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Nuclear Energy in the Czech Republic

Nuclear Energy in the Czech Republic. EUROPE INVESTS AGAIN IN NUCLEAR ENERGY Berlin , November 23 , 2006. Jiří Borovec Vice-Chairman of the Board , CEZ, a. s. What I am going to say. Situation in the Czech Republic ČEZ Introduction Future developement, opportunities & plans

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Nuclear Energy in the Czech Republic

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  1. Nuclear Energy in the Czech Republic EUROPE INVESTS AGAIN IN NUCLEAR ENERGY Berlin, November 23, 2006 Jiří Borovec Vice-Chairman of the Board,CEZ, a. s.

  2. What I am going to say • Situation in the Czech Republic • ČEZ Introduction • Future developement, opportunities & plans • ČEZ New Nuke build

  3. CEZ IS A DOMINANT PLAYER IN ALL SEGMENTS OFTHE CZECH ELECTRICITY MARKET Lignite mining Generation Transmission Distribution Supply for final consumption 45% 22 million tons 72% 59.5 TWh 100% 62 TWh* 5 out of 8 distribution companies 62% of customers 54% 31.1 TWh CEZ 55% 27 million tons 46% 26.5 TWh 38% of customers Others 28% 23.1TWh • CEZ owns the largest Czech mining company (SD) • The Czech transmission grid is owned and operated by CEPS, 100% owned by the Czech state ZCE, SCE, STE, VCE, SME Note: * estimate Source: CEZ, ERU, all figures as of 2005

  4. CEZ ABROAD Poland (Elcho, Skawina) • Installed capacity (MW) • Revenues (EUR million) Czech republic • Electricity sales (TWh) • Number of customers (million) • Installed capacity (MW) • Revenues (EUR million) • 900 • TBA • 68 • 3.4 • 12,300 • 3,340 Romania (EDC Oltenia) • Electricity sales (TWh) • Number of customers (million) • Revenues (EUR million) • 7 • 1.4 • 340 Bulgaria (3 EDCs in western region + Varna PP 1260 MW) • Electricity sales 8 TWh • Number of customers 1.9 million • Revenues 380 M EUR Own assets Trading office Source: CEZ, a. s.

  5. CEZ - POWER PLANTS Germany Poland Germany Slovakia Austria Total 12 300 MW

  6. RENEWABLESČEZ OBNOVITELNÉ ZDROJE s.r.o. WILL HAVE 21 HYDROPLANTS AND 1 WIND FARM Installed power capacity MVE 43,4 MW HPS Střekov 19,5 MW Wind power stations 1,6 MW Ústí n. L. Liberec Spálov Les Království Střekov NovýHrádek Předměřice Karlovy Vary Hradec Králové Obříství Pardubice Praha Pastviny Přelouč Práčov I Ostrava Hracholusky Bukovec Olomouc Plzeň Černéjezero I, II, III Jihlava Kníničky Vydra Zlín Spytihněv Komín Brno Čeňkovapila Veselí nadMoravou • Development opportunities • wind power stations • small hydroelectric plants • biomass and biogas • solar power České Budějovice Hydroelectricpower station Wind farm

  7. NUCLEAR POWER PLANTS – 3,760 MW Temelín 2x1000 MW VVER 1000 (PWR) Commissioned 2002 Dukovany 4x 440 MW VVER 440 (PWR) Commissioned 1985

  8. NUCLEAR POWER PLANTS • Type of reactor • Basic description • Total investment costs • Commercial operation • Beginning of operation • Current highlights • PWR – pressurized water reactor, as majority of reactor types around the world • Based on the original Russian technical design with many improvements in cooperation with Westinghouse Electric to achieve higher operational safety, e.g., • new instrumentation and control system • new monitoring system (incl. radiation monitoring) • new cabling (non-flammable and fire-resistant) • modification of the electric components • new accident analysis and safeguard system • new type of nuclear fuel • CZK 98.6 bn (USD 4.4 bn) – very competitive amount • 1st Unit since June 2002 • 2nd Unit since April 2003 • 1985-87 • undergoes renovation of its I & C system belongs, to world‘s best in safety of operation by WANO performance indicators Electricity generation in 2005: 12,692 GWh TEMELIN Installed capacity: 2 x 1,000 MW DUKOVANY Electricity generation in 2005: 13,732 GWh Installed capacity: 4 x 440 MW Source: CEZ

  9. CEZ GROUP HAS VERY ATTRACTIVE LOW COST GENERATION FLEET AND HAS SECURED LOW FUEL COSTS THROUGH LONG TERM CONTRACTS CEZ Group generation capacity (2005) MW Annual production of CEZ Group TWh 100% of generation Utilization 2005 Completion of Temelín nuclear power plant 2,000 MW 12,297 3.4% 12% Hydro (river accumulation and pump storage) 15.6% 60 Lignite off basin and hard coal (peakload) 58% 39.5% Lignite at lignite Basins (baseload) 2000 2001 2002 2004 2005 2003 75% 41.5% 69% 70% 71% 74% 74% 72% Nuclear (baseload) Share in power production in the CR Source: CEZ

  10. WHOLESALE ELECTRICITY PRICES IN CENTRAL EUROPE GROW DRIVEN BY INCREASING DEMAND AND LACK OF GENERATION CAPACITIES Wholesale power price (baseload) 2000 index EEX 2006 – 45.3 €/MWh EEX 2007 – 50 €/MWh +30 % 260 +30 % +10 % 240 220 +20 % 200 -25 % 180 160 +?? % +15.0 % 140 +11.4 % 120 • The price difference between the two markets is arbitraged away via cross border capacity fee collected by Transmission Grid Operators 100 80 60 2000 2001 2002 2003 2004 2005 2006 2007 CR 2006 – 35.9 EUR/MWh (exchange rate CZK 29/EUR) EEX Forward 2007 (baseload) EUR/MWh

  11. 101,0 High consumption scenario 110 +37,1 Assumptions: • Electricity intensity will be as today • Average annual GDP growth will be 4% until 2012, and 3% thereafter (in high scenario: 5% until 2012 and 3,5% thereafter) 101 2020 FACTS – ELECTRICITY CONSUMPTION IN CZECH REPUBLIC TWh What will be electricity consumption in 2020, if GDP grows and will we not make any savings? 63,4 60,9 59,8 2003 2004 2005

  12. PROSPECTIVEELECTRICITY DEMAND Power consumption in the Czech Republic TWh Estimated capacity reduction in Central Europe by 2010 Installed capacity, MW nuclear phase out – Bohunice V1 2%-3% Slovakia H1 2005 +2.2% shutdowns for environmental reasons 1,000-2,000 +2.9% Poland +2.0% -0.2% +2.9% Hungary ageing/environmental Czech Republic CEZ, IPPs Change in Centrel in 2004-08 + 8 TWh – 4 TWh Resulted to Power shortage • Quick reduction of overcapacity in the region • Lower pressure on export profiles to Germany/Austria • Price convergence to one level across Central Europe Source: Europrog, ERÚ, CEZ

  13. DECOMMISSIONING OF CURRENT POWER PLANTS AND GROWTH OF CONSUMPTION CAUSE LACK OF ELECTRICITY Production of current power plants vs. consumption growth without savings (expected 23 TWh 2020) 123-146 TWh Domestic consumption 101-110 TWh Missing production capacity 87-110 TWh 59-68 TWh Current coal power plants Gas and other renewables Nuclear power plants Hydro

  14. 1 WHERE TO GET MISSING ELECTRICITY 59-68 TWh 5 Coal and nuclear ? • How much electricity can we obtain by savings and imports? • What is the optimal fuel mix of the new production capacity to cover remaining deficit? • When do we have to start building new capacity to cover the 2020 deficit? 4 ? Gas 3 ? Renewables 2 ? Import 1 ? Savings Missing electricity in 2020

  15. €€€ € DIFFERENT GEOGRAPHIC CONDITIONS AND PREFERENCES OF EUROPEAN COUNTRIES DETERMINE ENERGY MIX • Perfect geographic conditions for hydro Norway Austria • Geographic conditions for hydro • Acceptance of nuclear energy High Germany(2020) Finland • Geographic conditions for hydro • Nuclear energy politically unacceptable Italy Utilization of renewables and gas • High dependence on gas imports • Good conditions for wind power plants by the North Sea • Political decision about nuclear power plant decommissioning Germany(2005) Low France • High acceptability of nuclear energy Poland CR Low High • Large reserves of lignite and hard coal Energy independence and stability of supplies

  16. It is highly likely that 3 500 MW of coal p.p. capacity will be shot down in 2015 due to ecological limits (NOx), next decommissioning up to 7 000 MW is possible • Only decommissioning of 3 500 MW will make Poland dependent on imports • No construction, no plans for new construction today • It is not possible to rely upon imports from surrounding countries • Total capacity decommissioned in Central Europe until 2020 will be over 30 GW • Total missing installed capacity will be up to 15 GW Poland Germany Czech Republic Slovakia • Decommissioning of 1 600 MW until 2008* • Slovakia will become net importer (today it is net exporter) Austria Hungary • Today Austria is dependent on imports in peak hours • Total import in 2005 was 16,3 TWh • The biggest importer in Central Europe (18% of consumption) • No plans for new construction • Fuel sources are limited 2 CZECH REPUBLIC CAN NOT RELY UPON IMPORTS OF ELECTRICITY • Decommissioning of nuclear power plants (27% of current consumption) due to political decision • Despite current investment boom, Germany will only be able to cover its own needs * Nováky, Vojany, Jaslovské Bohunice

  17. 7 Additional potential TWh per year Hydro energy • Future development of hydro energy is possible only in area of MVE* (up to 10 MW of installed capacity) • Potential for new construction up to 0,5 TWh per year • Technology modernization – potential of increasing efficiency by 10-20% – benefit: 0,1 TWh per year 0,6 Wind energy • Estimated potential of wind power plants is 600-1 000 MW** • Estimated plant utilization: 15-25% 0,8 2,2 Biomass • Yield of biomass (there are differences according to type of herb): 10-15 t/ha per year • Thermal power of biomass: ~1 t = 1 MWh • Estimated area of usable land: 300 000 ha 3,0 4,5 3 WHAT IS THE POTENTIAL OF RENEWABLES IN CZECH REPUBLIC? 59-68 TWh Rene- wables 3 7 0 Import 2 1 Savings 23 * MVE – small hydro power plants ** Association for renewables; investor's estimations

  18. 25 4 POTENTIAL OF ELECTRICITY PRODUCTION FROM GAS 59-68 TWh Basic facts about gas power plants in CR • Half of CO2 emissions in comparison with lignite power plants • Flexible source able to balance grid and to cover peaks • High dependence on Russia (diversification is in principal practically possible) • Significantly higher price of produced electricity in comparison with price from lignite or nuclear power plants • Given the market gas price, return on investment is not justified • New installed capacity can reach 1 000 – 1 500 MW (for ancillary services and cogeneration) • Additional production will be up to 5 TWh Gas 4 5 Renewables 3 7 0 2 Import 1 Savings 23 Missing electricity in 2020

  19. 7 Until 2020 it is necessary to renovate and build coal and nuclear power plants which will together generate annually 24-33 TWh (until 2030 35-58 TWh) 5 ROLE OF COAL AND NUCLEAR CAPACITY IN COVERING THE DEFICIT IN 2020 87-110 TWh 35-58 59-68 TWh 5 5 Coal and nuclear 24-33 7 0 4 Gas 5 Renewables 3 7 0 40 2 Import 1 Savings 23 Missing electricity in 2020 Missing electricity in 2030

  20. INCREASE THE PRODUCTION CAPACITY • Hydro – minimum possibility • Coal plant – limited possibilities to extend mining capacity • Renewables – not voluminous efect • Nuclear– the only real possibilities • Decision for 2x660 MW coal plant made and construction started • Renuewables • Analysis for new nuclear Let us go for nuclear!

  21. Public opinion Acceptability of Nuclear Energy at Dukovany and Temelin sites Dukovany Region (May 2006) TemelínRegion (May 2006) 17% Resolutely no / Rather no 50% 50% Definitely yes / Rather yes 83% Acceptability of Nuclear Energy at the Czech republic

  22. BUILD A NEW NUCLEAR POWER PLANT? • What? • Where? • When?

  23. WHAT • 1000 - 1600 MWe • PWR (experience) • Turn key project • Based on proven technologies • Licenced design, compliance with Czech legislation, EUR (EUROPEAN Utility Requirements, WENRA … • Aditional construction (transport….) • … etc….

  24. WHERE Tetov Blahutovice There are four sites available in the Czech Republic by nuclear site conditions.

  25. WHEN Decision to built + 0,2 Govermental acceptance + 0,2 Feasibility study + 0,2 Request for EIA + 3 EIA + 3,5 Contract – starting point for cooperation with vendor on design documentation + 6 Construction licence (civil and nuclear) + 7 Start construction + 12 Commisioning + 13 Operation

  26. Finland 1998 2002 2003 2005 2006 2009/10 THE COMMISSIONING PROCESS OF NEW NUCLEAR PLANT TAKES MANY YEARS, THUS DECISSION REGARDING NEW BUILD HAS TO BE MADE AS SOON AS POSSIBLE Czech Republic Testing Commi- ssioning Required permits and certificates (e.g. EIA, EURATOM, building permit) Building realization 0 7 15 16,5 Analyses of possible impacts on environment Other required permits Building realization Initiation of public discussion Authorization and ratification by Finland parliament Final decision about locality Initiation of construction Construction is in 5 months delay Commi- ssioning

  27. THANK YOU FOR YOUR ATTENTION

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