Issuance activity: Tomorrow, MinFin is scheduled to auction CZK3.0bn of 2034 bonds, CZK2.0bn of 2036 bonds and CZK1.0bn of 2038 floaters. The November calendar indicates a total supply of CZK20.0bn, slightly below monthly average. The actual issuance is however some 40% higher ytd than the indication in the issuance calendars, as was the case with last week’s auction. MinFin has also recently increased its T-bills supply, planning to offer CZK15.0bn of CZK-denominated T-bills plus an additional EUR500m EUR-denominated ones in November, with CZK45bn and EUR1.0bn in T-bills maturing in 2026 already issued. The state budget for 2026 remains uncertain. We assume the cash deficit of the state budget may deepen to CZK320bn next year. In our estimates, this would imply an increase in the public finance deficit from 2.2% of GDP this year to 2.8% of GDP next year. More in the Czech Economic Outlook: https://bit.ly/CEO_4Q25_EN.

Issuance activity: Tomorrow, MinFin is scheduled to auction CZK3.0bn of 2034 bonds, CZK2.0bn of 2036 bonds and CZK1.0bn of 2038 floaters. The November calendar indicates a total supply of CZK20.0bn, slightly below monthly average. The actual issuance is however some 40% higher ytd than the indication in the issuance calendars, as was the case with last week’s auction. MinFin has also recently increased its T-bills supply, planning to offer CZK15.0bn of CZK-denominated T-bills plus an additional EUR500m EUR-denominated ones in November, with CZK45bn and EUR1.0bn in T-bills maturing in 2026 already issued. The state budget for 2026 remains uncertain. We assume the cash deficit of the state budget may deepen to CZK320bn next year. In our estimates, this would imply an increase in the public finance deficit from 2.2% of GDP this year to 2.8% of GDP next year. More in the Czech Economic Outlook: https://bit.ly/CEO_4Q25_EN.

Market situation: Market CZK interest rates and CZGB yields have increased over the past week, reflecting the general risk-on sentiment and the Czech October CPI. Headline inflation exceeded expectations, accelerating from 2.3% yoy a month earlier to 2.5% yoy (BBG consensus 2.3% yoy, CNB forecast 2.2% yoy) primarily due to volatile food prices. Core inflation stood at 2.8% yoy in line with the CNB forecast. More on October inflation here: https://bit.ly/CPI_Oct25_EN. Last week’s CNB meeting was uneventful, with rates held unanimously unchanged and the repo rate likely to remain at 3.5% in the near future. More here: https://bit.ly/CNB_Focus_Nov25_EN.

Rates outlook: We believe that the fiscal stimulus is set to push CZK market interest rates and bond yields further up, although the slowdown in industrial sector may temporarily halt this trend. Regarding the CNB, we no longer anticipate further cuts to the repo rate, which is likely to remain at 3.5% for an extended period. This is despite the fact that headline inflation may temporarily fall below the 2% target in 2026 due to a decline in energy prices.

CEZ reported a 56% yoy increase in net profit to CZK5.5bn for 3Q25. This exceeded the market consensus by +10%. However, this was influenced by a significant decrease in the effective tax rate, which fell from 88.0% in 3Q24 to 56.4% in 3Q25. EBITDA of CZK29.3bn (-5.7% yoy) fell short of estimates by 7%. This was due to lower electricity realization prices, lower trading profits, and poorer performance of emission sources and hydroelectric power plants. While CEZ repeated its full-year EBITDA guidance, it simultaneously lowered the upper limit of its original net profit expectation to CZK26-28bn from CZK26-30bn.

CEZ reported a 56% yoy increase in net profit to CZK5.5bn for 3Q25. This exceeded the market consensus by +10%. However, this was influenced by a significant decrease in the effective tax rate, which fell from 88.0% in 3Q24 to 56.4% in 3Q25. EBITDA of CZK29.3bn (-5.7% yoy) fell short of estimates by 7%. This was due to lower electricity realization prices, lower trading profits, and poorer performance of emission sources and hydroelectric power plants. While CEZ repeated its full-year EBITDA guidance, it simultaneously lowered the upper limit of its original net profit expectation to CZK26-28bn from CZK26-30bn.

Total revenues for 3Q25 amounted to CZK72.9bn, which is an 11.6% yoy decrease. EBITDA reached CZK29.3bn in 3Q25, marking a 5.7% yoy decline. The Generation segment declined by 19% yoy due to lower electricity sales prices (EUR124/MWh compared to EUR135/MWh), decreased production from emission sources, and poorer performance of hydro and gas power plants. These declines were partially offset by higher production (+3.4% yoy) from nuclear power plants. Compared to last year, there were no profits from trading (last year CZK0.8bn). Additionally, CEZ lowered its expectations for coal-fired power plant production for the entire year. The Distribution segment grew by +46% yoy, mainly due to the consolidation of GasNet, which joined the group on September 1, 2024. The Sales segment grew by +15% yoy, mainly due to the significant increase in performance of ESCO companies (+148% yoy), which compensated for a one-time item (CZK1.3bn in 3Q24) that did not recur this year. Mining fell by 28% yoy, as did generation. The EBITDA margin increased by 2.5pps to 40.2%. Net profit, adjusted for extraordinary items in 3Q25, increased significantly by 56% to CZK5.5bn. The difference compared to 3Q24 is the effective tax rate. This year, it reached 56.4%, whereas in 3Q24, it was 88%. Additionally, CEZ recorded a loss from Rolls-Royce SMR of CZK0.4bn. This item is likely to recur in subsequent periods.

Leverage (net debt to EBITDA) increased slightly to 1.5x following dividend payments. This is an increase from 1.3x in the first half of 2025 and 1.5x at the end of 2024.

2025 Guidance: CEZ reiterated its EBITDA profit projection, which should range between CZK132-137bn this year. CEZ management narrowed, in this case lowered, the upper limit of the expected range to net profit, which should reach CZK26-28bn. The previous estimate was CZK26-30bn. The updated projection would correspond to a dividend payout of almost CZK42 or a gross yield of +3.2% at an 80% payout ratio. For 9M25, the reported figures are 77% of the full-year EBITDA target and 82% of net profit. At the same time, CEZ raised its estimates for the windfall tax to CZK31-34bn (originally CZK29-33bn).