CEZ Group Corporate Social Responsibility Report 2010-2011_en

CEZ GroupCorporate SocialResponsibility Report 2010/2011

2 Contents CEZ Group Corporate Social Responsibility Report 2010/2011

Contents

1. Introduction 41.1 About the Company 41.2 Group Structure Chart 51.3 Generation, Technology,

Organization 6

2. Economics 112.1 Mission, Vision, Strategy 112.2 Performance and Innovation 122.3 Safety and Quality Management 142.4 Risk Management 172.5 Audits, Document Management and

Distribution Systems 182.6 Respect for the Law 192.7 Tendering Principles 22

3. Social Responsibility 233.1 Employees 233.1.1 Corporate Culture Principles 233.1.2 Antidiscriminatory Measures 243.1.3 Training and Development 243.1.4 Motivational Programs and Benefits 263.1.5 Turnover and Care for Departing

Employees 283.1.6 Occupational Safety and Health 283.1.7 Employee Communications 293.1.8 Employee Charitable Activities 313.1.9 Employee Feedback 323.1.10 Labor Unions 323.2 Corporate Identity 343.2.1 Public Relations 343.2.1.1 Principles and Types of

Communication 353.2.1.2 Information Centers 373.2.1.3 Education Program 393.2.1.4 Seeking Out and Supporting

Talent 413.3 Donorship and Partnership

Programs 423.3.1 The Nadace EZ Foundation 423.3.2 Regional Partnerships 553.3.3 Corporate Volunteering 573.4 Suppliers and Customers 633.4.1 Competitive Behavior 643.4.2 Contractual Principles 653.4.3 Consumer Protection 663.4.3.1 The EZ Ombudsman 663.4.3.2 Customer Awareness and Education 673.4.3.3 Customer Services 69

4. The Environment 714.1 Environmental Protection 724.2 Generation, Mining, Construction 734.3 Distribution and Conveyance 784.4 Land Clean-up and Reclamation 794.5 Environmental Program 814.6 Plant Renewal 874.7 Renewable Sources 884.8 The FUTUR/E/MOTION Initiative 914.9 Conservation 98

5. Social Issues 1005.1 Memberships in Organizations 1005.2 Social Dialog 1055.3 Public Activities 106

Social responsibility has become an integral partof both long-term planning and everyday practiceat CEZ Group. Together with the company, theemployees get involved in the activities of variousnon-profit organizations and take a hand in public-benefit projects (such as, for example, Time Fora Good Cause and Making Wishes Come True,Thinking of Others).

Corporate social responsibility is a matter ofcourse that pervades all the companys activitiesas well as those of all its integrated subsidiaries.We treat our surrounding areas, customers,shareholders, employees, and the general publicwith the respect and consideration they deserve.Our social responsibility also extends to the carewith which we utilize the tangible and intangiblecapital inherent in natural resources, leverage thevalue of our brand, and approach our relationshipswith our partners. Should they have any matters ofconcern, customers and other parties can takethem up with the EZ Ombudsman.

We regularly update our technological processesand support scientific research and itsapplications. Among all priorities, the safety of allour operations is always placed first. We conductcontinuous, thorough monitoring and evaluation ofair pollution parameters, treat by-products fromour coal-fired power plants and convert them intosecondary raw materials, vigilantly manage spentnuclear fuel, and protect fauna by, for example,preventing unnecessary bird injuries due toelectric shock.

Since 1992, CEZ Group has been stimulatingyoung peoples interest in studying technical fieldsthrough its World of Energy education program.For its strategic approach to education, EZ, a. s.received the special Company and Schoolaward in the 2011 TOP RESPONSIBLE

CORPORATION competition. Whats more,a survey conducted last year among universitystudents showed that, for them, EZ is the mostsought-after employer.

We provide long-term, unselfish support foreducation, culture, sports, and fellow citizens withhealth issues in accordance with the principle:We help where we operate. We have showna willingness to hear the needs of localorganizations that are familiar with local problems.We take into account public opinion and werespect it in the Your Choice project. Anotherexample is a highly popular Nadace EZFoundation program entitled Trees 2011 inwhich cities and other municipalities receivedfunding for planting greenery and/or renovatingparks and greenways: all told, over 44,000 treeswere planted.

CEZ Group listens to the civil society andadvances it through beneficial programs. Ourphilanthropic programs further cooperationbetween the commercial and not-for-profit sectors.We are open to dialog and discussion on solutionsto contemporary problems.

This report presents a basic array of information toenable you, the reader, to judge for yourselfwhether CEZ Group acted correctly, ethically, andconsiderately during the past two-year period. I amconfident that you have already met with theresults of our work and that you share our joy andsatisfaction with the positive changes. Our actionsspeak for us louder than our words.

Daniel BeneChairman of the Board of Directors andChief Executive Officer, EZ, a. s.

3 Foreword CEZ Group Corporate Social Responsibility Report 2010/2011

Dear friends,It is my pleasure to present you with this report documenting the ways in which CEZGroup upholds its corporate social responsibility. In this year, which brought manychanges for CEZ Group, we demonstrate in new ways that social responsibility isa fundamental value for us, and not just an empty place-holder. We provide specificassistance, going beyond what is required by law, and we always strive in our businessto set and achieve goals that are beneficial to all and sustainable over the long term.We prefer broader projects that improve the environment or mitigate specific socialproblems over one-off events.

4 Introduction CEZ Group Corporate Social Responsibility Report 2010/2011

1. Introduction

1.1 About the Company

CEZ Group is an established, integratedelectricity conglomerate with operations in anumber of countries in Central andSoutheastern Europe and Turkey,headquartered in the Czech Republic. Itsprincipal businesses encompass generation,trading, and distribution of power and heat,trading in and sales of natural gas, and coalmining. The shares of the Groups parentcompany, EZ, a. s., are traded on the Pragueand Warsaw Stock Exchanges. As ofDecember 31, 2011, the Czech Republicremained the companys largest shareholderwith a nearly 70% stake in the stated capital.

CEZ Group continues to implementtechnologies of the future. It commissioned itsfirst charging station for electric cars andpreparations for more are ongoing withpartners. It is investing in research anddevelopment, environmental protection, andenergy conservation projects. As part of itsbusiness activities, CEZ Group upholdsprinciples of sustainable development,supports energy efficiency, rolls out newtechnologies, systematically mitigates theenvironmental burden posed by its business,and supports the development of education,child care, and health. CEZ Group operates itsplant and equipment to the highest possiblestandards of safety.

Although the corporate culture is performance-oriented, at the same time CEZ Groupsbusiness activities are governed by strictethical standards this includes actingresponsibly toward local communities, society,and the environment. CEZ Group is a majorsupporter of a number of non-profitorganizations and public-benefit initiatives.

We supporttechnologiesof the future.


1.2 Group Structure Chart

For accounting purposes, the CEZ Consolidated Group consisted of a total of 120 companies as atDecember 31, 2011. Of this number 99 were fully consolidated, and 21 associates and joint-ventureswere consolidated by the equity method.

For accounting purposes, the companies of the CEZ Consolidated Group are divided into sevenoperational segments:Power Production & Trading Central EuropeDistribution & Sale Central EuropeMining Central EuropeOther Central EuropePower Production & Trading Southeastern EuropeDistribution & Sale Southeastern EuropeOther Southeastern Europe

A full, detailed description of the CEZ Consolidated Group, including the Group structure chartand the Alphabetical list of companies Group members, can be found in the CEZ Group 2011Annual Report.

Czech Republic Ministry of Finance of the Czech Republic (MoF)controlling entity

EZ, a. s. subsidiaries of MoFcontrolled entity

subsidiaries of EZ, a. s. entities indirectly controlled by MoFsub-subsidiaries of MoF

entities indirectly controlled by EZ, a. s. entities indirectly controlled by MoFsub-subsidiaries of EZ, a. s. sub-sub-subsidiaries of MoF

entities indirectly controlled by EZ, a. s.sub-sub-subsidiaries of EZ, a. s.

entities indirectly controlled by EZ, a. s.sub-sub-sub-subsidiaries of EZ, a. s.


1.3 Generation, Technology,Organization

In 20102011, CEZ Group offered endcustomers in the Czech Republic the followingcommodities and related services:

electricity (EZ Prodej, EZ),natural gas (EZ Prodej),heat, i.e. thermal energy (EZ, TeplrnaTrmice, EZ Teplrensk, EZ Energo,Elektrrna Chvaletice, Energetick centrum,EZ Energetick sluby),electricity distribution (EZ Distribuce).

Customers can order electricity and naturalgas directly, in the form of supplies of theactual commodity (Electricity or Natural GasSupply Contract), in which case the customerobtains distribution service through a separateDistribution Service Supply Contract. Muchmore frequently, however, they do businesswith us through an Integrated Supply Contractfor the commodity in question, under whichEZ Prodej provides the customer not onlywith supplies of the commodity, but alsoarranges for provision of distribution servicesby the relevant local distributor in accordancewith applicable legislation.

Power Plantsnuclear

hydro

pumped-storage

brown coal

biomass combustion

power heating plants

black coal

wind

photovoltaic

black coal with coke gas combustion

biogas

Minesbrown coal

NAME OF POWER PLANT/MINE owned by EZ, a. s.NAME OF POWER PLANT/MINE owned by other CEZ Group member (sources in operation)

PPRRUUNNOV I, IIOV I, II

KKAAMMKK

SSLLAAPPYY

TTCCHHOOVVIICCEE II,, IIIIVVRRANAN

MMOOHHEELLNNOO

KKOOEENNSSKKOO II,, IIII

LLIIPPNNOO II,, IIII

EELLIINNAA

HHODONNODONN

TUTUIIMMIICCEE IIII MMLLNNKK

DDTTMAROVICEMAROVICE

TISTISOOVV II,, IIII

DDUUKKOOVVAANNYY

POPOEERRAADDYY

LLEEDDVIVICCEE II,II, IIIIII POPO IIII

DDVVRR KKRRLLOOVV NADNAD LLAABBEEMM

DDAALLEEIICCEE

OORRLLKK

PPEEDDMMIICCEE NADNAD LLAABBEEMM

PPAASSTTVVIINNYY

PPRROOVV

HHNNVVKKOOVVIICCEE

VVYYDDRRAA

EERRNN JJEEZZEERROO

DDLLOUHOUH SSTTRRN I, IIN I, II

PPEELLOUOU

EEKKOOVVAA PPIILLAA

OOSSTTRRAVAVA A VTVTKKOOVVIICCEE

TTEEMMEELLNNSSPPYYTTIHNIHNVV

PPAARRDDUUBBIICCEE

JJAANNOOVV

VVNNIICCEE

AABBIICCEEPPNNOOVVVVRRANANOOVVSSKK VVEESS

BEBEEERROOVIVICCEE

EEVVTTNN

BUBUTTHHRRAADD

EEKKAANNIICCEE

RRAALLSSKKOOMIMIMMOO

CCHHNNOOVV

HHRRUUOOVVANANYY NNAD JEVIOVKOUAD JEVIOVKOU

BBRRNONO KKOOMMNN

BBRRNONO KKNNNNIIKKYY

HHRRADADEECC KKRRLLOOVV

CCHHVVAALLEETTIICCEE

SSTT NADNAD LLAABBEEMM SSTTEEKKOOVVSSPPLLOOVV

OBOBSSTTVV

LLEESS KKRRLLOOVVSSTTVV

PraguePrague

DODOLLYY NNSSTTUUPP TUTUIIMMIICCEEDODOLLYY BBLLIINNAA

PRUNOV I, II

KAMK

SLAPY

TCHOVICE I, IIVRAN

MOHELNO

KOENSKO I, II

LIPNO I, II

ELINA

HODONN

TUIMICE II MLNK

DTMAROVICE

TISOV I, II

DUKOVANY

POERADY

LEDVICE II, III PO II

DVR KRLOVNAD LABEM

DALEICE

ORLK

PEDMICE NAD LABEM

PASTVINY

PROV

HNVKOVICE

VYDRA

ERN JEZERO

DLOUH STRN I, II

PELOU

EKOVA PILA

OSTRAVA VTKOVICE

TEMELNSPYTIHNV

PARDUBICE

JANOV

VNICE

ABICEPNOVVRANOVSK VES

BEEROVICE

EVTN

BUTHRAD

EKANICE

RALSKOMIMO

CHNOV

HRUOVANY NAD JEVIOVKOU

BRNO KOMN

BRNO KNNIKY

HRADEC KRLOV

CHVALETICE

ST NAD LABEM STEKOVSPLOV

OBSTV

LES KRLOVSTV

HHRRAACCHOHOLLUUSSKKYY

PPLLZZEE BBUUKKOOVVEECC OVOVOV

SVITAVYSVITAVYSVITAVYSVTL NAD SZAVOU BRADLOSVTL NAD SZAVOU BRADLOSVTL NAD SZAVOU BRADLO

JIHLAVAJIHLAVAJIHLAVA

Prague

DOLY NSTUP TUIMICEDOLY BLINA

OTNOTNOTN

NOV HRDEKNOV HRDEKNOV HRDEK

FRDLANTFRDLANTFRDLANT

HRACHOLUSKY

PLZE BUKOVEC

Location of CEZ Group Power Sources in the Czech Republic


ElectricityDespite ongoing market liberalization, CEZGroup is still the biggest supplier of electricityto end customers in the Czech Republic. Weoffer our existing and potential new customersin all market segments innovative productsand services, and adapt them to thecustomers needs in justified cases. Thisenabled us to defend our leading position inall three basic segments large end-customers, retail-commercial, and retail-residential in 2011. As increased competitivepressure in the electricity market hasexpanded into the retail-commercial and retail-residential segments, CEZ Groups marketshare in these segments declined despite theabove-average success rate of our customerretention initiatives in 2011.

In 2011, CEZ Group power plants in the CzechRepublic generated a total of 63,321 GWh ofelectricity, up 57 GWh from 2010. In 2010,CEZ Group power plants in the CzechRepublic generated a total of 63,264 GWh ofelectricity, up 2,422 GWh from 2009.

At December 31, 2011, CEZ Group companiesin the Czech Republic owned generationinstallations with aggregate installed capacityof 12,813.6 MW, up 85.7 MW from year-end2010. The most significant changes included a70 MW increase in the installed capacity ofUnit 1 of Dukovany Nuclear Power Stationfollowing a turbine rebuild, the obtaining of11.1 MW of installed capacity in cogenerationunits within the company EZ Energo, thecommissioning of a new turbine with 4.1 MWof installed capacity in Dvr Krlov nadLabem, and the commissioning of the ovbiogas station belonging to the companyBioplyn technologie with 0.526 MW ofinstalled capacity.

Natural GasIn 2011, CEZ Group became the biggestalternative supplier of natural gas in the CzechRepublic in terms of the number of customersacquired. The chosen strategy in theresidential segment, resulting in over 174,000new customers acquired in 2011, followed theGroups successful entry into the natural gasmarket in the corporate customers segment inpast years. Thus, CEZ Group now suppliesnatural gas to customers in all marketsegments large end-customers, medium-sized end-customers, small end-customers,and residential customers.

We offer younatural gas.

Heat GenerationCEZ Group heat generation sources in theCzech Republic supplied a total of 10,422 TJin 2011. In terms of the year-on-yearcomparison, this represents a 731 TJ (7%)decline in supplies. Compared to 2010, theonly addition to the production portfolio wasEZ Energo, which generates heat in small-scale gas-fired cogeneration units.

We generate heatfor you.


DistributionIn the Czech Republic, the CEZ Groupcompany that distributes electricity is EZDistribuce, which arranged for 32,613 GWh ofelectricity to be supplied to customers in 2011.The year-on-year decrease of 324 GWh wascaused, in particular, by lower demand forelectricity associated with weather conditions.In terms of voltage levels, the decrease tookplace mainly in the low-voltage segment (down736 GWh). At the medium and high voltagelevels, on the other hand, distribution volumegrew by 324 GWh and 88 GWh, respectively.

We supply youwith electricity.

InternationalCEZ Group focuses in particular on markets inCentral and Southeastern Europe. Primarily, itconcentrates on countries in which it alreadyoperates in some form, and where it can applyits rich experience in managing an electricityconglomerate at a time of a newly liberalizedpower market and pass on its know-how.Another important aspect of CEZ Groupsinternational operations is renewable sourcesof energy in locations where the naturalconditions are amenable to this purpose.CEZ Group is one of the ten biggest energycorporations in Europe.

2011 was the Groups most successful year yetin terms of its international acquisitions. Theaggregate EBITDA (Earnings Before Interest,Taxes, Depreciation, and Amortization) of theinternational acquisitions reached nearlyCZK 11 billion, which is CZK 2 billion higherthan the 2010 result which itself was thehighest at the time. So far, the results of EZsinternational acquisitions have generatednearly 80% of the amount invested in them.

At year end 2011, CEZ Group included76 international companies with nearly14,000 employees in eight countries of CentralEurope, Southeastern Europe, and Turkey.These companies now contribute CZK 67billion to CEZ Groups revenues and accountfor one quarter of the Groups fixed assets.

In addition to the Czech Republic, there areCEZ Group companies with direct energysector operations in Albania, Bulgaria,Hungary, the Netherlands, Poland, Romania,Slovakia, Serbia, and Turkey. In Albania, CEZGroup operates the countrys sole distributioncompany. In Bulgaria, it distributes and sellselectricity in the western part of the countryand generates power in its own coal-firedpower plant near Varna, the Black Sea portcity. In Poland, two black coal-fired powerplants near the countrys border with theCzech Republic are part of CEZ Group, as is acompany that is preparing to build wind powerplants. In Romania, CEZ Group is involved inthe generation of electricity from renewablesources through the operation of theFntnele and Cogealac wind farms and theReia hydro power system, in addition toelectricity distribution operations. In Turkey,CEZ Group and its local partner operate adistribution company and generate electricityin gas, hydro, and wind power plants. In theremaining countries, the companies carry onwholesale operations in electricity, othercommodities, and related derivatives, functionas holding companies, or engage in financingactivities. Throughout Central and SoutheasternEurope, CEZ Group engages in wholesaletrading in electricity and natural gas.


Anniversaries of CEZ Group Power PlantsSeveral CEZ Group power plants celebratedanniversaries in 2010.

The first Czech nuclear power plantcelebrated 25 years in operation. Thanks toits safe, reliable, and efficient operation, theplant in Dukovany is the flagship of CEZGroups generation portfolio. In recent yearsit has managed to get into the top one-fifthbest operated nuclear power plants in theworld and its operating indicators are betterthan the European Union average. It is evenamong the worlds best in terms of certainindicators.

December 2010 marked ten years since thefirst reactor unit at Temeln Nuclear PowerStation generated its first kilowatt-hourof electricity. Before the plant wascommissioned, the region of South Bohemiawhere the Temeln plant is located wasforced to bring in electricity from other areas primarily from environmentally burdenedNorth Bohemia. The plant in Temeln madeit possible to replace, once and for all, theaging coal-fired power plants in NorthBohemia that were being shut down oneby one. This year saw the total amount ofelectricity generated so far by the Temelnplant pass the 100 billion kWh mark. That isenough to power all Czech households for aperiod of nearly seven years.

2 EdF

3 Iberdrola

1 Enel

4 E.ON

5 RWE

6 GdF Suez

7 EdP

8 EZ

9 EnBW

10 PGE

37.0

28.5

61.0

27.0

24.0

11.3

11.0

9.3

6.0

5.0

0 20 40 60

2 EdF

3 Enel

4 E.ON

5 Iberdrola

6 RWE

8 Fortum

9 Verbund

10 EnBW

52.9

44.1

59.1

40.8

35.4

23.6

20.8

20.2

10.8

9.9

0 20 40 60

1 GdF Suez

7 CEZ Group

Top 10 Power Companies in Europe(number of customers 2010, millions)

Top 10 Power Companies in Europe(market capitalization in EUR billions,as at May 17, 2011)

CEZ Group is one of Europes top ten power companies


2010 marked 35 years since May 1975,when the first generating units of the powerplant in Dtmarovice (North Bohemia) cameon-line. Construction on the plant, located ata site adjoining the Polish border near theBohumn esk Tn railroad corridor,began in 1971. The plants generating unitswent on-line one-by-one between May 1975and November 1976. The project wasdesigned by Energoprojekt Praha, thecontractor for the construction portion wasVOKD Ostrava, and the technical equipmentwas supplied by koda Plze.Four decades have passed since thecommissioning, in 1970, of units 1 and 2 ofPoerady Power Station, one of the mostutilized coal-fired power plants in the CzechRepublic. With its installed capacity andrelatively high level of use, it plays asubstantial role in the economy andenvironment of Northwestern Bohemia. Theplant generates heat only for use in its ownoperations. Technical and environmentalprograms implemented at the plant ensurereliable, economical, and environmentally-sound operation, fully comparable withsimilar plants in other advanced Europeancountries.

The smallest and, at the same time, theoldest of the jubilee-celebrating powerplants is ern jezero, which turned 80in 2011. The first pumped-storage hydropower station in the Czech Republic, thestation is located in umava, at an elevationof 1,008 meters above sea level, in abeautiful natural setting northwest ofelezn Ruda featuring the biggest glaciallake in umava and also the biggest naturallake in the Czech Republic. ern jezeroLake has an area of 18.43 hectares and amaximum depth of 40.6 meters.

Our power plantsare celebratinganniversaries.

11 Economics CEZ Group Corporate Social Responsibility Report 2010/2011

2. Economics

2.1 Mission, Vision, Strategy

Mission and VisionCEZ Groups mission is to maximize its returnand secure long-term growth in shareholdervalue. Therefore, CEZ Group directs its effortstoward fulfillment of its vision of becoming theleader in the electricity market in Central andSoutheastern Europe.

For the Group, supporting economic growthand the living standard of the population isboth a responsibility and a duty. As one of themost important players in the Czech Republiceconomy, CEZ Group is well aware of the needfor it to behave responsibly. Over the past 15years, the EZ Power Company has generatedover CZK 106 billion in income tax receiptsand dividends for the Czech State, its biggestshareholder. Of that figure, income tax receiptsalone account for CZK 66 billion. At the sametime, the economic accomplishments of CEZGroup lay groundwork for the CzechRepublics overall business environment. CEZGroups businesses provide gainfulemployment to over 100,000 people and sincethe foundation of EZ, a. s. in 1992 the Grouphas invested nearly CZK 300 billion in the CzechRepublic, benefiting domestic companies andof course their employees as well.

StrategyIn 2011, CEZ Group responded to turbulencein the electricity market related to economicstagnation in the Eurozone and Europeancountries reaction to the Fukushima nucleardisaster. In conjunction with the NEW VISIONstrategic initiative, the CEZ Group strategy wasupdated. The updated strategy aspires tominimize the principal risks threatening CEZGroups business performance and, at thesame time, leverage current growthopportunities.

In addition to electricity production,distribution, and sale, CEZ Groups activitiesinclude nuclear research; designing, building,and maintaining power plants and gridinfrastructure; mining of raw materials;processing of generation by-products; as wellas information and communicationtechnologies. At the same time, CEZ Group isone of the three largest producers of heat inthe Czech Republic.


2.2 Performance and Innovation

20102011 was a time of conducting analysesand preparing measures in the variousbusiness segments.

In the Production segment, 2011 saw continuedimplementation of the SAFELY 15 TERA ETEproject, the objective of which is to achieveannual generation volume of at least 15 TWhat Temeln Nuclear Power Station in 2012. Theproject moved ahead according to plan, withactivities focused on plant & equipment, safety,working with suppliers, human resources, andorganization & management. The principalproject priorities in 2011 were operationalreliability of equipment and organization ofwork during outages. In the human resourcesdevelopment area, the year saw continueddevelopment of a program for increasing thequality of human performance andstandardizing it in the power plants executiveprocesses.

The goal of the SAFELY 16 TERA EDU is toincrease the annual electricity generationvolume of Dukovany Nuclear Power Station toapproximately 16 TWh starting from 2013,while maintaining the current level of safetyand operating reliability. The project isreaching its goal by shortening plannedoutages for fuel replacement and increasingthe plants output by making modifications tothe main generating equipment to bring it upto its full design capacity. Through unittransformer and turbogenerator rebuilds, fuelmodifications, and other improvements, thetarget achievable capacity of 500 MWe has sofar been achieved on Units 14, one by onestarting in 2005. New, shorter outage plans arealso being implemented with success.

The Securing LTO EDU (Long TermOperation) project is the first phase of theSecuring the Long-term Operation ofDukovany Nuclear Power Station program.The programs objective is to operate theplants reactors, while maintaining the requiredlevel of safety, beyond 2015.

The projects goal is to prepare the plantsequipment, personnel, documentation, andprocesses for an extension of the plants licensebeyond 2015 and carry out those measuresnecessary to operate the plant until 2025 with anoutlook for further extension of operations.Progress made in implementing the project isdocumented and submitted each year to theState Office for Nuclear Safety.

The Streamlined Corporation project wasconcluded at the end of 2010. Its principalobjectives were to put in place the optimal modelof CEZ Group management and administration,effectively calibrate non-core services, andoptimize the work force head count. Mostimportantly, the project brought about across-the-board changes to the organization, eliminatingone level of management and thereby saving onstaff costs, improving management of theconsulting budget, etc.

2011 saw application of the Design-to-Costmethodology in the production division. Thismethodology is utilized with the aim of increasingthe effectiveness of expenses incurred indeveloping the production divisions portfolio,including repair and maintenance expenses.During 2011, the methodology was applied incost-intensive projects. All told, 14 projects withconservative cost estimates of CZK 3.8 billionwere prepared, in which the use of Design-to-Cost tools resulted in potential savingsamounting to 24% of total costs, with no changesto key project parameters. From 2012 on, theexperience gained will be expanded toadditional projects. CEZ Group intends toleverage the experience gained in application ofthe Design-to-Cost methodology in theproduction division by using it to optimize capitalexpenditures for distribution assets in thecompany EZ Distribuce and in coal mining atSeveroesk doly.

A fundamental component of the Performanceprogram is a project entitled FrameworkStrategy for Provision of Services at CEZGroup, implementation of which has alreadycommenced. The establishment of a SharedServices Center (SSC) is based on the principlesof higher integration of the Groups currentprocess-based subsidiaries, unifiedmanagement, and service quality. The goal ofthe project is to improve support and servicefunctions and propose a new model forproviding services within the Group (in theCzech Republic only).


In distribution, 2011 saw the successfuloptimizing of preventive maintenance ruleswhile maintaining compliance with allapplicable laws, regulations, and safetystandards. At EZ Distribuce, a project entitledAsset Management was implemented, themain outcome of which was a proposal forimproving the effectiveness of internal assetmanagement processes combined withextensive organizational changes that arebeing rolled out from February 2012. Internalprocesses were also optimized at EZDistribun sluby, as well as in the technicaloperations section of EZ Men.

In order to achieve the results demanded ofthe Sales segment, it is necessary to bringabout a substantial improvement in thesuccess rate in retaining the current customerportfolio, seek out new roads to market, andbe even more aggressive in reducing sales-and customer service-related costs. Theproject is focused on potential improvementswithin the segment (e.g. improving churnmanagement convincing customers to stay,reducing customer service costs, acceleratingcash flows, optimizing the supplier switchingprocess), as well as without (acquiring newgas customers in the Czech Republic,improving information support, acquiring endcustomers in the Slovak Republic).

Accomplishments of the distribution andinternational affairs divisions includedsustained, long-term reductions in operatingexpenses by transferring best practices incorporate management, as well as rigorousmanagement of companies working capital.Another major priority in this area has beenmaximizing the repatriation of funds expendedabroad, back to the corporate parent.

Optimization, Cost EffectivenessIn response to lower electricity consumptionand prices in the wake of the economic crisis,increasing EU regulation of the power industry,and other unfavorable market factors, in theautumn of 2010 CEZ Group launched itsstabilization initiative, entitled NEW VISION.

NEW VISION saw cutbacks in the Groupsprogram of capital expenditures, together withaggressive optimizing of its internal processesand cost structure. New, ambitious goals wereset to retain the current credit rating. This isimportant to ensure continued access toadvantageous financing for developmentprojects such as the completion of TemelnNuclear Power Station.

We are improvingperformanceand implementinginnovative processes.

2004 2009 2015 2020

HISTORI

CALGRO

WTH

FUTURE

GROWTH

EZSTR

ATEGY

STABILIZING CONSOLIDATION

NEWVISION


The NEW VISION initiative is based on thefollowing priorities:

We make financial management a keyaspect of all parts of the company.We set ambitious goals in each segment,and we fulfill them.We implement best practices in everysegment of CEZ Groups business.Support functions must be inexpensive andeffective.

In the autumn of 2011, five new strategicprograms were added to the NEW VISIONinitiative. The new components were CEZGroups response to uncertainty and difficult-to-predict developments in the energymarkets:

New nuclear source This programs goalis to prepare a business plan that will enableprofitable completion of new reactor units atTemeln Nuclear Power Station, includingsecuring financing and resolvingconstruction and regulatory risks.Fuel procurement This programs goal isto resolve relations with coal suppliers andsecure sufficient fuel to operate the coalportfolio. Utilize biomass and alternativefuels to the maximum possible extent toincrease the value of our conventionalsources.Performance This programs goal is toobtain, by building on existing NEW VISIONmeasures, an additional CZK 30 billion incash flow by the year 2015 for growthinitiatives and to bring about a long-termimprovement in Group performance. We willendeavor to achieve maximum cost-efficiency,continue to consolidate support services,and reduce the number of subsidiaries.Regional power This programs goalsare to build a strong position in the regions,expand business activities in district heat,cogeneration, and the production of energyfrom waste and biomass.Renewable sources CEZ Groupsstrategy in generation is based on thecreation of a diversified production mix, bypursuing nuclear projects whereverpossible, building gas-fired power plants,and investing in coal-fired power plants(when there is a significant cost incentive todo so), as well as through renewablesources and environmental investments.

The objective of the updated strategy and newstrategic programs is to appropriately addressthe principal risks to CEZ Groups bottom lineand, at the same time, take maximumadvantage of the growth opportunitiescurrently in the market.

Our NEW VISIONinitiative is helpingto stabilizeour operations.

2.3 Safety and Quality Management

Safety, quality, and environmental protectionconstitute a mutually interrelated whole. Forthis reason, management of these areas withinEZ is also integrated. CEZ Groups safetyand security stands on three fundamentalpillars: management, technology, and people.The principal objectives are:

nuclear safety,radiation protection,technical safety,fire protection,physical security of nuclear materials andnuclear installations,occupational safety and health,environmental protection.


Safety and Environmental Protection PolicyThe EZ, a. s. Board of Directors is fully awareof and accepts without reservation itsresponsibility, under applicable law and theCzech Republics international obligations, toensure the safety of its plants, protectindividuals both within the company andmembers of the general public, protect theenvironment, and assure quality. To meet thisresponsibility, EZ, a. s. has pledged to put inplace and develop commensurate conditionsand bring to bear sufficient human andfinancial resources, effective governancestructures, and control mechanisms.Therefore, it has promulgated the Safety andEnvironmental Protection Policy and theManagement Quality Policy.

The Safety and Environmental ProtectionPolicy was passed by the EZ, a. s. Board ofDirectors and issued as an order of the ChiefExecutive Officer effective from May 1, 2010. Itincludes the following chapters whose titlescorrespond to the strategic pillars of the Policy:

We place protection of human life andhealth before all other interests.We pursue safety and environmentalprotection as integral parts of management.We comply with laws, regulations, and ourpublic obligations, and we take note ofrecognized practices.We continually improve safety andenvironmental protection.We regularly assess risks and either preventthem, eliminate them, or reduce their impactto an acceptable level.We ensure that plant and equipmentcomplies, long-term, with all technical,safety, and economic criteria.In selecting and evaluating suppliers, wetake into account their attitudes towardsafety and the environment.We communicate openly and effectively onsafety-related topics.We secure sufficient numbers of high-quality, motivated employees and suppliers.We manage key knowledge.

Management of occupational safety andenvironmental protection is treated by internaldirectives in accordance with legislation andwith the utilization of certification systems. AllEZ conventional, nuclear, and hydro powerstations are long-standing holders ofISO 14001 and Safe Enterprise certifications.One half of the subsidiaries subject to the newsafety management system are holders ofSafe Enterprise and/or OHSAS 18001certifications, and depending on the characterof their business nearly one half (43%) holdISO 14001 certification.

Quality-of-Management PolicyIn September 2010, the EZ, a. s. Board ofDirectors of passed the Quality-of-ManagementPolicy, setting forth the primary principles bywhich quality is to be perceived by allemployees. EZ management defines theword quality to mean fulfillment of theseprinciples:

We treat our partners and customers withrespect.We conduct our planning in accordancewith our strategic objectives.We standardize and describe our bestpractices.We complete work assignments flawlesslyon the first try.We perform checks, and respondimmediately to shortcomings.We take decisions based on knowledge ofthe matter and verified facts.We improve things, and we make changesflexibly and safely.

The Quality-of-Management Policy.


In order to implement the Quality-of-Management Policy, the management systemand all related internal processes must beproperly calibrated, assessed, documented andapproved. In 2011, we completed and evaluatedthe Integrated Management System project.CEZ Group helps to meet ever increasingdemands concerning the quality of deliveriesand the safety and products and services, andcreates conditions for effective process-basedand line management in all areas. For thisreason, we undertook a new task entitledImplement a communications campaignfocused on the Quality-of-Management Policy.Processes are modeled to ensure we meet therequirements of our external and internalcustomers and stakeholders. Here, the PDCAmodel is applied. CEZ Group organizesworkshops for managers focusing on applicationof the new projects objectives, helps to developmodern methods of evaluation such as Self-evaluation and Elimination of Root Causes, andthereby creates conditions for achieving fault-free, reliable deliveries of products and services.

By continually improving the managementsystem and implementing good practices, CEZGroup is engaging in long-term efforts to removediscrepancies and potential weak points. Whenevaluating the management system, we checkthe extent to which established goals andrequirements (including requirements of thegeneral public) are being met.

CEZ Group supports the management systemby correctly formulating its management andwork documentation, in particular through theproject Change in the document managementsystem in the production division, which at thesame time is helping ensure that stakeholdersalways obtain quality documentation.

Nuclear SafetySafety of nuclear installations must be, and is,our absolute priority. Since the management ofEZ, a. s. understands this imperative, itsystemically builds and applies a safety cultureand creates conditions for its ongoingimprovement. For this reason, among others, ithas embarked on a Unified Safety project,within which a new Safety and EnvironmentalProtection Policy and a new Quality-of-Management Policy have been promulgated.This has resulted in changes to process-basedsafety management and a reorganization ofrelated functions.

The objective of nuclear safety is to prevent anuncontrolled fission chain reaction as well asany unpermitted releases of radioactivesubstances or ionizing radiation into theenvironment. The minimum requirements formeeting this objective are given by the NuclearAct and its implementing regulations, and byinternational recommendations issued by theInternational Atomic Energy Agency in Viennaand other organizations (WANO, WENRA,NEA, etc.).

On October 31, 2011, EZ submitted the FinalReports relating to the stress tests carried outon the Czech nuclear power plants. Afterassessing them, the State Office for NuclearSafety drafted a National Report, which itsubmitted to the European Commission.Taken together, the Final Reports on the safetyof both Czech nuclear power plants have over400 pages, and it took tens of EZ experts sixmonths to draft them. Specialists from otherinstitutions, such as the Nuclear ResearchInstitute in e and the Czech TechnicalUniversity, were also involved. The assessmentconfirmed that both plants are resistant and nosafety faults requiring immediate action werefound. In the analyses, the experts assessedTemeln and Dukovanys resistance to highlyunlikely external influences. For example, theyassessed how both plants would deal withearthquakes in excess of design parameters,freezing temperatures of 46 C lasting anentire month, or extended hot spells with highsof 46 C. The possibility of flooding was alsoconsidered for example, what would happenif the nearby Vltava River were to rise to levelsseen only once in 10,000 years, either due to acatastrophic failure of the Lipno Dam or rainfallexceeding the maximum levels seen over thepast 10,000 years.

Nuclear safety isour priority.


In the event of a radiation accident at theTemeln Nuclear Power Station, in 2011 CEZGroup once again published a guide intendedto protect people living in the plants vicinity.The guide contains information and basicinstructions to ensure the protection ofpersons in the Temeln Nuclear Power Stationaccident planning zone. The guide containsthe following information:

The area that could be potentiallyendangered by radioactive substances inthe event of a radiation accident at TemelnNuclear Power Station.What measures can be taken to protect thepopulace.Shelters.Iodine prophylaxis.Evacuation.Principles of telephone use.

In late 2011, an accident guide with a 20122013 calendar was distributed to residents andorganizations within 20 km of DukovanyNuclear Power Station. People have beenreceiving calendars from the power plant since1994. At the back of the current issue there isinformation on what to do in the event of anextraordinary radiation event. The basicinstructions for taking shelter, use of iodinetablets, and evacuation are repeated. Thecalendar is illustrated with 50 pictures byclients of the World of Colors (Barevn svt)Day Center.

2.4 Risk Management

CEZ Group continually develops an integratedrisk management system and a system ofinternal control mechanisms, including anindependent internal audit function thatcontinually vets all processes for compliancewith best practices, internal and externalstandards, and legislation.

An important risk management body is theRisk Management Committee, an advisorycommittee to the Chief Executive Officer ofEZ which, with the exception of approvingthe risk limit in the one-year plan (in thecompetency of the EZ Board of Directors),proposes how the integrated risk managementsystem will be developed; proposes the overallallocation of risk capital to individual risks andorganization units; proposes binding rules,accountability, and a structure of limits forindividual risks; and monitors the overallimpact of risks on CEZ Group, including thedegree to which CEZ Groups debt capacity isdrawn down, and fulfillment of ratingrequirements.

The monthly reports for the Risk ManagementCommittee quantify unified developmentscenarios for selected risk factors and theirimpact on the current year, the business planperiod, and the debt capacity.

During 2011, the risk management tools werefurther integrated with the strategy and centralcontrolling processes: in particular, centralunified management and quantification toolswere introduced for risks associated with newplant and plant retrofit CAPEX projects,including putting additional emphasis on theimportance of the risk profile of CAPEXprojects being considered as the projectscompete internally for CEZ Group resources.


2.5 Audits, Document Managementand Distribution Systems

Internal AuditCEZ Group sees internal audit activities as apart of its social responsibility. The mission ofinternal audit is to help add value by providingindependent, objective assurance andconsulting services to meet the needs of CEZGroups entire organization structure and itsstatutory bodies. It provides the companysgovernance bodies with assurances that allrisks substantial ones in particular areknown and under control. It thereby helps CEZGroup achieve its goals and initiates businessimprovements and measures to mitigatebusiness risks. EZ has had an internal auditfunction since 1993.

In accordance with the Internal AuditProfessional Practice Standards, the internalaudit department is subject to a periodic (onceevery five years) independent assessment. Thelast such assessment confirmed, among otherthings, that internal audits findings andrecommendations help management toimprove the functioning and effectiveness ofprocesses. Internal audit is a professionaldepartment providing quality services to itsinternal customers, and it has great potentialfor further increasing value for customers. It isfully integrated into CEZ Groups corporategovernance structure, is sufficientlyindependent, and has the necessary powers toduly fulfill all its tasks. It is very muchappreciated by the management of EZ. TheHead of Internal Audit Section is a member ofthe companys senior management team andthe departments remit covers the entire CEZGroup, including international acquisitions.

The results of audit activities are presented tothe EZ Board of Directors and the AuditCommittee on a regular, quarterly basis.

The efficiency with which audit results are putinto practice and/or reflected in relevantprocesses was increased in two ways through the audited entitys cooperation inimplementation of corrective measures (e.g. inthe area of management documentation) andthrough direct transference ofrecommendations lying outside thecompetency of the audited entity to thecompetent departments/entities. The systemicform of the recommendations/correctivemeasures improved the effectiveness of follow-up audits to a level enabling them to fully coverthe initial audits.

Relations are maintained with other auditdepartments within CEZ Group (EZDistribuce, Severoesk doly, Bulgaria,Romania, Albania, and Turkey).

In cooperation with the risk managementdepartment, the internal audit risk map isinterconnected with the corporate risk mapand updated annually. Auditing and vettingactivities were coordinated between theinternal audit department and the safety andquality department, to forego any duplicationor conflicts in the audited entities.

Internal audits position within the organizationstructure and its guiding principles (powersand responsibilities, including its Statute andCode of Ethics) are defined in the companysinternal governance documents as well as atthe corporate level.

Through audits,we help makeour businessmore effective.


Document Management and DistributionSystems

CEZ Group Document ManagementAt CEZ Group, documents serve to ensuresafety and effective planning, functioning,measuring, and improvement of systems,processes, and activities in accordance withexternal requirements and the strategies of theindividual companies. They are also used tomanage projects, operate core and non-coreequipment, and provide services. Documentsmust be interlinked.

Centrally Issued DocumentsAdministration of documents (record-keeping,comment and approval processes, publishingand demonstrable distribution) isaccomplished using CEZ Group documentmanagement software systems (the ECMManaged Documents application or otherapplications operated for these purposes).Binding forms and annexes relating to issueddocuments are recorded and published insimilar fashion.

2.6 Respect for the Law

LegislationThe basic set of standards regulating theeconomic and commercial aspects of CEZGroups business activities is contained in ActNo. 513/1991 Sb., the Commercial Code, andas an issuer of a security accepted for tradingin a public market, EZ is also subject to ActNo. 256/2004 Sb. on Doing Business in theCapital Market. Both acts were amendedseveral times in 2011. In selecting its suppliers,EZ is bound by Act No. 137/2006 Sb. onPublic Procurement, which was also amendedseveral times in 2011 as well as being thesubject of several new Government decreesand regulations.

In addition to the general legislative frameworkdescribed above, legislation specificallytreating the power industry is of keyimportance for CEZ Group. This sector-specificlegislative framework is based on thefollowing:

Act No. 458/2000 Sb. on the Conditions forDoing Business and Exercising StateAdministration in the Energy Sectors andamending certain acts (the Energy Act),Act No. 18/1997 Sb. on the Peaceful Use ofNuclear Energy and Ionizing Radiation andamending certain acts (the Nuclear Act),Act No. 406/2000 Sb. on EnergyManagement,Act No. 180/2005 Sb. on Promotion ofElectricity Produced from RenewableSources and amending certain acts (theRenewable Energy Promotion Act).

In addition to the four core acts listed above forthe power sector, the energy business ingeneral and the generation of electricity andheat in particular is being affected more andmore by environmental legislation andlegislation implementing the European Unionsefforts to bring about a global improvement inthe environment. Of this legislation, thefollowing acts are of key importance:

Act No. 86/2002 Sb. on Air Protectionand amending certain other acts (the CleanAir Act),Act No. 695/2004 Sb. on Conditions forTrading in Greenhouse Gas Emission Rightsand Amending Certain Acts.

We respectlegislation.


International ControlsCEZ Groups electricity and heat generationoperations are regularly subjected tointernational controls, particularly in relation tonuclear power plants.

2011 saw the third IAEA (International AtomicEnergy Agency in Vienna) review in the historyof Dukovany Nuclear Power Station. The reviewteam stated that the plant is a very well-operatedinstallation, and recommended that it makethree changes. In eleven cases, the review teamproposed additional improvements to existingprocedures. However, the OSART (OperationalAssessment Review Team) review also tookback with it ten good practices that it willrecommend to other nuclear plant operators atan international forum.

The OSART review vets the manner in whichthe plant is operated and developed. It takesplace at the IAEAs recommendation onceevery year, based on an invitation from theGovernment of the Czech Republic. Uponbeing discussed by the Governments ofnuclear countries, the recommendations andgood practices of all OSART reviews becomepublic and can be found in the database atwww.iaea.org.

Also in 2011, Temeln Nuclear Power Stationand Dukovany Nuclear Power Station weresubjected to stress tests. The nuclear plantstress test mandated by the EuropeanCommission is defined as a targetedassessment of nuclear power plant safetymargins and resistance in the face of eventslike those that took place at the FukushimaDaiichi plant in Japan after the earthquake andsubsequent tsunami on March 11, 2011. Themandate calls for the tests to analyzecombinations of extreme situations that couldlead to a nuclear disaster, even though theprobability of such a combination actuallyoccurring is low.

The assessment was carried out by specialistsin nuclear safety, design of nuclearinstallations, accident management, disasterpreparedness, and disaster phenomenologyresearch, all fully qualified for this work. Inassessing the extreme scenarios, they took adeterministic approach, proceeding from theassumption of successive failures of allpreventive measures.

The results of the stress tests confirm thatTemeln Nuclear Power Stations robustnessprovides a considerable margin of safety towithstand serious accidents. The results of thestress tests reaffirm the effectiveness andcorrectness of earlier decisions to implementmeasures leading to increased resistancecompared to the original design. Noshortcomings were found that would requireimmediate corrective measures. The plant isable to safely withstand even highlyimprobable, extreme accident conditionswithout posing any threat to its surroundings.

The Final Report provides a description ofDukovany Nuclear Power Station and itslocation in light of the knowledge gained fromsafety studies, analyses, surveys, historicalexperience, and engineering estimates relatingto a concurrence of several unexpected (i.e.,exceeding design parameters) andimprobable situations and failures combinations of conditions that could result ina hypothetical catastrophic failure of agenerating unit with an estimated frequency ofoccurrence of once every 1,000,000 years ofplant operation (or even lower).


Internal Control MechanismsCEZ Groups system of internal controlsconsists of a number of rules and proceduresput in place by management. The purpose isto help meet targets in terms of proper andeffective company operation, which meansmonitoring, in particular, the following:

adherence to management policies,proper care for and protection of companyassets,improvements in the efficiency of utilizationof company assets,economical use of all company resources,safe and reliable operation of plant andequipment,prevention and identification of fraud anderrors,correct and complete accounting,compilation of reliable financial statements,timely identification of risks, assignment ofresponsibility, and adoption of adequatemeasures.

The system applies throughout the companyand provides crucial feedback in themanagement process. It includes all activities ofexecutives at all levels of management, throughwhich it determines, on an ongoing basis,whether achieved results are in line with plan.

Company management endeavors tocontinuously improve the system of internalcontrols in line with changing internal andexternal business conditions. The state andeffectiveness of the internal control system aremonitored and assessed by the Internal AuditSection, based on the principles ofinternationally recognized standards, and areevaluated by the external auditor as well. TheEZ Audit Committee coordinates activitiesbetween the external and internal auditors,and vets the objectiveness of the assessmentof the internal control system.

In 2011, a total of 64 audits were conducted:18 at EZ itself and 46 in the subsidiaries(including 11 audits in international holdings),where they are conducted by the Internal AuditSection of EZ under contract. In 2010, 63audits were conducted, five of which tookplace abroad.

Also in 2011, CEZ Group published its Reporton the Application of GPW (Warsaw StockExchange) Principles, which includes a list ofaspects where the application differs from theprovisions of the Corporate GovernanceCodex, along with the companys rationale.The document is public and can be found onthe CEZ Group website.

We continuouslyimprove the systemof internal controls.


CertificationsCEZ Group proves that it is serious aboutcompliance and maintaining high levels ofsafety and quality by obtaining and regularlyrenewing various certificates.

Selected CEZ Group companies which havebeen determined to have increased risk inindividual safety-related areas are certified forcompliance with the ISO 9001, ISO 14001, andOHSAS 18001 standards. Internationalholdings, too, are gradually being integratedinto the CEZ Group safety managementsystem.

All EZ conventional, nuclear, and hydropower stations are long-standing holders ofISO 14001 and Safe Enterprise certifications.One half of the subsidiaries subject to the newsafety management system are holders of SafeEnterprise and/or OHSAS 18001 certifications,and depending on the character of theirbusiness nearly one half (43%) hold ISO 14001certification.

International members of CEZ Group, too, aresubject to certification processes. In 2011, webegan the process of certifying the Bulgariancompanies CEZ Bulgaria, CEZ ElektroBulgaria, and CEZ Razpredelenie Bulgaria. Inearly 2012 they obtained a final reportaccording to which they successfully passedthe compliance vetting process according tothe EN ISO 9001:2008 international standard.

2.7 Tendering Principles

In order to ensure its deliveries are of thehighest quality, EZ is pursuing a new strategyfor collaboration with suppliers. Under the newstrategy, suppliers are selected in acompetitive environment based on the resultsof tenders, supplier evaluations, andsubsequent negotiations. The strategy is tofind competitive suppliers with the objective ofsecuring the best standards of contractualperformance. Above all, the company prefersprice, quality, and speed.

On its website, at the address http://www.cez.cz/edee/www/cs/registrace/registrace.jsf?type=dodavatel, EZ has introduced an Internetportal where new suppliers can register.Should any changes on the suppliers sidetake place at a later time, the supplier canmodify its on-line profile (http://www.cez.cz/edee/www/cs/registrace/prihlaseni.jsf).Registration gives the supplier an option forsimple, fast communications.

Our tendersare transparent.

23 Social Responsibility CEZ Group Corporate Social Responsibility Report 2010/2011

3. Social Responsibility

3.1 Employees

Employees are part of CEZ Groups spiritualwealth. They create high-quality value for ourcustomers. Therefore, we care about them,provide them good conditions for their work,and encourage them to continuously developtheir qualifications. We support employeespersonal growth and give them interestingoptions for spending their free time.

Employees areour spiritual wealth.

3.1.1 Corporate Culture PrinciplesIf CEZ Group is to continue fulfilling its visionand keep on achieving ambitious goals, it isimportant for an appropriate corporate cultureto take root and grow. That culture is defined bythe Seven Principles, and has been a part of theCEZ Group strategic framework since 2005.

The Seven PrinciplesCreate value safelyTake responsibility for resultsPlay as one teamDevelop our potentialGrow beyond bordersSeek new solutionsPlay fair

The principles for CEZ Group employees arevalues that they share and respect: they are animportant part of what it means to be a part ofCEZ Group. Great emphasis is placed onbringing the principles to life, so they are notjust empty words, but an easy-to-understandguide to how to behave and make decisions inones day-to-day work.

Each of the Seven Principles is broken downinto specific behaviors. This is a more detailedinterpretation of how the employee should acttoward his or her colleagues and towardsinternal and external customers. Assessment ofthe extent to which employees actual behavioris in line with these principles is a standard,integral component of the employee evaluationprocess. The evaluation results are reflected inindividual employees compensation,encouraging them to perform to their bestpotential and act in accordance with thecorporate culture.


3.1.2 Antidiscriminatory MeasuresAntidiscriminatory measures, procedures, andinstructions are built into the work rules andcollective agreements of the individualcompanies as well as into the documentsgoverning recruiting and selection ofemployees.

EZ and the CEZ Group integratedsubsidiaries are highly technical companiesthat place high demands not only onemployees professional qualifications, but alsoon their physical and psychological fitness fortheir jobs. Yet these companies also employ120 handicapped persons in selectedpositions, thereby giving them an opportunityfor integration into society and improving theirquality of life.

When hiring,we applyantidiscriminatorymeasures.

3.1.3 Training and DevelopmentThrough its employee development programs,CEZ Group offers its employees a wide varietyof activities. First and foremost is the systemfor ensuring that employees have and maintainthe requisite professional qualifications in linewith the qualification requirements of therespective job position.

During 2010 we completed a project forimplementing modern electronic methods andtools for training and testing employees whosejob positions call for electrotechnicalqualifications.

CEZ Groups development programs arecapable of being tailored to specificdepartments, organizational units, and targetgroups in both professional subjects and softskills. At the same time, they include work-study programs that enable employees todevelop their qualifications in technical fields bystudying at secondary schools and universities.For managers, there are special activitiesdesigned to improve management skills, suchas coaching and leadership programs.

In order to train and educate its employees,CEZ Group utilizes the newest methods andshares best practices. One such tool is thee-learning platform. The e-learning portfoliois continually expanding and currentlyencompasses over 100 courses in the areas ofmandatory training, development programs,and specialized courses in various fields.

CEZ Group pays special attention to trainingnuclear plant managers. To develop middlemanagers and their management skills,including leadership skills, 2011 saw theimplementation of a training program entitledEZ Manaer. Managers stationed ingenerating unit control rooms took part inregular Play Safe courses focused on teamworkand making safe and effective decisions.

In the framework of international cooperationamong nuclear plant operators, severalsupport missions took place in 2010 and 2011in CEZ Groups nuclear power plants, focusedon workflow control, assessments of outages,and self-evaluation. Since 2011, the nuclearpreparation department has been intensivelyinvolved in a project entitled Correctivemeasures ensuing from stress tests and theaccident response management program.

In 2011, specialized nuclear power plant stafftraining processes were reviewed andevaluated by the international OSART reviewteam at Dukovany Nuclear Power Station andby the WANO Peer Review team at TemelnNuclear Power Station. Both reviews yieldedvery good results, including the identificationof several good practices that can be put touse in other countries.


Also, a team of experts from the humanresources development department is playinga major role in preparing and securing humanresources as well as training employees for theplanned completion of Units 3 and 4 ofTemeln Nuclear Power Station and forDukovany Nuclear Power Stations LTO (LongTerm Operation) project.

The EZ Leader program for the Temelnand Dukovany Nuclear Power Stations is nowin its second year. The project aims tosystematically prepare and developparticipants individual management potentialfor possible future assignments tomanagement positions in both nuclear plants.

Nuclear Power Plant Training CentersCEZ Group has training centers in threelocations: at Dukovany Nuclear Power Station,at Temeln Nuclear Power Station, and in Brno.They include full-scale simulators of generatingunits of both nuclear power plants, which areused to train both our own employees andthose of external suppliers. The primary missionof these centers is to prepare employees toengage in activities that are important in termsof nuclear safety. 2011 saw the opening of aPractical Skills Center at Temeln Nuclear PowerStation, where several teams provide practicaltraining in selected procedures andmanipulations for employees of both EZ andits suppliers. The new center is licensed by theState Office for Nuclear Safety.

In conjunction with the CEZ Group humanresources development strategy, a knowledgemanagement program has been prepared asa fundamental prerequisite for preserving andproperly handling the companys uniqueknowledge. This program is currently beingpiloted in both nuclear power plants. Aperformance management system is beingimplemented at the same time.

EZ PotentialsThe EZ Potentials program is open touniversity graduates with technical or economicmajors who have no more than two years ofwork experience. Program participants, who arechosen from a larger pool of applicants, areappointed to specific job positions in CEZGroup companies. Over a period of 12 monthsthey undergo an all-around practical trainingprogram designed to develop soft skills,including workshops, coaching, tours of CEZGroup operations, and motivational meetingswith top management. The whole time they areled by experienced managers, actively involvedin key projects and working on importantindividual task assignments.

Knowledge ManagementPreserving and sharing the experience ofexperts plays an important role in mitigatingrisk associated with staff mobility and aging. Atthe nuclear power stations in particular, thisarea receives increased attention in view of itsimpact on operational safety. CEZ Groupapplies Knowledge Management principlesprimarily to key expert experience that is notcovered by the standard documentation.

In principle, knowledge management helpsboth to identify significant practical experienceand those who possess it, as well as tosystemically ensure it is shared and mitigate therisk of its loss. In 2010 and 2011, afterimplementation of the knowledge managementprocess at Temeln and Dukovany NuclearPower Stations was completed, the processwas expanded to other units in the organizationstructure. The International Atomic EnergyAgency designated the CEZ Groups process-based Knowledge Management model as agood practice.

The long-term objective is to gradually expandthe implementation of knowledgemanagement until it is fully integrated into theday-to-day work of all employees. CEZ Groupintends to live up to its slogan: We respect ouremployees knowledge and we know how towork with it.


3.1.4 Motivational Programs and BenefitsThe principal goal of motivational programsand benefits is to motivate and retain individualemployees in support of the fulfillment of thecompanys strategic objectives while efficientlymanaging personnel expenses and ensuringtheir optimal distribution among individuals.

Employee CompensationThe compensation system and wage policyare designed to facilitate internal fairness andexternal competitiveness. At CEZ Group,employees are paid wages that are in line withthe long-term financial performance results ofCEZ Group and its standing in the labormarket. Base wages are differentiatedaccording to the complexity, responsibility, anddifficulty levels of the work performed. Variablewage components ensure that the employeescompensation is linked to company-wide andindividual targets, as well as to the employeesacting in accordance with company principles.Thus, they motivate the employee to takepersonal responsibility for results, as well as formeeting strategic targets. Planning for andmanaging deviations in personnel expenses especially factors such as the work force headcount, year-on-year wage adjustments, andwage policies leads to cost effectiveness.

We motivateour employees.

Award for Best Employees of Divisions,Organizational Units, and SubsidiariesEach year, the head of each division,subsidiary, and power plant selects one of hisor her subordinates as a candidate for theZAR award. This award is given inrecognition of the most successful employeeacross all the countries where CEZ Groupoperates.

ZAR is awarded to rank-and-file employees,not teams, since CEZ Group seeks to supportthe principle of taking individual responsibilityfor fulfillment demanding targets. The winnersof the award are employees who madesubstantial contributions to their units resultsduring the past year and achieved excellentresults in terms of meeting their personaltargets. In 2011 there were 45 ZAR winners:30 from companies in the Czech Republic and15 from abroad. In 2010, 42 employees wonthe award: 34 from the Czech Republic andeight from abroad.

The awards are announced each year at workmeetings. The main prize, however, is an all-expenses-paid trip to a gala, where the ChiefExecutive Officer officially presents the awardto the winners. The purpose of this exclusivemeeting is to give key CEZ Group employeesan opportunity to exchange work experienceand communicate with each other on aninformal basis.

CEO Awards for Extraordinary Contributionsto CEZ Groups GrowthEach year, the Chief Executive Officerrecognizes one individual and two work orproject teams for their extraordinarycontributions to CEZ Groups growth.Nominations for these CEO Awards aregathered from all divisions, organizationalunits, subsidiaries, and international holdings.According to tradition, the awards areannounced and presented during the EZManagement Meeting.

In 2010, the award for individuals went toBalzs Hajdu in recognition of hisaccomplishments in developing the EZ salesrepresentation in Hungary and jump-startingsales of electricity to end customers, and toViktor ern for a proposal for managinginternational projects using gates anddesigning a process-based model for projectsin the investment division. In the category ofteams, the award went to the 18-member teamof the Gas Retail team consisting of employeesof EZ, EZ Prodej, and EZ Zkaznicksluby, for the quick preparation andsuccessful launch of sales of natural gas tohouseholds, with a focus on CEZ Groupemployees.


In 2011, in the individuals category, the awardwent to Petr Rohek, who played a key role intransforming the accounting function, primarilyin setting up the newly formed transactionaccounting department. He helped to defineunified accounting processes, as well asplaying a role in recruiting and training newemployees in Ostrava. In the teams category,the award winner was the six-memberStrategic Recruiting team at the humanresources division which worked to recruitgraduates trained in technical fields and buildthe employers brand. The team achievedexcellent results in 2012: it defended for EZthe title The Most Desired Company in theEmployer of the Year competition. It won thecompany another most-preferred-employer titlein a Trendence Institute survey of technicaland economic school students. The teamswork was also recognized by the professionalpublic, which awarded it the PersonnelProject of the Year award within the Employerof the Year competition.

Our employeesreceive companyawards.

Benefits at CEZ GroupThe provision of benefits is common practiceat most companies. Compared to othercompanies in its class, CEZ Group offers itsemployees an above-average number ofbenefits. The collective agreements at CEZGroup include a social component where thebenefits are described.

Benefits are included in every employeescompensation and can be both monetary andin-kind. Each year, they add up to manythousands of CZK in financial value. CEZGroup companies operate with a shortened,37.5-hour work week, one additional week ofpaid vacation is provided beyond the statutoryminimum, and employees are entitled to paidpersonal time beyond that required by law.CEZ Group companies provide employees awide portfolio of benefits, such as personalaccounts intended in particular for rest andrelaxation, Supplemental Pension Insurancecontributions, life insurance, employee mealplans, contributions to help cover expensesduring the first three days of sick leave, healthcare, special bonuses for employee jubileesand upon retirement, the Mobility programdesignated for key employees whose workresponsibilities require them to travelfrequently either within the company or CEZGroup as a whole, and one-off social aid inextraordinary cases. Above and beyond thebenefits set forth in the collective agreements,the employer negotiates on behalf of itsemployees discounts and other special termson the purchase of goods and services fromselected companies.

Most of all, the employer strives to offer itsemployees benefits that are advantageous forthem, and by offering a wide variety of benefitsto encourage as many employees as possibleto take advantage of them. Although theemployer incurs considerable expense toprovide the benefits, employees often seethem as an entitlement or natural part of theemployer-employee relationship, not as anadded bonus or expression of the employersappreciation.


3.1.5 Turnover and Care for DepartingEmployeesCEZ Group dedicates increased care toemployees who are departing as a result ofreorganizations. In order to mitigate the impactof these changes, all departing employees areeligible for the Outplacement program,which aims to ease their transition and helpthem continue in their professional careers.

CEZ Group also thinks of its former employees retirees, caring for them, for example,through the CEZ Group Seniors Foundation.The last annual seniors meeting took place onOctober 6, 2011 at the Daleice pumped-storage hydro power station, where the seniorsmet with the management of the Hydro PowerStations organizational unit. Meetingparticipants took a tour of the power plant,talked with their former colleagues right at theworkplace, and concluded the meeting bytaking rides in the Peugeot iOn electric car.

We offer careto our departingemployees.

3.1.6 Occupational Safety and HealthThe Safety and Environmental ProtectionPolicy was passed by the EZ Board ofDirectors and issued as an order of the ChiefExecutive Officer effective from May 1, 2010. Itincludes the following chapters whose titlescorrespond to the strategic pillars of the Policy:

We place protection of human life andhealth before all other interests.We pursue safety and environmentalprotection as integral parts of management.We comply with laws, regulations, and ourpublic obligations, and we take note ofrecognized practices.We continually improve safety andenvironmental protection.We regularly assess risks and either preventthem, eliminate them, or reduce their impactto an acceptable level.We ensure that plant and equipmentcomplies, long-term, with all technical,safety, and economic criteria.

In selecting and evaluating suppliers, wetake into account their attitudes towardsafety and the environment.We communicate openly and effectively onsafety-related topics.We secure sufficient numbers of high-quality, motivated employees and suppliers.We manage key knowledge.

Caring for employees safety and health a keypriority for EZ. In 2010 and 2011, thecompany brought about a major increase incare for the safety and health of workers of itssubsidiaries and even those of suppliers, asdemonstrated by the following figures.

Number of Injuries in the Production Segment,Including EZ

In June 2011, after three years, CEZ Groupconducted a new, extensive survey ofemployees opinions on the safety culture.Compared to 2008, the index increased from4.6 to 5.04, with 6 being the highest possiblescore. Another way of presenting the overallevaluation of the safety culture is to say that84% of employees are satisfied, on average,with the level of all aspects covered by thesurvey. 92% of employees agreed that cultureof safety at CEZ Group is improving. Amongother factors, this is attributed to a number ofmeasures and activities that were put in placeon the basis of the previous survey. CEZ Groupapproved and implemented a new Safety andEnvironmental Protection Policy, andemployees can also participate in discussionson this topic on the new safety portal.

20

22

24

26

28

2008 2009 2010 2011


The term safety culture was first used in areport published by the IAEA in 1986 and wasfurther elaborated in publications thatfollowed. It is used in conjunction with thesafety of nuclear power plants, but theinterpretation of the term remains very broad,and principles defining a culture of safety canbe used to assess the level of safety outsidethe nuclear power field as well. At CEZ Group,safety culture is defined as that assembly ofcharacteristics and attitudes in organizationsand individuals which establishes that, as anoverriding priority, safety issues receive theattention warranted by their significance.

For employees, 2010 saw the opening of asafety portal that is part of the corporateIntranet. Here, employees can find the Safetyand Environmental Protection Policy,information on the assessment of safetythroughout the entire CEZ Group, informationand figures excerpted from the Final Reportson the nuclear power plant stress tests,statistics on material events at CEZ Groupfrom a safety perspective, and a range of otherinformation. Popular sections include YourStories, where employees can read about theircolleagues experiences, and My Perspective,which carries interviews in which CEZ Grouprepresentatives share their opinions on specificsituations. An employee brochure entitled YouDecide has also been published, based on thesafety portal.

3.1.7 Employee CommunicationsThe objectives of the companys internalcommunications are to provide employeeswith clear, comprehensible information thatthey need for their work; create an atmosphereof open, frank communication; and encourageemployees to be involved and maintain apositive attitude toward the company. For itsinternal communications, CEZ Group utilizes awide variety of communication channels:

the corporate Intranet,the EZ News magazine,on-line interviews on the Intranet,EZ.TV the Intranet television portal,electronic newsletters,the roadshow a big annual meetingbetween managers and employees,informal round-table discussion meetings utilized by managers to get feedback fromtheir employees.

Profession meetings, whose objective is tofacilitate sharing of experience betweenemployees with the same profession but fromdifferent regions, have become very popular,as have meetings of employees in cooperatingunits, which serve to fine-tune cooperationacross the Group. Each year, dozens of suchmeetings take place. They bring added valueby reinforcing person-to-person contacts andcommunication among people who need towork together effectively, even though theirrespective workplaces are hundreds ofkilometers apart.

CEZ Group strives to develop an open dialogbetween the companys management and itsemployees. Members of senior managementobtain feedback from employees by visitingthem at their workplaces or in settings wherethey feel best, and use that feedback in theirwork. Employees can also share their opinions,suggestions, and/or questions though the on-line application Orange Connection. Answersto frequently asked questions are published onthe Intranet and in the employee magazine. Atthe roadshow, CEZ Group encouragesemployees to ask questions and shareopinions openly. Prior to events, they can sendin suggestions for presentation topics andquestions for management representativeseither through the Intranet application or viaSMS. The most interesting topics are treatedby panel discussions, which also encourageemployees to ask questions. Thanks to thesemeasures, the number of questions andduration of the discussions at the regularroadshows are growing.


CEZ Group also supports informal meetingsamong employees and events organized foremployees and their family members inrecognition of their good work. For example,various pre-Christmas events are held.

Another example is the family summervacation event. In 2011, employees and theirfamilies and younger children especially were invited to visit the most interestingtechnical exhibits in the country. This eventwas partially a benefit for employees, but theprincipal goal was to support childrens andyoung peoples interest in technology and thestudy of technical fields.

Popular employee events include open housesheld by the individual power plants. Forexample, in November 2011 the TemelnNuclear Power Station Information Centerorganized an evening tour of the plant for thefirst time ever. Two tour buses were preparedfor participating employees and their closestfamily members. A total of 87 people most ofthem children boarded the buses. Each ofthe visitors was treated to a bus tour inside theplant compound, driving right past thegenerating units, machine rooms, the spentfuel repository, and the cooling tours. Afterleaving the guarded plant complex, they tookanother tour through the village of Temeln sothey could view the lit-up power plant fromafar. The entire tour, including a runningexplanation by a guide from the informationcenter, lasted just under an hour and made ahuge impression, especially on the youngerparticipants. The objective of these events isboth to reinforce employees sense ofbelonging, but also to support the upbringingof a new generation of technicians.

In June 2011, CEZ Group conducted anopinion survey among employees to measuretheir levels of satisfaction and engagement.Since the survey also included measurement ofthe safety culture, employees of key supplierswho influence safety were also invited toparticipate. 81% of the work force participatedin the survey. Their overall satisfaction reached92%. Of the overall number of participants,98% said they liked their job, and 95% saidthey would apply for a job at CEZ Group again.The results are better than at other companieswith which CEZ Group compares itself (agroup of 15 companies from Central andSoutheastern Europe, power and otherindustrial companies including nuclear powerplant operators). The survey found highstandards of corporate culture, internalfunctioning, and employee care. In allmeasured areas, including the area ofcommunication, CEZ Group received scoresabove the market average. Within theframework of managed discussion (in so-calledfocus groups), issues and areas where CEZGroup had the weakest scores were discussedwith employees from various professions andlevels of management. The employees clarifiedwhat needs to be improved, and how.Subsequently, an action plan was formulated,including a set of measures aimed at improvingthese weak points. It is focused on reinforcingemployee trust, dialog with management, andinterdepartmental cooperation. Some of thecorrective measures have already been put intopractice, and their results are being monitoredand evaluated on an ongoing basis.

Another source of information for employees isthe safety portal, which was launched in2010. Since then, it has been regularlyupdated with safety-related information thathas a positive influence on employee behaviorand actions.

Communicatingwith our employeesis important to us.


3.1.8 Employee Charitable Activities2010 was the fourth year of the MakingWishes Come True, Thinking of Othersproject, in which employees help orphanedchildren, handicapped people, and newlyyoung people from foster families as well.Nearly 1,000 employees from all CEZ Groupworkplaces made wishes come true. Theproject also received support from variouscelebrities, including sports stars. In 2010, CEZGroup and the Nadace EZ Foundationdonated a total of CZK 1,154,600 to the project,which was used to purchase things likehousing, a new computer, and music lessons to name just a few. The Sense and Sensibility(Rozum a cit) Foundation became a partner ofthe project.

Im in my second year as an apprenticemason and I really like it. I also want to getcertified to work with drywall and scaffolding,and one day I want to make a living at it, saysMartin, one of the projects beneficiaries fromEast Bohemia.

In 2011, CEZ Group employees participating inthe Making Wishes Come True, Thinking ofOthers project provided support to 30protected workshops from all over the CzechRepublic, donating a total of CZK 425,353, towhich the Nadace EZ Foundation addedanother CZK 500,000. The protectedworkshops used the contributions to helpcover their operating expenses; purchasetools, equipment, and materials; and improveworking conditions for their clients.


CEZ Group employees also helped in otherprojects. For example, in 2010 they teamedwith the ADRA Foundation to extend a helpinghand to people hit by flooding in the Liberecarea. In addition to screening the affected area,they did clean-up work and helped withwhatever else was needed.

In the spring of 2011, CEZ Group employeesinitiated a fund drive to help victims of thenatural disaster in Japan. A total of 705employees provided financial donations,raising a total of CZK 574,238. The NadaceEZ Foundation provided a matchingdonation. The cheque for CZK 1,148,476 waspresented to the director of the ADRAhumanitarian organization. The money went totowns in the Sendai, Fukushima, andYamamoto areas, where they were usedprimarily to help senior citizens, people with norelatives to help them, and handicappedpeople. The money raised in the fund drivehelped build temporary housing and obtainschool supplies and bicycles for schoolchildren who used to attend school in theimmediate vicinity of Fukushima and now mustcommute to schools farther away.

We provide helpon-site in placesaffected by naturaldisasters.

3.1.9 Employee FeedbackEmployees of EZ and the integratedsubsidiaries had the option of taking theircomplaints relating to the exercise of rightsand obligations ensuing from the employer-employee relationship to the Chief HumanResources Officer of EZ. Complaints aredealt with by the social relations department,which ensures that the content of eachcomplaint is duly investigated and theemployee receives a response. Whenshortcomings are found, necessary correctivemeasures are taken.

3.1.10 Labor UnionsAt year end 2011, there were a total of 29separate basic labor organizations at EZ, andapproximately 2,000 employees, or 34% of thecompanys total work force, were unionized. Atthe integrated subsidiaries of CEZ Group inthe Czech Republic, a total of 44 basic labororganizations operated, and approximately3,200 employees, or 50% of these companiestotal work force, were unionized. 35 basiclabor organizations were members of fourregional Associations of Basic Organizations,while another nine basic organizationsoperated independently in the subsidiaries.

The labor organizations are organized into twolabor unions: the ECHO Labor Union and theCzech Union of Power Industry Employees.

During 2010 and 2011, regular meetingswere held between the employer andlabor representatives, at which the labororganizations received information and topicsset forth by the Labor Code and the CollectiveAgreement were discussed.

At EZ and the integrated subsidiaries, thecurrent Collective Agreements expire onDecember 31, 2014. In the autumn of 2011,collective bargaining took place onamendments to the collective agreements atEZ and the integrated subsidiaries, relatingprimarily to wage growth for 2012. Collectivebargaining culminated in December with thesigning of Amendment No. 9 to the EZCollective Agreement and Amendment No. 6to the collective agreements of the integratedsubsidiaries.

Fifteen basic labor organizations operatewithin the Severoesk doly Group. Thecollective agreements there are entered intofor three-year periods and are currently set toexpire at the end of 2012.


Labor organizations also operate in CEZ Groupcompanies abroad. At all three Romaniancompanies, CEZ Distributie, CEZ Romania, andCEZ Vanzare, the current collective agreementsare set to expire at the end of 2012.Negotiations with labor organizations in 2011centered primarily on the gradual unification ofall the collective agreements. In the Polish CEZGroup companies, there were a total of fourlabor organizations in 2011. On January 13,2011, a new

CEZ Group Corporate Social Responsibility Report 2010-2011_en

Documents

Transcript of CEZ Group Corporate Social Responsibility Report 2010-2011_en