ELECTRICITY GENERATION IN ROMANIA

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

2. Current situation of generation in romaniabalanced portfolioWITH RENEWABLES EARNING THEIR RESPECTED PLACE LATELY

3. Without new investments, romania turns from net exporter of electricity into net importer, endangering its security of supply and exposing to higher prices

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

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

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

7. EXCEPTIONAL POTENTIALS FOR RENEWABLES IN ROMANIA WIND BIOMASS SOLAR

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

9. EXISTING CLASIC POWER PLANTS HAVE LOT OF ISSUESregulated end-user tariffs should increase to make room for URGENTLY NEEDED new investmentscompetitive market works fine • 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 Consumers Low end user prices – not much room for new investments Quality of services required Distributors Network congestions Connections to networks Losses Investments Frozen distribution tariffs/high postponed revenues Regulated suppliers Squeezed between regulated end user fixed prices and continuously increased costs (generation,aso) Transmission Network congestions Connections to networks Losses Investment • Where to invest? • Distributed generation • Efficient cogeneration • Renewables • High efficiency • Rehabilitation • Nuclear • Hydro • Pump storage EU directives 20-20-20 • Reality - hydro • Lack of investments • Clogged lakes • Dry years lately • Insolvency Financing Tougher conditions – more equity, higher interest, PPA Construction Law makers Stability Predictability Operation • Reality – nuclear • Approaching 20-25 years (lifetime) • Decommissioning costs • New units very expensive ANRE Fair in-time regulations • 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

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

11. CEZ GROUP IS BENEFITING FROM LOW COST GENERATION FLEET CEZ Group installed capacity and generation (2011) 69.2 TWh 15,122 MW • 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 11% Black coal (baseload and midmerit) Lignite / Brown coal (baseload and midmerit) 43% Nuclear (baseload) 41% CEZ has a long-term competitive advantage of low and relatively stable generation costs Hydro and others 5% Share on generation Source: CEZ

12. 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 rehabilitated 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 CEZ Vanzaresupplies electricity for 1,4 million customers, not only in our region, but all over Romania CEZ Distributiecontinues to invest every year about 50 mil.euro into distribution networks for its 1,4 million customers

13. WIND FARMS IN FANTANELE, COGEALAC AND GRADINA Basic information about CEZ Wind Farms • 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 Cogealac FantaneleEst Fantanele Vest • 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 • 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; • 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

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

15. Thank you very much for your kind attention!