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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of June 2006
Commission File Number 333-7182-01
CEZ, a. s.
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(Translation of registrant's name into English)
c/o Duhova 2/1444
140 53 Prague 4
Czech Republic
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F. [X] Form 40-F. [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): [ ]
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82- ________
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The following information was filed by CEZ, a. s. in Czech language with the
Prague Stock Exchange as required by its rules and regulations:
CEZ DISCLOSES TERMS AND CONDITIONS OF ITS OPTION PLAN
On Friday June 2, CEZ announced that, according to the CNB's latest
EU-conforming interpretation, the disclosure requirement applies not only to
stock transactions, but also to executed option agreements.
Accordingly, the company's Board of Directors promptly decided to disclose
information on option agreements made by 15 members of CEZ's management to the
CNB Capital Markets Supervision.
List of Current Option Agreements
Potential Net Proceeds of
Sale as of This Date
(Current Share Price less
Acquisition Price and
Position Name Number of Shares Acquisition Price* Personal Income Tax)
- ---------- ----------------- ------------------ ------------------- -------------------------
Directors Roman Martin 750000 shares 139.2 CZK/share 282 CZK mil.
Borovec Jiri 300000 shares 206.6 CZK/share 99 CZK mil.
Benes Daniel 300000 shares 506.6 CZK/share 38 CZK mil.
Pleskac Tomas 300000 shares 549.8 CZK/share 29 CZK mil.
Svoboda Alan** 300000 shares 160.87 CZK/share 109 CZK mil.
Pasak Zdenek*** 300000 shares 829.03 CZK/share loss - 28 CZK mil.
Executive Feist Jiri 75000 shares 243.53 CZK/share 23 CZK mil.
Committee Krizek Karel 75000 shares 274 CZK/share 21 CZK mil.
Members Mazac Bohumil 75000 shares 243.53 CZK/share 23 CZK mil.
Sedlak Josef 75000 shares 243.53 CZK/share 23 CZK mil.
Schmalz Vladimir 75000 shares 243.53 CZK/share 23 CZK mil.
Skalka Michal 75000 shares 651.73 CZK/share 2 CZK mil.
Suk Jaroslav 75000 shares 243.53 CZK/share 23 CZK mil.
Smucr Igor 75000 shares 274 CZK/share 21 CZK mil.
Stepan Lubomir 75000 shares 773,7 CZK/share loss -4 CZK mil.
* Until April 20, 2006, the 6-month average price before the appointment date;
after April 20, 2006, the one-month average price before the appointment date.
** Alan Svoboda served as Director of CEZ until April 21, 2006, and has not yet
exercised his option rights.
*** Zdenek Pasak, who has served as Director since April 22, 2006, has not yet
signed his option agreement. However, the share acquisition price has already
been fixed, and governs the potential gain/loss. He will sign his option
agreement under the new rules, according to which he will be entitled to
exercise one-third of his options no earlier than one year after the execution
of the option agreement, and the remaining two-thirds after subsequent years in
office.
The option plan was introduced in CEZ in 2001, when none of the current
Directors were serving in the company. The option is a standard financial
instrument affording the holder the right to purchase shares in the future for a
pre-determined price. Any investor may purchase such option. Under the option
agreement, CEZ's Directors acquire the right to purchase shares for a price
equal to the average share price before the appointment date. The aim of this
incentive plan is to hold the management's interest in the appreciation of the
value of the company for the shareholders. In the case of CEZ, the Czech
Republic, as the principal shareholder, will earn CZK 290 per each crown of gain
for the company's management (Board of Directors and Executive Committee
Members).
BACKGROUND ON CEZ'S OPTION PLAN
- The option plan is a standard management incentive tool that
integrates management interests with those of the shareholders. For
each crown earned on the option plan by the entire management of the
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CEZ Group and the participants in the plan, the Czech Republic as the
majority owner will earn more than CZK 290 (net of tax revenues).
- CEZ's option plan was authorized by the General Meeting of CEZ in
2001. None of the current Directors was involved in the plan at that
time.
- Information on the option plan was made public at the time of its
approval in 2001.
- Until the beginning of 2004, the price of CEZ's shares had stagnated
and the option plan had not brought any significant benefits to is
beneficiaries.
- Since spring 2004, after the introduction of the new management of
CEZ, the price of CEZ's shares has been growing consistently,
resulting in an increase, not only in the shareholders' profits, but
also in potential gains from the management option plan.
OPTION PLAN MECHANISM:
Parties involved: Board of Directors
Members of CEZ's Executive Committee
(eligibility for signing an option agreement arises 3 months
after the appointment date).
What is involved: The option to purchase the company's shares for a price
prevailing before the appointment date
(The option of a standard financial product - the advantage
of the participants in the plan is that they are not
required to pay for the option and may choose the time for
its exercise).
Rules:
- Participation in the option plan is a one-time step (the value of the
potential gain may not be added to the annual salary).
- The value of the option depends on the value of the shares (it
fluctuates over time) - accordingly, the gain cannot be determined
exactly until the time of exercise of the option and the sale of the
shares.
- The participant in the plan must buy the shares using their own funds,
and the difference between the acquisition value and the current value
is subject to income tax - the net gain is therefore substantially
lower.
OPTION PLAN RESULTS:
The option plan of CEZ surely has been conducive to an appreciation of the state
interest in the company by more than 200 billion crowns over the last two years,
and hence to building a reserve for the future pension reform.
Thanks to efficient management, cost cutting, and prudent investments abroad,
the value of CEZ has been increasing substantially more rapidly than that of the
other power utilities, despite the fact that electricity prices in the Czech
Republic have been increasing more slowly than those in all of the neighboring
countries.
Electricity price growth CEZ or EON share price growth
in the 2004-2006 period in the 2004-2006 period
-------------------------- -------------------------------
CZK % CZK, or EUR %
- --------------- ------------ ----------- ------------ ----------------
Czech Republic 228 28.0% 308 301%
Germany 390 47.9% 36.2 69%
* using the exchange rate of 28.30 Kc/EUR
In the case of Germany, the table above refers to the price at the beginning of
September 2005 (the time when a CEZ auction was held). Since September 2005,
however, the German prices (annual forward) have increased by a further 25% (or,
as the case may be, by 37% when compared with the 2004 base).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CEZ, a. s.
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(Registrant)
Date: June 5, 2006
By: /s/ Libuse Latalova
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Libuse Latalova
Head of Finance Administration