Annual Reports

Chairman’s Statement

Dear shareholders, dear business partners,

to take over a well-functioning company may seem like an easy task. When
a few months ago I began to familiarize myself with the ČEPS Company from
the position of Chairman of the Board, it was clear to me that this statement is
a good start, on which, however, we must continue to improve the Company
further. I am glad that I can now say that in 2016 we managed to keep the
system running smoothly and, in addition, we completed several key projects.

It is not every year that we can proudly announce that we successfully commissioned
new power lines. In 2016, this announcement can be made about two new lines.
We officially commissioned the power line designated V410/419 connecting the
transformers stations Výškov and Čechy Střed. New, almost one hundred kilometer
long stretch is one of the most used sections, and it will ensure safe and reliable
transmission of electrical energy from northwestern to central Bohemia including
defense against overflows from Germany. Additionally, this power line can serve
as a positive role model in terms of length of the construction. Although it had
to go through all stages of the permitting processes, the entire power line was
completed in just nine years. In comparison with other projects it is an amazingly
short time, as permitting processes usually take several years longer.

The Czech transmission system was extended with another approximately
80 kilometers in northern Moravia, where a new power line designated V458
between substations Krasíkov and Horní Životice will help reinforce the local
electricity supply. This power line has been involved in the functioning of the
transmission system since autumn.

In the Hradec u Kadaně substation, we launched two PST transformers.
Unfortunately, the last – fourth transformer failed acceptance tests at the Italian
factory, and thus it was not possible to launch all four machines by the end of
the year, as was originally planned. Again, however, the importance of safety of
the operation of the transmission system, to which our staff pays attention at
each step, was made clear. Only through strict tests, which we also demand from
the manufacturer of these machines, we have discovered the defect in a timely
manner and avoided a collision during actual operation.

To allow the transmission system to operate safely under all circumstances, in
2016 we continued to prepare our employees for possible crises, thanks to drills
organized together with the integrated rescue system units and also the Czech
army. In this context, an extraordinary event was an anti-terrorism exercise, during
which the attackers reached the control room and threatened to destroy the
transmission network. Although we believe that we will never have to actually deal with such situations, being prepared for them is, for us as a subject of critical
infrastructure of the state, of crucial importance.

In terms of operation, the year 2016 was smooth. Although shutting down
the Krajnik-Vierraden power line at the Poland-Germany interconnector and
launching PST transformers in Poland pointed to a possible increase in expenses
for international redispatch, transit flows did not exceed the limits too often,
so there was no need to resort to a crisis scenario.

Reaffirmation of a high credit rating of A2 by Moody’s helped the ČEPS Company
to further develop the transmission system and thus to fulfill its investment
program. Thanks to this we were able to proceed to the implementation of
our pre-announced intention. On September 30, 2016, ČEPS a.s. issued bonds
with a total nominal value of CZK 500 million with a maturity of 5 years
and a coupon rate of 0.25% per annum. Upgrade and development of the
transmission system and hence its safe operation, which is our priority, is not
possible without an efficient acquisition of foreign resources needed to finance
the investment program.

I appreciate the fact that ČEPS is a working and stable company with healthy
and long-term planned projects. ČEPS, a.s. has been and always will be located
at a strategic level, where it is essential to ensure high quality of technical
functioning of the transmission system. I would therefore also like to praise my
predecessors for taking such an attitude to the development and maintenance of
the network. My thanks for the past year, however, also go to the shareholders
for their support, business partners for their cooperation and our staff for the
professional work they performed in 2016. Thanks to this, I dare say that the solid
foundation on which we build, will bring us further successful years.



Jan Kalina
Chairman of the Board of Directors




ČEPS Annual Reports