Introduction by Chairman of the Board of Directors

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2 Contents Introduction by Chairman of the Board of Directors 4 Key Statistics 7 Corporate Governance 9 The Board of Directors Report on Business Performance and Company s Assets 10 Supervisory Board Report 16 Profit Distribution 17 Financial Section 18 Relations Report 50 2

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4 Introduction by Chairman of the Board of Directors Dear Business Friends, We are proud to present you with the Annual Report of Elektrárny Opatovice, a.s. that provides a comprehensive view of the economic year 2010 and of the most significant events affecting the Company s life in that same year. I am pleased to state that despite some adverse external factors of 2010 the Company managed to deliver very good economic performance. It is important to emphasize that this Annual Report was compiled for a company that was formally established only in 2010 when a decision made by the Company s sole shareholder resulted in the division of the original business organization Elektrárny Opatovice, a.s. (business ID No.: ) and in the creation of two new legal entities, namely the company NPTH, a.s. (business ID No.: ) and the company Elektrárny Opatovice, a.s. (business ID No.: ) whose Annual Report you are holding in your hands. The former Elektrárny Opatovice, a.s. was renamed EBEH Opatovice, a.s. I am sure you wonder what prompted the division. It was due to two fundamental reasons: The integration of the new company Elektrárny Opatovice, a.s. in the group of Energetický a průmyslový holding, a.s. and the transfer of a business share in Pražská teplárenská a.s. to the company NPTH, a.s. The newly established Elektrárny Opatovice (EOP) can thus focus only on its business activities in the area of power and heat production and sales, while entrusting the management of its property interests to a designated company. Within the terms of the division process EOP took over all employees and the original trade name; i.e. the commercial firm Elektrárny Opatovice, a.s. to continue our Company s traditional trademark. In 2010 the Company generated very good economic performance when its profit after tax surpassed the plan and amounted to CZK 776 million. In 2010 we supplied our customers with a total of TJ of thermal energy, which represents a 9% year-on-year increase that can be attributed mainly to favorable climatic conditions. In 2010 we supplied a total of GWh of electrical power, a volume comparable to the previous year. However, there was a decrease in power revenues due to the lower market price of electricity. In 2010 it was our primary goal to maintain the price of heat at a level that ranks our Company among the most affordable heat suppliers in the Czech Republic. It was this policy that enabled us to connect new customers purchasing an annual heat volume of 21.6 TJ in Keeping an attractive price of heat continues to remain our priority in

5 Introduction by Chairman of the Board of Directors The year 2010 witnessed the ongoing fulfillment of the long-term project of developing our main power source in Opatovice. We face the greatest challenges in the field of securing long-term supplies of fuel and technological modifications. We have to be capable of meeting the stricter emission limits prescribed by EU legislation and effective as of A respective decision is expected to be made at the end of Afterwards, we will be able to launch the preparation of specific capital investment projects. We believe that in 2010 our Company was perceived as a reliable and responsible partner by our customers as well as by the community members in the region in which we operate. In compliance with our corporate social responsibility program we supported a number of beneficial projects in the area of health care, social services, education and culture. The amount of financial support provided in 2010 was nearly CZK 6 million. In conclusion, let me thank in my own name and in the name of the whole Board of Directors all of our customers for their trust in our Company; all of our employees whose performance significantly contributed to the last year s results; and all of our business partners who support our Company in its long-term development efforts. Jan Špringl Chairman of the Board of Directors of Elektrárny Opatovice, a.s. 5

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7 Key Statistics Unit Year 2010 Attainable output of all turbo generators MW 363 Electrical power supply GWh Total heat output of the power plant MW 698 Total heat output of stand-by sources MW 268 Heat supply to customers TJ Revenues Thousands CZK Operating profit Thousands CZK Profit before tax Thousands CZK Profit after tax Thousands CZK Capital expenditures spent on long-term assets Thousands CZK Of which:long-term tangible and intangible assets Thousands CZK Number of employees (average recalculated) Number of persons 379 Total assets Thousands CZK Long-term tangible and intangible assets Thousands CZK Long-term financial assets Thousands CZK Inventories Thousands CZK Equity Thousands CZK Registered capital Thousands CZK Bank loans and overdrafts Thousands CZK Other information and explanations 1. Elektrárny Opatovice, a.s. does not have any organizational component (branch) abroad. 2. Elektrárny Opatovice, a.s. did not run any research and development activities in 2010 and therefore it did not have any research and development related expenditures. 3. After the balance sheet date there did not occur any other significant events than those described in the notes to the financial statements (see the Financial Part of this Annual Report). 7

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9 Corporate Governance Board of Directors Chairman Vice Chairman Member Member Member Supervisory Board Chairman Vice Chairman Member Member Member Member Executive Management Managing Director and Production Director Finance Director Project Development Director Ing. Jan Špringl Mgr. Hana Krejčí, Ph.D. Mgr. Ing. Tomáš David Ing. Ladislav Kudrnáč Ing. Jiří Pěnka JUDr. Daniel Křetínský František Vondrouš¹ Ing. Petr Havránek¹ MUDr. Štěpánka Fraňková MUDr. Zdeněk Fink Mgr. Petr Řezníček Ing. Ladislav Kudrnáč Ing. Lukáš Maršálek Ing. Miloslav Decker The composition of the above bodies of the company is valid as of the date of this Annual Report publication. For the information on the composition of the company s governing bodies as of December 31, 2010 see the notes to the financial statements (see the Financial Part of the Annual Report). Note: ¹ Representative elected by the company s employees 9

10 The Board of Directors Report on Business Performance and Company s Assets Operational and commercial results Power supply The 2010 total annual supply of power was GWh. The main power purchaser was the company Pražská energetika, a.s. Another portion of the generated power was sold mainly as part of bilateral trading - as supporting service to the company ČEPS, a.s. that runs a transmission system. The remaining capacity available was sold on a daily market as electricity to independent electricity utilities within the Czech Republic. The relevant factor affecting the volume of power supplies in 2010 was the slightly increasing demand for electricity induced by the global economic recovery and a mild increase in electricity consumption within the Czech electric power system. Heat sales In 2010 the company Elektrárny Opatovice, a.s. sold a total of 4422 TJ of heat to its customers. In 2010 new customers were connected to the heat distribution system operated by the Opatovice power plant. The anticipated annual heat sales generated from these new points of sale is 21 TJ. The new connections were provided to residential clients, the industrial sector and public utilities. Sale of power by-products The major segment of the sales of power by-products (PBP) was represented by fly-ash supplied to cement and concrete plants and by stabilized mixture supplied for the construction of a flood-protection dam in Vrdy (the Doubrava river) and stabilized fly-ash and slag for the ongoing construction of the R37 road between Hradec Králové and Pardubice near the power plant in Opatovice n. L. The stabilized flyash and slag are expected to be purchased for the completion of the above highway in 2011 as well. 10

11 The Board of Directors Report on Business Performance and Company s Assets Economic performance and financial results The year 2010 is evaluated as economically successful. The company generated profit after tax of CZK 776 million of which revenues from own products and services sold amounted to CZK million in The company s performance remained stable throughout the year. The Environment The company operated its production resources and equipment so as to fulfill the requirements stipulated in valid legislation and integrated licenses. All of the company s operations were conducted with the aim to minimize environmental impacts. Maintenance and investments made within the power plant and the heat distribution system were carried out to the extent ensuring the high reliability and efficiency of all equipment, which is closely linked to environmental concerns. In 2010 the company successfully re-applied for its environmental certification according to the international standard EN ISO 14001:2004. Its environment protection policy adopted as part of the company s management system declares a higher-than-standard approach and mechanisms that secure the continual reduction of the power plant s impact on the environment that goes beyond valid legislative requirements. Compliance with all legislative requirements in 2010 was confirmed by inspections performed by the company s supervising governing bodies. In 2010 the company registered its power by-products, namely slag, fly-ash and gypsum in accordance with ES regulation No. 1907/2006 known as REACH. Following this same regulation the company subjected the power by-products to a number of ecological toxicological tests in line with good laboratory practice (GLP) and according to specific OECD methodologies that ensure the independence and objectivity of results. The tests and their subsequent evaluation, also completed according to REACHspecified methodologies, did not prove any negative effects of the power by-products on human health or the environment. The use of these products in the building industry has positive environmental effects because it helps to preserve primary natural resources (e.g. stone, clinker, limestone, sand and gravel) and to reduce greenhouse gas emissions (CO 2 production during cement production). The cost of the above registration according to REACH amounted to CZK 1.4 million in

12 The Board of Directors Report on Business Performance and Company s Assets In connection with the adoption of the new European directive on industrial emissions No. 2010/75/EU the further ecological modification of sources is under preparation in the power plant. In the period of it should lead to the greater reduction in nitrogen and sulfur oxide emissions to approx. half of their current volumes. Human resources The beginning of 2010 saw the company s restructuring during which the number of staff was reduced by 15%. The whole process whose cornerstone was systematic overheads reduction was aimed at cost optimization across the company. Staff reduction concerned the whole company and the involvement of individual employment categories was as follows: 56% of laborers, 32% administrative and clerical staff and 12% technical employees. The prevailing majority of the dismissed employees terminated their employment by agreement as of the end of January Personnel changes were implemented quickly and without significantly negative impacts on the company s operations. The company s strong points, i.e. good relationships between employees, employees loyalty to the company and the company s good reputation in the region have remained unaffected. Similarly, relationships maintained with the trade unions organized within the company are correct. The company s executive management meets the trade unions committee regularly, informs it and discusses with it labor, social and payroll issues. The conditions stipulated by the agreed-upon collective agreement have been fulfilled. In the course of 2010 personnel changes were not limited only to layoffs. The electricity trading department had to hire 3 new employees through a selection process. Their jobs primarily involve working in the capacity of commercial dispatchers on the market for electricity. At the end of 2010 the company had 372 employees. Relationships with the region and corporate social responsibility Our program of corporate social responsibility provided support to a number of beneficial charities, social, health care, educational and cultural projects in the region spanning from Hradec Králové through Pardubice to Chrudim. Some of the projects and entities we supported were the following: 12

13 The Board of Directors Report on Business Performance and Company s Assets The municipality of Dříteč a contribution to children s playground enlargement The municipality of Opatovice nad Labem a contribution to the financing and reconstruction of electrical wiring and lighting in the elementary school in Opatovice nad Labem The district charity organization in Pardubice a contribution to the purchase of disability aids and assistance devices for hospice care provided in homes The Social Services Home in Slatiňany a contribution to the purchase of lifting equipment for a rehabilitation pool filled with hollow plastic balls Smíření The Hospice Association for the Pardubice region a contribution to the kitchen equipment for a hospice in Chrudim PROSTOR PRO, owns., Hradec Králové a contribution to the equipment and partial modification of a new room in the Pohoda Mother s Club The District Red Cross Organization in Pardubice a contribution to the financing of youth projects specialized in first aid and healthy lifestyle education and material equipment for the humanitarian unit of the Red Cross Organization in Pardubice The Early Care Association in Pardubice a contribution to hippo rehabilitation, swimming and other forms of therapy for young children with disabilities Hvězda SKP Pardubice, The Handicapped Athletes Club a contribution to the purchase of sports equipment The Regional Library in Pardubice a contribution to the purchase of books for people with sight and hearing impairments Eastern Bohemia Theater in Pardubice a contribution to all-year operation and prizes for the 10 th year of the Grand Festival of Laughter The Classic Music Festival Smetana Litomyšl, o.p.s. a contribution to the organization of the 52 nd year of the Smetanova Litomyšl festival Philharmonic Orchestra Hradec Králové o.p.s. a contribution to the restoration and maintenance of music instruments 13

14 The Board of Directors Report on Business Performance and Company s Assets Chamber Philharmonic Orchestra Pardubice - a contribution to the organization of the 2010/11 concert season General Upper Secondary School, Pardubice, Dašická a contribution to the purchase of the equipment of the chemical laboratory and chemical room The University of Pardubice - a contribution to the enlargement of the University Library primarily with foreign electronic resources, electronic books and databases as well as for the production of a publication released on the occasion of 60 years of university education in Pardubice The University of Hradec Králové a contribution to the financing of stipends for successful students and to purchase of electronic library databases The Faculty Hospital in Hradec Králové - a contribution to the purchase of 2 fetoscopes for the Obstetric and Gynecological Clinic, 1 movable ventilator for children and adults for the Emergency Department and 1 vitals monitor for the 1 st Internal Clinic, the Cardiostimulation Center Chrudim Hospital, a.s. a contribution to the bedside monitors for the Department of Chronic Intensive Care Occupational safety and health protection In 2010 the company s occupational safety management system was audited and re-certified in accordance with ČSN OHSAS In 2010 the company reported five occupational injuries. All of them were connected to common laborrelated risks. The prevention of injuries will thus be paid close attention. It will mainly focus on preventive inspections of all workplaces, on the quality of training courses provided in the area of occupational safety health protection during the regular annual maintenance of the power plant technological equipment that usually takes place from April to July. 14

15 The Board of Directors Report on Business Performance and Company s Assets Future outlook In the long-term the company will continue to prepare solutions aimed at making the Opatovice power plant capable of meeting future stricter requirements for air protection; i.e. the preparation of the reconstruction of the boiler combustion equipment will remain one of our priorities. Last but not least the company will continue its efforts to connect new heat buyers to the EOP heat distribution system at highly favorable prices. In Opatovice nad Labem on May 19, 2011 On behalf of the company: Ing. Jan Špringl Chairman of the Board of Directors Mgr. Hana Krejčí, Ph.D. Vice Chairman of the Board of Directors 15

16 The Supervisory Board s report on the year 2010 and on the review of the company s final account and proposed profit distribution The Supervisory Board of the Company declares that in 2010 it supervised the execution of the powers of the Board of Directors and the implementation of the Company s business activities and performed inspection activities stipulated by the Commercial Code and the Articles of Association. The Supervisory Board had all information necessary for the proper execution of its activities. In 2010 the Supervisory Board commented on all relevant decisions that affect the running, economy and proper management of the Company. The Supervisory Board also followed the Company s economic performance and the status of its assets. Therefore, the Board of Directors decisions and any and all entrepreneurial activities of the Company can be pronounced to have been in accordance with the Articles of Association and generally valid legal regulations. During its meeting held on this present day the Supervisory Board reviewed the Company s financial statements for the accounting period from January 1, 2010 until December 31, 2010, and agreed with an opinion submitted by an independent auditor according to whom the financial statements provides a true and fair view of the Company s assets and liabilities, costs, revenues, profit and loss and cash flows. The Supervisory Board further reviewed the Board of Directors proposal for profit distribution and the payment of dividends or director s fees. Consequently, the Supervisory Board suggests that the sole shareholder of the Company approves the financial statements of 2010 as well as the proposal for profit distribution and the payment of dividends or director s fees. In Opatovice nad Labem on June 23, 2011 JUDr. Daniel Křetínský Supervisory Board Chairman 16

17 Profit distribution according to a decision of the company s sole shareholder acting in the capacity of the general meeting on June 24, 2011 The sole shareholder of EOP 1 makes this decision to distribute EOP s profit for the accounting period of 2010 as proposed by the EOP s governing body: EOP reports after-tax profit of CZK 775,603, for Retained earnings from previous years are CZK 6,217,429, Allocation to the statutory reserve fund 0,- Kč Allocation to the social fund ,- Kč Dividends ,- Kč Director s fees 2 : Board of Directors 0,- Kč Director s fees 2 Supervisory Board 0,- Kč Total allocations ,- Kč The dividend is payable within 90 days from the date of the sole shareholders decision about profit distribution. At June 30, 2011 a portion of the dividend of CZK 3,596,472, will be offset with EOP s receivable from the sole shareholder. The remaining dividend of CZK 1,249,999, will be credited to the sole shareholder s account within its maturity period. ¹ EOP = Elektrárny Opatovice, a.s. 2 Tantiémy in Czech 17

18 Financial Section Auditor s Report Company s Statutory Financial Statements 18

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20 Balance sheet In full format As at 31 December 2010 Non-consolidated (in thousands of Czech crowns TCZK ) Translated from the Czech original Identification number: Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Ident. A S S E T S line Current period Prior period Gross Adjust. Net Net a b c TOTAL ASSETS (L ) A. Receivables for subscribed registered capital B. Fixed assets (L ) B.I. Intangible fixed assets (L.05 to 12) B.I.1. Incorporation expenses Research and development Software Intellectual property rights Goodwill Other intangible fixed assets Intangible fixed assets under construction Advance payments for intangible fixed assets B.II. Tangible fixed assets (L.14 to 22) B.II.1. Land Buildings Plant and equipment Cultivated areas Adult livestock Other tangible fixed assets Tangible fixed assets under construction Advance payments for tangible fixed assets Adjustments to acquired fixed assets B.III. Long-term investments (L.24 to 30) B.III.1. Investments in group undertakings Investments in associated companies Other long-term securities and ownership interests Loans - group undertakings, associated companies Other long-term investments Long-term investments (provisional value) Advance payments for long-term investments

21 Balance sheet In full format As at 31 December 2010 Non-consolidated (in thousands of Czech crowns TCZK ) Translated from the Czech original Identification number: Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Ident. A S S E T S line Current period Prior period Gross Adjust. Net Net a b c C. Current assets (L ) C.I. Inventories (L.33 to 38) C.I.1. Raw materials Work-in-progress and semi-finished products Finished goods Young and other livestock Goods for resale Advance payments for inventories C.II. Long-term receivables (L.40 to 47) C.II.1. Trade receivables Receivables - group undertakings Receivables - associated companies Receivables from shareholders/owners and alliance partners Long-term advances paid Estimated receivables Other receivables Deferred tax asset C.III. Short-term receivables (L.49 to 57) C.III.1. Trade receivables Receivables - group undertakings Receivables - associated companies Receivables from shareholders/owners and alliance partners Social security and health insurance Tax receivables Short-term advances paid Estimated receivables Other receivables

22 Balance sheet In full format As at 31 December 2010 Non-consolidated (in thousands of Czech crowns TCZK ) Translated from the Czech original Identification number: Ident. A S S E T S line Current period Prior period Gross Adjust. Net Net a b c C.IV. Short-term financial assets (L.59 to 62) C.IV.1. Cash Bank accounts Short-term securities and ownership interests Short-term investments (provisional value) D.I. Deferrals (L ) D.I.1. Prepaid expenses Complex prepaid expenses Accrued revenues Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 22

23 Balance sheet In full format As at 31 December 2010 Non-consolidated (in thousands of Czech crowns TCZK ) Translated from the Czech original Identification number: Ident. L I A B I L I T I E S line Current period Prior period a b c 5 6 TOTAL LIABILITIES AND EQUITY (L ) A. Equity (L ) A.I. Registered capital (L ) A.I.1. Registered capital Own shares and ownership interests (-) Changes in registered capital A.II. Capital contributions (L.74 to 78) A.II.1. Share premium Other capital contributions Revaluation of assets and liabilities Revaluation reserve on transformations Differences resulting from transformations A.III. Reserve funds, undistributable fund and other funds from profit (L.80+81) A.III.1. Statutory reserve fund / Undistributable fund Statutory and other funds A.IV. Retained earnings (L.83+84) A.IV.1. Retained profits Accumulated losses A.V. Profit (loss) for the current period (+/-) B. Liabilities (L ) B.I. Provisions (L.88 to 91) B.I.1. Tax-deductible provisions Provision for pensions and other similar payables Income tax provision Other provisions Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 23

24 Balance sheet In full format As at 31 December 2010 Non-consolidated (in thousands of Czech crowns TCZK ) Translated from the Czech original Identification number: Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Ident. L I A B I L I T I E S line Current period Prior period a b c 5 6 B.II. Long-term liabilities (L.93 to 102) B.II.1. Trade payables Liabilities - group undertakings Liabilities - associated companies Liabilities to shareholders/owners and alliance partners Long-term advances received Debentures and bonds issued Long-term bills of exchange payable Estimated payables Other payables Deferred tax liability B.III. Short-term liabilities (L.104 to 114) B.III.1. Trade payables Liabilities - group undertakings Liabilities - associated companies Liabilities to shareholders/owners and alliance partners Payables to employees Payables to social security and health insurance Tax liabilities and subsidies Short-term advances received Debentures and bonds issued Estimated payables Other payables B.IV. Bank loans and overdrafts (L ) B.IV.1. Long-term bank loans Short-term bank loans Short-term financial liabilities C.I. Accruals (L ) C.I.1. Accrued expenses Deferred revenues

25 Balance Profit and sheet Loss In full format Account As at 31 December 2010 Non-consolidated classification by nature (in translated thousands fromof Czech crowns TCZK the Czech ) original Translated for the year from ended the 31 December Czech original 2010 Identification (in thousands number: of Czech crowns TCZK ) Identification number: Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Ident. TEXT Line Accounting period Current Prior a b c 1 2 I. Revenue from goods A. Cost of goods sold Gross profit (L.01-02) II. Revenue from production (L ) II.1. Revenue from own products and services II.2. Change in inventory of own production II.3. Own work capitalized B. Cost of sales (L.09+10) B.1. Materials and consumables B.2. Services Added value (L ) C. Personnel expenses (L.13 to 16) C.1. Wages and salaries C.2. Remuneration of board members C.3. Social security and health insurance expenses C.4. Social expenses D. Taxes and charges E. Depreciation of intangible and tangible fixed assets III. Proceeds from disposals of fixed assets and raw material (L.20+21) III.1 Proceeds from disposals of fixed assets III.2 Proceeds from disposals of raw material F. Net book value of fixed assets and raw material sold (L.23+24) F.1. Net book value of fixed assets sold F.2. Raw materials sold G. Change in provisions and adjustments relating to operating activity and change in complex prepaid expenses IV. Other operating revenues H. Other operating expenses V. Transfer of operating revenues I. Transfer of operating expenses * Operating profit (loss) (L )

26 Balance Profit and sheet Loss In full format Account As at 31 December 2010 Non-consolidated classification by nature (in translated thousands fromof Czech crowns TCZK the Czech ) original Translated for the year from ended the 31 December Czech original 2010 Identification (in thousands number: of Czech crowns TCZK ) Identification number: Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Ident. TEXT Line Accounting period Current Prior a b c 1 2 VI. Proceeds from sale of securities and ownership interests J. Securities and ownership interests sold VII. Revenue from long-term investments (L ) VII.1. Revenue from investments in group undertakings and associated companies VII.2. Revenue from other long-term securities and ownership interests VII.3. Revenue from other long-term investments VIII. Revenue from short-term financial investments K. Financial assets expenses IX. Revenue from revaluation of securities and derivatives L. Expenses for revaluation of securities and derivatives M. Change in provisions and adjustments relating to financial activity X. Interest revenue N. Interest expense XI. Other financial revenues O. Other financial expenses XII. Transfer of financial revenues P. Transfer of financial expenses * Profit (loss) from financial operations (L ) Q. Income tax on ordinary profit (loss) (L.50+51) Q.1. - current Q.2. - deferred ** Profit (loss) on ordinary activities after tax (L ) XIII. Extraordinary revenue R. Extraordinary expenses S. Income tax on extraordinary profit (loss) (L.56+57) S.1. - current S.2. - deferred * Extraordinary profit (loss) (L ) T. Transfer of profit or loss to partners *** Profit (loss) for the accounting period (L ) **** Profit (loss) before tax (L )

27 Balance Cash flow sheet In full format statement As at 31 December 2010 Non-consolidated non-consolidated, (in translated thousands fromof Czech crowns TCZK the Czech ) original Translated for the year from ended the 31 December Czech original 2010 Identification (in thousands number: of Czech crowns TCZK ) Identification number: Current period P. Cash and cash equivalents, beginning of period Net operating cash flow Z. Operating profit (loss) before tax A.1. Non-cash transactions A.1.1. Depreciation of fixed assets A.1.2. Change in: A goodwill and adjustments to acquired assets A provisions and adjustments relating to operating activity A.1.3. Profit(-) Loss(+) on sale of fixed assets A.1.4. Other non-cash transactions A.* Net operating cash flow before tax, changes in working capital and extraordinary items A.2. Changes in working capital A.2.1. Change in receivables from operating activities and deferrals A.2.2. Change in short-term liabilities from opearating activities and accruals A.2.3. Change in inventories A.2.4. Change in short-term financial assets, other than cash and cash equivalents A.** Net operating cash flow before financial balances, tax and extraordinary items A.3. Interest paid excluding amounts capitalised A.4. Interest received A.5. Income tax paid on ordinary income and income tax relating to prior periods A.6. Receipts and disbursement from extraordinary items A.7. Other financial receipts and disbursement A.8. Dividends received and profit shares A.*** Net operating cash flow Prior period Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 27

28 Balance Cash flow sheet In full format statement As at 31 December 2010 Non-consolidated non-consolidated, (in translated thousands fromof Czech crowns TCZK the Czech ) original Translated for the year from ended the 31 December Czech original 2010 Identification (in thousands number: of Czech crowns TCZK ) Identification number: Current period Investment activity B.1. Acquisition of fixed assets B.1.1. Acquisition of tangible fixed assets B.1.2. Acquisition of intangible fixed assets B.1.3. Acquisition of long-term investments B.2. Proceeds from sales of fixed assets B.2.1. Proceeds from sales of tangible and intangible fixed assets B.2.2. Proceeds from sale of long-term investments B.3. Advances and loans to related parties B.*** Net cash flow from investment activity Financial activity C.1. Change in long-term liabilities and bank loans C.2. Increase and decrease in equity from cash transactions C.2.1. Subscription of shares and investments C.2.2. Equity paid to shareholders C.2.3. Other cash contributions from partners and shareholders C.2.4. Loss settlement from partners C.2.5. Payments from funds created from net profit C.2.6. Dividends paid and profit shares including withholding tax paid C.2.6. Cash movements in equity resulting from derivative transactions C.*** Net cash flow from financial activity F. Net increase or decrease in cash balance R. Cash and cash equivalents, end of period Prior period Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 28

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30 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: Description and principal activities Establishment and description of the Company Elektrárny Opatovice, a.s. ( the Company ) was recorded in the Commercial Register maintained by the Regional Court in Hradec Králové the Pardubice branch, Section B, Insert No on 1 August Elektrárny Opatovice, a.s. was established as a result of demerger by spin-off from the original company, Elektrárny Opatovice, a.s., ident. no ( the original company ) as at the decisive date of 1 January On the demerger by spin-off, NPTH, a.s., ident. no , was also established. In accordance with the Demerger Project, part of the assets and liabilities of the company being demerged was transferred to Elektrárny Opatovice, a.s. It was the part relating to the original company s existing business activities. The principal business activities of the Company are the production and sale of electricity and heat. Ownership structure The sole shareholder of Elektrárny Opatovice, a.s. as at 30 September 2010 was EAST BOHEMIA ENERGY HOLDING LIMITED with its registered office at SAVVIDES CENTER 59-61, Nikósie, Cyprus. The Company has concluded neither a controlling agreement, nor a contract for the transfer of profit with its sole shareholder, EAST BOHEMIA ENERGY HOLDING LIMITED. A report on relations between related parties will form a part of the annual report for the current period. Organisational structure The Company consists of a power plant in Opatovice; heat distribution in Pardubice, Hradec Králové, Chrudim, Rybitví, Lázně Bohdaneč, Opatovice nad Labem and Čeperka; and backup resources in Pardubice, Hradec Králové and Chrudim. Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Registered office Elektrárny Opatovice, a.s. Opatovice nad Labem Pardubice 2 Czech Republic Identification number

31 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: Members of the board of directors and supervisory board as at 31 December 2010 Board of directors Ing. Jan Špringl (Chairman) - from 1 August 2010; recorded in the Commercial Register on 1 August 2010 Mgr. Hana Krejčí, Ph.D. (Vice-Chairman) - from 1 August 2010; recorded in the Commercial Register on 1 August 2010 Mgr. Ing. Tomáš David - from 1 August 2010; recorded in the Commercial Register on 1 August 2010 Ing. Ladislav Kudrnáč - from 1 August 2010; recorded in the Commercial Register on 1 August 2010 Ing. Jiří Pěnka - from 1 August 2010; recorded in the Commercial Register on 20 October 2010 Acting on behalf of the Company until 20 October 2010 Chairman of the board of directors together with another board member or three board members jointly may act on behalf of the Company. Recorded in the Commercial Register on 1 August Acting on behalf of the Company effective from 20 October 2010 Chairman of the board of directors together with another board member, or three board members jointly, or one board member having a written authorisation may act on behalf of the Company. Recorded in the Commercial Register on 20 October Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Supervisory board JUDr. Daniel Křetínský - from 1 August 2010; recorded in the Commercial Register on 1 August 2010 Mgr. Jan Čechlovský - from 1 August 2010; recorded in the Commercial Register on 1 August 2010 Ing. Jaroslav Deml - from 1 August 2010; recorded in the Commercial Register on 1 August 2010 Ing. Otakar Divíšek - from 1 August 2010; recorded in the Commercial Register on 1 August 2010 Ing. Petr Havránek - from 15 October 2010; recorded in the Commercial Register on 18 January 2011 František Vondrouš - from 15 October 2010; recorded in the Commercial Register on 18 January

32 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: The Company did not provide any loan or borrowing to the members of the board of directors and supervisory board, or persons close to them, did not conclude any contract with them which would result in securing liabilities of these persons, and did not transfer any assets to them free of charge. Other changes in the Commercial Register All other changes in the Commercial Register were made in connection with the establishment of the Company as at 1 January Significant accounting policies applied by the Company a) Tangible and intangible fixed assets Tangible and intangible fixed assets are stated at acquisition cost. Tangible fixed assets costing up to TCZK 40 and intangible fixed assets costing up to TCZK 60 are charged to the profit and loss account in the year that they are acquired. Technical improvements to fixed assets increase the acquisition cost of these assets. Assets are depreciated using the following methods over the following periods: Asset Basis Period Buildings Straight-line years Structures Straight-line 5 50 years Machinery and equipment Straight-line 4 30 years Motor vehicles Straight-line 4 15 years Patents Straight-line 15 years Licences Straight-line 5 years Adjustment to acquired fixed assets Straight-line 15 years Software Straight-line 4 years Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Intangible assets include emission rights, regardless of their cost and period of use. Allocated emission rights are stated at replacement cost, set based on the price in the EEX market in Germany on the date it is charged to the Company s account in the national register, translated using a fixed rate of exchange for the first working day of the calendar month in which the emission rights are allocated. Purchased emission rights are stated at acquisition cost. Consumption (or any other disposal, such as a sale) of emission rights is recorded by decreasing intangible assets through expenses and, simultaneously, by recording the decrease of subsidy in revenues. 32

33 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: b) Long-term investments Long-term investments comprise investments in group undertakings and associated companies, debt securities that the Company has the intent and ability to hold to maturity, and other long-term securities for which the Company s intent is not known upon acquisition. Long-term investments are stated at cost, which includes expenses directly incurred in connection with the acquisition, such as fees and commissions paid to brokers, advisors and stock exchanges. Securities, except held-to-maturity securities and securities comprising investments in group undertakings and associated companies, are measured at fair value as at the balance sheet date. Gains/losses arising from the change in fair value are not included in the net profit or loss for the period until they are realised, and are recorded as changes in Revaluation of assets and liabilities in equity. c) Short-term securities and ownership interests Securities held for trading and held-to-maturity debt securities due within one year are recorded at acquisition cost. d) Inventories Raw materials inventory is stated at cost, which includes the purchase price of the inventory and related customs duties and in-transit storage and freight costs incurred in delivering the inventory to the manufacturing facility. Cost is determined using the weighted average method. e) Establishment of adjustments and provisions Tangible fixed assets The Company establishes adjustments to tangible fixed assets where the net book value is temporarily higher than the present value in use. Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Receivables The Company establishes adjustments for doubtful receivables based on an analysis of the credit status of customers and the ageing structure of receivables. 33

34 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: Provisions A provision for repairs of tangible fixed assets is created in compliance with Act No. 593/1992 Coll., on Reserves to Determine Income Tax Base, as amended. Statutory provisions for restoration and rehabilitation are created in accordance with Act No. 185/2001 Coll., on Waste, as amended, and with implementing Regulation of the Ministry of Environment No. 383/2001 Coll., setting the amount of a provision for restoration and rehabilitation, maintenance of waste dumps and the renewal after their use, and the details of establishing and using this provision. Other provisions are established based on an analysis of the condition in which the subject of a provision is. f) Foreign currency translation At the beginning of each calendar month the Company sets a fixed exchange rate based on the Czech National Bank official rate for the first working day of the month, which is applied to transactions recorded during the month. As at the balance sheet date, foreign currency monetary assets and liabilities are translated at the prevailing Czech National Bank official rates. Unrealised foreign exchange gains and losses are recognised in the profit and loss account. g) Derivatives Derivatives held for trading Financial derivatives held for trading are carried at fair value and gains (losses) from changes in their fair values are recorded in the profit and loss account. Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Hedging derivatives Hedging derivatives are carried at fair value. The method of recognising the fair value is dependent on the hedge accounting model. Hedge accounting is applied where: - hedge is formally documented at the date of a hedging transaction, - hedge is expected to be effective over the period of its duration, - hedge effectiveness is measurable, - hedge is effective during the accounting period, - it is highly probable that the transaction will occur where it relates to the hedging of expected transactions. 34

35 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: If a derivative is used for hedging against risks of changes in cash flows arising from assets, liabilities, legally enforceable contractual relations or expected transactions, the change in the fair value of a hedging derivative corresponding to the effective part of the hedge is reported in Revaluation of assets and liabilities in equity. The ineffective part of the hedge is included in the profit and loss account. h) Income tax Income tax for the period comprises current tax and the change in deferred tax. Current tax comprises an estimate of tax payable calculated based on the taxable income, using the tax rate valid as at the first day of the accounting period, and any adjustments to taxes payable for previous periods. Deferred tax is based on all temporary differences between the carrying and tax value of assets and liabilities, and other temporary differences (tax losses carried forward, if any), multiplied by the tax rate expected to be valid for the period in which the tax asset/liability will be utilised. A deferred tax asset is recognised only if it is probable that it will be utilised in future accounting periods. i) Classification of liabilities The Company classifies as short-term any part of long-term liabilities, bank loans and overdrafts that is due within one year of the balance sheet date. j) Recognition of sales and purchases of electricity The Company continues to be active in trading with electricity as its legal predecessor which was registered with the Prague Power Exchange in Electricity physically purchased and then sold is recognised in revenues from the sale of goods and cost of goods sold. As the Company is planning to settle all its concluded contracts, unsettled contracts are only reported in off-balance sheet records as at the balance sheet date. 3. Comparability of accounting periods Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Owing to the fact that the Company was part of the demerger by spin-off as at the decisive date of 1 January 2010, the prior period information in the balance sheet represents balances from the pro-forma opening balance sheet as at 1 January Comparable information is not included in the profit and loss account and cash flow statement for the same reason. 35

36 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: To increase the transparency of the financial statements, the balance of a long-term loan to the parent company was transferred from Other receivables to Receivables group undertakings. The same adjustment was made in the data as at 1 January 2010 for comparability purposes. 4. Fixed assets a) Intangible fixed assets Intellectual property rights Software Emission rights Intangible FA under constr. Total Acquisition cost Balance at 1/1/ Additions Disposals Transfers Balance at 31/12/ Accumulated depreciation Balance at 1/1/ Depreciation expense Disposals Balance at 31/12/ Net book value 1/1/ Net book value 31/12/ In the period ended 31 December 2010, revenues from the sale of emission rights acquired free of charge totalled TCZK and revenues from the sale of purchased emission rights totalled TCZK Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 36

37 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: b) Tangible fixed assets Land Buildings, Machinery Tangible Adjustment Other Advances halls and and FA under to acquired assets paid structures equipment constr. fix. assets Total Acquisition cost Balance at 1/1/ Additions Disposals Transfers Balance at 31/12/ Accumulated depreciation Balance at 1/1/ Depreciation expense Disposals Balance at 31/12/ Adjustments Balance at 1/1/ Change in adjustments Balance at 31/12/ Net book value 1/1/ Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Net book value 31/12/

38 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: Non-capitalised tangible and intangible fixed assets In accordance with the accounting policy described in note 2(a) above, the Company charged low value tangible and intangible fixed assets to the profit and loss account in the year that they were acquired. The cumulative acquisition cost of these tangible and intangible fixed assets that were still in use was as follows: Balance at 31/12/2010 Balance at 1/1/2010 Tangible assets Intangible assets (software) Total Investments a) Long-term 31/12/2010 Ownership interests Ownership Shares held Nominal value of shares in CZK Total profit (+) loss (-) at 31/12/ 2010 Equity at 31/12/2010 Acquisition cost Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 EOP & HOKA s.r.o % * * REATEX, a.s. 100% * * V A H O s.r.o. 100% * 617* 295 Total long-term investments * Unaudited results 38

39 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: /1/2010 Ownership interests Ownership Shares held Nominal value of shares in CZK Total profit (+) loss (-) at 1/1/ 2010 Equity at 1/1/2010 Acquisition cost EOP & HOKA s.r.o % REATEX, a.s. 100% V A H O s.r.o. 100% Total long-term investments The registered offices of the subsidiaries are as follows: EOP & HOKA s.r.o. areál elektrárny Opatovice nad Labem Pardubice 2 V A H O s.r.o. areál elektrárny Opatovice nad Labem Pardubice 2 REATEX a.s. Na Rybárně Hradec Králové Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Elektrárny Opatovice, a.s. has not concluded a controlling agreement or a contract for the transfer of profit with the above companies. The Company will not prepare the consolidated financial statements. Elektrárny Opatovice, a.s. and its subsidiaries and associated companies are included in the consolidated financial statements of their parent company, Energetický a průmyslový holding, a.s., prepared in compliance with IFRS. The consolidated financial statements incl. the notes will be published in the Commercial Register. 39

40 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: b) Short-term Short-term investments comprise bank deposit notes from UniCredit Bank Czech Republic, a.s. and Československá obchodní banka, a. s. totalling TCZK (1/1/2010 TCZK ). 7. Trade receivables and payables and other receivables a) Short-term trade receivables total TCZK (1/1/2010 TCZK ), of which TCZK (1/1/2010 TCZK ) is overdue. An adjustment of TCZK (1/1/2010 -TCZK ) was set up as at 31 December 2010 for doubtful receivables. Receivables from group undertakings include loans provided to EAST BOHEMIA ENERGY HOLDING LIMITED totalling TCZK (1/1/2010 TCZK 0). Other short-term receivables comprise a loan of TCZK 300 (1/1/2010 TCZK 0), receivables from financial derivatives of TCZK (1/1/2010 TCZK 0), and an auction security deposit of TCZK (1/1/2010 TCZK 6 087). b) Long-term trade receivables represent a receivable of TCZK payable in The Company reports long-term advances due in more than one year of TCZK (1/1/2010 TCZK ). Receivables from group undertakings include loans provided to EAST BOHEMIA ENERGY HOLDING LIMITED totalling TCZK (1/1/2010 TCZK ), payable in June Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 c) Short-term trade payables total TCZK (1/1/2010 TCZK ). The Company s policy is generally to pay trade payables as they fall due, and as a result no payables are overdue. 40

41 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: Derivates a) Trading derivatives As at the balance sheet date the Company held the following financial derivatives for trading: Forward exchange contracts Due date (expiry) 31/12/2010 Fair value Options of TEUR /1/ Interest rate swaps new ineffective part until 30/9/ Interest rate swaps original until 9/3/ Forward sales of TEUR January Total b) Hedging derivates In 2010, the Company entered into two new interest rate swaps to hedge against changes in the interest rates of loans of TCZK and TCZK A part of these hedging derivatives in the fair value of TCZK did not fulfil the effectiveness test criteria and was reclassified to financial derivatives held for trading as at 31 December 2010 and charged to the profit and loss account. The fair value of swaps (hedging derivatives) as at 31 December 2010 was TCZK Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 As at 1 January 2010 the Company held two swaps to hedge against changes in the interest rates of loans of TCZK and TCZK A part of the fair value of the interest rate swaps of TCZK was classified as a financial derivative held for trading as at 1 January 2010 and reported in Retained profits from previous years in the pro-forma opening balance sheet. The fair value of swaps (hedging derivatives) as at 1 January 2010 was CZK These derivatives were reported as derivates held for trading as at 31 December 2010 owing to the extinguishment of the hedged instrument and charged to the profit and loss account (see Note 8a). In addition, the Company concluded forward sale contracts of TEUR (1/1/2010 TEUR ) due in December The fair value of forward sale contracts as at 31 December 2010 was TCZK (1/1/2010 TCZK ). 41

42 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: Interest rate swaps and forward sale contracts are reported in Other receivables or Other payables in the balance sheet. The fair value of swaps, forwards and the related deferred tax liability were accounted for in Revaluation of assets and liabilities in equity (see Note 11). A bank loan and a short-term revolving loan provided by the syndicate of banks led by UniCredit Bank Czech Republic, a.s. (see Note 13) have a nature of an instrument hedging against currency risks. Foreign currency translation of TCZK and the related deferred tax liability were recorded in Revaluation of assets and liabilities in equity (see Note 11). 9. Adjustments Adjustment to tangible fixed assets Adjustment to inventory Adjustment to other receivables Adjustment to receivables Total Balance at 1/1/ Additions Release/utilisation Balance at 31/12/ Registered capital Balance at 1/1/2010 and at 31/12/ registered shares at CZK per share Registered capital Share premium Total Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 42

43 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: Changes in equity a) Movement in the individual components of equity Registered capital Revaluation of assets and liabilities Statutory reserve fund Social fund Retained earnings Current year profit or loss Balance at 1/1/ Additions to/utilisation of funds Total Profit for Change in revaluation Balance at 31/12/ In 2010, the Company created a special reserve fund of TCZK corresponding to the amount of a short-term loan provided to its parent company. This short-term loan was granted in compliance with the conditions defined in Section 161(f) Financial assistance of the Commercial Code. The general meeting of shareholders will decide about the distribution of the current year profit. b) Movements in the Revaluation of assets and liabilities account: Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Balance at 1/1/ Change in fair value of hedging derivatives (hedge of future cash flows) Change in deferred tax relating to the revaluation of assets and liabilities Balance at 31/12/

44 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: Provisions Statutory provision for repairs Statutory provision for restoration and rehabilitation Other operating provisions Other financial provisions Total Balance at 1/1/ Additions Utilisation Balance at 31/12/ Bank loans The Company has a long-term bank loan from the syndicate of banks led by UniCredit Bank Czech Republic, a.s. The balance of this loan as at 31 December 2010 was TEUR , i.e. TCZK The loan is payable on 31 December The interest rate consists of the EURIBOR referential rate for 1, 3 or 6 months and margin. The loan has been secured by pledging the enterprise, movable and immovable property, trade receivables, potential payments arising from insurance contracts and potential collection of funds from bank accounts. In addition, the Company has a long-term bank loan from the syndicate of banks led by UniCredit Bank Czech Republic, a.s. The balance of this loan as at 31 December 2010 was TEUR , i.e. TCZK The loan is payable on 31 December The interest rate consists of the EURIBOR referential rate for 1, 3 or 6 months and margin. The loan has been secured by pledging the enterprise, movable and immovable property, trade receivables, potential payments arising from insurance contracts and potential collection of funds from bank accounts. The Company may draw a short-term revolving loan up to TCZK provided by the syndicate of banks led by UniCredit Bank Czech Republic, a.s. EUR 0 (CZK 0) had been drawn as at 31 December The interest rate consists of the 1M EURIBOR or PRIBOR referential rate for 1, 3 or 6 months according to the currency and margin. The loan has been secured as the above long-term loan. This is another tranche of one loan contract. Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 As at 1 January 2010, the Company had a bank loan of TCZK provided by the syndicate of banks led by Komerční banka, a.s. and Československá obchodní banka, a.s. The loan was repaid on 10 August As at 1 January 2010, the Company had a short-term revolving loan up to TCZK provided by the syndicate of banks led by Komerční banka, a.s. and Československá obchodní banka, a.s., of which TCZK had been drawn. This part was paid on 10 August

45 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: Segment information 2010 Revenues from the sale of electricity and heat Lease of tangible fixed assets Revenues from the sale of own products Re-invoicing of water and sewerage charges Other activities Total In 2010, revenues from export totalled TCZK This involved exports of building material and sales of electricity. In accordance with the accounting policy described in Note 2(j), the Company reports open fixed-term purchases and sales of electricity as at 31 December These transactions are recorded on the date they are settled. Settlement until the end of 2011 in TCZK Nominal value of contracts for the purchase of electricity Nominal value of contracts for the sale of electricity Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 45

46 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: Related parties All significant transactions with related parties have been carried out based on an arm s length principle. a) Trade receivables and payables The following related party balances (relating to subsidiaries and other related parties) are included in the trade receivables and payables described in Note 7 above: Receivables Payables 31/12/2010 1/1/ /12/2010 1/1/2010 EOP & HOKA s.r.o REATEX a.s Pražská teplárenská a.s TERMONTA PRAHA a.s Energotrans, a.s Plzeňská energetika a.s EP Investment Advisors, s.r.o United Energy Coal Trading, a.s EGEM s.r.o První energetická a.s V A H O s.r.o Total b) Other short-term receivables Other short-term receivables comprise a short-term loan of TCZK 300 (1/1/2010 TCZK 0) provided to a related party. Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 c) Long-term and short-term receivables from group undertakings As at 31 December 2010, the Company reports a long-term receivable of TCZK (1/1/2010 TCZK ), representing a loan provided to EAST BOHEMIA ENERGY HOLDING LIMITED, which is the Company s owner. The receivable is payable in June As at 31 December 2010, the Company records a short-term receivable of TCZK (1/1/2010 TCZK 0), representing a loan provided to EAST BOHEMIA ENERGY HOLDING LIMITED, which is the Company s owner. The receivable is payable in June

47 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: d) Remuneration and loans provided to directors and supervisory board members Board of directors Supervisory board at 31/12/2010 at 31/12/2010 Number of members 5 6 Fees paid Bonuses paid Members of the board of directors and management use the Company s vehicles for both business and private purposes. e) Group relations The Company has not concluded a controlling agreement with its sole shareholder, EAST BOHEMIA ENERGY HOLDING LIMITED. A report on relations between related parties will form part of the annual report. 16. Employees and executives Average number of employees and executives and personnel expenses for the 1-12/2010 period: 1 Jan 31 Dec 2010 Number Wages and Social security and health Social salaries insurance expenses expenses Employees Executives Total Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number Social security and health insurance liabilities Social security and health insurance liabilities total TCZK (1/1/2010 TCZK 7 604), of which TCZK (1/1/2010 TCZK 5 312) relates to social security and TCZK (1/1/2010 TCZK 2 292) to health insurance. None of these liabilities are overdue. 47

48 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: Tax liabilities, receivables and subsidies Tax liabilities total TCZK (1/1/2010 TCZK ), of which TCZK (1/1/2010 TCZK ) relates to value added tax, TCZK (1/1/2010 TCZK 2 783) to personal income tax and TCZK 12 (1/1/2010 TCZK 12) to other taxes. None of these liabilities are overdue. In addition, a subsidy relating to the acquisition of emission rights of TCZK (1/1/2010 TCZK ) was reported in Tax liabilities. Tax receivables comprise a receivable of TCZK 604 (1/1/2010 TCZK 396) relating to excise duties and TCZK (1/1/2010 TCZK ) to corporate income tax. 19. Income tax a) Current Current income tax comprises the tax estimate for 2010 of TCZK and an adjustment to the tax estimate for 2009 of TCZK b) Deferred Deferred tax assets and liabilities Assets Liabilities Net 31/12/2010 1/1/ /12/2010 1/1/ /12/2010 1/1/2010 Tangible and intangible assets Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number 71 Receivables Provisions Revaluation of assets and liabilities reported in equity Other temporary differences Adjustment to acquired FA Deferred tax asset/ (liability)

49 Notes to the Czech statutory financial statements Non-consolidated, translated from the Czech original Year ended 31 December 2010 All amounts are shown in thousands of Czech crowns TCZK Identification number: In accordance with the accounting policy described in Note 2 (h), a tax rate of 19% was used to calculate deferred tax. 20. Components of cash and cash equivalents (for cash flow purposes) For the purposes of the cash flow statement, cash and cash equivalents are defined to include cash in hand, cash in transit and cash at the bank, except for funds on the escrow accounts determined for restoration and rehabilitation: 31/12/2010 1/1/2010 Cash Bank accounts Balances on escrow accounts Cash and cash equivalents reported in the cash flow statement Fees payable to statutory auditors The information about the fees paid to statutory auditors will be included in the group s consolidated financial statements for Material subsequent event Mr. Jaroslav Deml and Mr. Otakar Divíšek resigned from their positions of supervisory board members on 31 January Date: Signature of the authorised representative Auditor: KPMG Česká republika Audit, s.r.o. Pobřežní 648/1a, Praha 8 Identification number: Licence number March 2011 Ing. Jan Špringl Ing. Ladislav Kudrnáč 49

50 Relations report A report on relations between the controlling and the controlled persons and on relationships between the controlled person and other persons controlled by the same controlling person; i.e. between the interconnected persons compiled by the Board of Directors of Elektrárny Opatovice, a.s., having its registered office at Pardubice 2, zip code: , Opatovice nad Labem, business ID No.: , entered in the Commercial Register kept by the Regional Court in Hradec Králové, Section B, Insert 2940 (hereinafter referred to as the Controlled Person or EOP ) pursuant to 66a(9) of Act No. 513/1991 Sb., Commercial Code: A) RELATIONS BETWEEN JANUARY 1, 2010 AND DECEMBER 31, 2010 Interconnected persons: The list of all Interconnected persons was submitted by the Controlling person to the Board of Directors of EOP. I) Contractual relationships between the controlled person and controlling persons I. 1) Contracts made between January 1, 2010 and December 31, 2010 EAST BOHEMIA ENERGY HOLDING LIMITED (former LIBUTE INVESTMENTS Ltd.) (hereinafter referred to as EBEH ) i) Schedule No. 3 dated August 30, 2010 that regulated delay charges applicable under the loan contract from November 10, 2008 originally entered into by the legal predecessor of EOP, the company EBEH Opatovice, a.s. that acted until December 31, 2009 under the commercial name International Power Opatovice, a.s. and from January 1 until July 31, 2010 under the commercial name Elektrárny Opatovice, a.s. (hereinafter referred to as the Legal Predecessor ) and International Power Consolidated Holdings Limited for 9 months and subsequently prolonged until June 30, The novation dated November 13, 2009 transferred the rights and obligations established by the loan contract from International Power Consolidated Holdings Limited to International Power Holdings B.V. and then to EBEH. In accordance with the Elektrárny Opatovice, a.s. Division Project involving division and establishment of two new companies (hereinafter referred to as the Project ) the rights and obligations arising from the loan contract were passed from the Legal Predecessor to EOP. Schedule No. 3 extended the validity of the loan contract until June 30,

51 Relations report ii) The novation of September 9, 2010 of the loan contract dated June 7, 2007 made by and between the Legal Predecessor and International Power Consolidated Holdings Limited. The novation dated November 13, 2009 transferred the rights and obligations arising from the loan contract from International Power Consolidated Holdings Limited to International Power Holdings B.V. and later to EBEH. This novation regulated delay charges applicable to a portion of the loan provided that fell upon EOP in compliance with the Project. Simultaneously, the validity of the loan was prolonged until June 30, iii)the loan contract of December 9, 2010 on the provision of a loan that was valid until June 30, The interest on provided loans was usual in the place and at the time of performance. By analogy, the other terms and conditions contained in loan contracts were usual in the place and at the time of performance. The Controlled person did not suffer any loss from these contractual relations with EBEH. No other contracts were made with any other Controlling persons between January 1, 2010 and December 31, I. 2) Other contracts under which performance was provided between January 1, 2010 and December 31, 2010 During the above-specified period there were no other valid contracts under which EOP would have provided performance to the Controlling persons. I. 3) Other legal acts EOP did not make any other legal acts or measures in the interest of or upon suggestion of the Controlling persons. II) Contractual relationships with interconnected persons II.1) Contracts made between January 1, 2010 and December 31, 2010 i) ii) i) EBEH Opatovice, a.s. Contract to Provide Service dated September 23, 2010 under which EOP provided services consisting of the performance of administrative operations, including bookkeeping. Nonresidential lease contract dated September 23, 2010 under which EOP leased office premises. NPTH, a.s. Contract to Provide Service dated September 23, 2010 under which EOP provided services consisting of the performance of administrative operations, including bookkeeping. 51

52 Relations report ii) Nonresidential lease contract dated September 23, 2010 under which EOP leased office premises. i) TERMONTA PRAHA a.s. Contract for Work Done and Services Supplied dated August 17, 2010 under which TERMONTA PRAHA a.s. completed a piping route for the delivery of cleaning plant sludge for a combustion test. Energotrans, a.s. i) Purchase contract dated August 14, 2010, under which EOP purchased electrical power. ii) Purchase contract dated August 25, 2010, under which EOP sold electrical power. iii) Purchase contract dated August 26, 2010 under which EOP purchased electrical power. iv) Purchase contract dated August 27, 2010 under which EOP purchased electrical power. v) Purchase contract dated September 3, 2010 under which EOP purchased electrical power. vi) Purchase contract dated September 7, 2010 under which EOP purchased electrical power. vii) Purchase contract dated September 9, 2010 under which EOP purchased electrical power. viii) Purchase contract dated September 10, 2010 under which EOP purchased electrical power. ix) Purchase contract dated September 11, 2010 under which EOP purchased electrical power. x) Purchase contract dated September 15, 2010 under which EOP purchased electrical power. xi) Purchase contract dated September 27, 2010 under which EOP purchased electrical power. xii) Purchase contract dated September October 5, 2010 under which EOP sold electrical power. xiii) Purchase contract dated October 8, 2010 under which EOP sold electrical power. xiv) Purchase contract dated November 13, 2010 under which EOP sold electrical power. xv) Purchase contract dated November 15, 2010 under which EOP sold electrical power. xvi) Two purchase contracts dated November 16, 2010 under which EOP sold electrical power. xvii) Purchase contract dated November 18, 2010 under which EOP sold electrical power xviii) Purchase contract dated November 25, 2010 under which EOP sold electrical power. xix) Purchase contract dated November 25, 2010 under which EOP purchased electrical power. xx) Purchase contract dated November 26, 2010 under which EOP purchased electrical power. xxi) Purchase contract dated December 4, 2010 under which EOP sold electrical power xxii) Purchase contract dated December 13, 2010 under which EOP purchased electrical power. xxiii) Two purchase contracts dated December 14, 2010 under which EOP purchased electrical power. xxiv) Purchase contract dated December 17, 2010 under which EOP purchased electrical power. xxv) Purchase contract dated December 18, 2010 under which EOP sold electrical power xxvi) Purchase contract dated December 21, 2010 under which EOP purchased electrical power. 52

53 Relations report The subject matter of the above contracts was partial business transactions that followed the terms and conditions of the Framework Agreement for the Supply and Purchase of Electrical Power made in 2003 as stated in clause II. 2). The prices paid for the performance provided according to the above contracts made with the Interconnected persons were usual in the place and at the time of performance. The Controlled person did not suffer any loss from these contractual relations. No other contracts were made with any other Controlling persons between January 1, 2010 and December 31, II. 2) Other contracts under which performance was provided between January 1, 2010 ad December 31, 2010 Pražská teplárenská a.s. i) Contract for Work Done and Services Supplied Service Contract dated August 12, 2005 as annotated by Schedule No. 1 dated February 26, 2007 under which Pražská teplárenská a.s. provided services consisting of the performance or repairs, calibration and verification of resistance thermometers and gauges. TERMONTA PRAHA a.s. i) Contract to provide repairs and maintenance dated January 26, 2004 as annotated by Schedule No. 1 dated October 31, 2006, under which TERMONTA PRAHA a.s. performed the repair and maintenance of the technological equipment of EOP. ii) Contract to supply and purchase electrical energy from the EOP low-voltage power system dated December 30, 2004 as annotated by Schedule No. 1 dated March 14, 2008, under which EOP supplied electrical power. iii) Nonresidential lease contract dated December 5, 2008, under which EOP leased office premises. iv) Cell Phone Lease Contract dated January 26, 2009 under which EOP handed over a cell phone for use. v) Contract for Work Done and Services Supplied dated July 1, 2009 under which TERMONTA PRAHA a.s. replaced the existing filtered water distribution system. 53

54 Relations report Energotrans, a.s. i) Framework Agreement to supply and purchase electrical power dated November 13, This Agreement was performed by way of partial business transactions specified in clause II.1). The contracts listed in clause II. 2) were made with the Legal Predecessor of EOP, however all rights and obligations ensuing from those contracts were transferred to EOP in accordance with the Project. The price of the performance provided according to the above contracts made with the Interconnected persons was usual in the place and at the time of performance. The Controlled person did not suffer any loss from these contractual relations. There were no other valid contracts made with any of the Interconnected persons between January 1, 2010 and December 31, II. 3) Other legal acts EOP did not make any other legal acts or measures in the interest of or upon suggestion of the Interconnected persons. B) RELATIONS AS OF DECEMBER 31, 2010 Interconnected persons: The list of all Interconnected persons was submitted by the Controlling person to the Board of Directors of EOP. I) Contractual relationships between the Controlled person and the Controlling persons I. 1) Contracts made on December 31, 2010 During the above-specified period no contract was made under which EOP would have provided performance to any of the Controlling persons. 54

55 Relations report I. 2) Other contracts under which performance was provided on December 31, 2010 EBEH i) Schedule No. 3 dated August 30, 2010 that regulated delay charges applicable to the loan contract dated November 10, 2008 originally made by and between the Legal Predecessor of EOP, the company EBEH Opatovice, a.s. that acted until December 31, 2009 under the commercial name International Power Opatovice, a.s. and from January 1, 2010 until July 31, 2010 under the commercial name Elektrárny Opatovice, a.s. (hereinafter referred to as the Legal Predecessor ) and International Power Consolidated Holdings Limited for 9 months and subsequently prolonged until June 30, The novation dated November 13, 2009 transferred the rights and obligations established by the loan contract from International Power Consolidated Holdings Limited to International Power Holdings B.V. and then to EBEH. In accordance with the Elektrárny Opatovice, a.s. Division Project involving division and establishment of two new companies (hereinafter referred to as the Project ) the rights and obligations arising from the loan contract passed from the Legal Predecessor to EOP. Schedule No. 3 extended the validity of the loan contract until June 30, ii) The novation of September 9, 2010 of the loan contract dated June 7, 2007 made by and between the Legal Predecessor and International Power Consolidated Holdings Limited. The novation dated November 13, 2009 transferred the rights and obligations arising from the loan contract from International Power Consolidated Holdings Limited to International Power Holdings B.V. and later to EBEH. This novation regulated delay charges applicable to a portion of the loan provided that fell upon EOP in compliance with the Project. Simultaneously, the validity of the loan was prolonged until June 30, iii) The loan contract of December 9, 2010 on the provision of a loan that was valid until June 30, The interest on provided loans was usual in the place and at the time of performance. By analogy, the other terms and conditions contained in loan contracts were usual in the place and at the time of performance. The Controlled person did not suffer any loss from these contractual relations with EBEH. No other contracts made with any other Controlling persons were valid on December 31, I. 3) Other legal acts EOP did not make any other legal acts or measures in the interest of or upon suggestion of the Controlling persons. 55

56 Relations report II) Contractual relationships with interconnected persons II.1) Contracts made on December 31, 2010 During the above-specified period no contract was made under which EOP would have provided performance to any of the Interconnected persons. II. 2) Other contracts under which performance was provided on December 31, 2010 EBEH Opatovice, a.s. i) ii) Service Provision Contract dated September 23, 2010, under which EOP provided services consisting of administrative operations, including bookkeeping Nonresidential lease contract dated September 23, 2010, under which EOP leased office premises NPTH, a.s. i) ii) Service Provision Contract dated September 23, 2010, under which EOP provided services consisting of administrative operations, including bookkeeping Nonresidential lease contract dated September 23, 2010, under which EOP leased office premises EGEM s.r.o. i) Contract for Work Done and Services Supplied dated December 9, 2010, under which EGEM s.r.o. secured technical aid for the feeding of newly installed electric circulation pumps. Pražská teplárenská a.s. i) Contract for Work Done and Services Supplied Service contract dated August 12, 2005 as annotated by Schedule No. 1 dated February 26, 2007, under which Pražská teplárenská a.s. provided services consisting of repairs, calibration and verification of resistance thermometers and gauges. 56

57 Relations report TERMONTA PRAHA a.s. i) Contract to Perform Repairs and Maintenance dated January 26, 2004 as annotated by its Schedule No. 1 dated October 31, 2006, under which TERMONTA PRAHA a.s. performed repairs and maintenance of the technological equipment of EOP. ii) Contract to provide and purchase electrical energy from the EOP low-voltage power system dated December 30, 2004 as annotated by Schedule No. 1 dated March 14, 2008, under which EOP supplied electrical power. iii) Nonresidential lease contract dated December 5, 2008, under which EOP leased office premises. iv) Cell Phone Lease Contract dated December 26, 2009 under which EOP handed over a cell phone for use. i) i) i) i) ii) iii) Energotrans, a.s. Framework agreement to supply and purchase electricity dated November 13, První energetická a.s. Framework agreement to supply and purchase electricity dated November 29, United Energy, a.s. Contract for Work Done and Services Supplied dated February 15, 2010, under which United Energy, a.s. performed the analysis of coal in order to determine the emission factor. EP Investment Advisors, s.r.o. (formerly J&T Investment Advisors, s.r.o.) Contract to Provide Consulting Services dated January 4, 2010 under which EOP purchased consulting services regarding budget-funded development and maintenance projects, strategic and development projects and technical specifications for selection procedures. Contract to Provide Professional Assistance dated March 1, 2010 under which EOP purchased consulting services regarding the optimization of the employment structure, human resources management and personnel cost. Contract about Controlling and Analytical Consulting Services dated May 20, 2010 under which a person interconnected with EOP provided a license for systematic planning SW. Simultaneously, the interconnected person carried out the continual analysis of entrepreneurial activities. 57

58 Relations report United Energy Coal Trading, a.s. i) Contract about Contractual Relationship Management dated November 16, 2009 under which EOP purchased services consisting of defining rationalization measures for fuel transportation. The contracts listed in clause II. 2) that were made prior to August 1, 2010 were concluded with the Legal Predecessor. However, in accordance with the Project any and all rights and obligations ensuing from such contracts passed to EOP. The price of the performance provided according to all contracts specified under clause II. 2) with the Interconnected persons was usual in the place and at the time of performance. The Controlled person did not suffer any loss from these contractual relations. There were no other valid contracts made with any of the Interconnected persons on December 31, II. 3) Other legal acts EOP did not make any other legal acts or measures in the interest of or upon suggestion of the Controlling persons. In Opatovice nad Labem on March 29, 2011 On behalf of the Board of Directors of the Company: Ing. Jan Špringl Chairman of the Board of Directors Mgr. Hana Krejčí, Ph.D. Deputy Chairman of the Board of Directors 58

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