Integriteitsrapport Holland Integrity Group toegevoegd op 10 december aan de stukken

Report Province Zeeland Integrity Due Diligence Energetický a prumyslovy holding a.s., Mr Daniel Křetínský and Mr Patrik Tkáč

Amsterdam, 8 December 2022 Holland Integrity Group Special Services B.V. This report contains 37 pages and 6 annexes

Holland Integrity Group Special Services BV Kingsfordweg 151 P +31 (0)20 491 7720 1043 GR Amsterdam F +31 (0)20 491 7714 The Netherlands hollandintegritygroup.nl

CoC 3212 6272

Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

TABLE OF CONTENT

Managementsamenvatting ............................................................................................................................................6 1

2

Introduction ...........................................................................................................................................................7 1.1

Assignment and purpose ...........................................................................................................................7

1.2

Process of the integrity due diligence......................................................................................................7

1.3

Conditions and limitations of the due diligence ....................................................................................7

1.4

Readily available information ....................................................................................................................8

1.5

Research activities performed ...................................................................................................................9

Normative framework ........................................................................................................................................10 2.1

General........................................................................................................................................................10

2.2

Integrity due diligence ..............................................................................................................................10

2.3

Sanctions.....................................................................................................................................................10

2.3.1

General ...................................................................................................................................................10

2.3.2

Economic sanctions .............................................................................................................................10

2.3.3

Transportation over land and by sea .................................................................................................12

2.3.4

Sanctions concerning financial transactions.....................................................................................12

2.4 2.4.1

General ...................................................................................................................................................12

2.4.2

FATF Guidance on PEPs ...................................................................................................................12

2.5

3

Publicly Exposed Persons........................................................................................................................12

Corruption and bribery ............................................................................................................................13

2.5.1

General ...................................................................................................................................................13

2.5.2

International framework ......................................................................................................................14

2.5.3

European framework ...........................................................................................................................14

2.5.4

Situation in Czech Republic ................................................................................................................14

Findings with respect to EPH...........................................................................................................................16 3.1

General........................................................................................................................................................16

3.2

Corporation ................................................................................................................................................16

3.2.1

General ...................................................................................................................................................16

3.2.2

Corporate data ......................................................................................................................................16

3.2.3

Shareholders ..........................................................................................................................................16

3.2.4

Board of directors and supervisory board .......................................................................................17

3.2.5

Subsidiaries ............................................................................................................................................17

3.2.6

Business activities .................................................................................................................................17

3.3 3.3.1

Finances ......................................................................................................................................................18 General ...................................................................................................................................................18

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

3.3.2

Relevant issues.......................................................................................................................................19

3.3.3

Loans and listed bonds ........................................................................................................................19

3.3.4

Debts and bankruptcy .........................................................................................................................19

3.4 3.4.1

General ...................................................................................................................................................19

3.4.2

Litigation at European level ................................................................................................................19

3.4.3

Litigation in Czech Republic...............................................................................................................20

3.4.4

Regulatory and law enforcement........................................................................................................21

3.5

4

Media ...........................................................................................................................................................21

3.5.1

General ...................................................................................................................................................21

3.5.2

Impact of war in Ukraine, deals with Gazprom and ties with Kremlin ......................................21

3.5.3

Article ‘The “coal villain” of the European Union?’......................................................................24

Findings with respect to Mr Daniel Křetínský ...............................................................................................25 4.1

General........................................................................................................................................................25

4.2

Personal circumstances.............................................................................................................................25

4.2.1

General ...................................................................................................................................................25

4.2.2

Family .....................................................................................................................................................25

4.2.3

Education ...............................................................................................................................................25

4.3

Employment history and business activities .........................................................................................25

4.3.1

General ...................................................................................................................................................25

4.3.2

Employment history ............................................................................................................................25

4.3.3

Business interests ..................................................................................................................................26

4.3.4

Debt and bankruptcy ...........................................................................................................................26

4.4

Finances ......................................................................................................................................................26

4.4.1

General ...................................................................................................................................................26

4.4.2

Origin of income and wealth .............................................................................................................26

4.5

Disputes / litigation ..................................................................................................................................26

4.5.1

General ...................................................................................................................................................26

4.5.2

Litigation ................................................................................................................................................27

4.5.3

Regulatory and law enforcement........................................................................................................27

4.6

5

Disputes / litigation ..................................................................................................................................19

Media ...........................................................................................................................................................27

4.6.1

General ...................................................................................................................................................27

4.6.2

Political exposure ..................................................................................................................................27

4.6.3

Alleged bribery in MIBRAG case ......................................................................................................30

Findings with respect to Mr Patrik Tkáč .........................................................................................................32 5.1

General........................................................................................................................................................32

5.2

Personal circumstances.............................................................................................................................32

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

5.2.1

General ...................................................................................................................................................32

5.2.2

Family .....................................................................................................................................................32

5.2.3

Education ...............................................................................................................................................32

5.3 5.3.1

General ...................................................................................................................................................32

5.3.2

Employment history ............................................................................................................................32

5.3.3

Business interests ..................................................................................................................................32

5.3.4

Debts and bankruptcy .........................................................................................................................33

5.4

Finances ......................................................................................................................................................33

5.4.1

General ...................................................................................................................................................33

5.4.2

Origin of income and wealth .............................................................................................................33

5.4.3

Energetický a prumyslovy holding a.s. ..............................................................................................33

5.5

Disputes / litigation ..................................................................................................................................34

5.5.1

General ...................................................................................................................................................34

5.5.2

Litigation ................................................................................................................................................34

5.5.3

Regulatory and law enforcement........................................................................................................34

5.6

6

Employment history and business activities .........................................................................................32

Media ...........................................................................................................................................................34

5.6.1

General ...................................................................................................................................................34

5.6.2

Successful start of career.....................................................................................................................35

5.6.3

Political exposure ..................................................................................................................................35

5.6.4

Connections with Russia .....................................................................................................................36

5.6.5

Involvement in bribery investigation .................................................................................................36

Summary...............................................................................................................................................................37

Annex 1 – An overview of the shareholders’ positions over the years ..............................................................38 Annex 2 - The summary of the final decision of the EC and the press release...............................................40 Annex 3 – Response to article ‘The “coal villain” of the European Union’ .....................................................42 Annex 4 - Press articles related to EPH ..................................................................................................................44 Dispute with Czech Coal group ............................................................................................................................44 Protests against EPH in Germany .......................................................................................................................44 Member company fined for deceiving customers ..............................................................................................44 Plans for closing coal power plants by 2030 .......................................................................................................45 Loan from state .......................................................................................................................................................45 German green energy compensation

...................................................................................................................45 Annex 5 - Press articles related to Mr Křetínský....................................................................................................46 Criticism for allegedly misusing the news portal Info.cz ..................................................................................46 Offshore affiliations ................................................................................................................................................46 Donations and charity work ..................................................................................................................................46

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

Petition against Le Monde takeover .....................................................................................................................46 Allegations of manipulating Czech media ..........................................................................................................47 Part of scheme to stop corruption in football ...................................................................................................47 Ownership in Royal Mail and PostNL .................................................................................................................48 AVE CZ odpadové hospodářství s.r.o. ................................................................................................................49 Annex 6 - Press articles related to Mr Tkáč ............................................................................................................50 Offshore affiliations ................................................................................................................................................50 Media reports on companies associated with Mr Tkáč.....................................................................................50 Aeronet.cz on J&T ties to the Chinese mafia .....................................................................................................50

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

M A N AG E M E N T S A M E N VAT T I N G Op verzoek van Gedeputeerde Staten van de Provincie Zeeland heeft Holland Integrity Group Special Services B.V. een integriteitonderzoek ingesteld naar Energetický a prumyslovy holding a.s. (hierna EPH) en haar zogeheten uiteindelijk belanghebbenden Mr Daniel Křetínský (hierna de heer Křetínský) and Mr Patrik Tkáč (hierna de heer Tkáč) (hierna gezamenlijk EPH cs). Gedeputeerde Staten wenst een beeld te krijgen van de reputatie en integriteit van EPH cs, indien en voor zover dit aan de hand van door EPH cs verstrekte gegevens en uit open bronnen kan worden vastgesteld. Het betreft een transactie van PZEM N.V. met EP Netherlands B.V. Hiervoor heeft de raad van het bestuur van PZEM statutaire goedkeuring nodig van de Algemene vergadering van aandeelhouders van PZEM. Provincie Zeeland is één van de aandeelhouders in PZEM met een belang van 50% van de aandelen. Voor de uitvoering van dit onderzoek hebben wij aansluiting gezocht met de geldende Nederlandse wet- en regelgeving en richtlijnen. Het integriteitonderzoek heeft zich gericht op het vaststellen van indicaties van onregelmatigheden, belangentegenstellingen of andere relevante omstandigheden die de integriteit van EPH en haar uiteindelijke belanghebbenden kunnen aantasten.

In het kader van dit onderzoek hebben wij de medewerking van EPH cs gevraagd, informatie en documenten bij hen opgevraagd alsmede gegevens uit internationale open bronnen geraadpleegd, zoals persdatabanken, handelsregisters, kadaster en overige relevante bronnen. Deze gegevens (‘het publiek domein’) zijn voor een ieder toegankelijk. Wij attenderen erop dat enkele instanties die dergelijke gegevens verwerken en beheren, een ‘lijdelijke’ houding aannemen. Dit heeft tot gevolg dat deze instanties de verantwoordelijkheid voor de juistheid en volledigheid van gegevens leggen bij de verstrekker van deze gegevens. Voorts mag voor zich spreken dat enkele open bronnen, zoals persdatabanken, en internet gegevens bevatten die subjectief van aard kunnen zijn. In dit licht hebben wij bij berichtgeving van subjectieve of negatieve aard in andere bronnen gezocht naar een nadere onderbouwing dan wel falsificatie. We willen benadrukken dat, gegeven het doel en de aard van het integriteitonderzoek, onze focus in dit integriteitonderzoek gericht is op het verzamelen van indicaties van onder meer onregelmatigheden. Dit kan resulteren in een rapport waarin een onbalans bestaat door de aanzienlijke aandacht voor negatieve berichten en weinig tot geen aandacht voor positieve berichten. Ons rapport met de gepresenteerde bevindingen moet dan ook in dit licht worden bezien.

In hoofdstuk 2 van dit rapport hebben wij het juridische en onderzoekstechnische raamwerk en de geldende richtlijnen voor dit integriteitonderzoek kort beschreven. Daarnaast hebben wij in dit hoofdstuk een schets gegeven van het relevante kader op het terrein van de sancties met betrekking tot Rusland, zogeheten politiek prominente personen en corruptie en omkoping. De resultaten van ons onderzoek met betrekking tot EPH, de heer Křetínský en de heer Tkáč zijn achtereenvolgens in de hoofdstuk 3 tot en met 5 gepresenteerd. Zoals beschreven in deze hoofdstukken hebben wij in het integriteitonderzoek geen onderbouwde aanwijzingen aangetroffen die duiden op onregelmatigheden, verstrengeling van belangen of andere relevante omstandigheden, waardoor de reputatie en/of integriteit van EPH cs ter discussie zou kunnen komen te staan. Voor de specifieke details verwijzen wij naar de genoemde hoofdstukken.

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

1

I N T RO D U CT I O N

1.1

Assignment and purpose

On 14 October 2022, Holland Integrity Group Special Services B.V. (referred to hereinafter as Holland Integrity Group) was requested by the Province Executive of the Province Zeeland (referred to hereinafter as Province Zeeland) to conduct an integrity due diligence regarding Energetický a prumyslovy holding a.s. (referred to hereinafter as EPH) and the ultimate beneficial owners (referred to hereinafter as UBOs) Mr Daniel Křetínský (referred to hereinafter as Mr Křetínský) and Mr Patrik Tkáč (referred to hereinafter as Mr Tkáč). EPH, Mr Křetínský and Mr Tkáč are together referred to hereinafter as EPH cs. This integrity due diligence is conducted in relation to Province Zeeland’s intention to enter into a transaction with EPH regarding the power station Sloe in Vlissingen, the Netherlands. The integrity due diligence aims to ascertain whether there are indications of irregularities, conflicts of interest, or other relevant circumstances that may subvert the integrity of EPH and its UBOs.

1.2

Process of the integrity due diligence

After we received the request of Province Zeeland to conduct an integrity due diligence concerning EPH cs, Mr Frank Verhagen (referred to hereinafter as Mr Verhagen), CEO of PZEM, introduced us to Mr Jan Špringl (referred to hereinafter as Mr Špringl), CEO of EP Power Europe and member of the boards of directors of EPH, on 13 October 2022, and informed him of the request of Province Zeeland and requested the cooperation of EPH cs. On 18 October 2022, we have provided the representatives of EPH, Mr Křetínský and Mr Tkáč with information letters, questionnaires, and requests for their consent. In the information letters, we have requested EPH, Mr Křetínský and Mr Tkáč to provide us with information and certain documents. Mr Pavel Fekar (referred to hereinafter as Mr Fekar) is assigned as our first point of contact on behalf of EPH cs. Since 18 October 2022, he provided us with documentation concerning EPH. The final and signed questionnaires and corresponding documentation concerning EPH and Mr Křetínský were received on 10 November 2022 and the documentation regarding Mr Tkáč on 16 November 2022. On 23 November 2022, separate interviews with Mr Tkáč and Mr Křetínský were held at their offices in Prague. In these interviews, Mr Tkáč and Mr Křetínský fully cooperated and answered all questions concerning the relevant topics.

On 1 December 2022, we have provided the separate draft reports of EPH, Mr Křetínský and Mr Tkáč to each of them with the request to read and comment on the correctness and completeness of the issues mentioned in the separate draft reports. After receiving the comments, the reports were completed and on 8 December 2022 provided to Province Zeeland.

1.3

Conditions and limitations of the due diligence

Holland Integrity Group has informed EPH, Mr Křetínský and Mr Tkáč in writing prior to conducting the integrity due diligence. The integrity due diligence took place on the basis of voluntary cooperation. Within the context of this due diligence, we have collected data from public sources (such as press data banks, trade registers and other relevant sources) in various countries. We would like to point out that some of the bodies that process and store data adopt a ‘passive’ approach. The result of this is that the bodies concerned leave responsibility for the accuracy and completeness of their data up to the provider of such data.

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

Furthermore, we wish to emphasize that some public sources of information, such as press data banks and websites on the internet, contain information that may be subjective in nature. Therefore, we always try to collect supporting documentation from reliable sources to validate the suggestions made in some public sources. Due to the size of the media profile of EPH cs and time and budget constraints for the project, research was focused on the reputation and related core adverse and noteworthy information concerning EPH cs, and not the reputation of all individual associated companies, whereas EPH, Mr Křetínský and Mr Tkáč were mentioned in a role of (in)direct shareholder.1 The integrity due diligence is not a financial audit of financial annual reports, nor do we evaluate the technical aspects of environmental or fiscal issues. We also would like to stress that given the purpose and nature of the integrity due diligence our main focus is aimed at gathering adverse information regarding EPH cs. This could result in a report in which considerable attention is paid to adverse publications and no or limited attention to non-adverse publications. Our report with the presented findings should be seen in this respect. When conducting the integrity due diligence, the requirements as set out in the Dutch legal and investigative framework are implemented.

Given the requirements in the Dutch regulatory and privacy legislation and the public use of the report, sensitive corporate information and personal information regarding Mr Křetínský and Mr Tkáč are left out. Holland Integrity Group treats all data that comes to its attention during the due diligence with strict confidence and will not pass on such data nor make such data available to other parties, unless required to do so by law. Holland Integrity Group is supplying the final report to the client Province Zeeland only. Province Zeeland is authorised to use the report for her deliberations and decision-making concerning the mentioned transaction and shared with other stakeholders in this process. The information contained in Holland Integrity Group’s due diligence file will be destroyed after a period of a maximum of five years of custodianship. This period may be extended if an instance should arise of (possible future) legal proceedings.

1.4

Readily available information

For the purposes of our due diligence, we have made use of the following data:  The questionnaires filed on behalf of EPH, Mr Křetínský and Mr Tkáč.  The documents provided by representatives of EPH, Mr Křetínský and Mr Tkáč, such as: o

EPH Articles of Association.

o

Criminal record certificates regarding EPH, Mr Křetínský and Mr Tkáč.

o

Annual reports from 2009 to 2021.

o

The structure of the shareholders of EPH.

o

Overviews of functions of Mr Křetínský and Mr Tkáč.

o

Overviews of legal proceedings or disputes of EPH, Mr Křetínský and Mr Tkáč.

1 It is our experience that in adverse publications concerning individual associated companies the ultimate holding

company and related UBO’s are also mentioned.

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

o

The statements of consent of EPH, Mr Křetínský and Mr Tkáč.

o

And various other documents.

 Data from public sources (press data banks, trade registers and other relevant sources). The information provided by EPH cs and the information from public sources will be kept in our due diligence file. Only relevant data has been presented in this report. It may be that (parts of) information from interviews, the due diligence information request or other written or oral statements are mentioned in the report.

1.5

Research activities performed

The integrity due diligence is completed with this report. It reflects the relevant findings with respect to the facts and circumstances in relation to the integrity of EPH cs. Holland Integrity Group does not judge upon the desirability of entering into a business transaction with EPH cs. This assessment is reserved to Province Zeeland. In more detail, we have conducted the following research activities:  Requesting information (among which the completed questionnaires, etc.).  Conducting research in public sources (press data banks, trade registers and other relevant sources).  Analysing the results of the research.  Interviewing Mr Tkáč and Mr Křetínský in Prague on Wednesday 23 November 2022.  Preparing a report with preliminary findings.  Processing the feedback of EPH cs regarding the draft report.  Providing the ultimate report to Province Zeeland. In the following chapters, our findings based upon the information provided by EPH cs and from public sources with respect to the conducted integrity due diligence are displayed. The search in public sources has been finalized on 22 November 2022.

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2

N O R M AT I V E F RA M E WO R K

2.1

General

In this chapter, we explain the legal and investigative framework and definitions we used for this integrity due diligence.

2.2

Integrity due diligence

While conducting this integrity due diligence, connection is sought with the requirements that are applied in Dutch laws, other legislation and guidelines, such as the Province Act (de Provinciewet), the Implementing Act Foreign Direct Investment Screening Ordinance (de Uitvoeringswet screeningsverordening buitenlandse directe investeringen), the Public Administration Probity Screening Act (de Wet bevordering integriteitsbeoordelingen door het openbaar bestuur (BIBOB)), the Financial Supervision Act (de Wet op het financieel toezicht (WFT)), the Handbook Integrity Investigation (het Handboek Integriteitsonderzoek) of the Ministry of the Interior and Kingdom Relations and the guidelines provided by the Netherlands Financial Forensic Institute and other Dutch and European institutes for forensic investigators and expert witnesses. A part of this legislation does apply to Province Zeeland. The normative framework in these laws and guidelines does however serve as an important guideline for the design and execution of this integrity due diligence.

In the context of this integrity due diligence, the geopolitical situation in Europe and the nature of the business of EPH make that sanctions, so-called politically exposed persons (referred to hereinafter as PEPs), and corruption and bribery, amongst other forms of financial and economic crime, are relevant topics.2 The framework of these topics is outlined in the following paragraphs.

2.3

Sanctions

2.3.1

General

As it is described on the website of the European Union (referred to hereinafter as EU), since March 2014, the EU has progressively imposed restrictive measures (sanctions) against Russia, initially in response to the annexation of Crimea and Sevastopol and the destabilisation of Ukraine.3 On 23 February 2022, the EU expanded the sanctions in response to the recognition of the non-government controlled areas of the Donetsk and Luhansk oblasts of Ukraine and the ordering of Russian armed forces into those areas. After 24 February 2022, in response to Russia’s military operations against Ukraine, the EU expanded the sanctions. The EU has imposed an additional series of eight packages of sanctions against Russia, starting on 23 February 2022.4 Sanctions include targeted restrictive measures (individual sanctions), economic sanctions and diplomatic measures. 2.3.2

Economic sanctions

General 2.3.2.1 On the EU website, it is described that the EU has imposed a number of import and export restrictions on Russia. This means that European entities cannot sell certain products to Russia (export restrictions) and 2 All politicians in this report can be considered a PEP. As described later in this report, due to their position and

influence, it is recognised that many PEPs are in positions that potentially can be abused for the purpose of committing money laundering offences and related predicate offences, including corruption and bribery. 3 Council Decision 2014/512/CFSP of 31 July 2014 and Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia’s actions destabilizing the situation in Ukraine 4 The sanctions can be found at the website www.eur-lex.europe.eu/eu-and-world/sanctions-restrictive-measures

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that Russian entities are not allowed to sell certain products to the EU (import restrictions). The export and import restrictions exclude products primarily intended for consumption and products related to health, pharma, food and agriculture, in order not to harm the Russian population. The list of sanctioned products includes among others:  Crude oil and refined petroleum products, with limited exceptions.  Coal and other solid fossil fuels (as there is a wind-down period for existing contracts, this sanction will apply as from August 2022).  Steel, steel products and iron.  Gold, including jewellery.  Wood, cement and plastics.  Seafood and liquor (e.g., Caviar, vodka).  Cigarettes and cosmetics. Energy sector 2.3.2.2 According to the EU website, the EU imposed a ban on the export of specific refining technologies to Russia as well as an import ban on all forms of Russian coal and all Russian seaborne crude oil and petroleum products. According to Eurostat, petroleum products are products derived from crude oil. These products include refinery gas, ethane, liquified petroleum gas (LPG), gasoline, naphtha and many other types of fuels. Petroleum products can also be made from coal, natural gas, and biomass.

More specific, it is prohibited to purchase, import or transfer coal and other products, as listed in Annex XXII of Regulation (EU) 833/2014, from Russia and it is prohibited to purchase, import or transfer crude oil or petroleum products, as listed in Annex XXV of Regulation (EU) No 833/2014, from Russia. Related technical or financial assistance and brokering services are also prohibited. Certain exemptions apply. This ban is subject to certain transition periods to allow the sector and global markets to adapt, and a temporary exemption for pipeline crude oil to ensure the phase out. This allows the EU and its partners to secure alternative supplies and minimises the impact on global oil prices. After a wind down period of 6 months, EU operators will be prohibited from insuring and financing the transport, in particular through maritime routes, of oil to third countries. More specific, according to the EU website, the Council decided on 3 June 2022 to adopt various measures concerning oil import and transport. These sanctions will come into force with immediate effect and will phase out Russian oil imports in an orderly fashion. For seaborne crude oil, spot market transactions and execution of existing contracts will be permitted for six months after entry into force, while for petroleum products, these will be permitted for eight months after entry into force.

Member States who have a particular pipeline dependency on Russia can benefit from a temporary exemption and continue to receive crude oil delivered by pipeline, until the Council decides otherwise. However, Member States benefiting from this exemption will not be able to resell such crude oil and petroleum products to other Member States or third countries. Due to its specific geographical exposure, a special temporary derogation until the end of 2024 has been agreed for Bulgaria which will be able to continue to import crude oil and petroleum products via maritime transport. In addition, Croatia will be able to authorise until the end of 2023 the import of Russian vacuum gas oil which is needed for the functioning of its refinery. On 5 October 2022, the G7 agreed to introduce a price cap on Russian oil exports, taking effect after 5 December 2022 for crude oil and after 5 February 2023 for refined petroleum products. It is mentioned on the EU’s website that while the EU's ban on importing Russian seaborne crude oil fully remains, the price cap, once implemented, would allow European operators to undertake and support the transport of Russian oil to third countries, provided its price remains under a pre-set ‘cap’. This will help to further reduce Russia's

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revenues, while keeping global energy markets stable through continued supplies. It will also help address inflation and keep energy costs stable at a time when high costs – particularly elevated fuel prices – are a great concern to all Europeans. 2.3.3

Transportation over land and by sea

According to the EU website, the EU has prohibited Russian and Belarusian road transport operators from entering the EU, including for goods in transit. However, EU countries can grant derogations for:  The transport of energy.  The transport of pharmaceutical, medical, agricultural and food products.  Humanitarian aid purposes.  Transport related to the functioning of diplomatic and consular representations of the EU and its countries in Russia, or of international organisations in Russia which enjoy immunities in accordance with international law.  The transfer or export to Russia of cultural goods on loan in the context of formal cultural cooperation with Russia. It is also mentioned that the EU has closed its ports to Russia’s entire merchant fleet of over 2,800 vessels. However, the measure does not affect vessels carrying:  Energy.  Pharmaceutical, medical, agricultural and food products.  Humanitarian aid.  Nuclear fuel and other goods necessary for the functioning of civil nuclear capabilities.  Coal (until 10 August 2022, after which imports of coal into the EU will be banned). 2.3.4

Sanctions concerning financial transactions

According to the EU website, the ban prevents ten Russian and four Belarusian banks from making or receiving international payments using the international messaging service SWIFT, which facilitates information exchange between banks and other financial institutions, unless the payments relate to exempted goods.

2.4 2.4.1

Publicly Exposed Persons General

In this paragraph, we describe the relevant international guidance provided regarding publicly exposed persons. 2.4.2

FATF Guidance on PEPs

The Financial Action Task Force (referred to hereinafter as FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (referred to hereinafter as AML) and counter-terrorist financing (referred to hereinafter as CFT) standard.

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

Over the years, the FATF provided guidance on the definition of PEPs.5 In the FATF 2013 Guidance, a PEP is defined by the FATF as an individual who is or has been entrusted with a prominent public function.6 Due to their position and influence, it is recognised that many PEPs are in positions that potentially can be abused for the purpose of committing money laundering (referred to hereinafter as ML) offences and related predicate offences, including corruption and bribery, as well as conducting activity related to terrorist financing (referred to hereinafter as TF). According to the 2013 publication, the FATF defines a PEP as follows:  Foreign PEPs: individuals who are or have been entrusted with prominent public functions by a foreign country, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials.  Domestic PEPs: individuals who are or have been entrusted domestically with prominent public functions, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials.

 International organisation PEPs: persons who are or have been entrusted with a prominent function by an international organisation, refers to members of senior management or individuals who have been entrusted with equivalent functions, i.e., directors, deputy directors and members of the board or equivalent functions.  Family members are individuals who are related to a PEP either directly (consanguinity) or through marriage or similar (civil) forms of partnership.  Close associates are individuals who are closely connected to a PEP, either socially or professionally. Regarding the period an individual, family member or close association should be treated as a PEP, it is mentioned in the FATF 2013 Guidance that this should be consistent with the risk-based approach which is also outlined in this report. In the report, it is stated that the handling of a client7 who is no longer entrusted with a prominent public function should be based on an assessment of risk and not on prescribed time limits. As possible risk factors are mentioned, the level of (informal) influence that the individual could still exercise, the seniority of the position that the individual held as a PEP and whether the individual’s previous and current function are linked in any way.

The period for which family members and close associates of PEPs who are no longer entrusted with a prominent public function should be treated as PEPs is directly related to the assessment of risk for the PEP.

2.5 2.5.1

Corruption and bribery General

In this paragraph, we describe the relevant guidance provided by the United Nations (referred to hereinafter as UN) and other relevant organisations regarding corruption and bribery.

5 FATF, Politically Exposed Persons (Recommendations 12 and 22), June 2013; 2003 FATF 40 Recommendations. 6 In the Glossary to the FATF Recommendations, all relevant definitions are set out. 7 This applies also to future business partners, employees and other individuals and companies which are subject of an

integrity or customer due diligence.

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

2.5.2

International framework

The UN has provided guidance in defining and the combat of corruption. The UN Convention against Corruption of 2003 (referred to hereinafter as Convention 2003) is the only legally binding universal anticorruption instrument. The vast majority of the UN Member States are parties to the Convention 2003. The Convention 2003 requires countries to establish criminal and other offences to cover a wide range of acts of corruption, if these are not already crimes under domestic law. According to the Convention 2003, corruption hurts the poor disproportionately by diverting funds intended for development, undermining a government's ability to provide basic services, feeding inequality and injustice and discouraging foreign aid and investment. The Convention 2003 introduces a comprehensive set of standards, measures and rules that all countries can apply in order to strengthen their legal and regulatory regimes to fight corruption. It calls for preventive measures and the criminalization of the most prevalent forms of corruption in both public and private sectors. In this integrity due diligence, we have also focused on indications of the following forms of corruption and bribery, as mentioned in the Convention 2003, amongst others:  Article 15 - Bribery of national public officials, divided into two elements: offering and accepting.

 Article 16 - Bribery of foreign public officials and officials of public international organizations.  Article 18 - Trading in influence, divided into two elements: offering and accepting.  Article 19 - Abuse of functions.  Article 20 - Illit enrichment.  Article 21 - Bribery in the private sector. 2.5.3

European framework

In addition to the UN, the Organisation for Economic Co-operation and Development (referred to hereinafter as OECD) also established legally binding standards for the members states to criminalise bribery of foreign public officials in international business transactions.8 In the EU, the OECD guidelines on combating corruption from 2011 have been implemented. 2.5.4

Situation in Czech Republic

On 22 June 2021, the OECD Working Group on Bribery (referred to hereinafter as the Working Group) made a statement that it is concerned about the announcement of the resignation of the Czech Republic’s chief prosecutor, after ten years of service, following alleged disagreements with the Minister of Justice. In the Working Group announcement, it is mentioned that on 14 May 2021, the chief prosecutor announced his resignation at a press conference where he alluded to pressures from the Minister of Justice. The resignation comes a month after the chief prosecutor made a public statement regarding an ongoing investigation, with media reporting that the Minister of Justice had plans to submit a disciplinary lawsuit against him based on this statement. From public sources we learned that the ongoing investigation concerns the then Czech Prime Minister Mr Andrej Babiš (referred to hereinafter as Mr Babiš).9 There were no indications in public sources that EPH cs is related to this investigation.

8 All EU member states are member of the OECD. 9 Peter Laca, ‘Top Czech Prosecutor Quits, Citing Attacks From Justice Minister’, Bloomberg, 14 May 2021; James

Shotter, ‘Czech public prosecutor reopens Andrej Babis fraud probe’, Financial Times, 4 December 2019.

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

The Working Group mentioned in its statement that allegations involving possible political interference in the work of the prosecutorial authority are particularly concerning given that the Czech Republic has consistently failed to adopt reforms to safeguard investigative and prosecutorial independence. The Working Group has been monitoring this issue since 2013, as it may affect the Czech Republic’s ability to meet its obligations under Article 5 of the OECD Anti-Bribery Convention. This Article prohibits considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved to influence foreign bribery investigations and prosecutions.

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

3

F I N D I N G S W I T H R E S P E CT T O EPH

3.1

General

The due diligence is aimed, among others, at collecting facts and circumstances regarding the reputation and integrity of EPH cs. Below we display our findings with respect to EPH, obtained from the documentation provided by the representatives of EPH and from public sources.

3.2

Corporation

3.2.1

General

In this paragraph, we will present the information concerning the corporation. 3.2.2

Corporate data

According to available documentation regarding EPH, the company was established on 7 August 2009 and registered in the Commercial Register on 10 August 2009 by subscription of the registered capital in the form of a non-monetary contribution of 100% of shares of Bauliga a.s., Honor Invest a.s. and Masna Holding Limited. The current legal form of EPH is a joint-stock company. EPH’s registered and postal address is Pařížská 130/26, Josefov, 110 00 Prague 1, Czech Republic. EPH has 1,000 outstanding shares with a share value of CZK 4,000,000 (approximately 163,565 EUR)10 per share. The nominal capital of EPH adds up to CZK 4,000,000,000 (approximately 163,565,059 EUR). The company’s line of business is described as follows: ‘Production, trade and services not listed in Appendices 1 to 3 of the Trade Act’. The company has the registration number 283 56 250 at the Czech Commercial Register. EPH mentioned in its annual reports that it heads a leading European energy group that owns and operates assets in the Czech Republic, the Slovak Republic, Germany, Italy, the United Kingdom (referred to hereinafter as UK), Ireland, France and Switzerland. EPH is a vertically integrated energy utility covering a complete value chain with a primary focus on gas transmission, distribution and storage as well as power and heat generation and distribution.

EPH and its group companies focus on regulated and long-term contracted assets in the areas of natural gas transmission, power, gas and heat distribution as well as gas storage and power generation. 3.2.3

Shareholders

According to documentation provided by representatives of EPH cs, in November 2022 EPH’s shareholders are the Czech company EP Corporate Group a.s. with a stake of 56% plus one share and the Czech company J&T Energy Holding a.s. with a stake of 44% minus one share. From documents provided we learned that a group of managers of EPH participate in EP Corporate Group a.s., which results in an indirect stake of these managers in EPH of 6%. From the annual reports and other documents provided by EPH cs, we learned that from the establishment of EPH on 7 August 2009 until present, the ownership of EPH has changed on various moments.11 An overview of the shareholder’s position over the years is enclosed as annex 1 to this report. The most important changes concern:

10 Per rate of 4 November 2022. 11 In the following statement on EPH’s website the formation of EPH is described:

https://www.epholding.cz/tiskove-zpravy/jt-and-ppf-sign-an-agreement-on-forming-an-energy-and-industrialholding-company/

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

1. The withdrawal of Timeworth Holdings Limited, subsidiary of the international investment group PPF Group, associated to Mr Petr Kellner12 (referred to hereinafter as Mr Kellner), in 2013. 2. The withdrawal of Biques Limited and Milees Limited, associated to the investment group J&T, related to Mr Tkáč amongst others, in 2017. 3. The renewed participation of J&T Energy Holding a.s., associated to the investment group J&T, related to Mr Tkáč amongst others, in 2020.13 For more detailed information concerning each of these changes, we refer to EPH’s annual reports. We analysed these changes and discussed the context and reasons of these changes with Mr Tkáč and Mr Křetínský. The data collected and information provided in the interviews by Mr Tkáč and Mr Křetínský gave insight into the background of these changes and does not lead to additional questions. Mr Křetínský and Mr Tkáč are considered in public databases to be a PEP. Mr Křetínský, due to his relationship with his mother14, and his positions at partly Slovak state-owned energy companies. Mr Tkáč, due to his close corporate affiliation with Mr Křetínský. This observation does not have any legal implications for Province Zeeland as the relevant legislation is not applicable to them. It is only relevant for understanding and assessing the business and (geo)political context in which Mr Křetínský and Mr Tkáč operate. 3.2.4

Board of directors and supervisory board

According to information retrieved from public sources, Mr Marek Spurný, Mr Pavel Horský and Mr Jan Špring are legal representatives and members of the board of directors at EPH, whereas Ms Tereza Štefunková, Mr Martin Fedor and Mr Petr Sekanina serve as its members of the supervisory board, Mr Sekanina being chairman of this board. 3.2.5

Subsidiaries

In EPH’s annual reports, overviews of EPH’s subsidiaries and related companies are enclosed. Given the scope of the integrity due diligence and the budget and time restraints, we have not included all of EPH’s subsidiaries and related companies in our research. For an overview of EPH’s subsidiaries and related companies, we refer to the annual reports of EPH. 3.2.6

Business activities

According to documentation of EPH, the main activities are structured into two divisions: EP Infrastructure (referred to hereinafter as EPIF) and AP Power Europe (referred to hereinafter as EPPE). The two divisions are visualised as follows:

12 Mr Kellner was a Czech business man who died in a helicopter crash in Alaska in 2021. 13 The renewed participation is also described in the press article: https://www.blesk.cz/clanek/zpravy-

udalosti/664415/podnikatel-tkac-se-vraci-do-eph-ma-44-procent-akcii-majoritu-drzi-kretinsky.html 14 Ms Židlická, Mr Kretínský's mother, is a former judge of the Czech Constitutional Court, who was in office

between 2004 and 2014.

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

In the same document, the core portfolio of the activities of EPPE per country is visualised as follows:

According to European legislation, the business activities of EPH’s subsidiaries on the energy markets in the various European countries are regulated.

3.3

Finances

3.3.1

General

In this paragraph, we describe relevant financial aspects in the context of the integrity due diligence. We emphasize that we have not conducted an audit into the financial reports of EPH.

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

3.3.2

Relevant issues

In this due diligence, we have collected and analysed the annual reports of EPH in relation to relevant events, disputes, litigations, claims and press articles. Amongst others, the composition and development of EPH’s equity in relation to the changes in the shareholding of the company, as described in subparagraph 3.2.3 of this report, and the consolidated cashflow, sales, financing, valuation of the shares and other financial aspects of the company were taken into consideration. In the interview on 23 November 2022, these relevant aspects were discussed with Mr Křetínský. He provided insight into the background and context of these aspects. Searches conducted at official and public sources revealed no substantiated questions concerning issues related to EPH’s equity, cashflow and other financial aspects. The information provided and discussed in the interviews with Mr Tkáč and Mr Křetínský does not lead to additional questions concerning the finances of EPH in the context of this integrity due diligence. 3.3.3

Loans and listed bonds

In the interview on 23 November 2022, Mr Křetínský explained that EPH finances her business activities in general with equity, senior debts provided by leading banks and bonds, and does not use hybrid or other hidden financial structures. According to public information and information in the annual reports, EP Energy a.s., EPH Financing CZ a.s., SPP Financing Structure B.V. and EP Infrastructure a.s., subsidiaries of EPH, have issued bonds at the regulated markets of the stock exchanges in the Czech Republic and the Republic of Ireland. An English subsidiary of EPH, EPH Energy Limited was regulated under number 797973 at the Financial Conduct Authority in the UK. Searches conducted at official Czech, Irish, Dutch and English sources revealed no matches involving EPH’s subsidiaries in regulatory issues. 3.3.4

Debts and bankruptcy

Searches conducted at official Czech sources revealed no matches involving EPH in bankruptcy or insolvency procedures. Debts and bankruptcy checks are available in the Czech Republic and searches are conducted using the company’s name or registered number.

3.4 3.4.1

Disputes / litigation General

In the official European and Czech civil and criminal litigation sources, searches have been conducted regarding EPH. In EPH’s annual reports, certain litigations and claims are mentioned. As agreed with Mr Fekar, the responses provided by EPH are qualified by materiality. For the sake of completeness certain responses also disclosed facts, matters or circumstances below a reasonable materiality threshold. 3.4.2

Litigation at European level

According to information provided by EPH and from public sources, in November 2009, an inspection was carried out on EPH by the European Commission (referred to hereinafter as EC) to investigate a potential violation of EU competition rules. In May 2010, an investigation was launched on EPH by the EC for obstruction of an EU inspection. In December 2010, EPH was formally charged by the EU regulators following a statement of objection sent by the EC for obstructing an antitrust investigation inspection in November 2009. In March 2012, EPH was fined, jointly with EP Investment Advisor’s, EUR 2.5 million by

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Province Zeeland Report Integrity Due Diligence EPH, Mr Křetínský and Mr Tkáč 8 December 2022

the EC for obstruction during the inspection carried out by Commission officials in November 2009. In November 2014, EC’s decision and fine from March 2012 was confirmed and upheld by the EU General Court. The summary of the final decision of the EC and the press release regarding the decision have been enclosed as annex 2 to this report. 3.4.3

Litigation in Czech Republic

Searches conducted at official Czech civil and criminal litigation sources revealed ten non-adverse matches involving EPH. The database of the Supreme Court of the Czech Republic has been publishing decisions as of 2000, and there is no information on how far back the database of the Constitutional Court goes. Most sources provide detailed information on decisions, but some sources omit individuals’ names. EPH was mentioned in a case from 2012 found at the Constitutional Court of the Czech Republic, as being owned by the son of, at that time judge of the Czech Constitutional Court, Ms Michaela Židlická – Křetínský (referred to hereinafter as Ms Židlická). The case pertained to a request of a group of senators of the Senate of the Parliament of the Czech Republic to exclude Ms Židlická from the case as the judge of the Constitutional law regarding the promotion of electricity production from renewable energy sources amendment, stating that the fact that her son operates in the energy sector might cause conflict of interest. We discussed this case with Mr Křetínský. He explained that he was not aware of this case as his mother has never mentioned it to him. He further mentioned that he has never discussed any specific corporate matter with his mother, except her interest in Sparta Prague.