Dalekov ovod od Group Future strategy, restructuring process and - - PowerPoint PPT Presentation

SLIDE 1

Dalekov

• vod
• d Group

Future strategy, restructuring process and financing

SLIDE 2

Diclamer

2

These materials and the oral presentation do not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any

• ffer to purchase or subscribe for, any securities of the Dalekovod Plc. (“Company”) nor should they or any part of them or the fact of their

distribution form the basis of, or be relied on in connection with, any contract or investment decision in relation thereto. This presentation includes certain forward-looking statements. Actual results could differ materially from those included in the forward- looking statements due to various risks and uncertainties, including but not limited to changes in business, economic and competitive conditions, regulatory reforms, foreign exchange rate fluctuations, uncertainties in litigation or investigative proceedings and availability of

• financing. These forward-looking statements represent the Company's expectations or beliefs concerning future events and involve known and

unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. None of the Company, their advisers or any other person accepts any liability for any loss howsoever arising, directly or indirectly, from the issue of this document or its contents. Additional detailed information concerning important factors that could cause actual results to differ materially is available in the Group's Annual Report. The third party information contained herein has been obtained from sources believed by the Company to be reliable. Whilst all reasonable care has been taken to ensure that the facts stated herein are complete and accurate and that the opinions and expectations contained herein are fair and reasonable, no representation or warranty, expressed or implied, is made by the Group or its advisors, with respect to the completeness or accuracy of any information and opinions contained herein. These materials include non-IFRS measures, such as EBITDA. The Company believes that such measures serve as an additional indicators of the Group's operating performance. However such measures are not replacements for measures defined by and required under IFRS. In addition, some key performance indicators utilized by the Company may be calculated differently by other companies operating in the sector. Therefore the non-IFRS measures and key performance indicators used in these materials may not be directly comparable to those of the Group's competitors. This document may not be distributed and may not be reproduced in any manner whatsoever any distribution or reproduction of the attached document in whole or in part is unauthorized.

SLIDE 3

Table of Contents

• Introducing the Dalekovod Group
• Business Performance in 2010
• Restructuring Process and results for Q1/2011
• Future outlook
• Appendix

SLIDE 4

An overview of the Dalekovod Group

• Dalekovod is vertically integrated company combining engineering, design, manufacturing

and construction services in the following areas:

• Power transmission and distribution projects, esp. transmission lines ranging from 0.4 kV to 1000 kV
• Substations of all types and voltage levels up to 500 kV
• Underground and underwater cables up to 220 kV
• Telecommunication facilities for all types of networks and antennas
• Production of suspension and jointing equipment for all types of transmission lines and substations

from 0.4 kV to 1000 kV

• Manufacturing and installation of all metal segments for roadways, esp. for road lighting, guard rails

and traffic signalization, tunnel lights and traffic management

• Electrification of railway and tram lines in cities
• Infrastructure projects in the energy , rail and road transportation and telecommunication sectors
• ffering : Engineering, Design, Production and Construction services
• Insisting on world-renowned quality and environment protection standards along with continuous

development of new products Dalekovod has established its basic goal - continuous improvement of customers' satisfaction

• The company currently employs 1.994 people of which 600 work internationally
• In 2009 the company entered into new line of business – renewable energy
• Providing complete services to infrastructure sectors in electric power industry, road and railway

traffic, telecommunications, gas pipelines, construction industry and renewable energy industry.

• Becoming a leading company in its line of business in Europe!

Dalekovod Group Mission Vision

4

SLIDE 5

Legal Structure of the Dalekovod Group

Dalekovod d.d. Albania Dalekovod Adria Ltd. Dalekovod Ulaganja Ltd. Norway Kazakhstan Macedonia Montenegro Ukraine Germany Dalekovod Cinčaonica Ltd. 100% Dalekovod Projekt Ltd. Dalekovod Professio Ltd. Dalekovod EMU Ltd. 100% DALCOM GmbH, Freilassing Dalekovod Namibia Dalekovod TKS Ltd. Doboj 92.9% Cindal Ltd. Doboj 95.1% Unidal Ltd. Vinkovci 49.0% Dalekovod TIM Inc, Topusko 95.7%

Sweden

100% 100% 100% 100%

Anti-corrosion protection

• f steel by galvanizing

Manufacturing of TL structures and other structures Galvanizing, anti- corrosion protection, Bosnia and Herzegovina Manufacturing of hot forgings (transmission lines, railway tracks, etc.) Works of expanded metal made of steel, copper, aluminum Production, sales and services related to electricity meters SPV for investments in TLM (factory for aluminium processing) SPV for investments in the Sky Office Project (50% project ownership)

Design of transmission lines, substations, etc. Holding company for investments into renewable energy sources

Dalekovod Ukraine Ltd. Dalekovod Greenland Ltd. Dalekovod Polska SA

International Croatia

Dalekovod Kosovo Dalekovod Libya

Dalekovod EKO 100% Velika Popina Ltd. 50% OIE Macedonia 50% EKO

• Ltd. 50%

Dalekovod Ljubljana Ltd.

Parent company Production companies SPV’s Project companies Construction companies Subsidiaries &

• Rep. offices

Dalekovod Nigeria Dalekovod Mostar Ltd. 5 Sportski grad TPN Ltd.

Consortium with Konstuktor and IGH (large domestic construction companies) for investment in Spaladium Arena (Split, Croatia)

15%

SLIDE 6

History of the Dalekovod Group

1949 ► Foundation of Dalekovod 1962 ► 1st International reference – Transmission Line in Togo 1993 ► Transformed into the joint stock company 2005/2006 ► Key international reference in Iceland (230 km, 420 kV TL) as entrance point to Scandinavian markets (esp. Norway) 2004 ► First International acquisition of TKS Doboj, manufacturing plant for TL structures 2001 ► Listing on Zagreb Stock Exchange (2nd quotation, mandatory by the law) 2010 ► First renewable energy project completed 2000/2001 ► Introduction of the ESOP Program (60% of employees participated) 2009 ► Listing on the 1st quotation of ZSE 2009 ► First investments into renewable energy

• Managed to sign EUR 125,6 mn of international deals over

the past 7 months

• Continuously generating a higher share of revenues from

foreign markets

• Begun

corporate restructuring in

• rder

to

• ptimize
• perations and sustain competitive advantage
• Invested in renewable energy sources in order to lower the

riskiness of the business and high reliance on the tendering process Recent key developments

50 100 150 200 250 300 350 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Revenues 2010: EUR 226,8 mn 2009 ► Key international reference in Kazakhstan as an entry point to CIS markets

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SLIDE 7

International Presence and Recent Key References

Kazakhstan – KEGOC - 385,5 km transmission line TL 500 kV Island – Lansnet - 230 km transmission line 420 kV

Projects Product orders (metal structures, suspension and jointing equipment) and other orders

EUR 80.5 mn EUR 24.5 mn

Norway- STATNETT – 103 km transmission line TL 420 kV

EUR 21.9 mn

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SLIDE 8

37 37 37 37 23 26 21 12 62% 70% 56% 32% 0% 10% 20% 30% 40% 50% 60% 70% 80% 5 10 15 20 25 30 35 40 45 2007 2008 2009 2010 Production capacity Output Capacity Utilization

Production Facilities

Metal structures

• The company owns four production facilities and has one JV (Unidal)

with large number of different cataloguing codes:

• Metal structures - Production of lattice and other steel

structures (TL towers, masts and lighting poles, road equipment, railway equipment, halls, telecommunication etc.)

• Suspension and jointing equipment
• After completion of CINDAL plant (Bosnia and Herzegovina), company’s

capacity for galvanizing services will significantly increase

• The company plans to modernize targeted production segments and

position itself as a niche player to ensure and increase product competitiveness

• Company considers JV’s in other segments of production
• Company participates in 9,2 MW wind farm through a JV

Location of production facilities Suspension and jointing equipment

* Galvanization plant capacities and hot forgings capacities are not included

Key Highlights

in 000 tons in 000 tons

Dugo Selo (Galvanization plant) TKS Doboj (Metal structures) UNIDAL (Forged steel factory, JV with Slovenian UNIOR) TIM TOPUSKO (Expended metal factory) Factory Velika Gorica (metal structures, suspension and jointing equipment)

4,6 4,6 4,6 4,6 3,7 3,3 3,4 2,6 80% 73% 74% 56% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0 2007 2008 2009 2010 Production capacity Output Capacity Utilization

ZD6 (9,2 MW WPP, JV)

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SLIDE 9

Management Team

Key personnel

Branimir Alujević, B.Sc.E.E. Director of Engineering Business Unit Zdenko Milas, M.Sc.Econ Director of Production Business Unit Krešimir Anušić, B.Sc.E.E. Director of Construction Business Unit Damir Skansi, M.Sc.Econ MB Assistant President for strategy and corporate management, Director of Business Process Support Unit Jurica Prižmić, M.Sc.Econ Director of Strategic development Viktor Horvatinović, B.Sc.Econ Finance Director/Head of Accounting

Organizacijska struktura

Management Board

mr.sc. Luka Miličić, M.E. President of the Management board Krešimir Kraljevć, B.E. Deputy of CEO and Member of Management Board Tomislav Belamarić, B.E. Member of the Board

Construction Business Unit Headcount: 610 Business Process Support Headcount : 158 Engineering Business Unit Headcount : 184 Production Business Unit Headcount : 459 Design Headcount : 98

Engineering and Construction

Headcount : 21 Production Headcount: 472

Other companies within the Dalekovod Group Dalekovod Plc.

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SLIDE 10

SWOT Analysis

WEAKNESSES

• organization burdened with fixed costs inherited from times

when company predominantly operated on smaller markets with diverse products and services

• expensive access to strategic raw materials and products
• large concentration of the customers and historical large

dependence on domestic market

• due to expensive products and labor tendering is profitable

with integral proposition (design-production-assembly) only in Scandinavia, WE and Croatia

• dislocation of production

OPPORTUNITIES

• new investment cycles in energy, road and rail infrastructure in

Europe –need to renovate and increase capacity of existing power grids + development of completely new grid network

• core region of the company (SEE) requires significant

investments in energy infrastructure (due to envisaged growth in electricity consumption per capita) on the path to EU (convergence story)

• streamlining operations and divesting non-core operations in
• rder to lower fixed costs and free up the B/S
• investments in renewable energy sources

THREATS

• further reduction of infrastructure investments in company’s

core market (Croatia)

• difficult and expensive access to financial resources, liquidity

problems in the sector in Croatia

• foreign competition that uses export subsidies and incentives

to compete on the Croatian market

• domestic “cheaper” competition which operates in a “grey

economy” without paying taxes STRENGHTS

• references in various business programs which serve as a key

competitive advantages in project tendering

• managed to compete in most demanding worldwide tenders

(such as Norway, Iceland, EBRD sponsored in CIS, CEE) in terms of references, knowledge, quality, deadlines and financial strength

• ability to implement “turnkey” projects - synergy of vertical

integration (own development, engineering, manufacturing and assembly)

• knowledge and experience of employees

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SLIDE 11

Strategy of the Dalekovod Group

Generating growth on international markets

• Group’s strategy has become focused on further internalization of its businesses operations with the plan to generate about

80% of total revenue in the foreign markets

• In 2010-2013 period the Group plans to achieve revenue CAGR of at least 15%
• Primary focus is set on the countries of the region, Scandinavia, CIS and possibly EU

Increasing profitability

• Optimizing the unit productions cost, primarily by reducing the number of employees (around 300 employees - 15% of total

labor force) and abandoning low profitable lines in order to ensure competitiveness of its products and services in the forthcoming period

• Improving W/C management

Deleveraging and FCF generation

• With strong focus on its core business, the Company has taken decisive action to divest all of its non-core assets
• Proceeds from the disposal will be used for deleveraging and for investing in new projects (renewable energy) which will

significantly improve Group’s FCF generation

Improving the business model

• Company has recognized a renewable energy sector as a one where it possesses key competences and it intends to become

a regional leader in this line of business (wind power plants, biomass, thermal water, etc.) through strategic partnerships or by its own development

• The company shall invest funds in projects that ensure stable and continuous FCF, primarily by relying on investments in

renewable energy projects in the Region, thus reducing the riskiness of the business (less dependent on tendering)

• The Group is aiming to generate about 15% of Group EBIDTA from continuous operations by 2013 and around 25% by 2015

Access to international capital market and widening the investor base

• The Company believes it provides an interesting play for investments in energy infrastructure sector in the SEE Region, CIS,

and WE and thus intends to utilize both domestic and international capital market in order to broaden its investors base and raise a new capital in the next two years

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SLIDE 12

Table of Contents

• Introducing the Dalekovod Group
• Business Performance in 2010
• Restructuring Process and results for Q1/2011
• Future outlook
• Appendix

SLIDE 13

Income statement (in EUR mn) 2007 2008

as % of sales

2009

as % of sales

2010

as % of sales

Total revenues 254,1 319,7

100,0%

334,0

100,0%

226,6

100,0%

Sales revenues 252,0 317,0

99,2%

330,0

98,8%

213,6

94,2%

Other revenues 2,1 2,7

0,8%

4,0

1,2%

13,1

5,8%

Material expenses and other direct costs 164,4 259,4

81,1%

205,7

61,6%

135,0

59,6%

Staff costs 49,3 56,1

17,6%

52,3

15,7%

41,2

18,2%

Other expenses 20,0 24,5

7,7%

25,4

7,6%

19,5

8,6%

Change in work in progress and finished goods

• 2,1
• 49,4
• 15,5%

17,3

5,2%

14,5

6,4%

EBITDA 22,5 29,1

9,1%

33,2

9,9%

16,5

7,3% 0,0%

Depreciation 5,7 6,9

2,2%

8,1

2,4%

7,7

3,4%

Operating profit (EBIT) 16,7 22,2

6,9%

25,2

7,5%

8,8

3,9%

Financial revenues 0,6 0,2

0,1%

0,1

0,0%

0,3

0,1%

Financial expense 3,4 7,0

2,2%

10,1

3,0%

8,5

3,7%

Profit before tax 13,9 15,3

4,8%

15,1

4,5%

0,6

0,3%

Tax 3,0 3,3

1,0%

3,2

1,0%

0,5

0,2%

Net Income 10,9 12,0

3,7%

11,9

3,6%

0,1

0,1%

• In 2010 the Group achieved revenues of EUR 226,6 mn (32 % drop and 2% greater than planned). The Company managed to increase its

revenue share generated in foreign markets according to the plan to 33 % (28% in 2009)

• Although the top line fared better than planned, the bottom line was hit severely primarily due to:
• negative macro-economic trends (low number of contracts in Croatia) and liquidity shocks (extending the collection period and

increase of input prices)

• acceptance and realization of projects with low profit margins
• implementation of a more conservative cost accounting policies
• significant underutilization of Company’s production capacities along with and higher prices of material and other inputs
• In order to reduce the fixed costs and accommodate to market situation company lowered cost of labor (from EUR 52mn to EUR 41mn,

without pursuing any lay-offs) as well as managed to decrease marginally direct costs in 2010

• Since this off-set was not enough to protect profit margins, the EBITDA declined from EUR 33,2 mn in 2009 to EUR 16,5 mn in 2010 and

thus caused Management to further engage in significant restructuring processes of the Group

2010 Business Results

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Balance sheet (in EUR mn) 2007 2008 2009 2010 Long term assets 77,9 94,3 110,7 123,3 Tangible assets 68,1 80,9 97,0 97,0 Intangible assets 3,1 3,0 3,1 3,6 Financial assets 3,8 7,0 8,5 16,6 LT receivables 3,0 3,4 2,0 6,1 Short term assets 173,9 269,3 208,6 204,4 Inventory 36,4 101,8 66,1 48,0 Accounts receivable 112,0 151,3 135,8 142,9 Financial assets 0,1 0,1 0,1 0,1 Cash and equivalents 25,4 16,1 6,7 13,5 Total Assets 251,8 363,6 319,3 327,7 Shareholders Equity 75,3 82,2 94,0 95,3 Long term liabilities 27,5 37,2 36,2 58,9 LT financial liabilities 26,7 25,7 25,3 57,8 Long term provisions 0,9 0,9 1,1 1,0 Deffered revenues 0,0 10,6 9,7 0,0 Short term liabilities 149,0 244,1 189,1 173,5 Accounts and other payables 102,4 140,7 115,4 90,7 ST Financial liabilities 46,4 103,0 73,3 82,7 Reserves and tax payables 0,2 0,5 0,4 0,1 Total liabilities and SE 251,8 363,6 319,3 327,7

SLIDE 14

50 100 150 200 250 300 350 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Croatia International

Country Investor Project description Contracted (EUR) Norway STATNETT Construction of 90 km 420 kV transmission lines Sima Samnanger 23,4 mn Greenland Grenlandska vlada / ISTAK Ilulissat hydroelectric p. - 45 km 60 kV TL 6,3 mn Ukraine NEK-UKRENERGO TL 330 kV Dniester - Bar 10,8 mn Ukraine NEK-UKRENERGO expansion and modernization of 330kv substation Bar 10.3 mn Ukraine NEK-UKRENERGO 135 km 750 kV TL Rivne- Kiev 59,2 mn Foreign markets Delivery of suspension, jointing and other equipment on different international markets 8,6 mn Norway STATNETT delivery of steel tower construction for construction of TL Sima Samnanger 7,0 mn* TOTAL

125,6 mn

• The Company continued further internalization of its business operations thus the share of foreign revenues in 2010 increased to 33%

(28% in 2009) with a tendency of further growth in the forthcoming periods

• Despite the aggravated business operations, the Dalekovod Group managed over the past 7-month period to conclude EUR 125.6 mn

worth contracts in the foreign markets which will be realized in 2011 and 2012

• The Group strategy is to further focus on internalization of its business operations, esp. Norway and Sweden, countries which are planning

to invest over € 10 billion in the energy infrastructure in the next 5-year period, as well as Ukraine and Kazakhstan

Internationalization of Business Operations

Total revenue (in EUR million) Revenue from international markets Contracted projects for 2011/2012 Completed or almost completed projects in 2010

* The exact value of the contract will know when all construction documentation and BOM will be designed in details and approved

Country Investor Project description Contracted (EUR) Albania/ Montegero Operatori Sistemit Transmetimit (OST) / CRNOGORSKI ELEKTROPRENOSNI SISTEM A.D. 156 km TL 400 kV Tirana Podgorica 41,9 mn Norway STATNETT 30 km TL 420 kV Sauda - Liastolen (70% completed) 12,0 mn Sweden VATTENFALL SERVICES NORDIC AB Construction of 500 kV transmission line Dannebo Finnbole 2,1 mn Macedonia TE-TO AD-SKOPLJE Construction of transmission lines TE-TO Skopje - TL 110 kV Skopje1 - Skopje2 5,8 mn Bosnia and Herzegovina J.P. ELEKTROPRIVREDA HZ HB D.D. ECSEE ALP3-BiH Schedule No.2 2,6 mn Slovenia Elektro-Slovenija d.o.o. Different projects (TL 400 kV Divača-Redipuglia,TL reconstruction, delivery of suspension and jointing equipment ) 2,6 mn Slovenia Elektro-Slovenija d.o.o. instalation with the delivery of safe climbing equipment (70% 3,6 mn Other larger foreign projects in progress Montenegro CGES AD Podgorica EPCG AD Nikšid Enlargement of substation Ribarevina, construction od substation Podgorica 5, 12 km 110kV TL, and different other works 7,0 mn Montenegro CGES AD Podgorica Substation Mojkovac, Substation Andrijevica - enlargement, constraction, connection to the network, project docummentation 1,7 mn Macedonia AD MEPSO Substation 400/110 kV Bitola 2 1,6 mn Bosnia and Herzegovina J.P. ELEKTROPRIVREDA HZ HB D.D. An electronic electricity meters 9,9 mn Bosnia and Herzegovina J.P. ELEKTROPRIVREDA HZ HB D.D. Suspension and medium voltage equipment 6,8 mn

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9% 22% 25% 28% 33% 0% 5% 10% 15% 20% 25% 30% 35% 20 40 60 80 100 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

SLIDE 15

Profitability Margins

EBITDA and EBITDA margin EBIT and EBIT margin Net Profit and Net Profit margin Return on Equity (ROE) and Capital Employed (ROCE)

15

4% 4% 4% 0% 0% 3% 5% 10 20 30 40 50 60 70 80 90 100 2007 2008 2009 2010 9% 9% 10% 7% 0% 2% 4% 6% 8% 10% 12% 20 40 60 80 100 120 140 160 180 200 220 240 260 2007 2008 2009 2010 7% 7% 8% 4% 0% 2% 4% 6% 8% 10% 12% 20 40 60 80 100 120 140 160 180 200 2007 2008 2009 2010

0% 3% 6% 9% 12% 15% 18% 21% 2007 2008 2009 2010

ROE ROCE

SLIDE 16

Days payable Days receivable Inventory days

• Contraction of demand on the domestic market had an adverse impact on the liquidity of the Group and due to the long

receivable collection period of 228 days the Company was forced to finance its working capital through ST debt

• The Company managed to transfer a portion of the burden onto its suppliers, whose payment period increased compared to

2009 from 148 to 169 days. However, prolongation of the days payable had an negative impact on input prices of raw material which caused downward pressures on operating margins

• By the end of 2010 the net working capital amounted to EUR 31 mn equaling to 15% of the total current assets, which makes

the Company vulnerable to inventory accumulation risks and further prolongation of days receivable

• According to the long-term Company’s Plan, the share of net working capital shall be increased to 30 percent in order to

decrease the liquidity risks caused by specificity of the business, including, among others: long-term projects, long payment periods and business dependent on tendering processes

Liquidity and Working Capital

Structure of due account payables Structure of due account receivables

34% 8% 24% 19% 15% 0-60 days 60-90 days 90-180 days 180-360 days more than 360 40% 30% 20% 5% 5% 0-60 days 60-90 days 90-180 days 180-360 days more than 360

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161 175 148 233 171 196 148 169 50 100 150 200 250 300 350 2007 2008 2009 2010

Working capital analysis

61 138 85 89

SLIDE 17

Indebtedness

• Total Company’s net debt as of 31 Dec 2010 amounted to EUR 127,1 mn which represents an increase of 38,3% compared to the same

period last year. The main reasons for Groups indebtedness include:

• Project financing of the Sky Office (development of the real estate project in Zagreb)
• W/C financing
• CAPEX financing (wind power plants, TKS Doboj, Cindal)
• The company recently utilized anti crises measures provided by the Government and restructured part of its ST debt with LT loan through

CBRD in the amount of EUR 32 mn (lengthening of debt duration and halving the financing costs)

Total indebtedness Financial expenses Long-term debt and leasing Debt on the Sky office project is of a temporary nature since the company plans to divest the project by YE 2012. The company entered into this project in 2007 with secured financing provided by Unicredit Due to unfavorable financing conditions in Croatia in 2009 company relied on ST financing and waited on the improvement of market conditions in order to arrange more favorable LT financing. The growth of LT

• vs. ST debt ratio started in 2010 and will further

continue in 2011 Although company’s indebtedness increased by 43% compared to 2009, the company managed to increase its LT vs. ST debt ratio from 26:74 in 2009 to 41:59 in 2010. With anticipated more favorable financing condition the company plans to further improve the above- mentioned ratio in order to prolong the debt maturity profile and thus reduce the refinancing risk

Project financing

• f Sky Office

EUR 16,1 mn

LT debt EUR 46,3 mn Net ST debt EUR 64,7 mn (Debt 78,2mn) (Cash 13,5 mn) Net debt: 127,1 mn

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46 103 73 83 27 26 25 58 20 40 60 80 100 120 140 160 2007 2008 2009 2010

Short term debt Long term debt

3,4 7,0 10,1 8,5 2 4 6 8 10 12 2007 2008 2009 2010

SLIDE 18

Dalekovod Share Price Development

DLKV –R-A Dalekovod Share price Price (20/05/11) EUR 33.1 52 week high EUR 52.7 52 week low EUR 29.3 Volatility 60 days 28.9% Analyst consensus buy 1 under review 2 Capital structure Number of shares 2.293.812 Market capitalization EUR 74.4 mn Freefloat (%) 85.07% Freefloat (shares) 1.95 mn Liquidity Average daily volume 12 months EUR 138 k 6 months EUR 164 k 3 months EUR 76 k Daily volume as %

• f market capitalization

0.22% Daily trade as %

• f free float

0.26% Freefloat turnover 387 days

DLKV vs. . CROBEX DLKV-R-A share information DLKV price and trade volume

• Dalekovod share price underperformed the market in recent three year period due to the perception that Company's business is primarily

dependent on the Croatian construction sector which was severely hit by the crisis

• Dalekovod share is one of the most liquid on Zagreb Stock Exchange

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500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 4.500 5.000 20 40 60 80 100 120 140 160 180

20.05.08. 20.05.09. 20.05.10. 20.05.11. Turnover (000 EUR) Share price (EUR)

• 85%
• 65%
• 45%
• 25%
• 5%

15%

20-May-08 20-May-09 20-May-10 20-May-11 Dalekovod CROBEX

SLIDE 19

Table of Contents

• Introducing the Dalekovod Group
• Business Performance in 2010
• Restructuring Process and results for Q1/2011
• Future outlook
• Appendix

SLIDE 20

Restructuring of the Group and Capital Increase

Balance sheet strengthening through reduction of ST liabilities Investments in projects with stable and continuous CF in order to reduce dependence on tendering Increasing the productivity of business units and reducing fixed costs 30% of proceeds 40% of proceeds 30% of proceeds

2 3 1

In accordance with the Acts of Association the Management Board is considering a capital increase by issuing up to 25% of new shares with the exclusion of pre-emptive rights of the existing shareholders. Use the proceeds from the capitalization shall be following:

• As the company continues its focus on international markets from which it constantly generates a larger share of revenues the

Management realized that the Dalekovod needs to undertake a process of corporate restructuring in order to prepare the company for more aggressive international expansion

• The company led by history of experience and references from the most challenging markets wants to use the forthcoming period to

strengthen its position on international level. The company is also committed to tap an international capital market in the medium term in

• rder to obtain a new investor base, enhance company profile and image, remove the perception on a Croatian construction company

and raise new funds for further business development and expansion

• In order to succeed in the abovementioned strategy the company and its Management are fully aware that the year 2011 needs to be

used for corporate restructuring in order to ensure long term stability and competitiveness

• The company realizes that future growth and profitable operations are subject to the following:

1) Reorganization of the Group and its business processes 2) Optimization of fixed costs 3) Strategic focus on core activities and disposal of non core assets 4) Reduction of short term indebtedness and optimization of working capital 5) Investments in projects with stable and continuous FCF generation (renewable energy)

20

SLIDE 21

Reorganization of the Group and Business Processes

• Dalekovod Group is currently made up of four business units: Engineering, Production, Construction and Business Process Support
• The current organizational problems are primarily reflected in the following:
• Organization primarily oriented towards the domestic market,
• Inadequate number of employees in particular departments/divisions
• Undefined areas of responsibility of individual business units
• Underdeveloped reporting system
• Inadequate planning and budgeting of individual business units and projects
• High fixed costs for competing in international markets
• Employment structure for the increased volume of business in foreign markets
• Lack of competitiveness in foreign markets for a satisfactory volume of business in the Production business unit
• With the goal to improve business processes and ensure future profitability and viability of each project the Company has decided to put

emphasis on the engineering and production business units as profit centers

• By this measure the Engineering Business Unit shall only focus on tendering, contracting and project management and this will enable

greater orientation to targeted international markets and allow greater flexibility to adapt to changing market conditions

• Production will be removed from the Holding company and function as an independent Ltd. and thus both offer its products to Engineering

and Construction business unit and operate under market principles targeting all interested third party companies

Due date: end of 2011

Board

Production Engineering BPS Construction

Current structure New structure Dalekovod Plc.

Production Design

Other

Board

BPS Engineering and Construction

Dalekovod d.d.

Design

Other

Production Production becoming an independent Ltd.

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SLIDE 22

Optimizing Business Processes

Engineering

• Engineering business unit will be focused on managing predetermined market segments, offering, contracting and realization
• f projects, all in order to achieve higher performance in specific markets as well as provide greater flexibility and enable

easier adaptation to the changing market conditions. Through the unification of the abovementioned processes Dalekovod will ensure better cost control an profitability of each project

• The most qualified Project Managers from the Construction business unit will be transferred to the Engineering business unit

and will be responsible for managing specific business programs and/or specific markets. Further, project Managers will be responsible for the profitability of their delegated program or market

• Each project manager will be responsible for the entire cost structure of the project and have predefined profit margins.

Project Managers will be incentivized based on performance which will be measured by both revenue generation and profitability of the contracted project

Production

• Production business unit will be separated from the Dalekovod Plc. and function independently as a new Ltd. (in one of the

existing Ltd.’s, Dalekovod Cinčaonica Ltd. or Tim Topusko Ltd.)

• The newly formed Ltd. will optimize the product assortment and strictly focus on core products and shut down all

unprofitable programs

• Employees from the current Production Business Unit within Dalekovod Plc. will be relocated into the new Ltd. Management
• f the new Ltd. will employ and transfer an optimal number of workers from the Production business unit into the newly

formed Ltd. while all remaining will workers will be declared redundant

• Preparation for separating the new Ltd. are currently underway and the new structure will formally be implemented as soon

as all necessary preconditions are satisfied, including, among others, the finalization of the construction hall and relocation of equipment

Changes within business units after the implementation of the new organizational structures:

Due date: mid 2012

22

SLIDE 23

in EUR # of employees Headcount reduction Average gross salary (yearly) Annual savings

Savings on salaries 1.421 307 20.270 6.222.973 Staff transport savings 92.930 Other employment benefits 107.865 Total savings 6.423.768

• Due to business contraction on the domestic market and the planned reorganization of the Group, in which the main driver of revenue

growth and profitability will come from the Engineering division, the company is determined in reducing fixed costs primarily through staff

• ptimization and streamlining of the organizational structure
• Along with the strategy of further internalization and larger share of revenues outside the domestic market the company believes that an
• ptimal number of employees in Dalekovod Plc. should not surpass 1.100 which in turn represent a necessary headcount reduction by

22%. (307 employees)

• In the process of reorganization and headcount reduction, employees which are declared redundant will be offered a simulative severance

pay with some having necessary prerequisites for early retirement

Workforce Optimization and Streamlining Operations

The company plans to offer severance pay in the amount of yearly gross salary which will represent a one off expense of EUR 6.2 million in 2011 Yearly savings due to headcount reduction will amount to EUR 6.4 million while savings in 2011 will be on the level of HRK 3.2 million

Savings due to headcount reduction One off severance pay expanses

Due date: mid 2011

• Dalekovod Group currently employs 1.994 people and will in the abovementioned process of staff optimization further revise employment

levels in all associated companies within the Dalekovod Group

23

in EUR # of employees Headcount reduction Severance pay One-off expense

Dalekovod Plc. 300 20.270 6.081.081 Dalekovod Plc. (early retirement) 7 13.514 94.595 TOTAL 1.421 307 20.116 6.175.676 1.421

SLIDE 24

Sale of Non-Core Assets and Strategic Partnerships

• With a view of focusing on the core businesses of the Group and improving the liquidity, Dalekovod is planning in the forthcoming period

to initiate the process of selling most of the Company’s non-core assets, including

Due date: end of 2013

* * **

24

• By divesting the above stated projects and forming JV’s in strategically important areas the Company will in the forthcoming 3-year period

release around EUR 63 million of employed capital (liabilities and capital), which will further be used for deleveraging and new CAPEX

Project name Project description Engaged capital as of 31.12.2010.

Project Sky office Sky Office project relates to construction of the larges office building in Zagreb (70,000 m2). The total investment value is EUR 98 million and Dalekovod has a 50% ownership in the project. Upon completion of the project the total capital employed by Dalekovod will reach EUR 50 million 27,1 Dalekovod TKS Doboj Dalekovod currently has a 92,9% ownership in TKS Doboj and intends to sell up to 50% of the company to a strategic

• partner. Plant capacity is 20.000 tons and the company produces transmission lines, lighting and antenna grids and

polygonal columns and various metal structures 2,7 TIM Topusko In 2007 Dalekovod completed an acquisition of 86,7 % stake in TIM Topusko (extended metal factory). The company is currently in the process of tendering for large international contracts but in case the company misses on contracting the stated projects Dalekovod will tend to divest TIM Topusko 4,9 Dalekovod Cindal Dalekovod has a 95% ownership of Cindal (galvanizing plant) and intends to sell up to 50% of the company to a strategic partner. Cindal is the largest galvanizing plant in the region with yearly capacity of over 24.000 tons 1,1 TPN Sportski grad Split Consortium with the leading Croatian construction companies (Konstruktor and IGH) for the development of Spladium Arena and associated facilities (Split, Croatia). Dalekovod has a 15% stake in the project 1,5 Dalekovod Adria SPV used for investment in the company TLM (Tvornica Lakih Metala) 4,4 Unidal d.o.o. Joint venture with Unior-Treče as of January 2005. The principal activity of the company is manufacturing of forget steel and Dalekovod intends to sell the remaining stake in the company (49%) 1,3 Velika Gorica Commercial real estate in Velika Gorica (near Zagreb). The property is currently in the manufacturing zone but the underlying location will soon obtain the license for commercial usage (planed to become an urban residence) 12,7 Other Investments in Questus PE fund, property and halls on island Korčula, property in Zablade and shares of Croatian companies 7,5 Total (in EUR mn)

63,3

* Amount for 50% shareholding ** Real estate valuation performed by ZANE - Zagreb nekretnine d.o.o. (February 2011.)

SLIDE 25

Divesting Non-Core Assets

• The construction project of the galvanizing plant Cindal includes completing the largest galvanizing plant in Bosnia

and Herzegovina, with a 13.0m x 2.5 m x 2.0 m bath. The reason behind the investment was to realize synergies with the existing factory DTKS a.d. and achieve the most competitive price of its products

• Total capacity of the galvanizing plant Cindal is 24,000 t/annually with
• 95% of the Company’s is owned by Dalekovod, while total investment amounts to EUR 10, 7 mn
• Due to the strategy of core focus on engineering and renewable energy businesses the Company decided to sell

up to 50% stake to a strategic partner (negotiations underway)

• The Sky Office Project includes the construction of a commercial real estate with a total of 70,000 m2 in Zagreb,

Croatia

• Sky Office will be the largest commercial real estate property in Zagreb and the total project value amounts to

EUR 98 mn

• Dalekovod has a 50% shareholding in the project
• The company decided to undertake this specific project due to the following:
• Freeing up the location of Žitnjak (current headquarters) for further development (valuable real estate at

Dalekovod’s current HQ location)

• Utilization of own production capacities (metal facades)
• Gaining a strong references in electrical and mechanical engineering as well as building automation
• Increase of commercial real estate value in the future (EU convergence)
• Upon completion of the project the Company is determined to sell its share in the Sky Office Project and already

started discussion with potential buyer

25

Dalekovod TKS Doboj /Cindal

Sky office Velika Gorica

• The Company owns valuable real estate in Velika Gorica (near Zagreb) with total area of 72.138 m2 (halls appx.

18.000 m2, offices appx. 3.500 m2) and is considering reallocation of the area

• According to the Urban Plan, the area can be used for development of industrial or commercial real estate

(attractive location next to Zagreb airport, rail station and highway A11 Zagreb-Sisak)

• The real estate value is EUR 12.7 million (valuation performed in February 2011 by ZANE real estate, member of

Unicredit Group)

SLIDE 26

Investments in 2011 - Wind power plant ZD2 and ZD 3 of 36 MW – Bruška

• From the raised proceeds the company plans to complete the construction of wind power plants ZD 2&3 with total capacity of 36 MW
• Dalekovod has a 50% ownership in the project while the total value of the investment is EUR 61 mn

Existing investment – Wind power plant ZD6 of 9.2 MW - Velika Popina

• During 2010 the Company completed its first renewable energy project by investing and constructing a wind power plant ZD6 with total

capacity of 9.2 MW

• The investment value totals EUR 15.8 mn and Dalekovod has a 50% ownership in the project

In order to generate 1/3 of Group EBITDA from continuous sources the Company plans to develop further 120 MW in wind PP by 2014 (subject to approvals and licenses) and capture cca. 30% of Croatian total wind power plant capacity The Company considers expanding wind power plan business to neighboring countries as soon as they provide regulatory prerequisites

in EUR million 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

ZD 2 i 3

Revenues 0,0 2,8 5,8 5,9 6,1 6,2 6,4 6,6 6,7 6,9 EBITDA 0,0 2,4 4,9 5,0 5,2 5,3 5,4 5,6 5,7 5,9 Net income 0,0 0,2 1,7 1,9 2,1 2,3 2,5 2,7 2,9 3,1

ZD 6

Revenues 1,4 1,5 1,5 1,5 1,6 1,6 1,7 1,7 1,7 1,8 EBITDA 1,2 1,2 1,2 1,3 1,3 1,3 1,3 1,4 1,4 1,5 Net income 0,3 0,4 0,4 0,5 0,5 0,6 0,6 0,7 0,7 0,8 Total revenues 1,4 4,3 7,3 7,5 7,7 7,8 8,0 8,2 8,5 8,7 EBITDA 1,2 3,6 6,1 6,3 6,5 6,6 6,8 7,0 7,1 7,3 EBITDA margin 81,3% 83,7% 84,2% 84,2% 84,3% 84,3% 84,3% 84,4% 84,4% 84,4% Net income 0,3 0,6 2,1 2,3 2,6 2,8 3,1 3,3 3,6 3,9 Net margin 21,8% 13,3% 28,8% 31,4% 33,8% 36,1% 38,4% 40,5% 42,6% 44,5%

Investments in Renewable Energy - Wind Power Plants

Income statement (50 % of wind power business) – expected IRR >15%

26

SLIDE 27

0,0 10,0 20,0 30,0 40,0 50,0 4Q/2010 1Q/2011

• 6,0
• 5,0
• 4,0
• 3,0
• 2,0
• 1,0

0,0 4Q/2010 1Q/2011

• 1,5
• 1,0
• 0,5

0,0 0,5 1,0 1,5 2,0 4Q/2010 1Q/2011

Fist results of restructuring effects and profitability growth In Q1 2011 Dalekovod intensified its restructuring efforts which resulted in first positive movements:

• Decreasing accounts payable by 8% and lowering levels of subcontracting resulted in

reduction of material costs as % of total revenue from 80,3% to 67,3% (Q4/2010 vs. Q1/2011)

• Implemented cost savings resulted in reduction of other expenses from 11,2% to 10,0%

(Q4/2010 vs. Q1/2011 )

• Contracted EUR 32 million LT arrangement with Croatian Bank for Reconstruction and

Development with very favorable financing terms

• Repayment of commercial bills (EUR 16.5 million) at the end of Q1 in order to lower

financial expenses (first effects to be seen in Q2) Implementation of announced measures positively effected the profitability of the Group and Q1 EBITDA amounted to EUR 1.5 million, representing a significant growth in comparison to a loss of EUR 1.3 million in Q4 2010 Net income, although still in the negative territory (primarily due to high financial costs) improved by 38% from a negative EUR 4.8 million in Q4 2010 The Group continued its efforts to capture new projects on international markets and contracted EUR 125,6 million over the past 7 months. The project will be executed in the course of 2011 and 2012 It is worth mentioning that the company begun prequalification for tendering on numerous Western European markets (with some already completed) as it plans to open up new markets knowing the spurring demand for infrastructure project all over Europe

Business Results in Q1/2011 – First Results of Restructuring Measures

EBITDA Q1/11 vs. Q4/10 (in EUR mn) Net income Q1/11 vs. Q4/10 (in EUR mn) Sales revenue Q1/11 vs Q4/10 (in EUR mn)

27

SLIDE 28

Table of Contents

• Introducing the Dalekovod Group
• Business Performance in 2010
• Restructuring Process and results for Q1/2011
• Future outlook
• Appendix

SLIDE 29

Dalekovod Group Plan – Sales Revenue Structure

Revenues by markets Revenue by product groups

• Although the company expects first signs of domestic market revival in 2011 (infrastructure projects announced by the

Government as well as expected completion of previously delayed projects in Croatia), the presented Plan is focused primarily

• n international markets which will account for 44% of total revenues in 2011 (33% in 2010) and grow to over 80% by 2013
• In accordance with the organizational changes within the Group, non-core asset disposals and expected growth of energy

infrastructure related projects (especially in Scandinavian countries, Ukraine and Kazakhstan) Engineering business unit will

• ver the years become the largest and fastest growing contributor of total revenue
• The presented Plan of the Dalekovod Group includes highly conservative expectations for tendering on the domestic market

and the company is aware that the potential pick-up of domestic infrastructure projects cycle could lead to higher growth projections and significantly larger business volumes

56,5% 23,8% 16,5% 43,5% 76,2% 83,5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2011 2012 2013

Croatia International markets

44,4% 80,0% 94,3% 20,9% 7,9% 1,8% 2,2% 26,4% 11,8% 3.5% 6,5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2011 2012 2013

Power engineering Road infrastructure Railways Constuction, telecommunication systems, etc. Product placement

29

SLIDE 30

59,68 22,13 9,23 2,90 2,17 1,94 1,46 1,16 1,09 1,04 0,89 0,85 0,74 0,04 0,02 105

Spurring Market Demand

Europe’s infrastructure investment needs¹ ²

• According to the EU Commission, EU will invest up to EUR

440 bn into new connections, asset replacements and reinforcement of its transmission and distribution systems

• Until 2015, the whole of Europe will need around EUR 30

bn of investments into new transmission lines (35.000 km of new transmission lines and reconstruction of 7.000 km of existing ones)

• Sweden and Norway (Dalekovod’s main export markets)

plan to invest up to EUR 10 bn into energy infrastructure by 2015 Renewable energy ³

• In September 2010, the EU Commission published the EU

energy scenarios which expects renewables to generate 33% of electricity demand in 2020

• Wind energy will supply 494.7 TWh of electricity meeting

14% of Europe’s total electricity demand in 2020, up from 2.3% in 2005, and 5.3% in 2010

• The European Commission expects 333 GW of new electric

generating capacity in EU from 2011-2020 while wind would account for 141 GW or 41% of all new installations

• Overall strategy is to enable wind energy to supply 20% of

Europe’s electricity in 2020, 33% in 2030, and 50% in 2050

• As a long term strategy the EU Energy policies heavily

emphasizes the investments in renewable energy as the policy as the policy goal is to achieve 80-95% emission reduction by 2050 Required Renewable energy Capital Expenditure 2010-2020 ³ > EUR 100 bn investments into Emerging Europe Drivers for new infrastructure investments



On average over 30 years old



Big investments cycle underway to support rising demand



Europe cannot add additional capacity without significant investments



Capacity is driven by higher energy demand and by renewable generation (the need to transport vast amounts of power for places energy is harvested - rural areas - to where it is used - urban areas)

Aging infrastructure

Lack of capacity

30

Sources: 1. European Network of Transmission System Operators for Electricity (www.entsoe.eu)

• 2. Statnett (www.statnett.no)
• 3. European wind energy association (www.ewea.org) i EU Commission anc capital elements

SLIDE 31

Dalekovod Group – Foreign Market Tendering Plan

• Apart from the already contracted international projects in 2010 and Q1/2011, the following projects represent the tendering

plan for the period between 2011 and 2013:

• The foreign market tendering plan shall additionally expand, especially for CIS, Norway and Sweden, which are planning to

significantly increase their investments into infrastructure projects over the next 4 to 5 years

31

Market Category Country Project description Status Project time plan International Sweden Substation 400 kV Barkeryd waiting to sign the contracts 2011/2012 International Norway 274 km 400 kv TL Orskog-Fardal (3 lots) not being tendered yet 2012-2014 International Norway Distribution of lighting towers not being tendered yet 2012 International Sweden 200 km 400 kV TL interconnection of souther Sweden and Norway (50 km lot) expected tendering 2012-2013 International Bosnia and Herzegovina sive zone - continued project planned 2011/2012 International Montenegro 400 kV TL Tivat - Pljevlja not being tendered yet 2012 International Macedonia 400 kV TL Štip - Serbian boarder not being tendered yet 2012 International Slovenia 90km 2x400 kV TL Krško-Ljubljana tender in place 2011/2012 International Slovenia TL 2 x 110 kV Beričevo-Trbovlje waiting to sign the contracts 2011/2012 International Kazakhstan Construstion of substation of Alma and connection to the transmission network with TL 220 kv and 500 kV -

• I. phase

prequalification completed, waiting for tendering 2012/2013 International Kazakhstan Construstion of substation of Alma and connection to the transmission network with TL 220 kv and 500 kV -

• II. phase

not being tendered yet 2012/2013 International Ukraine 750 kV Zaporizhzhia-Kakhovska not being tendered yet 2012/2013 International Albania 150 km 400 kv TL Tirana Priština waiting on tendering outcome 2011/2012 International Albania južni prsten 110 kV (TL and substation) not being tendered yet 2011/2012 International Sweden 50 km 400 kv TL Stackbo-Harma (Svenska Kraftnat) tender in progress 2011/2012 International Slovenia TL 2x110kV Formin - Cirkovce not being tendered yet 2011 International Bosnia and Herzegovina EPHZHB annual purchasing 2011 Total: > EUR 650 mil.

SLIDE 32

Investments into Renewable Energy

• Due to Group’s significant know-how

and history of references in the field of power engineering Dalekovod is looking to form JV’s and PPP’s to invest into renewable energy projects in the region (wind farms, biomass, waste, geothermal etc.)

• Primary focus is Croatia, B&H and Serbia which

have thus far minimally invested in renewable energy projects and are expecting a surge in electricity consumption in forthcoming period

• Croatia is currently underinvested in the area
• f wind renewable energy with only 89 MW of

installed capacity. The countries strategy is to install up to 1.200 MW until 2020

• The

Croatian Government has created a favorable investment environment for the construction of wind power plants by setting a goal

• f

their share in total electricity consumption in Croatia between 9 and 10% in 2020 (vs. 0.34% in 2009)

• Through

continuous investment into renewable energy sources Dalekovod will create a strong base for potential listing of the Renewable energy business or trade sale in

• rder to raise capital for further expansion in

the Region

Source: EWEA (www.ewea.org)

Dalekovod’s WPP pipeline for the period 2012-2014*

* Dependent on obtaining all regulatory approvals and licenses

32

WPP (2012-2014) Instalment date Country MW Total investment value (in EUR mn)

WPP Kamensko - Voštane 2012. Croatia 60,0 90,0 WPP Mazin 2 2013. Croatia 20,0 30,0 WPP Otrid 2013. Croatia 20,0 30,0 WPP Breza 2014. Croatia 20,0 30,0 TOTAL 120,0 180,0

SLIDE 33

Key Targets for the Upcoming Period

Revenue CAGR > 15% EBITDA margin > 10%

• The company is aware that vast majority of international markets have extremely high infrastructure investment

needs with total demand forecasted at EUR 30 billion

• Due to significant know how and history of references on international markets Dalekovod expects to achieve revenue

CAGR of at least 15%, which has been company’s historical growth rate (10y CAGR on international markets of 18%) Sustainable net profit margin of 4-5% Deleveraging to 3x EBITDA Tageted ROE of ≈ 15%

• With a successful implementation of announced restructuring measures and further internationalization of business
• perations the company targets its historical EBITDA margin of > 10%
• Investments into renewable energy sources, from which the company plans to achieve around 25% of EBITDA until

2015, will further boost Group’s EBITDA (EBITDA margin of wind power plants > 80%)

• Within the process of corporate restructuring the company announced its plans to tap international capital markets. In
• rder to achieve attractive valuation and placement the Company targets bottom line margin between 4-5%, which is

in line with international peers (peers average net profit margin set at around - 4.5%)

• Through the sale of non core assets and stronger free cash flow resulting form anticipated restructuring measures the

company plans to deleverage its operations to 3x EBITDA and restructure its debt ratio with a LT vs. ST target of 70:30

• With the strong revenue growth, improved profitably and positive effects resulting from planned restructuring

measures, the Company plans to achieve ROE of ≈ 15% as well as implement a stable dividend payout (historical yield

• f 3-4%)

33

SLIDE 34

Investment Considerations

• Company experienced severe drop in revenues and profitability with a slowdown primarily of Croatian infrastructure projects in 2010 and
• 2011. However, due to company’s ability to compete on international markets, it plans to substitute domestic demand with international
• ne in 2011-2013 period where it expects significant revenue growth
• Dalekovod has undertaken serious restructuring efforts in 2010, which are expected to culminate in 2011 and continue even in 2012. By

reducing labor costs and divesting all of its non-core business (reliant on Croatian market) the company tends to deleverage both

• perational and financial costs
• The clear growth areas are engineering, production and assembly of transmission lines on international markets where the company

established a proven track record. Further, the company entered into highly profitable yet low risk renewable energy production business in Croatia and plans a possible extension to the Region. Project pipeline and tendering plan are indicating that the company positioned itself in a good direction for capturing the rapidly increasing demand. Since presented plan does not count on revival in Croatian infrastructure projects, its possible occurrence should further boost company’s performance

• Key objectives to succeed in the company’s strategy include:

Preparation to participate in the new investment cycle in the regional markets, mainly in the energy sector and rail infrastructure, as well as new investments cycles in Scandinavia and CIS, and some WE countries where Dalekovod plans to establish its presence Continue to invest its resources into renewable energy projects thus reducing the riskiness of its business model and exploiting first mover advantage, and possibly use this business to leverage itself though listing or a trade sale The Company plans to use the year 2011 for optimizing business operation, mainly through the reduction of fixed costs, debt restructuring and investments in projects with stable cash flow

2 3 1

34

In the following two years consider a capital increase through the combination of the following:

a) Private placement to institutional investors on ZSE b) Equity Credit Line arrangement (ECL) with a reputable international fund c) Dual listing on ZSE and foreign capital market

4

SLIDE 35

Table of Contents

• Introducing the Dalekovod Group
• Business Performance in 2010
• Restructuring Process and results for Q1/2011
• Future outlook
• Appendix

SLIDE 36

Macro Situation in Croatia

• Challenging macro environment, but measures taken by the Government, coupled with the external recovery and the growing momentum

towards the EU membership should support the return to growth in 2011

79 79 81 85 90 96 (5,8%) (1,3%) 2,0% 3,0% 3,4% 3,4% (10%) (5%) 0% 5% 20 40 60 80 100 2009A 2010E 2011E 2012E 2013E 2014E

(%) (US$bn)

Nominal GDP (US$) Real GDP growth

Source: EIU, EIZ, Bloomberg.

Croatian GDP Monetary Indicators FDI & FX Reserves Debt Indicators

5,3 5,6 6,1 6,3 6,4 6,4 115% 117% 120% 123% 126% 129% 7,5% 0,4% 1,8% 3,0% 3,1% 3,0% 0% 20% 40% 60% 80% 100% 120% 2 4 6 8 10 2009A2010E2011E2012E2013E2014E

HRK / USD, avg CPI, avg Money market IR

(HRK/USD) (%)

62 60 58 57 57 57 99% 101% 102% 99% 93% 88%

(5,1%) (3,9%) (4,5%) (5,1%) (5,2%) (5,2%)

(10%) 10% 30% 50% 70% 90% 110% 30 40 50 60 70 80 2009A 2010E 2011E 2012E 2013E 2014E

(%)

(US$bn)

Total foreign debt Total debt / GDP CA balance / GDP 14,89 13,79 13,23 13,15 13,51 13,54

2,9 2,5 3,3 2,9 3,1 3,1 0,00 5,00 10,00 15,00 1 2 3 4 5 2009A 2010E 2011E 2012E 2013E 2014E

(%) (US$bn)

FX Reserve FDI

Croatia’s Economic Environment



A number of significant challenges will be faced in 2011 to help Croatia recover from recession, stabilise the public finances and secure EU accession



Real GDP contracted by 5.8% in 2009, and a further contraction

• f 1.3% is expected for 2010, before a growth of 2.0% in 2011 as

demand recovers



Total foreign debt for 2010 is expected to be of c. $60bn



CCB forecasts that Croatia’s financing needs in 2011 will be HRK 31.0bn, which is lower than in 2010



The credit rating for the Croatian Government bond- maturing in 2012 is BBB/Baa3/BBB-



The CCB rate is currently at a 9.0% level



CCB cut the reserve ratio from 14% to 13% in February 2010, further cuts are possible in 2011 to bring the reserve ratio down to 11% in order to release extra liquidity



Inflation is likely to remain subdued Due to a significant contraction in domestic demand in 2010, inflation remained low (average of 1.3% in 2010) despite an increase in world oil prices and domestic energy and food prices Average inflation of 2.4% and 2.9% has been forecasted in 2011 and 2012, assuming a gain in recovery momentum



HRK/USD is currently at 5.73, while Bloomberg consensus suggests HRK depreciation in early 2011



The stability of the Kuna against the Euro will remain the priority for the Croatian National Bank, which will intervene in the foreign- currency market against appreciation or depreciation pressure

Macro Outlook HRK Interest Rates Inflation Public Debt EUR/HRK

 Annual average GDP growth of 3.3% in 2012-15 is

expected as demand recovers gradually

 Kuna is expected to depreciate, and it is a priority

for the Central Bank to stabilize the currency

 FDI’s are expected to be stable while further cuts in

reserve ratio are possible in order to release extra liquidity

 Current-account deficit is forecast to widen to 4.5%

in 2011, while external debt is currently at 100% GDP Significant macro challenges faced during 2010 Robust measures taken by the government Return to growth expected in 2011

Conclusions

36