annual report 2004 - Severočeské doly a.s.

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Report of the Board of Directors
on Company Business Activities and Assets
Business Environment
Significant Events of 2004
On 1 May 2004, the Czech Republic and another nine candidates joined the European Union. An amendment
to the Energy Act and the draft National Allocation Plan (NAP) for CO 2 emission trading, which
will enter into force after endorsement within the EU, were approved.
In the coal industry, Sokolovská uhelná, a.s. was privatized, and the privatization of OKD, a.s., KAR-
BON INVEST Group member was completed.
A bill to promote the generation of electricity from renewable energy sources is still at the stage
of discussion, and has had a first reading in Parliament.
Negotiations on the Ústecko Region Land-Use Plan 2006–2020, including the validity of and changes
to Area Environmental Limits for Coal Mining, kicked off.
In March 2004, the Government halted the process of privatization the state-held stake in
Severočeské doly a.s.
The Czech Economy in 2004
The Czech Republic’s gross domestic product went up by 4.0% in 2004. Consumer prices climbed by
2.8% year on year. The unemployment rate fell to 9.5%, mainly thanks to a change in the calculation
methodology to conform to EU standards. Labour offices had 541,675 unemployed registered in their
books; unemployment kept to the same level as in 2003. In the scope of the reform of public finances,
the value added tax standard rate was cut from 22% to 19% as of 1 May 2004. The corporate income tax
rate was reduced to 26%. Brown-coal mining reported a 4% decrease year on year. The prices of electricity,
gas, and district heating went up and the cost of acquiring electricity from renewable energy sources
was reduced. Hard-coal mining posted a moderate 2.2% rise year on year; the selling price of coking
coal went up.
The Czech crown appreciated against both the euro and the US dollar. As at 31 December 2004,
the exchange rates were 30.465 CZK per EUR and 22.365 CZK per USD.
Generation of Electricity in the Czech Republic
There was a year-on-year rise in total electricity generation by 1.3% (1.1 TWh) to 84.3 TWh. Electricity
generation at nuclear power plants rose by 1.7%, and in steam power stations fell by 0.4%.
The excavation of brown coal and lignite dipped year on year from 50.3 to 48.5 million tonnes; hardcoal
mining fell from 13.8 to 13.3 million tonnes.
Power generation in the Czech Republic in 2004 (%)
0 10 20 30 40 50 60 70
Coal power stations
62.6%
Nuclear power stations
31.2%
Vapour gas and gas power
stations — 3.1%
Hydro, wind, solar, and other
alternative power plants
3.1%
Market Share
Severočeské doly achieved sales of 21.8 million tonnes of coal in 2004, thus recording a drop in sales
production by almost 1 million tonnes (4.33%) compared to 2003, mainly because of a fall in boiler-coal
supplies to ČEZ power plants. Compared to the other brown-coal producers, Severočeské doly confirmed
its status as the number-one player on the brown-coal market with a market share of 44.85%.