COSMOVISIÓN INDÍGENA

The goal of the Efektivita Program, launched in 2007, was to secure continually increasing performance, make key processes more cost effective throughout CEZ Group and, thanks to these strategic initiatives, to gradually transform CEZ Group into one of the most efficient players in the European energy market.

In 2010 we had already begun to see the full effects of optimization measures taken in the past, in particular in the

following areas: improvements to ancillary and shared services, management of selected overheads, provision of optimized ICT services in the Group, integration of international equity holdings, and optimization of nuclear power plant safety and performance. By 2010, the total contribution of the Efektivita Program to EBITDA had reached CZK 14.2 billion.

Alongside the Efektivita Program’s seven original key projects – Streamlined Corporation, Transformation of ICT, Best Practices in Distribution, Integration of International Holdings, Safely 15 TERA ETE, Safely 16 TERA EDU, and Securing the Long-term Operation of Dukovany Nuclear Power Station – in June 2010 an eighth Efektivita Program project was added, focusing on sales and customer service.

The Streamlined Corporation project was completed at the end of 2010, with the stipulated goals achieved: establishment of an effectively functioning, integrated CEZ Group delivering financial savings and accompanied by a reduction in the number of employees engaged in support processes. By the end of 2010, savings had reached 321 full-time employees (since project launch), and in 2010 this project saved CZK 946 million. Key activities in 2010 included:

transformation and centralization of accounting services, culminating in the opening of the Accounting Services Center in Ostrava, which as of January 1, 2011 provides for practically all CEZ Group accounting functions

in the area of procurement and logistics, a reduction in the number of distribution warehouses from six to four a revision of all personnel processes.

The ICT Transformation project focused in 2010 on further optimizing information and telecommunication technology services, data center outsourcing, and bringing about additional growth in the quality of project delivery and customer services. The project’s total savings reached CZK 110 million. As part of the project, 2010 saw the announcement of a public tender for data center outsourcing. Based on the results of the competition dialog, this contract was cancelled and, subsequently, a decision was made to continue with internal consolidation projects in the field of ICT infrastructure optimization and consolidation. The program was terminated at year-end 2010.

In the Best Practices in Distribution project, 2010 saw the merger of ČEZ Distribuce, a. s. and ČEZ Distribuční zařízení, a.s. In addition, the project focused on assessing the medium-term (7 to 10 years) outlook for distribution in terms of capital expenditures and new technologies, including identification of the possible risks of future developments in this field. The program was terminated at year-end 2010.

After examining all aspects of a possible outsourcing of meter-reading operations within ČEZ Měření, s.r.o., we reached the conclusion that the overall economic impact of such a move would not be positive, and it was decided to continue providing for these operations internally, within CEZ Group. Cost-cutting activities in the area of preventive maintenance were completed at year-end 2010. A Web Map Service (WMS) system at ČEZ Distribuční služby is currently ramping up to full operation; its objective is to ensure optimum management of teams in the field as they work on the distribution grid. The benefits of the project Integration of International Holdings were increased income and long-term reductions in operating costs. In Bulgaria, dispatcher workplaces were optimized, a customer service and invoicing management system was launched, and we successfully commenced remote readings of customer meters at the low-voltage level. In Poland, we are optimizing combustion of biomass and, at the same time, preparing to build a small-scale hydro power plant in the town of Skawina. In Romania, we completed a central dispatch for the Fântânele wind farm and implemented a

Supervisory Control And Data Acquisition (SCADA) system to automate supervision and data acquisition in the distribution grid. Also, we successfully launched the integration process in Albania, where the project’s targets for 2010 were exceeded by a large margin thanks to effective optimizing of the organization structure in distribution. The program was terminated at year-end 2010.

SAFELY 15 TERA ETE – the objective was to improve selected safety indicators to levels seen among the top quarter of the world’s nuclear power plants and, in 2012, to generate 15 TWh of electricity with an outlook for maintaining or exceeding this level in future years. In 2009, Temelín Nuclear Power Station generated a record 13,253 GWh and in 2010 it broke the record once again, with 13,823 GWh of electricity generated.

Significant projects executed in 2010 include the migration from Westinghouse to TVEL as the supplier of nuclear fuel for Unit 1, and the commissioning of Temelín’s storage facility for spent nuclear fuel. Despite the record generation output, the target duration of planned outages was not met, because we had to address technical problems such as defects in low-pressure components of the turbo-aggregate and electric motor rotors in the primary circulation pump. We are preparing a replacement of nuclear fuel in Unit 2, which is planned for 2011. Also, a program to improve the quality of work done by humans is ongoing and we are implementing a project to make knowledge management a matter of standard practice in the relevant sections.

The objective of the SAFELY 16 TERA EDU project was to increase the annual electricity output of Dukovany Nuclear Power Station to approximately 16 TWh/year starting in 2013, while maintaining the existing level of power plant safety and reliability. The project is reaching its goal by shortening planned outages for fuel replacement and by increasing the output of the plant’s reactor units. Output is being increased by making modifications to the principal generating equipment to bring it up to its full design capacity. An upgrade of low-pressure turbine components at Dukovany Nuclear Power Station was the final step in increasing the output of all units to 456 MW_e. Starting in 2009, unit transformers and high-pressure turbine components were rebuilt, and as a result the full target output of 510 MW_ewas achieved on Units 3 and 4. By 2013, the same modifications will be carried out on the plant’s remaining units. The new outage schedules were successfully put into practice.

The “Securing LTO EDU” (Long Term Operation) project is the first phase of the Securing the Long-term Operation of Dukovany Nuclear Power Station program, the objective of which is to operate the reactors at Dukovany Nuclear Power Station beyond the end of their design life, i.e. beyond 2015. The project’s goal is to prepare the plant’s equipment, personnel, documentation, and processes for an extension of the plant’s license beyond 2015 and implement all measures necessary to operate the plant until 2025, with a view toward extending its operation even further.

The objective of the Efficiency in Sales and Customer Service project was to become, by 2015, a high-quality and

cost-effective provider of multi-commodity services focused on sales and service for CEZ Group end customers. To achieve the required segment results, it was necessary to begin making significant improvements in terms of maintaining the existing customer portfolio, finding new routes to market, and being even more ambitious in cutting costs in sales and customer service. The project focused on internal (e.g., reducing costs of deviations, accelerating cash flow) and external (acquiring new gas customers, improving information support, acquiring end customers in the Slovak Republic) areas of potential improvement.

FutureMotion Initiative

In June 2009, we launched an initiative entitled “FutureMotion – the Energy of Tomorrow” with the objective of securing a long-term stable and positive outlook for ČEZ, a. s. and the Czech power industry, help people lead comfortable and safe lives, minimize environmental burden and, at the same time, help the Czech Republic to build a knowledge economy. The initiative consists of several programs:

Environmental Investments

2010 saw the launch of a project to develop electromobility in cooperation with PEUGEOT ČESKÁ REPUBLIKA s.r.o. The goal of the partnership is to work together on promoting electric cars, gain practical experience in their day-to-day operation, and support the further development of electromobility. PEUGEOT ČESKÁ REPUBLIKA s.r.o. is providing 10 iOn vehicles under lease in 2011 and another 55 vehicles in 2012. CEZ Group agrees to build a network of over 150 charging stations. A business plan was drafted for the Solid Biofuels project, which will focus on possibilities for utilizing biomass in CEZ Group power plants, both in terms of plant technology and biomass procurement.

Small-scale Cogeneration

The area of small-scale cogeneration has become a standard process at ČEZ, a. s. It involves searching for and assessing business opportunities as well as preparing for construction. Tenders are underway to select suppliers of cogeneration units.

Smart Grids

As part of the “Smart Region” project, an agreement was signed with the City of Vrchlabí in northeastern Bohemia where the project is located. We completed research and development studies necessary for project execution (automated smart grid elements and the dynamic model), and work is ongoing to study island operation in the area in question. The first smart elements were installed. In the next five years, the project calls for 4,900 households and businesses to be outfitted with “smart” electric meters, electric car infrastructure to be built, and local power sources to be efficiently integrated into the grid. The AMM (metering) project continued with selection of a meter supplier and subsequent installation of the first “smart” electric meters. Modifications to distribution transformer stations to support AMM installation are ongoing.