1. ELECTRICITY GENERATION IN ROMANIA Sistemul energetic al Romaniei la rascruce 7 Noiembrie, 2012 ADRIAN BOROTEA Director Afaceri Corporatiste CEZ ROMANIA

2. CURRENT SITUATION OF GENERATION IN ROMANIA BALANCED PORTFOLIO WITH RENEWABLES EARNING THEIR RESPECTED PLACE LATELY 1

3. WITHOUT NEW INVESTMENTS, ROMANIA TURNS FROM NET EXPORTER OF ELECTRICITY INTO NET IMPORTER, ENDANGERING ITS SECURITY OF SUPPLY AND EXPOSING TO HIGHER PRICES 2

4. MARKET SHARES IN GENERATION – 6 MONTHS 2012 WIND COMPENSATED MISSING HYDRO (DRY YEAR AGAIN) 3

5. ON COMPETITIVE MARKETS, PRODUCERS (ESPECIALLY THERMAL ONES) BENEFIT OUT OF VERY HIGH PRICES 4

6. 5 Additional income from support scheme Producers’ revenues Bonus paymentElectricity sales Heat sales Regulated Power market price Electricity regulated price Heat regulated price High Efficiency Cogeneration - support mechanism

7. 6 EXCEPTIONAL POTENTIALS FOR RENEWABLES IN ROMANIA WIND SOLAR BIOMASS ZoneRecorded solar energy potential 0Over 1250 kWh/m 2 -year I1250 kWh/m 2 -year – 1150 kWh/m 2 -year II1150 kWh/m 2 -year – 1050 kWh/m 2 -year III1050 kWh/m 2 -year – 950 kWh/m 2 -year IVUnder 950 kWh/m 2 -year

8. 7 ANALYSTS SAY THAT ELECTRICITY CONSUMPTION WILL STEADILY INCREASE OVER NEXT YEARS, SO NEEDED INSTALLED CAPACITY

9. EXISTING CLASIC POWER PLANTS HAVE LOT OF ISSUES REGULATED END-USER TARIFFS SHOULD INCREASE TO MAKE ROOM FOR URGENTLY NEEDED NEW INVESTMENTS COMPETITIVE MARKET WORKS FINE 8 Where to invest? Distributed generation Efficient cogeneration Renewables High efficiency Rehabilitation Nuclear Hydro Pump storage Revenues Market prices for electricity Regulated prices for electricity Revenues from ancillary services Revenues from network losses T&D Supporting scheme for renewables Bonus for efficient cogeneration Export Reality - new investments Wind Photovoltaic CCGT Biomass Reality - hydro Lack of investments Clogged lakes Dry years lately Insolvency Reality – nuclear Approaching 20-25 years (lifetime) Decommissioning costs New units very expensive Financing Tougher conditions – more equity, higher interest, PPA Law makers Stability Predictability ANRE Fair in-time regulations Reality - Thermal power plants Depreciated technologies (‘60s) Oversized inefficient cogeneration units Expired lifetime High operational costs Expensive maintenance Low availability Low efficiency Environmental allowances/costs High prices for offered electricity Construction Operation Distributors Network congestions Connections to networks Losses Investments Frozen distribution tariffs/high postponed revenues Consumers Low end user prices – not much room for new investments Quality of services required Regulated suppliers Squeezed between regulated end user fixed prices and continuously increased costs (generation,aso) Transmission Network congestions Connections to networks Losses Investment EU directives 20-20-20

10. 9 Stability Predictability Gov strategy - Sound,Stable Investment recovery Remuneration of investment International crisis More prudent investors Consumption drop Directives Regional Competition For new investments Poverty CSR … … Old, not efficient capacities Regional markets Constraints More demanding consumers Fossil fuels scarcity Tariff liberalization Interconnectors R&D Free market Cash-flow Competition Bureaucracy

11. 10 Source: CEZ CEZ GROUP IS BENEFITING FROM LOW COST GENERATION FLEET CEZ Group installed capacity and generation (2011) CEZ has a long-term competitive advantage of low and relatively stable generation costs Hydro and others Lignite / Brown coal (baseload and midmerit) Nuclear (baseload) 15,122 MW 69.2 TWh Share on generation 41% 5%5% 43% Black coal (baseload and midmerit) 11%  Coal power plants are using mostly lignite from CEZ’s own mine (60% of lignite needs sourced internally, remaining volume through medium-term supply contracts)  Nuclear plants have very low operational costs

12. CEZ GROUP ALREADY INVESTED OVER 2 BILLION EUROS IN ROMANIA 11 CEZ Distributie continues to invest every year about 50 mil.euro into distribution networks for its 1,4 million customers CEZ wind parks at Fantanele & Cogealac-biggest on-shore from Europe, with its 600 MW installed, with an investment of over 1,1 billion Euro; About 590 MW are already up and running; Remaining capacity up to 600 MW to be commissioned by end 2012 At end 2010, CEZ bought 4 small micro-hydropower plants close to Resita, with an installed power of 18 MW, spending 20 mil.Euro; during 2012-2013, units are to be fully rehabilitated CEZ Vanzare supplies electricity for 1,4 million customers, not only in our region, but all over Romania

13. 12  Total projected size: 240 WTGs of GE 2.5 MW – installed capacity of 600MW in three wind farms  Total investment: 1.1 billion EURO  Expected end of construction for entire projects by the end of 2012  Estimated wind speed was confirmed during almost 2 years in operation;  First turbine was connected to Transelectrica in June 2010;  1st GC was received starting August 2010 production - Fantanele;  2nd GC was received starting November 2011 production - Fantanele;  Supporting scheme, consisting of 2 GC until 2017 and 1 GC starting 2018 for a total period of 15 years WIND FARMS IN FANTANELE, COGEALAC AND GRADINA Basic information about CEZ Wind Farms  82,5 MW  Construction has started in October 2008  Connected to the transmission grid in June 2010  Total production in 2011 - 138 GWh  Fully accredited for 15 years supporting scheme Fantanele Est Cogealac  255 MW, 245 MW in operation/testing  Construction works restarted in February 2011  1 GC received for testing period;  As new project over 125 MW, it has to be notified to EC within 3 months after accreditation 12  262,5 MW  Construction has started in October 2008  Connected to the transmission grid in June 2010  Total production in 2011 - 480 GWh  Temporary accredited to receive 2 GC for 2 years; meanwhile it was notified to EC and based on its individual endorsement, we estimate that full scheme will be confirmed, in terms of number of GC and 15 years period; Fantanele Vest

14. WIND IS THE CHEAPEST GREEN ENERGY FOR ROMANIAN ELECTRICITY CONSUMERS CONNECTION TO NETWORKS OF RENEWABLES (MW)

15. Thank you very much for your kind attention!