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1 © 2013 Deloitte Czech Republic

2005 2006 2007 2008 2009 2010 2011 2012 2013P 2014P 2015P0

10000

20000

30000

40000

50000

60000

Households

SME

Intraindustrial consumption

Large customers from EHV

Large customers from HV

Electricity consumption in CR – market prediction shows return to growth

In a recession electricity consumption falls, however in a recovery it returns to growth.In CR key determinants should be economic development, household enrichment and new technologies (heating pumps, EVs).

Long term prediction shows that electricity should gain bigger share on energy consumption as a clean source

GWh(netto)

Source: ERÚ, OTE


2005 2006 2007 2008 2009 2010 2011 2012 2013P 2014P 2015P0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

Households

Small offtake

Medium offtake

Large offtake

Gas consumption in CR stagnates but household heating will push it on an upward trend again

Gas consumption is on a downward trend for the last decade. Yearly consumption is highly dependent on economic activity and average temperature. It will stabilize in a short term horizon.

In the longer term however it is expected to grow with transition of households heating from coal to gas.

GWh

Source: ERÚ, OTE


2007 2008 2009 2010 2011 20120.0

20.0

40.0

60.0

80.0

100.0

120.0

Households Industry EPEX

Electricity prices – Opening gap between retail and wholesale prices

Electricity market prices are again in a decline.

However the market prices changed customers final bills only slightly; household prices were still on a rise.

Main cause was contributions to RES and VAT increase.

In 2014 customers experienced first decline in years. Wholesale price dropped dramatically .

Reasons behind a wholesale price decline are:

• economic weakness in Europe

• EU ETS collapse

• US shale gas pushing steam coal price down

2005 2006 2007 2008 2009 2010 2011 20120.0

20.0

40.0

60.0

80.0

100.0

120.0

Households Industry

EUR/MWh

Source: Eurostat, EEX

Source: 1Y futures, PXE


EUR/MWh

Gas prices – Opening gap between retail and wholesale prices

Similar trends as in electricity are in gas prices, but the determinants are different.

Main reason for household gas prices rise is RWE´s contract for gas imports linked to oil prices.

Industrial customers more price sensitive and able to find a new supplier with competitive offer.

Wholesale market price of European gas is still on a slow rise. Effect of US shale gas is still moderate.

Source: Eurostat, EEX

Source: Gaspool derivative index EGIX, EEX

2008 2009 2010 2011 20120.0

10.0

20.0

30.0

40.0

50.0

60.0

Households Industry EGIX


Supplier changes – customers begun to exploit benefits of liberalized markets…

2005 2006 2007 2008 2009 2010 2011 2012 2013

2 454 6,699 59633,327

84,424

361,941 348,056297,281

2005 2006 2007 2008 2009 2010 2011 2012 2013

3,511 13,15046,016 57,689

96,744

249,181

448,860 473,128

374,440

Electricity

Gas

Customers are very price sensitive and alternative suppliers took advantage of declining commodity prices after economic crisis. But the trend is slowing.

Market begun to move and big players started to lose their customer base very fast.

Source: OTE


Market areas historically supplied by a local distribution company. Those still have the biggest market share. Their customer base is unknown due to non-registered metering at OTE.ČEZ is estimated to had more than 3 mio. customers in 2012, E.ON 1 mio. and PRE 690 ths.

17.68%

…and alternative suppliers are on the rise (electricity January 2014)

From total count of 5 700 thousands of supply points TOP 6 of alternative suppliers held 17,68 % market share.

RWE as the biggest gas supplier is emulating ČEZ and building dual supplies.

Total 5 700 000 (2010)

Source: OTE, January 2014

New customers outside of own distribution area (OTE register)

Bohemia Energy

Centropol

RWE

X Energie

RIGHT POWER

COMFORT ENERGY

332,523

273,440

260,065

51,293

49,050

41,582


…and alternative suppliers are on the rise (gas January 2014)

26.52%

From total count of 2 868 083 of supply points TOP 6 of alternative suppliers held 26,5 % market share.OTE registered 50 suppliers on the market.

Gas market changes are faster then in electricity. The biggest reason is dual offer of commodities

Total 2 868 083

RWE´s 2012 year end customer count held cca 1,5 mio. and lost 250 000 customers in a year.Pražská plynárenská had cca 430 000 and E.ON 120 000 customers.

New customers outside of own distribution area (OTE register)

Source: OTE, January 2014

ČEZ Prodej

BOHEMIA ENERGY

E.ON Energie

CENTROPOL ENERGY

LAMA energy

X Energie

320,688

197,379

127,674

61,334

30,266

23,242


CR events (1/2) - New channels & productsEnergy companies are trying to find a new growth engines

Combined delivery Combined delivery of gas and electricity is an absolute necessity.It leverages existing customer base and maximizes revenue.It also give higher convenience to the customer.

Strategic implications

Regional energyUtilities are starting to targeting customers as an individual.This means designing new products and business structure.Good customer knowledge, targeting and dialogue is a precondition.

Retail store energy sale

E.ON with Tesco and COOP started to provide energy sale in local food stores.It opens up a new marketing channel and harden up competition.

Customer retentionCustomers started to fluctuate to the best offer and loyalty is low.Retention programs are developed to prevent this trend.Again customer knowledge and dialogue is essential.

Phone servicesCentropol and ČEZ announced intentions to be virtual phone

operator.This new service leverages customer base and experience, but

brings utilities to new uncharted territory.

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