565 1,842	14,820 2,651 4 10 - 11,565 1,842
Current assets:
Receivables Cash and cash equivalents Debt securities held-to-maturity Term deposits Equity securities held for trading Equity securities available-for sale Other current assets	LaR LaR HTM LaR HFT AFS LaR	43,190 13,482 3,852 7,315 6 946 2,098	43,190 13,482 3,852 7,315 6 946 2,098	48,767 20,095 6,299 8,373 6 2,112 2,026	48,767 20,095 6,299 8,373 6 2,112 2,026
Liabilities:
Long-term debt Short-term loans Accounts payable	AC AC AC	(157,271) (223) (41,137)	(175,831) (223) (41,137)	(176,526) (7,608) (44,068)	(200,746) (7,608) (44,068)
Derivatives:
Cash flow hedges:
Short-term receivables Long-term receivables Short-term liabilities Long-term liabilities	HFT HFT HFT HFT	549 6,242 (111) (626)	549 6,242 (111) (626)	211 4,519 (173) (3,464)	211 4,519 (173) (3,464)
Total cash flow hedges		6,054	6,054	1,093	1,093

* Some of the equity securities available-for-sale are carried at cost as the fair value cannot be reliably measured.

			2015		2014
	Cate gory	Carrying amount	Fair value	Carrying amount	Fair value
Commodity derivatives:
Short-term receivables Short-term liabilities	HFT HFT	19,178 (15,823)	19,178 (15,823)	21,038 (15,327)	21,038 (15,327)
Total commodity derivatives		3,355	3,355	5,711	5,711
Other derivatives:
Short-term receivables Long-term receivables Short-term liabilities Long-term liabilities	HFT HFT HFT HFT	881 764 (939) (1,330)	881 764 (939) (1,330)	1,399 937 (763) (2,386)	1,399 937 (763) (2,386)
Total other derivatives		(624)	(624)	(813)	(813)

LaR Loans and receivables

AFS Available-for-sale investments

HTM Held-to-maturity instruments

HFT Held for trading or hedging instruments

AC Financial liabilities at amortized cost

17.1. Fair Value Hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

There were no transfers between the levels in 2015 and 2014.

As at December 31, 2015, the fair value hierarchy was the following (in CZK millions):

Assets measured at fair value

	Total	Level 1	Level 2	Level 3
Commodity derivatives	19,178	514	18,664	-
Cash flow hedges	6,791	2,259	4,532	-
Other derivatives	1,645	35	1,610	-
Equity securities held for trading	6	6	-	-
Available-for-sale restricted debt
securities	14,320	14,320	-	-
Debt securities available-for-sale	676	676	-	-
Available-for-sale equity securities *	12,979	12,979	-	-
Liabilities measured at fair value
	Total	Level 1	Level 2	Level 3
Commodity derivatives	(15,823)	(1,793)	(14,030)	-
Cash flow hedges	(737)	(2)	(735)	-
Other derivatives	(2,269)	(507)	(1,762)	-
Assets and liabilities for which fair
values are disclosed
	Total	Level 1	Level 2	Level 3
Debt securities held-to-maturity	3,852	-	3,852	-
Long-term debt	(175,831)	(126,220)	(49,611)	-

As at December 31, 2014, the fair value hierarchy was the following (in CZK millions):

Assets measured at fair value
	Total	Level 1	Level 2	Level 3
Commodity derivatives	21,038	1,144	19,894	-
Cash flow hedges	4,730	996	3,734	-
Other derivatives	2,336	367	1,969	-
Equity securities held for trading	6	6	-	-
Available-for-sale restricted debt securities	14,820	14,820	-	-
Available-for-sale equity securities *	11,565	11,565	-	-
Liabilities measured at fair value
	Total	Level 1	Level 2	Level 3
Commodity derivatives Cash flow hedges	(15,327) (3,637)	(2,190) (110)	(13,137) (3,527)	- -
Other derivatives	(3,149)	(95)	(3,054)	-
Assets and liabilities for which fair values are disclosed
	Total	Level 1	Level 2	Level 3
Debt securities held-to-maturity Long-term debt	6,309 (200,746)	- (154,073)	6,309 (46,673)	- -

* Some of the available-for-sale equity securities are carried at cost as the fair value cannot be reliably measured.

The Group enters into derivative financial instruments with various counterparties, principally large power and utility groups and financial institutions with high credit ratings. Derivatives valued using valuation techniques with market observable inputs are mainly commodity forward and futures contracts, foreign exchange forward contracts, interest rate swaps and options. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations and option pricing models (e.g. Black-Scholes). The models incorporate various inputs including the forward rate curves of the underlying commodity, foreign exchange spot and forward rates and interest rate curves.

17.2. Offsetting of Financial Instruments

The following table shows the recognized financial instruments that are offset, or subject to enforceable master netting agreement or other similar agreements but not offset, as of December 31, 2015 and 2014 (in CZK millions):

	2015		2014
	Financial assets	Financial liabilities	Financial assets	Financial liabilities
Derivatives	27,615	(18,829)	28,104	(22,113)
Other financial instruments * Collaterals paid (received) **	23,610 1,309	(24,758) (536)	24,593 3,345	(19,944) (2,117)
Gross financial assets / liabilities Assets / liabilities set off under IAS 32	52,534 -	(44,123) -	56,042 -	(44,174) -
Amounts presented in the balance sheet	52,534	(44,123)	56,042	(44,174)
Effect of master netting agreements	(33,402)	33,402	(38,577)	38,577
Net amount after master netting agreements	19,132	(10,721)	17,465	(5,597)

* Other financial instruments consist of invoices due from derivative trading and are included in Receivables, net or Trade and other payables.

** Collaterals paid are included in Receivables, net and collaterals received are included in Trade and other payables.

When trading with derivative instruments, ČEZ enters into the EFET and ISDA framework contracts. These contracts generally allow mutual offset of receivables and payables upon the premature termination of agreement. The reason for premature termination is insolvency or non-fulfillment of agreed terms by the counterparty. The right to mutual offset is either embedded in the framework contract or results from the security provided. There is CSA (Credit Support Annex) concluded with some counterparties defining the permitted limit of exposure. When the limit is exceeded, there is a transfer of cash reducing exposure below an agreed level. Cash security (collateral) is also included in the final offset.

The information about offset of unbilled electricity supplied to retail customers with advances received is included in Note 11 and 22.

Short-term derivative assets are included in the balance sheet in Other financial assets, net, long-term derivative assets in Investments and other financial assets, net, long-term derivative liabilities in Other long-term liabilities and short-term derivative liabilities in Trade and other payables.

18. Financial Risk Management

Risk management approach

A risk management system is being successfully developed in order to protect the Group's value while taking the level of risk acceptable for the shareholders. In the Group, the risk is defined as a potential difference between the actual and the expected (planned) developments and is measured by means of the extent of such difference in CZK and the likelihood with which such a difference may occur.

Since 2005 a risk capital concept has been applied within the Group. The concept allows the setting of basic cap for partial risk limits and, in particular, the unified quantification of all kinds of risks. The value of aggregate annual risk limit (Profit@Risk) is approved by the Board of Directors based on the Risk Management Committee proposal for every financial year. The proposed limit value is derived from historical volatility of profit, revenues and costs of the Group (the top-down method). The approved value in CZK is set on the basis of a 95% confidence level and expresses a maximum profit decrease, which is the Group willing to take in order to reach the planned annual profit.

The bottom-up method is used for setting and updating the Risk frames. The Risk frames include the definition of risk and departments/units of the Group for which the frame is obligatory; definition of rules and responsibilities for risk management; permitted instruments and methods of risk management and actual risk limits, including a limit which expresses the share in the annual Profit@Risk limit.

Since 2009 the main Business Plan market risks are quantified (EBITDA@Risk based on MonteCarlo simulation in Y+1 to Y+5 horizon). The market risks are actively managed through gradual electricity sales and emission allowances' purchases in the following 6-year horizon, closing long-term contracts for electricity sale and emission allowances purchase and the FX and IR risk hedging in medium-term horizon. In Business Plan horizon, the risk management is also based on Debt Capacity concept which enables to assess the impact of main Investment and other Activities (incl. the risk characteristics), on expected cash flow and total debt in order to maintain corporate rating. Risks of Investment Projects are also managed and monitored based on unified quantification of all kinds of risk according to Group methodology.

Risk management organization

The supreme authority responsible for risk management in ČEZ, a. s. is the CFO, except for approval of the aggregate annual budget risk limit (Profit@Risk) within the competence of the ČEZ, a. s. Board of Directors. CFO decides, based on the recommendation of the Risk Management Committee, on the development of a system of risk management, on an overall allocation of risk capital to the individual risks and organizational units, he approves obligatory rules, responsibilities and limit structure for the management of partial risks.

The Risk Management Committee (advisory committee of CFO) continuously monitors an overall risk impact on the Group, including Group risk limits utilization, status of risks linked to Business Plan horizon, hedging strategies status, assessment of impact of Investment and other Activities on potential Group debt capacity and cash flow in order to maintain corporate rating.

Overview and methods of risk management

The Group applies a unified categorization of the Group's risks which reflects the specifics of a corporate, i.e. non-banking company, and focuses on primary causes of unexpected development. The risks are divided into four basic categories listed below.

1. Market risks	2. Credit risks	3. Operation risks	4. Business risks
1.1 Financial (FX, IR)	2.1 Counterparty default	3.1 Operating	4.1 Strategic
1.2 Commodity	2.2 Supplier default	3.2 Internal change	4.2 Political
1.3 Volumetric	2.3 Settlement	3.3 Liquidity management	4.3 Regulatory
1.4 Market liquidity		3.4 Security	4.4 Reputation

From the view of risk management, the Group activities can be divided into two basic groups:

Activities with the unified quantification of the share of respective activity in the aggregate risk limit of the Group (i.e. using specific likelihood, it is possible to objectively determine what risk is associated

with an activity/planned profit). These risks are managed by the rules and limits set by the CFO of ČEZ, a. s. based on the recommendation of the Risk Management Committee and, concurrently, in accordance with governing documents of the respective units/processes of the Group.

Activities whose share in the aggregate risk limit of the Group has not been quantified so far or for objective reasons. These risks are managed by the responsible owners of the relevant processes in accordance with internal governing documents of the respective units/processes of the Group.

For all risks quantified on a unified basis, a partial risk limit is set whose continuous utilization is evaluated at least once a month and is usually defined as a sum of the actually expected deviation of expected annual profit from the plan and the potential risk of loss on a 95% confidence. The Group's methodologies and data provide for a unified quantification of the following risks:

Market risks: financial (currency, interest and stock price) risks, commodity prices (electricity, emission allowances, coal, gas, crude oil), volume (volume of electricity produced by wind power plants)
Credit risks: financial and business counterparty risk and electricity, gas and heat end customer risk
Operational risks: risks of nuclear and fossil power plants operation in the Czech Republic, investment risks.

The development of the Group's quantified risks is reported to the Risk Management Committee every month through 3 regular reports:

Annual budget risks (annual Profit@Risk limit utilization)
Business plan risks (EBITDA@Risk based on MonteCarlo simulation)
Debt capacity (actual deviation from the optimal debt within Y+5 horizon, derived from rating agency requirements on debt indicators in order to preserve the ČEZ rating).

18.1. Qualitative description of risks associated with financial instruments

Commodity risks

The development of electricity, emission allowances, coal and gas prices is a key risk factor of the Group's value. The current system of commodity risk management is focused on (i) the margin from the own electricity production sales, i.e. from trades resulting in optimizing the sales of the Group's production and in optimizing the emission allowances position for production (the potential risk is managed on the EaR, VaR and the EBITDA@Risk bases), and (ii) the margin from the proprietary trading of commodities within the whole Group (the potential risk is managed on the VaR basis).

Market financial risks (currency, interest and stock price risks)

The development of foreign exchange rates, interest rates and stock prices is a significant risk factor of the Group's value. The current system of financial risk management is focused mainly on (i) the future cash flows and (ii) financial trades which are realized for the purposes of an overall risk position management in accordance with the risk limits (the potential risk is managed on the basis of VaR, EBITDA@Risk and complementary position limits). Own financial instruments (i.e. active and passive financial trades and derivative trades) are realized entirely in the context of an overall expected cash flows of the Group (including operational and investment foreign currency flows).

Credit risks

With respect to the Group's activities managed on a centralized level, credit exposures of individual financial partners and wholesale partners are managed in accordance with individual credit limits. The individual limits are set and continuously updated according to the counterparty's credibility (in accordance with international rating and internal financial evaluation of counterparties with no international rating).

With respect to the electricity sales to end customers in the Czech Republic, the actual credibility is monitored for each business partner based on payment history (in addition, the financial standing is considered for selected partners). This credibility determines the payment conditions of partners (i.e. it indirectly determines an amount of an approved credit exposure) and also serves to quantify both the expected and the potential losses.

The Group's maximum exposure to credit risk to receivables and other financial instruments as at December 31, 2015 and 2014 is the carrying value of each class of financial assets except for financial guarantees. Credit risk from balances with banks and financial institutions is managed by the Group's risk management department in cooperation with Group's treasury department in accordance with the Group's policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty.

In accordance with the credit risk methodology applied to the banking sector per Basel II, every month the expected and potential losses are quantified on a 95% confidence level. It means that the share of all credit risks mentioned above in the aggregate annual Profit@Risk limit is quantified and evaluated.

Liquidity risks

The Group's liquidity risk is primarily perceived as an operational risk (risk of liquidity management) and a risk factor is the internal ability to effectively manage the future cash flows planning process in the Group and to secure the adequate liquidity and effective short-term financing (the risk is managed on a qualitative basis). The fundamental liquidity risk management (i.e. liquidity risk within the meaning for banking purposes) is covered by the risk management system as a whole. In any given period, the future deviations of the Group's expected cash flows are managed in accordance with the aggregate risk limit and in the context of the actual and the targeted debt/equity ratio of the Group.

18.2. Quantitative description of risks associated with financial instruments

Commodity risks

The required quantitative information on risks (i.e. a potential change of market value resulting from the effects of risk factors as at December 31) was prepared based on the assumptions given below:

the indicator of risk associated with financial instruments is defined as the monthly parametric VaR (95% confidence) which expresses a potential change in fair value of contracts classified as derivatives under IAS 39 (the underlying commodities in the Group's derivative transactions are: electricity, EUA and CER/ERU emission allowances, gas, coal ARA, Richards Bay, Newcastle and crude oil and crude oil products)
highly probable forecasted future electricity generation sales with the delivery in the CZ power grid are included in the VAR calculation to reflect the hedging character of significant portion of the existing derivative sales of electricity with delivery in Germany
for the calculation of volatility and correlations (between commodity prices), the SMA (Simple Moving Average) method is applied to 60 daily time series
the source of market data is mainly EEX, PXE and ICE
the indicator VaR illustrates mainly the impact of revaluation of above mentioned financial instruments to statement of income.

Potential impact of the above risk factors as at December 31 (in CZK millions):

	2015	2014
Monthly VaR (95%) – impact of changes in commodity
prices	616	721

Currency risks

The required quantitative information on risks (i.e. a potential change of market value resulting from the effects of currency risk as at December 31) was prepared based on the assumptions given below:

the indicator of currency risk is defined as the monthly VaR (95% confidence)
for the calculation of VaR, based on volatility and internal correlations of each considered currency, the method of historical simulation VaR is applied to 90 daily historical time series
the relevant currency position is defined mainly as a discounted value of foreign currency cash flows from all contracted financial instruments, from expected foreign currency operational revenues and costs in 2016 and from highly probable forecasted foreign currency revenues, costs or capital expenditures that are being hedged by financial instruments
the relevant currency positions reflect all significant foreign-currency flows of the Group companies in the monitored basket of foreign currencies
the source of market FX and interest rate data is mainly IS Reuters and IS Bloomberg
the indicator VaR illustrates mainly the impact of revaluation of above mentioned currency position to statement of income.

Potential impact of the currency risk as at December 31 (in CZK millions):

	2015	2014
Monthly currency VaR (95% confidence)	848	833

Interest risks

For the quantification of the potential impact of the interest risk was chosen the sensitivity of the interest revenue and cost to the parallel shift of yield curves. The approximate quantification (as at December 31) was based on the following assumptions:

parallel shift of the yield curves (+10bp) was selected as the indicator of interest risk
the P/L sensitivity is measured as an annual change of the interest revenue and cost resulting from the interest-sensitive positions as at December 31
the considered interest positions reflect all significant interest-sensitive positions of the Group companies
the source of market interest rates is mainly IS Reuters and IS Bloomberg.

Potential impact of the interest risk as at December 31 (in CZK millions):

2015 2014

IR sensitivity* to parallel yield curve shift (+10bp)	(9)	(7)

* Negative result denotes higher increase in interest costs than in interest revenues

Stock price risks

The required quantitative information on risks (i.e. a potential change of financial instruments market value resulting from the effects of stock price risk as at December 31) was based on the assumptions given below:

monthly VaR (95% confidence) was selected as the indicator of stock price risk
the relevant stock position is defined as market value of stocks/stock options as at December 31
the considered stock positions reflect all significant stock-sensitive deals of the CEZ Group companies
the relevant volatility and standard deviation is determined from risk module IS Bloomberg
the source of market data is IS Bloomberg and ČNB data
the indicator VaR illustrates mainly impact of revaluation of above mentioned stock position, classified as equity securities available-for-sale, to statement of comprehensive income.

Potential impact of the stock price risk as at December 31 (in CZK millions):

	2015 2014
Monthly stock VaR (95% confidence)	985	1,016

Maximum credit exposure from provided guarantees at December 31 (in CZK millions):

	2015	2014
Guarantees provided to joint-ventures *	2,998	3,073

* Some of the guarantees could be called until August 2021 at the latest.

The guarantees provided relate to bank loans. The beneficiary may claim the guarantee only upon failure to comply with certain conditions of loans. The companies whose liabilities are the subject to the guarantees currently comply with their obligations.

Liquidity risk

Contractual maturity profile of financial liabilities at December 31, 2015 (in CZK millions):

	Loans	Bonds and debentures	Trade payables and other liabilities	Derivatives *	Guarantees issued **
Due in 2016	2,882	14,446	41,291	260,322	2,998
Due in 2017	3,004	18,550	159	27,968	-
Due in 2018	2,949	4,934	2	8,457	-
Due in 2019	2,939	6,284	1,751	3,679	-
Due in 2020	2,871	25,056	-	5,998	-
Thereafter	8,848	120,959	-	55,754	-
Total	23,493	190,229	43,203	362,178	2,998

Contractual maturity profile of financial liabilities at December 31, 2014 (in CZK millions):

	Loans	Bonds and debentures	Trade payables and other liabilities	Derivatives *	Guarantees issued **
Due in 2015	10,673	19,136	44,168	329,327	3,073
Due in 2016	2,231	15,049	282	54,418	-
Due in 2017	2,152	19,090	15	14,206	-
Due in 2018	2,082	5,306	-	7,442	-
Due in 2019	2,068	6,686	1,750	3,965	-
Thereafter	7,799	156,915	-	70,057	-
Total	27,005	222,182	46,215	479,415	3,073

* Contractual maturities for derivatives represent contractual cash out-flows of these instruments, but at the same time the Group will receive corresponding consideration. For fair values of derivatives see Note 17.

** Maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.

The committed credit facilities available to the Group as at December 31, 2015 and 2014 amounted to CZK 30.5 billion and CZK 24.4 billion, respectively.

18.3. Hedge accounting

The Group enters into cash flow hedges of future highly probable cash inflows from the sales denominated in EUR against the currency risk. The hedged cash flows are expected to occur in the period from 2016 to 2019. The hedging instruments as at December 31, 2015 and 2014 are the EUR denominated liabilities from the issued Eurobonds and bank loans in the total amount of EUR 2.9 billion and EUR 3.8 billion, respectively, and currency forward contracts and swaps. The fair value of these derivative hedging instruments (currency forward contracts and swaps) amounted to CZK 1,245 million and CZK (1,749) million at December 31, 2015 and 2014, respectively.

The Group enters into cash flow hedges of future highly probable purchases of emission allowances which are expected to occur in 2016. The hedging instruments as at December 31, 2015 and 2014 are the futures contracts for the purchase of allowances equivalent to 7.3 million tons and 13.1 million tons of CO² emissions, respectively. The fair value of these derivative hedging instruments amounted to CZK 546 million and CZK 513 million at December 31, 2015 and 2014, respectively.

The Group also enters into cash flow hedges of highly probable future sales of electricity in the Czech Republic from 2017 to 2021. The hedging instruments are the futures and forward contracts electricity sales in Germany. The fair value of these derivative hedging instruments amounted to CZK 4,263 million and CZK 2,329 million at December 31, 2015 and 2014, respectively.

In 2015 and 2014 the amounts removed from equity in respect of cash flow hedges were recognized in profit or loss and included in the lines Sales of electricity and related services, Gains and losses from commodity derivative trading, net, Emission rights, net, Other financial expenses and Other financial income. In 2015 and 2014 the Group recognized in profit or loss the ineffectiveness that arises from cash flow hedges in the amount of CZK (791) million and CZK 197 million, respectively. The ineffectiveness in 2015 and 2014 mainly relates to transactions for which the hedged items are no more highly probable to occur.

19. Provisions

		2015			2014
	Non-current	Current	Total	Non-current	Current	Total
Nuclear provisions Provision for reclamation of	48,083	2,038	50,121	45,292	2,010	47,302
mines and mining damages Provision for waste storage	7,289	274	7,563	6,454	295	6,749
reclamation	1,501	99	1,600	1,478	96	1,574
Provision for CO2 emissions (see Note 12)	-	2,709	2,709	-	4,525	4,525
Other provisions	3,652	3,099	6,751	4,079	2,832	6,911
Total	60,525	8,219	68,744	57,303	9,758	67,061

Provisions at December 31, 2015 and 2014 are as follows (in CZK millions):

19.1. Nuclear Provisions

The Company operates two nuclear power plants. Nuclear power plant Dukovany consists of four units which were put into service from 1985 to 1987. Nuclear power plant Temelín has two units which have started commercial operation in 2002 and 2003. The Czech parliament has enacted a Nuclear Act ("Act") which defines certain obligations for the decontamination and dismantling ("decommissioning") of nuclear facilities and the disposal of radioactive waste and spent fuel ("disposal"). The Act requires that all nuclear parts of plant and equipment be decommissioned following the end of the plant's operating life. For the purpose of accounting for the nuclear provisions, it is assumed that the end of the plant's operating life will be 2027 for Dukovany and 2042 for Temelín. A 2013 Dukovany and a 2014 Temelín decommissioning cost study estimate that nuclear decommissioning will cost CZK 22.4 billion and CZK 18.4 billion, respectively.

The Company makes contributions to a restricted bank account in the amount of the nuclear provisions recorded under the Act. These restricted funds can be invested in government bonds and term deposits in accordance with the legislation and are shown in the balance sheet as part of Restricted financial assets (see Note 4).

Pursuant to the Act, the Ministry of Industry and Trade established the Radioactive Waste Repository Authority ("RAWRA") as the central organizer and operator of facilities for the final disposal of radioactive waste and spent fuel. The RAWRA operates, supervises and is responsible for disposal facilities and for disposal of radioactive waste and spent fuel therein. The activities of the RAWRA are financed through a "nuclear account" funded by the originators of radioactive waste. Contribution to the nuclear account was stated by a government decision at 50 CZK per MWh produced at nuclear power plants. In 2015 and 2014, the payments to the nuclear account amounted to CZK 1,342 million and CZK 1,516 million, respectively. The originator of radioactive waste and spent fuel directly covers all costs associated with interim storage of radioactive waste and spent fuel.

The Group has established provisions as described in Note 2.24, to recognize its estimated liabilities for decommissioning and spent fuel storage. The following is a summary of the provisions for the years ended December 31, 2015 and 2014 (in CZK millions):

		Accumulated provisions
	Nuclear	Spent fuel storage
	Decommis sioning	Interim	Long-term	Total
Balance at December 31, 2013	13,746	7,191	22,890	43,827
Movements during 2014: Discount accretion and effect of inflation Provision charged to income statement Effect of change in estimate charged to income statement Effect of change in estimate added to fixed assets (Note 2.24) Current cash expenditures	481 - - 2,582 (1)	252 472 156 - (706)	801 - - 954 (1,516)	1,534 472 156 3,536 (2,223)
Balance at December 31, 2014	16,808	7,365	23,129	47,302
Movements during 2015: Discount accretion and effect of inflation Provision charged to income statement Effect of change in estimate charged to income statement Effect of change in estimate added to fixed assets (Note 2.24) Current cash expenditures	504 - - 2,186 -	221 544 22 64 (716)	694 - - 642 (1,342)	1,419 544 22 2,892 (2,058)
Balance at December 31, 2015	19,498	7,500	23,123	50,121

The current cash expenditures for the long-term storage of spent nuclear fuel represent payments to the state controlled nuclear account and the expenditures for interim storage represent mainly the purchase of interim fuel storage containers and other related equipment.

In 2015 and 2014 the Group recorded the change in estimate for interim spent fuel storage due to the change in expectations of future storage costs and change in discount rate, the change in estimate in provision for nuclear decommissioning due to the change in discount rate and the change in long-term spent fuel storage due to the modification of the expected output of the nuclear power plants and change in discount rate.

The actual decommissioning and spent fuel storage costs could vary substantially from the above estimates because of new regulatory requirements, changes in technology, increased costs of labor, materials, and equipment and/or the actual time required to complete all decommissioning, disposal and storage activities.

19.2. Provision for Mine Reclamation and Mining Damages and Waste Storage Reclamation

The following table shows the movements of provisions for the years ended December 31, 2015 and 2014 (in CZK millions):

	Mine reclamation and damages	Waste storage
Balance at December 31, 2013	6,561	1,518
Movements during 2014: Discount accretion and effect of inflation Provision charged to income statement Effect of change in estimate added to fixed assets (Note 2.25) Current cash expenditures	219 102 170 (303)	53 - 93 (90)
Balance at December 31, 2014	6,749	1,574
Movements during 2015: Discount accretion and effect of inflation Provision charged to income statement Effect of change in estimate added to fixed assets (Note 2.25) Current cash expenditures Reversal of provision	194 55 860 (295) -	47 - 35 (47) (9)
Balance at December 31, 2015	7,563	1,600

The provision for decommissioning and reclamation of mines and mining damages was recorded by Severočeské doly a.s., a mining subsidiary of ČEZ. Severočeské doly a.s. operates open pit coal mines and is responsible for decommissioning and reclamation of the mines as well as for damages caused by the operations of the mines. These provisions have been calculated using the best estimates of the expenditures required to settle the present obligation at the balance sheet date. Current cash expenditures represent cash payments for current reclamation of mining area and settlement of mining damages. Change in estimate represents change in provision as result of updated cost estimates in the current period, mainly due to changes in expected prices of reclamation activities.

20. Other Long-term Liabilities

Other long-term liabilities at December 31, 2015 and 2014 are as follows (in CZK millions):

	2015	2014
Deferred connection fees	4,601	5,510
Derivatives	1,956	5,850
Other	2,122	2,065
Total	8,679	13,425

21. Short-term Loans

Short-term loans at December 31, 2015 and 2014 are as follows (in CZK millions):

	2015	2014
Short-term bank loans Bank overdrafts	40 183	7,466 142
Total	223	7,608

Interest on short-term loans is variable. The weighted average interest rate was 0.7% and 0.3% at December 31, 2015 and 2014, respectively. For the years 2015 and 2014 the weighted average interest rate was 1.7% and 1.2%, respectively.

22. Trade and Other Payables

Trade and other payables at December 31, 2015 and 2014 are as follows (in CZK millions):

	2015	2014
Advances received from retail customers Unbilled electricity supplied to retail customers	18,710 (15,532)	15,360 (9,888)
Received advances from retail customers, net	3,178	5,472
Trade payables Fair value of option (see Note 5) Derivatives Other	32,329 182 16,691 5,630	33,518 70 16,193 4,873
Total	58,010	60,126

The information about payables to related parties is included in Note 32.

23. Accrued Liabilities

Accrued liabilities at December 31, 2015 and 2014 consist of the following (in CZK millions):

	2015	2014
Accrued interest	2,328	2,958
Taxes and fees, except income tax	2,258	2,176
Unbilled goods and services	8,807	10,145
Deferred income	425	438
Other	127	117
Total	13,945	15,834

24. Revenues and Other Operating Income

The composition of revenues and other operating income for the years ended December 31, 2015 and 2014 is as follows (in CZK millions):

52,229 3,365 34,134 159 15,626 1,267







67,039
173,819

6,306
4,484
6,059
4,777
21,626

1,004
195
131

2,562
2,414
6,306
201,751

25. Gains and Losses from Commodity Derivative Trading, Net

The composition of gains and losses from commodity derivative trading, net for the years ended December 31, 2015 and 2014 is as follows (in CZK millions):

	2015	2014
Electricity derivative trading:
Sales - domestic Sales - foreign Purchases - domestic Purchases - foreign	5,292 163,456 (4,864) (158,809)	7,673 161,842 (6,779) (154,914)
Effect of hedging (see Note 18.3) Changes in fair value of derivatives	(76) (4,595)	(270) (3,213)
Total gains from electricity derivative trading, net Other commodity derivative trading:	404	4,339
Gain (loss) from gas derivative trading Loss from oil derivative trading Loss from coal derivative trading	(228) (714) (2)	412 (1,878) (12)
Total gains and losses from commodity derivative trading, net	(540)	2,861

In 2014 the line item Changes in fair value of derivatives includes gain in the amount of CZK 1,952 million for the termination of contract with Crédit Agricole Corporate and Investment Bank.

26. Salaries and Wages

Salaries and wages for the years ended December 31, 2015 and 2014 were as follows (in CZK millions):

		2015		2014
	Key manage ment personnel 1) Total		Total	Key manage ment personnel 1)

Salaries and wages including remuneration of the board
members	(12,547)	(224)	(13,142)	(296)
Share options	(31)	(31)	(26)	(26)
Social and health security	(4,024)	(37)	(4,166)	(48)
Other personal expenses	(1,156)	(16)	(1,518)	(43)
Total	(17,758)	(308)	(18,852)	(413)

1) Key management personnel represent members of Supervisory Board, Audit Committee and Board of Directors of the parent company and selected managers of departments of the parent company with group field of activity. The remuneration of former members of company bodies is also included in personal expenses.

At December 31, 2015 and 2014, the aggregate number of share options granted to members of Board of Directors and selected managers was 2,391 thousand and 2,575 thousand, respectively.

Members of the Board of Directors and selected managers are entitled to receive share options based on the conditions stipulated in the share option agreement. Members of the Board of Directors and selected managers are granted certain quantity of share options each year of their tenure according to rules of the share option plan. The exercise price for the granted options is based on the average quoted market price of the shares on the regulated exchange in the Czech Republic during one-month period preceding the grant date each year. Options granted could be exercised at the earliest 2 years and latest 3.5 years after each grant date. Option right is limited so that the profit per share option will not exceed 100% of exercise

price and the beneficent has to hold at his account such number of shares exercised through options granted which is equivalent to 20% of profit made on exercise date until the end of share option plan.

In 2015 and 2014 the Company recognized a compensation expense of CZK 31 million and CZK 26 million, respectively, related to the granted options.

The following table shows changes during 2015 and 2014 in the number of granted share options and the weighted average exercise price of these options:

	Number of share options
	Board of Directors '000s	Selected managers '000s	Total '000s	Weighted average exercise price (CZK per share)
Share options at December 31, 2013	1,622	766	2,388	704.84
Options granted Movements Options forfeited	610 (120) (285)	177 120 (315)	787 - (600)	586.77 764.34 814.75
Share options at December 31, 2014 1)	1,827	748	2,575	643.14
Options granted Options exercised 2) Options forfeited	550 (100) (457)	175 (20) (332)	725 (120) (789)	541.45 565.54 749.16
Share options at December 31, 2015 1)	1,820	571	2,391	581.18

1) At December 31, 2015 and 2014 the number of exercisable options was 988 thousand and 1,128 thousand, respectively. The weighted average exercise price of the exercisable options was CZK 602.30 per share and CZK 737.24 per share at December 31, 2015 and 2014, respectively.

2) In 2015 the weighted average market share price at the date of the exercise for the options exercised was CZK 635.79.

The fair value of the options is estimated on the date of grant using the binomial option-pricing model. Because these stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models do not necessarily provide a reliable single measure of the fair value of stock options.

At the grant dates, the underlying assumptions and the resulting fair values per option were as follows:

	2015	2014
Weighted average assumptions:
Dividend yield	4.2%	4.6%
Expected volatility	22.8%	23.2%
Mid-term risk-free interest rate	0.3%	0.5%
Expected life (years)	1.4	1.4
Grant-date share price (CZK per share)	523.1	571.2
Weighted average grant-date fair value of options
(CZK per 1 option)	36.7	42.3

The expected life of the options is based on historical data and is not necessarily indicative of the exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

As at December 31, 2015 and 2014 the exercise prices of outstanding options were in the following ranges (in thousand pieces):

	2015	2014
CZK 450 – 650 per share CZK 650 – 900 per share	1,967 424	1,387 1,188
Total	2,391	2,575

The options granted which were outstanding as at December 31, 2015 and 2014 had an average remaining contractual life of 1.9 years and 1.8 years, respectively.

27. Other Operating Expenses

Other operating expenses for the years ended December 31, 2015 and 2014 consist of the following (in CZK millions):

	2015	2014
Services Travel expenses Losses on sale of property, plant and equipment Losses on sale of material Capitalization of expenses to the cost of assets and	(10,502) (192) (23) (11)	(12,065) (189) (18) (41)
change in own inventory Contractual fines and interest fees for delays Change in provisions and valuation allowances Taxes and fees Write-off of bad debts Gifts Other	2,848 (353) 1,689 (2,758) (532) (325) (2,095)	3,752 (17) 1,260 (3,024) (448) (350) (2,197)
Total	(12,254)	(13,337)

Taxes and fees include the contributions to the nuclear account (see Note 19.1). The settlement of the provision for long-term spent fuel storage is accounted for at the amount of contributions to nuclear account. Settlement of provision for long-term spent fuel storage is included in Change in provisions and valuation allowances.

28. Interest Income

Interest income for each category of financial instruments for the years ended December 31, 2015 and 2014 is as follows (in CZK millions):

	2015	2014
Loans and receivables	50	112
Held-to-maturity investments	29	87
Available-for-sale investments	214	262
Bank accounts	95	147
Total	388	608

29. Other Financial Expenses

Other financial expenses for the years ended December 31, 2015 and 2014 consist of the following (in CZK millions):

	2015	2014
Derivative losses	(123)	(418)
Loss on sales of available-for-sale financial assets	-	(96)
Change in impairment of financial investments	-	(49)
Gift tax on emission allowances	-	(99)
Impairment of MOL shares (Note 5)	-	(1,828)
Costs of buy back of bonds	(843)	(509)
Other	(144)	(158)
Total	(1,110)	(3,157)

30. Other Financial Income

Other financial income for the years ended December 31, 2015 and 2014 consist of the following (in CZK millions):

	2015	2014
Derivative gains	423	56
Gain on sales of available-for-sale financial assets	514	175
Dividend income	685	802
Refunded gift tax on emission rights	3,823	-
Other	211	157
Total	5,656	1,190

In November 2015 the Group was refunded part of the gift tax on emission allowances paid in 2011 and 2012 based on the decisions of Appellate Tax Directorate.

31. Income Taxes

Companies resident in the Czech Republic calculated corporate income tax in accordance with the Czech tax regulations at the rate of 19% in 2015 and 2014. The Czech corporate income tax rate enacted for 2016 and on is 19%. Management believes that it has adequately provided for tax liabilities in the accompanying financial statements. However, the risk remains that the relevant financial authorities could take differing positions with regard to interpretive issues, which could have a potential effect on reported income.

The components of the income tax provision are as follows (in CZK millions):

	2015	2014
Current income tax charge	(6,564)	(6,100)
Adjustments in respect of current income tax
of previous periods	21	1
Deferred income taxes	195	(125)
Total	(6,348)	(6,224)

The differences between income tax expense computed at the statutory rate and income tax expense provided on earnings are as follows (in CZK millions):

	2015	2014
Income before income taxes Statutory income tax rate in Czech Republic	26,895 19%	28,656 19%

"Expected" income tax expense	(5,110)	(5,445)
Tax effect of:
Change in tax rates and laws	-	(184)
Non-deductible gains and losses from derivatives	(23)	8
Non-deductible impairment of AFS investment	-	(366)
Non-deductible expenses related to shareholdings	(16)	(23)
Goodwill and other non-current assets impairment	(128)	(26)
Non-deductible fines and penalties	(82)	-
Non-taxable income from settlement agreement
with Republic of Albania	-	454
Non-deductible share based payment expense	(6)	(5)
Gift tax on emission allowances	726	-
Taxation of intercompany dividends	(450)	-
Share of profit (loss) from joint-ventures	(330)	(245)
Income already taxed or exempt	151	268
Tax credits	44	11
Gain on sale of subsidiary	-	14
Adjustments in respect of current income tax
of previous periods	21	1
Effect of different tax rate in other countries	(154)	(109)
Change in unrecorded deferred tax asset	(717)	5
Other non-deductible items, net	(274)	(582)
Income taxes	(6,348)	(6,224)
Effective tax rate	24%	22%

Deferred income taxes, net, at December 31, 2015 and 2014 consist of the following (in CZK millions):

	2015	2014
Nuclear provisions	7,894	7,424
Financial statement depreciation in excess of tax depreciation Revaluation of financial instruments Allowances Other provisions Tax loss carry forwards Other temporary differences	1,818 45 1,221 1,648 638 844	1,306 1,882 1,038 2,549 407 598
Unrecorded deferred tax asset	(782)	(65)
Total deferred tax assets	13,326	15,139
Tax depreciation in excess of financial statement depreciation Revaluation of financial instruments Other provisions Other temporary differences	(31,507) (389) (602) (1,250)	(31,247) (497) (674) (1,592)
Total deferred tax liability	(33,748)	(34,010)
Total deferred tax liability, net	(20,422)	(18,871)
Reflected in the balance sheet as follows:
Deferred tax assets Deferred tax liability	1,631 (22,053)	1,738 (20,609)
Total deferred tax liability, net	(20,422)	(18,871)

Movements in net deferred tax liability, net, in 2015 and 2014 were as follows (in CZK millions):

	2015	2014
Opening balance	18,871	18,377
Deferred tax recognized in profit or loss Deferred tax recognized in other comprehensive	(195)	125
income	1,764	386
Acquisition of subsidiaries	-	1
Currency translation differences	(18)	(18)
Closing balance	20,422	18,871

At December 31, 2015 and 2014 the aggregate amount of temporary differences associated with investments in subsidiaries, for which no deferred tax liability was recognized, amounted to CZK 26,954 million and CZK 35,888 million, respectively.

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

	2015				2014
	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 recognized in
equity	11,919	(2,264)	9,655	4,891	(929)	3,962
Cash flow hedges reclassified to statement of income	(1,954)	371	(1,583)	(3,933)	747	(3,186)
Cash flow hedges reclassified to assets	(230)	44	(186)	(95)	18	(77)
Change in fair value of available-for-sale financial
assets recognized in equity	1,440	72	1,512	(865)	(236)	(1,101)
Available-for-sale financial assets reclassified from equity	(103)	16	(87)	1,783	11	1,794
Translation differences -
subsidiaries	(1,046)	-	(1,046)	265	-	265
Translation differences -
joint-ventures	(1,218)	-	(1,218)	610	-	610
Translation differences
reclassified from equity Share on other equity	1	-	1	14	-	14
movements of joint-ventures	(38)	-	(38)	(121)	-	(121)
Re-measurement losses on
defined benefit plans	(28)	(3)	(31)	(26)	3	(23)
Total	8,743	(1,764)	6,979	2,523	(386)	2,137

32. Related Parties

The Group purchases from and sells to related parties products, goods and services in the ordinary course of business.

At December 31, 2015 and 2014, the receivables from related parties and payables to related parties are as follows (in CZK millions):

		Receivables		Payables
	2015	2014	2015	2014
Akcez Enerji A.S.	10	119	-	-
CM European Power International B.V.	86	199	-	-
CM European Power Slovakia s.r.o.	494	507	-	-
ČEZ Energo, s.r.o.	127	89	35	12
LOMY MOŘINA spol. s r.o.	-	-	21	21
Ústav aplikované mechaniky Brno, s.r.o.	1	1	24	9
Výzkumný a zkušební ústav Plzeň s.r.o.	58	-	3	6
Others	30	56	57	67
Total	806	971	140	115

The following table provides the total amount of transactions, which have been entered into with related parties for the relevant financial year (in CZK millions):

	Sales to related parties		Purchases from related parties
	2015	2014	2015	2014
Akcez Enerji A.S.	41	42	-	-
Akenerji Elektrik Üretim A.S.	39	44	-	-
ČEZ Energo, s.r.o.	384	297	293	29
in PROJEKT LOUNY ENGINEERING s.r.o.	22	33	16	23
LOMY MOŘINA spol. s r.o.	11	26	169	187
OSC, a.s.	-	-	129	128
Teplo Klášterec s.r.o.	55	54	-	-
Výzkumný a zkušební ústav Plzeň s.r.o.	70	7	8	4
Others	112	97	78	158
Total	734	600	693	529

Dividend income, interest and other financial income from related parties for the relevant financial year (in CZK millions):

	Interest and other financial income		Dividend income
	2015	2014	2015	2014
Akcez Enerji A.S.	13	14	-	-
CITELUM, a.s.	-	-	-	23
CM European Power Slovakia s.r.o.	13	16	108	2
LOMY MOŘINA spol. s r.o.	-	-	20	3
OSC, a.s.	-	-	21	16
Others	4	9	11	3
Total	30	39	160	47

Information about compensation of key management personnel is included in Note 26.

33. Segment Information

The Group reports its result based on operating segments which are defined with respect to geographical location of the assets with similar economic environment and characteristics, e.g. similar long-term average gross margins, similar nature of the products and services and with regard to regulatory environment.

According to geographical location, the Group distinguishes the following two regions that in combination with products and services form the reportable segments in 2015 and 2014: Central Europe (CE) and South East Europe (SEE). The Central Europe region includes the Czech Republic, the Netherlands, Poland, Germany, Hungary, Ireland and Slovakia. The South East Europe region consists of the operations of the Group in Bulgaria, Romania, Turkey, Albania, Cyprus, Serbia, Bosnia and Herzegovina, Russia and the Ukraine except for trading operations that are provided at the Group headquarters and therefore presented in the Central Europe region.

According to nature of the products and services the Group distinguishes four categories in 2015 and 2014 as follows:

1. The power production and trading which includes production of electricity and heat and the commodity trading activities of the Group;
1. The distribution and sale which sells electricity to end customers through the power distribution grid and provides power distribution services;
1. The mining that produces coal and limestone used by the power production business operations or sold to third parties; and
1. The other business activities.

The Group has seven reportable segments as a result of the combination of geographical location and nature of products and services in 2015 and 2014 as follows:

Power Production and Trading / Central Europe
Distribution and Sale / Central Europe
Mining / Central Europe
Other / Central Europe
Power Production and Trading / South East Europe
Distribution and Sale / South East Europe
Other / South East Europe

The accounting policies of the operating segments are the same as those described in Note 2. 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. The Group evaluates the performance of its segments based on EBITDA (see Note 15).

The definition of the operating segments will be adjusted in 2016 according to organizational changes in corporate governance of the Group which have been made effective since January 1, 2016.

The following tables summarize segment information by operating segments for the years ended December 31, 2015 and 2014 (in CZK millions):

Year 2015:	Power Produc tion and Trading CE	Distribu tion and Sale CE	Mining CE	Other CE	Power Produc tion and Trading SEE	Distribu tion and Sale SEE	Other SEE	Combi ned	Elimina tion	Consoli dated
Revenues and other operating income - other than intersegment Revenues and other operating	56,331	108,064	4,676	2,946	1,581	36,544	25	210,167	-	210,167
income - intersegment	36,359	3,476	5,026	21,721	442	275	1,945	69,244	(69,244)	-
Total revenues and other operating income	92,690	111,540	9,702	24,667	2,023	36,819	1,970	279,411	(69,244)	210,167
EBITDA	30,882	22,069	4,315	3,204	628	3,901	125	65,124	(20)	65,104
Depreciation and amortization	(17,456)	(4,044)	(2,419)	(1,823)	(995)	(1,811)	(71)	(28,619)	-	(28,619)
Impairment of property, plant and equipment and intangible assets including goodwill	(3,706)	(14)	-	8	(2,527)	(1,434)	(12)	(7,685)	-	(7,685)
EBIT	9,707	18,012	1,902	1,527	(2,894)	685	42	28,981	(20)	28,961
Interest on debt and provisions	(4,345)	(270)	(195)	(105)	(492)	(11)	(12)	(5,430)	896	(4,534)
Interest income	972	17	229	17	6	35	8	1,284	(896)	388
Share of profit (loss) from joint-ventures	134	-	14	-	(1,193)	(610)	-	(1,655)	-	(1,655)
Income taxes	(1,500)	(3,326)	(365)	(416)	(129)	(606)	(7)	(6,349)	2	(6,347)
Net income	25,390	14,415	2,296	1,860	(4,970)	(503)	25	38,513	(17,966)	20,547
Identifiable assets	267,990	83,626	21,480	9,930	16,974	22,254	181	422,435	(1,071)	421,364
Investment in joint-ventures	4,864	41	184	-	2,150	2,000	-	9,239	-	9,239
Unallocated assets										172,083
Total assets										602,686
Capital expenditure	17,601	7,527	1,776	8,797	323	2,134	767	38,925	(7,431)	31,494
Average number of employees	7,458	1,640	2,679	8,979	117	3,923	1,030	25,826	-	25,826

Year 2014:	Power Produc tion and Trading CE	Distribu tion and Sale CE	Mining CE	Other CE	Power Produc tion and Trading SEE	Distribu tion and Sale SEE	Other SEE	Combi ned	Elimina tion	Consoli dated
Revenues and other operating income - other than intersegment Revenues and other operating	57,327	100,310	4,743	3,029	1,526	34,784	32	201,751	-	201,751
income - intersegment	35,888	4,909	5,415	29,350	1,210	448	2,142	79,362	(79,362)	-
Total revenues and other operating income	93,215	105,219	10,158	32,379	2,736	35,232	2,174	281,113	(79,362)	201,751
EBITDA	39,523	19,290	4,163	4,666	606	3,869	84	72,201	297	72,498
Depreciation and amortization	(16,300)	(3,834)	(2,313)	(2,146)	(1,257)	(1,784)	(71)	(27,705)	-	(27,705)
Impairment of property, plant and equipment and intangible assets including goodwill	(443)	-	(1)	(38)	(6,794)	(749)	-	(8,025)	-	(8,025)
EBIT	22,792	15,463	1,856	2,621	(7,444)	1,347	14	36,649	297	36,946
Interest on debt and provisions	(5,253)	(401)	(224)	(20)	(568)	(20)	(23)	(6,509)	1,025	(5,484)
Interest income	1,263	14	259	9	9	60	19	1,633	(1,025)	608
Share of profit (loss) from joint-ventures	(15)	-	6	-	(1,195)	(19)	-	(1,223)	-	(1,223)
Income taxes	(3,222)	(2,798)	(352)	(559)	899	(132)	(3)	(6,167)	(57)	(6,224)
Net income	27,604	12,266	2,168	2,048	(8,406)	1,235	46	36,961	(14,529)	22,432
Identifiable assets	271,636	80,211	21,267	10,102	20,840	24,052	100	428,208	(1,666)	426,542
Investment in joint-ventures	5,005	-	190	-	4,159	2,923	-	12,277	-	12,277
Unallocated assets										189,051
Total assets										627,870
Capital expenditure	21,122	7,712	2,474	14,522	60	1,813	673	48,376	(13,964)	34,412
Average number of employees	7,205	1,500	2,950	9,171	360	3,923	1,139	26,248	-	26,248

Prices in certain intersegment transactions are regulated by the Energy Regulatory Office (see Note 1).

The following table shows the split of revenues and other operating income according to the location of the entity where the revenues are originated (in CZK million):

	2015	2014
Czech Republic	155,917	153,575
Bulgaria	25,043	24,398
Romania	13,099	11,930
Poland	6,843	4,289
Other	9,265	7,559
Total revenues and other operating income	210,167	201,751

The following table shows the split of property, plant and equipment according to the location of entity which they belong to at December 31, 2015 and 2014 (in CZK million):

	2015	2014
Czech Republic	374,612	372,707
Bulgaria	10,019	11,379
Romania	29,389	33,612
Poland	7,343	8,843
Other	1	1
Total property, plant and equipment	421,364	426,542

34. Net Income per Share

	2015	2014
Numerator (CZK millions) Basic and diluted: Net income attributable to equity holders	20,739	22,403
of the parent
Denominator (thousands shares) Basic:
Weighted average shares outstanding	534,193	534,115
Dilutive effect of share options	84	64
Diluted: Adjusted weighted average shares	534,277	534,179
Net income per share (CZK per share)
Basic Diluted	38.8 38.8	41.9 41.9

35. Commitment and Contingencies

Investment Program

The Group is engaged in a continuous construction program, currently estimated as of December 31, 2015 over the next five years as follows (in CZK billion):

2016	34.2
2017	32.8
2018	35.2
2019	32.4
2020	30.5
Total	165.1

These figures do not include the expected acquisitions of subsidiaries, associates and joint-ventures, which will depend on the number of future investment opportunities, for which the Group will be a successful bidder and also considering the recoverability of these investments.

The construction programs are subject to periodic reviews and actual construction may vary from the above estimates. At December 31, 2015 significant purchase commitments were outstanding in connection with the construction program.

Insurance Matters

The Nuclear Act sets limits for liabilities for nuclear damages so that the operator of nuclear installations for energy generation purposes is liable for up to CZK 8 billion per incident. The Nuclear Act limits the liability for damage caused by other nuclear installations and activities (such as transportation) to CZK 2 billion. The Nuclear Act also requires an operator to insure its liability connected with the operation of a nuclear power plant up to a minimum of CZK 2 billion and up to a minimum of CZK 300 million for other activities (such as transportation). The Company has obtained all insurance policies with minimal limits as required by the law. The Company concluded the above mentioned insurance policies with Česká pojišťovna a.s. (representing Czech Nuclear Insurance Pool) and European Liability Insurance for the Nuclear Industry.

The Group also maintains the insurance policies covering the assets of its coal-fired, hydroelectric, CCGT and nuclear power plants and general third party liability insurance in connection with main operations of the Group.

36. Events after the Balance Sheet Date

On February 5, 2016 the Group issued a two year private placement floating rate note with an aggregate nominal amount of EUR 86 million and a coupon of 3M EURIBOR plus 0.55%. The notes were issued under the established Euro Medium Term Note Programme.

On February 9, 2016 the Group issued a two year private placement floating rate note with nominal amount of EUR 15 million and a coupon of 3M EURIBOR plus 0.55%. The notes were issued under the established Euro Medium Term Note Programme.

There was a significant decrease in wholesale electricity prices after the balance sheet date. The wholesale electricity prices are one of the significant assumptions used in the estimate of recoverable amount of non-current assets of the Group (see Note 7).

AI Terminal

CEZ A.S.

1042_rns_2016-03-15_e4160555-e485-44e3-aca4-212361b26074.pdf

CEZ GROUP

CEZ GROUP CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2015

in CZK Millions

CEZ GROUP CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2015

continued

CEZ GROUP CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2015

in CZK Millions

CEZ GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2015

in CZK Millions

CEZ GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2015

in CZK Millions

CEZ GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2015

continued

CEZ GROUP CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2015

in CZK Millions

CEZ GROUP CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2015

continued

Supplementary cash flow information

CEZ GROUP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2015

1. The Company

2. Summary of Significant Accounting Policies

2.1. Financial Statements

2.2. Group Accounting

a. Group Structure

b. Subsidiaries

c. Associates

d. Joint-ventures

e. Transactions Involving Entities under Common Control

2.3. Changes in Accounting Policies

a. Adoption of New IFRS Standards in 2015

Annual Improvements to IFRSs 2011 - 2013

Financial assets

Financial liabilities

Impairment

Hedge accounting

IFRS 14 Regulatory Deferral Accounts

IFRS 15 Revenue from Contracts with Customers

IFRS 16 Leases

Amendments to IAS 1 Disclosure Initiative

Amendments to IAS 16 and IAS 41: Bearer Plants

Amendments to IAS 19 Defined Benefit Plans: Employee Contributions

Amendments to IAS 27: Equity Method in Separate Financial Statements

c. Changes in the Presentation of the Financial Statements

2.4. Estimates

2.5. Revenues

2.6. Unbilled Electricity

2.7. Fuel Costs

2.8. Interest

2.9. Property, Plant and Equipment

2.10. Nuclear Fuel

2.11. Intangible Assets

2.12. Goodwill

2.13. Emission Rights

2.14. Investments

2.15. Cash and Cash Equivalents

2.16. Financial Assets Restricted in Use

2.17. Receivables, Payables and Accruals

2.18. Materials and Supplies

2.19. Fossil Fuel Stocks

2.20. Derivative Financial Instruments

a. Fair value hedge

b. Cash flow hedge

c. Other derivatives

2.21. Commodity Contracts

2.22. Income Taxes

2.23. Long-term Debt

2.24. Nuclear Provisions

2.27. Leases

2.28. Treasury Shares

2.29. Share Options

2.30. Translation of Foreign Currencies

2.31. Non-current Assets Held for Sale

3. Property, Plant and Equipment

4. Restricted Financial Assets

5. Investments and Other Financial Assets, Net

6. Intangible Assets, Net

7. Impairment of Property, Plant and Equipment and Intangible Assets including Goodwill