ENERGA Group – 2013 results 10 March 2014
This graph shows the contribution of the individual business segments to adjusted EBITDA of the Group in 2013.
Summary of 2013 Individual net profit of ENERGA SA was PLN 499 m in 2013 and consequently the Management Board of ENERGA SA recommended payment of dividend of PLN 414 million , or PLN 1 per share Group's net profit reached PLN 743 million and was 63% higher y/y Group's EBITDA was approx. PLN 2 billion, increasing by PLN 336 million, or 21% y/y; this growth was driven mainly by the improved performance of the Distribution and Generation Segments Increase in non-current assets up to PLN 12,650 million in 2013, vs. PLN 10,697 million in 2012 Annual capital expenditures of the Group amounted to PLN 2,802 million , compared to PLN 1,849 million in 2012 As a result of the Group's focus on improving efficiency , the asset value per employee ratio improved by about 30% y/y 3
Key assets of the ENERGA Group Distribution Draft no. 3[PL] • 194 thous. km of power lines • 20.44 TWh of electricity delivered • geographical coverage of 77 thous. km 2 Generation 1 Hydro power plants Włocławek (160 MW) o Smaller generating entities (41 MW) o Pumped storage plant in Żydowo (160MW) o 3 wind farms Karcino (51 MW) o Karścino (90 MW) o Bystra (24 MW) o System power plant in Ostrołęka (647 MW) CHP plant in Ostrołęka (75 MW, 394 MWt) Other CHP plants (49 MW, 353 MWt) Sales 2.9 million customers o 31.01 TWh of electricity sold (18.2 TWh in retail o sales) 1 Achievable capacity 4
Key operational and financial data February 2014
ENERGA Group has stable foundations of the business 2012 2013 Dynamics Distribution of electricity (TWh) 20.1 20.4 1% Number of customers – distribution (000s) 2,917 2,946 1% Gross production of electricity (TWh) 4.1 5.0 22% Incl. RES 1 (TWh) 1.3 1.9 46% Retail sales of electricity (TWh) 20.5 18.2 -11% Q4 2012 Q4 2013 Dynamics Distribution of electricity (TWh) 5.2 5.3 2% Gross production of electricity (TWh) 0.8 1.2 50% Incl. RES 1 (TWh) 0.3 0.5 67% Retail sales of electricity (TWh) 5.4 4.6 -15% 1 Includes biomass, wind power plants and run-of-river plants. Does not include the pumped storage power plant. 6
We are increasing electricity production from renewable energy sources Gross electricity production (GWh) Installed capacity 2013 (MWe) Run-of-river hydro Biomass Wind 2 000 1 851 Biomass Wind 1 800 28% 151 32% 1 600 Run-of- river hydro 1 400 40% Total: 508 MWe 1 292 692 1 285 0 0 1 200 309 Certificates of orgin (green) on electricity generated (GWh) 552 1 000 Run-of-river hydro Biomass Wind 800 1 851 This covers 88% of ENERGA- OBRÓT's 151 demand for the mandatory redemption 600 of green proprietary 1 292 1 285 692 rights 1 008 983 309 400 552 733 492 200 1 008 983 276 109 733 185 129 198 147 0 2011 2012 2013 2011 2012 2013 Q4 2012 Q4 2013 Better water and weather condition for hydro power plants y/y (gross increase in production by 38%) o Acquisition of wind farms, which increased the Group's generating capacity by approx. WM 165. o 7
The ENERGA Group has been consistently improving the EBITDA margin Revenue (PLN m) EBITDA (PLN m) Adjustment by effect of material one-off events Adjusted EBITDA 2 220 11 429 11 177 255 1 864 10 368 1 611 235 91 1 965 1 629 1 520 539 2 936 2 892 393 75 96 464 297 2011 2012 2013 Q4 2012 Q4 2013 2011 2012 2013 Q4 2012 Q4 2013 Net profit (PLN m) CAPEX (PLN m) 743 2 802 703 456 1 849 1 446 145 698 656 -74 2011 2012 2013 Q4 2012 Q4 2013 2011 2012 2013 Q4 2012 Q4 2013 8
Regulatory business constitutes a stable source of the Group's EBITDA... Adjusted EBITDA (PLN m) ∑ 2 220 267 30 ∑ 1 864 404 ∑ 1 611 264 9 207 17 14 263 120 375 1 587 ∑ 539 1 318 79 ∑ 393 954 17 5 14 91 52 2 44 378 276 -28 -59 -25 -7 -40 -1 2011 2012 2013 Q4 2012 Q4 2013 Distribution RES Segment System Power Plants CHP Sales Services, other and adjustments * In 2011, the Generation Segment was not presented as a whole in the Consolidated Financial Statements, but rather divided into Subsegments: RES, System Power Plants and CHP. Accordingly EBITDA of the Generation Segment presented in the graph above is the sum of those individual subsegments. 9
… and is supported by other Segments in the value chain Distribution Sales PLN m 2012 2013 Dynamics 2012 2013 Dynamics Revenues 3,684 3,796 3% 7,179 7,107 -1% EBITDA 1,218 1,561 28% 264 207 -22% EBITDA margin 33.1% 41.1% ∆ 8 p.p. 3.7% 2.9% ∆ -0.8 p.p. Net profit 320 612 91% 192 170 -11% Net profit margin 8.7% 16.1% ∆ 7.4 p.p. 2.7% 2.4% ∆ -0.3 p.p. CAPEX 1,364 1,397 2% 30 42 40% incl.: Generation RES 1 System power plants 1,2 PLN m Dynamic Dynamic 2012 2013 2012 2013 Change 2012 2013 s s Revenues 1,512 1,549 2% 352 545 55% 1,038 890 -14% EBITDA 157 223 42% 261 404 55% -107 -205 -92% EBITDA 10.4% 14.4% ∆ 4 p.p. 74.1% 74.1% ∆ 0 p.p. - - - margin Net result 23 67 191% 191 263 38% -163 -203 -25% Net profit 1.5% 4.3% ∆ 2.8 p.p. 54.3% 48.2% ∆ -6 p.p. - - - margin CAPEX 412 1,332 223% 67 1,064 - 213 133 -38% 1 In its Consolidated Financial Statements for 2012, the Company recognized separately the RES, System Power Plants and CHP Subsegments. In the Consolidated Financial Statements for 2013, the Company presents them as a single Generation Segment. Therefore, financial information for the subsegments in the Generation Segment was presented solely for the purposes of this presentation, but they do not originate from the Consolidated Financial Statements for 2013. 2 ENERGA Elektrownie Ostrołęka SA contributes the key part of the results of the System Power Plants subsegment. 10
The ENERGA Group has been consistently implementing its investment plans Key investments CAPEX PLN m 3 000 2 802 Major investments in the electricity distribution segment: • PLN 704 m - grid development to facilitate 2 500 connection of new customers and generators 1 013 • PLN 562 m - distribution network Acquisition modernization to improve reliability of of wind 2 000 1 849 farms from supply; PLN 15 m - other expenditures for Dong and innovative grid technologies and solutions Iberdrola 319 412 (Smart Grid, SID) 1 446 groups 1 500 31 incl. expenditures for AMI: PLN 118 m . 42 42 30 201 Major investments in the generation segment: 5 30 • 1 000 PLN 1,013 m - acquisitions of wind farms in the RES subsegment;return on investment* of acquired wind farms was 1 397 1 364 9.4% in 2013 1 210 500 • PLN 86 m - modernization and addition of heat generation to the power units in Elektrownia Ostrołęka B 0 In the Sales Segment, PLN 24 m was invested to improve efficiency of sales and customers service. 2011 2012 2013 Distribution Sales Other & adjustments Generation-other *Return on investment is calculated as annualized EBITDA of the operating three Generation-wind acquisitions farms related to purchase prices allocated to these farms. data according to IFRS 11
Investments and improvement of efficiency of the the Distribution Segment contributed to EBITDA growth Investments in 2013 • Operating expenses (PLN m nominal) Connection of new customers and generators to the grid represented almost half of all expenditures: 1 Justified by ERO Actual opex net of profit from other activities2 Actual operating expenses of the Distribution Segment as % recognized by o At the end of 2013, ENERGA-OPERATOR had a ERO 58% market share in connected RES in Poland 102% 99% 111% 1 000 o The number of connected customers increased by 880 878 858 833 818 over 29 thousand, or 1% of the overall number of 771 800 customers • 600 Over 40% of expenditures was made for grid upgrades 400 o Approx. 1300 km overhead and cable power lines 200 were upgraded. Reduction of headcount: 0 2011 2012 2013 Headcount in the Distribution Segment fell from 6,954 1 Operating expenses excluding profit on other activity were PLN 898 m, in 2012 to 6,079 in 2013. PLN 880 m and PLN 927 m in 2011, 2012 and 2013, respectively. Optimization of procurement: Cost of network losses (PLN m) Cost per unit ratio fell by 13.6% y/y. Justified by ERO Actual What reduced OPEX GAP: Actual cost of grid losses as % recognized by ERO In 2011, the difference between actual operating expenses and costs recognized by ERO as justified was 101% 91% 94% 11% and fully eliminated in 2013. 339 325 323 318 307 298 300 200 100 0 2011 2012 2013 12
Key operating data of the Distribution Segment Volume and price of distributed energy 1 Distribution volumes (GWh) Average tariff (PLN/MWh) 25 000 200 20 444 20 058 19 611 20 000 168 167 15 000 160 166 168 10 000 5 279 153 5 178 5 000 0 120 2011 2012 2013 Q4 2012 Q4 2013 ¹ Average tariff calculated as ratio of billed sales of distribution services and volume of electricity delivered to final customers (MWh); Interruption indices SAIDI SAIFI (unplanned, catastrophic and planned) (unplanned, catastrophic and planned) (Number of minuntes outage duration per customer per year) (Interruptions per customer per year) 700 SAIDI - SAIDI 6 SAIFI - SAIFI hurricane Ksawery 600 hurricane Ksawery 5 500 4 3.37 355 400 0,33 3 5,45 300 603 121 2 3,82 200 3,04 309 1 234 100 0 0 2011 2012 2013 2011 2012 2013 13
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