PHOENIX (PHO): Photon Energy comments on draft changes to the Renewable Energy Act in the Czech Republic - raport 59

On 15 September 2010 the Czech government approved the draft changes to the Act 180/2005 on Renewable Energy as prepared by the Ministry of Industry and Trade. This draft, which still needs to pass the entire legislative process, foresees fundamental limitations to photovoltaic plants. As of 1 March 2011 the feed-in-tariff shall no longer apply to photovoltaic plants other than those installed on the roofs or facades of buildings with an installed capacity of up to 30 KWp. The feed-in-tariff for photovoltaic plants connected in 2011 is expected to be announced by the Energy Regulator by the end of November 2010. While there is no official communication by any official authority the consensus expectation in the industry is that the feed-in-tariff for Greenfield installations for the first two months of 2011 will be between CZK 5.50 and 6.00 per KWh while the rooftop tariff is expected in the range from CZK 7.00 to 8.50 per KWh compared to the feed-in-tariff for 2010 of CZK 12.15 per KWh. Both these rates are approximately in line with the proposed feed-in-tariffs for 2011 in Germany and based on expected investment costs in 2011 would provide project returns of approximately 8% per annum.

If enacted, these changes to the Renewable Energy Act would fundamentally alter the photovoltaic market in the Czech Republic as it would become a market with a potentially large number of small rooftop installations and thus exploit the key advantage of photovoltaics which is the location of the production capacity next to the point of consumption. Photon Energy has been betting on the rooftop market since its formation in 2008 through the introduction of the Roof Exchange concept to the Czech market through its fully-owned subsidiary Střešní burza s.r.o. A crucial precondition for the continued development of the rooftop photovoltaic market in the Czech Republic in 2011 will be the resumption of the granting of grid connection for rooftop projects up to 30 KWp which in violation of the law has been discontinued in early 2010 by the regional distributors ČEZ, E.ON and PRE due to concerns by the national backbone grid operator ČEPS about the stability of the power grid in the Czech Republic. As small installations no larger than 30 KWp cannot possibly impact the stability of the grid the consensus expectation in the industry is that the regional distributors will resume the issuance of new grid connections by the end of 2010.

Photon Energy intends to respond to this development by:

1. An update of its strategy and business model with a view of providing one-stop solutions to households, businesses and investors in the Czech rooftop market with its 30 KWp limit. Scale, speed and efficiency will be the critical success factors in this market environment.

2. An increased focus on the best possible exploitation of the Slovak market in 2011 where the company is in the process of building photovoltaic plants with a total installed capacity of 5 MWp in 2010 and which has a total potential of up to 300 MWp in 2011.

3. An accelerated expansion into the German and Italian markets which are the two largest photovoltaic markets worldwide.

The management of Photon Energy reiterates its view that given the growing number of countries introducing feed-in-tariffs for photovoltaic plants and the continued decline in investment cost the production of energy from solar power is quickly turning into a global opportunity. Management devotes significant time and resources to the preparation of the company to become a successful player internationally by projecting its proven integrated business model, its skilled and experienced work force and its professional reputation into new markets.

Legal basis: Article 3 section 2 point 15 of Exhibit 3 of the Alternative Trading System Rules, as adopted by Resolution Nr. 147/2007 of the Warsaw Stock Exchange Management Board, dated 1 March 2007.

Osoby reprezentujące spółkę:
Michal Gärtner - Chairman of the Board of Directors
Georg Hotar - Vice-chairman of the Board of Directors