TAURON Group’s H1 2018 Financial Results August 23, 2018
H1 2018 key data TAURON Group’s H1 2018 results H1 2018 vs [PLN m] H1 2017 9 202 5% Sales revenue 2 194 2% EBITDA 567 (44)% Net profit* CAPEX 1 480 (1)% up 0.13 up 0.03 Net debt/EBITDA 2.30x (vs 30.06.2017) (vs 31.12.2017) TAURON Group’s H1 2018 operating data H1 2018 vs H1 2017 2.53 (24)% Commercial coal production [tonne m] 7.55 (20)% Electricity generation [TWh] 6.73 (5)% Heat production [PJ] 26.01 1% Electricity distribution [TWh] 17.20 - Electricity retail supply [TWh] Net profit attributable to the shareholders of the parent company 2 of 34
Q2 2018 key data TAURON Group’s Q2 2018 results Q2 2018 vs [PLN m] Q2 2017 4 377 5% Sales revenue 902 (3)% EBITDA (69) - Net profit* CAPEX 912 6% up 0,13 up 0,03 Net debt/EBITDA 2.30x (vs 30.06.2017) (vs 31.12.2017) TAURON Group’s Q2 2018 operating data Q2 2018 vs Q2 2017 1.10 (39)% Commercial coal production [tonne m] 3.62 (21)% Electricity generation [TWh] 1.05 (41)% Heat production [PJ] 12.59 2% Electricity distribution [TWh] 7.93 (2)% Electricity retail supply [TWh] Net profit attributable to the shareholders of the parent company 3 of 34
Highlights Summary March 8 Obtaining of the new financing to complete the construction of the CCGT unit at Stalowa Wola March 9 Extending the period of availability of funds under the Bond Issue Program until 2022 Signing of the agreement with the Polish Development Fund defining the terms of engagement in the construction of the 910 MW unit at March 28 Jaworzno III Power Plant worth up to PLN 880 million Dissolving of the provisions related to employee benefits at TAURON Wytwarzanie – a positive impact on Q1 2018 EBITDA: PLN 230 April 6 million April 23 910 MW unit at Jaworzno III Power Plant completes a successful pressure test June 13 TAURON and PFR establish the first Corporate Venture Capital fund for developing innovations 4 of 34
Macroeconomic and market situation Poland’s GDP growth rate* and manufacturing Increase of industrial production sold* and electricity consumption (change yoy)*** PMI (quarterly average)** PKB PMI 8,5% 9% 58 9% 7,3% 8% 8% 7,0% 7% 7% 6,4% 56 6,0% 5,7% 5,5% 6% 6% 5,2% 4,9% 5,2% 5,1% 5,3% 4,6% 4,4% 5% 5% 3,3% 3,6% 4,0% 3,9% 4,3% 4,2% 3,8% 54 3,1% 3,4% 2,7% 2,7% 4% 4% 3,0% 2,5% 3% 3% 52 1,5% 2% 2% 1% 1% 0% 50 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 2018 2015 2016 2017 2018 GDP growth rate Manufacturing PMI Sold production growth rate Electricity prices under one year BASE Structure of electricity generation in Poland*** [TWh] contracts Average price Volume [GWh] 100 [PLN/MWh] 83,01 -2,1% 81,27 Y-13 191.60 108 861 Y-14 160.40 142 841 6,2% 80 5,14 -2,6% 5,01 6,2% Industrial power plants Y-15 168.11 146 932 9,8% 8,14 -10,0% 7,33 9,0% 3,8% 3,17 +51,0% 4,79 Y-16 166.47 147 923 5,9% Renewable energy 60 Y-17 160.27 76 729 32,0% sources 26,55 24,19 29,8% -8,9% Y-18 165.98 65 227 Gas-fired thermal Y-19 197.40 65 534 40 power plants Y-20 202.87 4 480 Lignite-fired thermal Average electricity sales prices on the competitive market (acc. -0,1% 20 power plants 40,01 39,96 49,2% 48,2% to ERO): Hard coal-fired thermal 2014: 163.58 PLN/MWh power plants 0 2015: 169.99 PLN/MWh H1 2017 H1 2018 2016: 169.70 PLN/MWh 2017: 163.70 PLN/MWh 2018: 184.94 PLN/MWh (estimate) Source: * GUS ** Bankier.pl ***PSE 5 of 34
H1 2018 key financial data Sales revenue [PLN m] Net profit attributable to the parent company’s shareholders [PLN m] 10 000 8 758 9 202 1 200 438 9 000 426 1 000 278 8 000 334 7 000 3 379 800 3 253 6 000 1 004 5 000 600 348 372 4 000 400 3 000 567 4 759 4 373 2 000 200 1 000 0 0 H1 2017 H1 2018 H1 2017 H1 2018 Electricity Heat Distribution and trading services Hard coal Other revenue H1 2018 EBITDA vs H1 2017 EBITDA [PLN m] 2 500 55 -2,0% 2 000 2 194 2 152 - 203 2 004 - 230 1 964 1 500 1 000 500 0 Reported H1 2017 One-off bonus - Dissolving of the ECSW Comparable H1 2017 Comparable H1 2018 Dissolving of the Reported H1 2018 EBITDA agreement with the provision EBITDA EBITDA provision related to EBITDA workforce employee benefits in the Generation segment 6 of 34
Q2 2018 key financial data Net profit attributable to the parent Sales revenue [PLN m] company’s shareholders [PLN m] 4 377 4 167 124 364 178 1 601 1 562 90 120 2 342 2 106 -69 Q2 2017 Q2 2018 Q2 2017 Q2 2018 Electricity Heat Distribution and trading services Hard coal Other revenue Q2 2018 EBITDA vs Q2 2017 EBITDA [PLN m] 1 200 55 1 000 -7,2% - 13 972 930 800 902 902 600 400 200 0 Reported Q2 2017 EBITDA One-off bonus - agreement Dissolving of the ECSW Comparable Q2 2017 Comparable Q2 2018 Reported Q2 2018 EBITDA with the workforce provision EBITDA EBITDA 7 of 34
Key segments’ H1 2018 results Other and [PLN m] Mining Generation Distribution Supply exclusions * Segment’s revenue 679 2 119 3 464 6 615 (3 675) (66) 592 1 336 326 6 EBITDA (866) 741 796 323 (39) EBIT 91 570 793 4 22 CAPEX Individual segments’ contribution to EBITDA [%] PLN m 3 000 2 152 2% 2 194 2 500 Other and exclusions 0,3% 2% 15% 2 000 25% Supply 1 500 Distribution 61% 1 000 56% Generation 500 27% Mining 17% 0 -0,2% -3% -500 H1 2017 H1 2018 Items not included in the segments presented 8 of 34
Key segments’ Q 2 2018 results Other and [PLN m] Mining Generation Distribution Supply exclusions * Segment’s revenue 294 947 1 675 3 161 (1 700) (76) 126 698 149 5 EBITDA (843) 369 425 147 (19) EBIT 51 327 520 4 9 CAPEX Individual segments’ contribution to EBITDA [%] PLN m (3)% 930 902 1% Other and exclusions 1% 16% 18% Supply Distribution 77% 64% Generation Mining 15% 3% 14% -8% Q2 2017 Q2 2018 * Items not included in the segments presented 9 of 34
H1 2018 EBITDA PLN m PLN 42m, 2% 3 000 24,6% -9,7% 27,9% 38,6% 4,9% 21,4% * 23,8% 133 2 500 227 2 194 2 152 - 219 - 38 1 239 2 000 857 - 61 1 500 1 000 955 1 296 500 0 H1 2017 EBITDA Mining Generation Distribution Supply Other and exclusions H1 2018 EBITDA EBIT Depreciation and write-offs Segment's increase Segment's decrease EBITDA margin * Other operations segment’s EBITDA margin 10 of 34
Q2 2018 EBITDA PLN m PLN (28)m, (3)% 1 200 22,3% -25,9% 13,3% 41,7% 4,7% 22,4% 20,6% * 1 000 930 902 102 445 -16 -2 822 800 -101 -11 600 485 400 200 79 0 Q2 2017 EBITDA Mining Generation Distribution Supply Other and exclusions Q2 2018 EBITDA EBIT Depreciation and write-offs Segment's increase Segment's decrease EBITDA margin Other operations segment’s EBITDA margin 11 of 34
Mining Segment – H1 2018 EBITDA change [PLN m] Financial data [PLN m] 1 000 782 800 679 600 400 91 56 200 0 0 -5 54 -66 -5 -50 -66 -66 -200 10 133 -8 -100 -400 -150 -600 -200 -800 -250 -250 -866 -1 000 -300 H1 H1 H1 2017 Hard coal sales Hard coal sales Coal production Change of Other H1 2018 2017 2018 volume price cost inventory level Sales revenue EBITDA EBIT CAPEX Commercial coal production volume vs sales per product [Mg m] √ • Increase of the sold coal unit price H1 2017 - • Decline of commercial coal production H1 2018 • 37.6% higher mining cash cost* (up from 170 PLN/Mg - 1 to 234 PLN/Mg) 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 Commercial coal production Large size lump coal sales Medium size lump coal sales Intra-Group coal dust sales Coal dust sales outside the Group Coal sludge sales Total costs excluding depreciation, impairment charges, costs not directly related to coal production and costs that do not have a 12 of 34 permanent impact on the Company’s cash flow
Mining Segment – Q2 2018 EBITDA change [PLN m] Financial data [PLN m] 398 400 294 200 40 51 25 27 20 25 0 0 -6 -76 -20 -200 -40 -400 14 0,1 -60 -76 51 -80 -600 -4 -100 -800 -120 -843 -140 -161 -1 000 -160 Q2 Q2 2017 2018 Q2 2017 Hard coal sales Hard coal sales Coal production Change of Other Q2 2018 volume price cost inventory level Sales revenue EBITDA EBIT CAPEX Commercial coal production volume vs sales per product [Mg m] 1,81 √ • Increase of the sold coal unit price Q2 2017 0,06 0,22 0,11 1,17 0,21 1,77 - • Decline of commercial coal production 1,10 Q2 2018 0,13 0,08 0,71 0,09 0,07 1,07 • 78.5% higher mining cash cost* (up from 151 PLN/Mg - 1 to 269 PLN/Mg) 0,0 0,2 0,4 0,6 0,8 1,0 1,2 1,4 1,6 1,8 2,0 Commercial coal production Large size lump coal sales Medium size lump coal sales Intra-Group coal dust sales Coal dust sales outside the Group Coal sludge sales Total costs excluding depreciation, impairment charges, costs not directly related to coal production and costs that do not have a permanent impact on the Company’s cash flow 13 of 34
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