CURRENT SITUATION OF GENERATION IN ROMANIABALANCED PORTFOLIO WITH RENEWABLES EARNING THEIR RESPECTED PLACE LATELY*

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

MARKET SHARES IN GENERATION 6 MONTHS 2012WIND COMPENSATED MISSING HYDRO (DRY YEAR AGAIN)*

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

*High Efficiency Cogeneration - support mechanism

*EXCEPTIONAL POTENTIALS FOR RENEWABLES IN ROMANIAWINDSOLARBIOMASS

ZoneRecorded solar energy potential0Over 1250 kWh/m2-yearI1250 kWh/m2-year 1150 kWh/m2-yearII1150 kWh/m2-year 1050 kWh/m2-yearIII1050 kWh/m2-year 950 kWh/m2-yearIVUnder 950 kWh/m2-year

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

EXISTING CLASIC POWER PLANTS HAVE LOT OF ISSUESREGULATED END-USER TARIFFS SHOULD INCREASE TO MAKE ROOM FOR URGENTLY NEEDED NEW INVESTMENTSCOMPETITIVE MARKET WORKS FINE *Where to invest?Distributed generationEfficient cogenerationRenewablesHigh efficiencyRehabilitation NuclearHydroPump storageRevenuesMarket prices for electricityRegulated prices for electricity Revenues from ancillary servicesRevenues from network losses T&DSupporting scheme for renewablesBonus for efficient cogenerationExport Reality - new investmentsWindPhotovoltaicCCGTBiomassReality - hydroLack of investmentsClogged lakesDry years latelyInsolvencyReality nuclearApproaching 20-25 years (lifetime)Decommissioning costsNew units very expensive FinancingTougher conditions more equity, higher interest, PPALaw makersStabilityPredictabilityANREFair in-time regulationsReality - Thermal power plants Depreciated technologies (60s)Oversized inefficient cogeneration unitsExpired lifetimeHigh operational costsExpensive maintenanceLow availabilityLow efficiencyEnvironmental allowances/costsHigh prices for offered electricity ConstructionOperationDistributorsNetwork congestionsConnections to networksLosses InvestmentsFrozen distribution tariffs/high postponed revenuesConsumersLow end user prices not much room for new investmentsQuality of services requiredRegulated suppliersSqueezed between regulated end user fixed prices and continuously increased costs (generation,aso)TransmissionNetwork congestionsConnections to networksLosses InvestmentEU directives20-20-20

*

*Source: CEZCEZ GROUP IS BENEFITING FROM LOW COST GENERATION FLEETCEZ Group installed capacity and generation (2011)CEZ has a long-term competitive advantage of low and relatively stable generation costsHydro and othersLignite / Brown coal (baseload and midmerit)Nuclear (baseload)15,122 MW69.2 TWhShare on generation41%5%43%Black coal (baseload and midmerit)11%Coal power plants are using mostly lignite from CEZs own mine (60% of lignite needs sourced internally, remaining volume through medium-term supply contracts)Nuclear plants have very low operational costs

CEZ GROUP ALREADY INVESTED OVER 2 BILLION EUROS IN ROMANIA*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 rehabilitatedCEZ Vanzare supplies electricity for 1,4 million customers, not only in our region, but all over Romania

*

Total projected size: 240 WTGs of GE 2.5 MW installed capacity of 600MW in three wind farmsTotal investment: 1.1 billion EURO Expected end of construction for entire projects by the end of 2012Estimated 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 yearsWIND FARMS IN FANTANELE, COGEALAC AND GRADINABasic information about CEZ Wind Farms82,5 MWConstruction has started in October 2008Connected to the transmission grid in June 2010Total production in 2011 - 138 GWhFully accredited for 15 years supporting scheme

Fantanele EstCogealac255 MW, 245 MW in operation/testingConstruction works restarted in February 20111 GC received for testing period; As new project over 125 MW, it has to be notified to EC within 3 months after accreditation*262,5 MW Construction has started in October 2008Connected to the transmission grid in June 2010Total production in 2011 - 480 GWhTemporary 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

WIND IS THE CHEAPEST GREEN ENERGY FORROMANIAN ELECTRICITY CONSUMERSCONNECTION TO NETWORKS OF RENEWABLES (MW)

DVRNDokumentDatumWorking Draft Last Modified 09.10.2005 11:24:42 PM Central Europe Standard TimePrinted 10/3/2005 3:38:19 PM Central Europe Standard Time

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PRG-ZPD013-20050929-13229P1E*PRG-ZPD013-20050929-13229P1EPozn:ern uhl - Dtmarovice (4*200), Vtkovice (2*16+25+22), Elcho(2*119,2), Skawina(4*110+50), Varna (6*210)

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