CEZ GROUP 1 INVESTMENT RECOMMENDATION TO DECEMBER 21, CFA INVESTMENT RESEARCH CHALLENGE MARCH 3, 2011 MADRID

CZECH CEZ GROUP 2 2 ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 2 CZECH REPUBLIC Technical University of Ostrava CEZ GROUP European power utility VALUATION 2 phases DCF equity method INVESTMENT RECOMMENDATION

CZECH VALUATION ASSUMPTIONS 3 3 VALUATION Company profile Industry profile Financial analysis Planned statements Free cash flow prediction Beta, cost of capital ASSIGNMENT Risk averse investor Three years perspective Valuation to TARGET PRICE807 CZK 2 phases DCF equity method Investment risks Actual issues RECOMMENDATIONHOLD ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 3

CZECH CEZ AS INTERNATIONAL UTILITY 4 Source: Company data, Czech team research MAJOR ELECTRICITY PRODUCER IN THE CZECH REPUBIC 74% of market70% MoF emp ONE OF TEN BIGGEST EUROPEAN POWER UTILITIES 65,3 TWh17 countries60 plants PRODUCTION BASED ON LIGNITE AND NUCLEAR POWER 45% lignite42% nuclear13% other 44% OF REVENUES IN POWER PRODUCTION 39% distribution4% mining14% other 4 ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 4

CZECH COMPANY COMPARISON 5 Source: Czech team estimates, Reuters 5 Industry average 7,6x 6x 43 Industry average 5,6% ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 5 Data to 21/12/2010

CZECH FINANCIAL ANALYSIS 6 6 Source: Company data, Czech team estimates ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 6

CZECH FINANCIAL ANALYSIS 7 7 Source: Company data, Czech team estimates ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 7

CZECH FINANCIAL ANALYSIS 8 8 Source: Company data, Czech team estimates ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 8

CZECH FINANCIAL ANALYSIS 9 9 Source: Company data, Czech team estimates ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 9

CZECH FINANCIAL ANALYSIS 10 Source: Company data, Czech team estimates ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 10

CZECH FINANCIAL ANALYSIS 11 Source: Reuters, Bloomberg, Company data, Czech team estimates ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 11

TEAM E 12 CZECH VALUATION BASE Source: Company data, Czech team estimates ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 12

TEAM E 13 TEAM E VALUATION Ratio between phases of DCF equity Source: Company data, Czech team estimates Phase 1 : Phase 2 : ∞ Levered β0,99 RmRm 6,29%6,99% RfRf 3,64%4,00% ReRe 6,26%8,50% g 1,49% Values in mil. CZK Value of phase Continuing value (perpetuity) Value of phase TOTAL VALUE Number of issued shares (pieces) VALUE OF SHARE (in CZK)807,080 Enterprise value Indebtness32,61% ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 13 Ratio between phases of DCF equity

TEAM E 14 Volatility of exchange rate Business with foreign countries Possible drop in rating Possible price increase of debt Unstable political situation In the Czech Republic and in other countries Low power prices Contra high fixed costs 14 CZECH INVESTMENT RISKS ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 14

CZECH POWER PRICES 15 Source: EEX, PXE, Czech team estimates ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 15

CZECH ACTUAL ISSUES 16 Development of subsidiary, taxed and bought emission allowances (mil. CZK) 16 Estimated prices of emission allowances (EUR) Source: Czech team estimates ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 16

CZECH SENSITIVITY ANALYSIS 17 Source: Czech team estimates ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 17

CZECH SENSITIVITY ANALYSIS 18 Source: Czech team estimates ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 18 Mean802 Variance10122 Standard deviation101 Min487 Max1126 PercentilVaRCVaR 1%-33,8%-38,8% 5% -20,6%-28,2% 10% -14,6%-22,8%

TEAM E 19 CZECH SUMMARY TICKER NYSE EURONEXT: CEZ HOLD TARGET PRICE: 807 CZK Good stable company with Czech political supportMajority of indexes around industry average or higherReasonable financial analysis indicatorsStable production of free cash flowUNDERVALUEDNecessity of cutting down costsUncertainity about allowancesExisting drop in dividendsInvestment risks ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 19

TEAM E 20 CZECH SUMMARY ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 20 TICKER NYSE EURONEXT: CEZ HOLD TARGET PRICE: 807 CZK Source: Czech team estimates Recommendation to 21 December 2010

TEAM E TICKER NYSE EURONEXT: CEZ HOLD TARGET PRICE: 807 CZK 21 CZECH RECOMMENDATION TO DECEMBER 21, 2010 ASSUMPTIONSCEZ GROUP PEER GROUP COMPARISON FINANCIAL ANALYSIS VALUATION INVESTMENT RISKS RECOMMENDATION 21

CZECH APPENDIX 22

Source: Czech team estimates, Company data CZECH APPENDIX - HIGHLIGHTS 23 Market profile 52 Week Price Range950,00 – 736,00 Average Daily Volume ,30 Beta0,99 Dividend Yield (Estimated)6,48% Shares Outstanding Market Capitalization Institutional Holdings79,86 % Insider Holdings0,84% Book Value per Share1 018,94CZK Debt to Total Equity35% Return on Equity21%

Source: Czech team estimates, Company data, Eurostoxx50 CZECH APPENDIX – INVESTMENT SUMMARY 24

Source: Czech team estimates, Company data CZECH APPENDIX – STATEMENT OF CASH FLOW E2011E2012E2013E2014E2015E2016E2017E2018E EAT Amortization CASH GENERATED FROM OPERATIONS CAPEX ∆ Current assets ∆ Current liabilities ∆ Working capital Financial investments CASH USED IN INVESTING ACTIVITIES Dividends Part payment of debts CASH USED IN FINANCING ACTIVITIES , DIFFERENCE OF CASH FLOW Net debts Condition of debts Statement of Cash Flows (in millions CZK)

Source: Czech team estimates, Company data CZECH APPENDIX – BALANCE SHEET (ASSETS) 26 Balance Sheet (in millions CZK) E2011E2012E2013E2014E2015E2016E2017E2018E ASSETS NON-CURRENT ASSETS Plant in service Less accumulated provision for depreciation Net plant in service Nuclear fuel, at amortized cost Construction work in progress Investment in associates and jointventures Investments and other financial assets Intangible assets, net Deferred tax assets 824 CURRENT ASSETS Cash and cash equivalents Receivables, net Materials and supplies, net Fossil fuel stocks Emission rights Other financial assets Other current assets 2 409

Source: Czech team estimates, Company data CZECH APPENDIX – BALANCE SHEET (LIABILITIES) 27 Balance Sheet (in millions CZK) E2011E2012E2013E2014E2015E2016E2017E2018E EQUITY AND LIABILITIES TOTAL EQUITY Equity attributable to equity holders of the parent Stated capital Treasury shares Retained earnings and other reserves Non controlling interests TOTAL LIABILITIES LONG-TERM LIABILITIES Long-term debt, net of current portion Accumulated provision for nuclear decommissioning and fuel storage Other long-term liabilities DEFERRED TAX LIABILITY CURRENT LIABILITIES Short term loans and current portion of long-term debt Trade and other payables Accurated liabilities

Source: Czech team estimates, Company data CZECH APPENDIX – INCOME STATEMENT 28 Income statement (in millions CZK) E2011E2012E2013E2014E2015E2016E2017E2018E REVENUES Sales of electricity Heat sales and other revenues Operating costs Gift tax Allowances OPERATING COSTS AFTER ALLOWANCES Amortization EBITDA EBIT Interests EBT Income tax EAT Dividends EAR

Source: Czech team estimates, Company data CZECH APPENDIX – FREE CASH FLOW 29 FCFF2010E2011E2012E2013E2014E2015E2016E2017E2018E EAT ODPISY změna ČPK INV úroky úroky(1-t) FCFF FCFE EAT Odpisy ČPK INV Saldo U FCFE Free cashflow (in millions CZK)

Source: Czech team estimates, Company data CZECH APPENDIX – VALUATION 30 DCF method Free cash flow to the equity Discounted free cash flow 27266,723594,020008,419751,219950,719222,119002,3 Values in CZKPhase 1 : Phase 2 : 2018 and more Value od phase Levered β0,99Levered β0,99 Continuing value (perpetuity) ReRe 6,26%ReRe 8,50% Value od phase RmRm 6,29%RmRm 6,99% Total value RfRf 3,64%RfRf 4,00% Number of issued shares CZ/A32,61%CZ/A23,02% Value of share807,080E/A37,64%E/A49,70% Counted growth in the second phase was 1,49% based on planned growth of sales

Source: ČEPS CZECH APPENDIX 31 STATETRANSMISSION SYSTEMPLANFACT Germany50 Hertz Trans GWh-1400 GWh TenneT-4077 GWh-6321 GWh PolandPSE Operator-726 GWh5849 GWh SlovakiaSEPS-5229 GWh-5825 GWh AustriaAPG-1997 GWh-6599GWh Czech RepublicČEPS GWh-14296GWh Cross-border power flows (2009) DE - 51,14€/MWh SK – 49,15€/MWh HU - 51,05€/MWh PL – 50,25€/MWh

Source: Comapny data, Czech team estimates CZECH APPENDIX 32