CEZ A.S.

M&A Activity • Oct 22, 2020

ČEZ Energy Group and Vršanská Uhelná from the Sev.en Energy Group haveagreed that the Počerady Power Plant burning brown coal will betransferred to Vršanská Uhelná at a higher purchase price at the end ofthis year, as of December 31, 2020. The transfer of the power plant wasalready agreed in a contract from 2013, and was to take place on January2, 2024. ČEZ is thus further fulfilling its strategy of gradually movingaway from coal-fired power plants and switching to low-emission orcompletely emission-free sources.

ČEZ and Vršanská Uhelná have agreed to accelerate the sale of thePočerady Power Plant with regard to the new emission standards of theEuropean Union valid from mid-2021, which require significantinvestments on the part of operators. Počerady is now the oldestcoal-fired power plant at ČEZ, when the first unit was put intooperation half a century ago and the power plant has not undergone majormodernization in recent years. ČEZ is also responding to the furthertightening of CO2 reduction targets announced by the European Commissionin the first half of this year. The original agreed price of 2 billionCzech Crowns for the transfer in 2024 was increased to the current 2.5billion Czech Crowns.

Simultaneously with the transfer, the existing purchase contract for thepurchase of coal from Vršanská Uhelná in the amount of 5 million t /year will be terminated. The agreement also includes ČEZ's approach tothe complete production of the Počerady Power Plant in the years2021-2023. The power plant will supply 5 TWh per year for a fixed price,and ČEZ will sell this electricity on the market.

ČEZ retains a modern 880 MW steam-gas unit in the Počerady locality, agas connection, a feeder supplying the locality with water from the OhřeRiver and other land, and counts on further operation and development ofthis locality.

History:

According to the 2013 contract, which ended many years of disputes overcoal supplies from Vršanská Uhelná, the Počerady Power Plant would besold on January 2, 2024. By the end of 2019, ČEZ had the last chance tocancel the sale. With regard to the steps taken by the EuropeanCommission to limit the increasing use of coal in connection with thetransition to a zero-emission economy, ČEZ did not exercise this option.ČEZ was to receive a fixed amount of 2 billion Czech Crowns fortransferring the power plant over to Sev.en (formerly Czech Coal). Inconnection with the earlier transfer, this amount has now increased to2.5 billion Czech Crowns.