TAURON Group’s Q1 2017 Financial Results May 11, 2017
Q1 2017 key data TAURON Group’s Q1 2017 results Q1 2017 vs [PLN m] Q1 2016 4 590 1% Sales revenue 1 185 36% EBITDA 640 98% Net profit* CAPEX 636 (3)% down 0.19 down 0.01 Net debt/EBITDA 2.31x (vs 31.03.2016) (vs 31.12.2016) Q1 2017 operating data Q1 2017 vs Q1 2016 1.51 25% Commercial coal production [t m] 4.89 14% Electricity generation [TWh] 5.30 9% Heat generation [PJ] 13.31 4% Electricity distribution [TWh] 9.12 9% Electricity supply [TWh] * attributable to the shareholders of the parent company 2 2 z 40
Highlights Summary TAURON Sprzedaż (TAURON Supply) terminates long term green certificates purchase agreements February 28 Amendment is signed with RAFAKO-MOSTOSTAL WARSZAWA consortium to the agreement on the construction of the 910 MW generation unit at Jaworzno III Power Plant – the unit’s completion deadline is extended by 8 months, the agreement value March 1 increases by PLN 71m Decision of the Management Board of TAURON Polska Energia on submitting the motion to the Ordinary General Meeting of Shareholders on covering the company’s net loss in the financial year 2016 from the company’s spare capital and not March 13 recommending the use of spare capital to pay out dividend Agreement and amendments related to the conditions of continuing the ”Construction of the CCGT unit at Stalowa Wola ” project March 31 come into force. Repayment of the PLN 581m debt to the institutions (EIB, EBRD, Pekao S.A.) financing ECSW (Stalowa Wola Combined Heat and Power Plant). TAURON Polska Energia is among the laureates of the 2016 Transparent Company of the Year ranking organized by ” Parkiet ” April 6 stock market and investors daily and the Accounting and Taxes Institute. The company was distinguished for its business transparency and market communications quality. Letter of Intent is signed with Grupa Azoty S.A. defining the general principles of cooperation related to the coal gasification project. April 20 Project’s estimated value: EUR 400m to 600m (depending on the selected technology version) 3 3 z 40
Macroeconomic and market situation Poland’s GDP growth rate* and manufacturing PMI Increase of industrial production sold* and (quarterly average)** electricity consumption (change yoy)*** 7,3% 8% 5% 56 6,0% 5,7% 4,3% 5,0% 4,5% 4,9% 5,3% 55 6% 3,8% 4,7% 3,9% 4,3% 4% 3,7% 54 3,7% 3,3% 3,3% 3,6% 3,1% 4% 3,0% 3,3% 3,1% 3,4% 3,3% 3,0% 3,1% 2,6% 2,5%1,5% 53 2,7% 1,8% 3% 52 2% 1,2% 2,5% 2,6% 2,2% 51 0% 1,8% 2% 50 1,3% -2% 49 -0,3% -2,0% 1% 48 -4% 0,5% -3,0% 47 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 0,0%0,0% 0% 46 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 production sold growth rate domestic electricity consumption change GDP growth rate manufacturing industry PMI GDP growth rate forecast Structure of electricity generation in Poland*** [TWh] Electricity prices under one year BASE contracts Average price [PLN/MWh] Volume [GWh] 50 5,3% Y-13 191.60 108 861 44,29 industrial power 42,06 Y-14 160.40 142 841 6,4% 2,83 +4% plants 6,5% 2,72 40 Y-15 168.11 146 932 4,24 +3,7% 9,6% 9,7% 4,09 1,58 renewable energy Y-16 166.47 147 923 +8,8% 3,6% 1,45 3,4% sources Y-17 160.27 76 729 30 14,02 12,09 +16% Y-18 159.74 14 778 gas-fired thermal 28,7% 31,7% power plants 164.73 1 743 Y-19 20 Y-20 170.22 97 lignite-fired power plants Average electricity sales prices on the competitive market (acc. to ERO):: -0,5% 21,73 21,63 51,6% 10 48,8% hard coal-fired 2012: 201.36 PLN/MWh thermal power plants 2013: 181.55 PLN/MWh 0 2014: 163.58 PLN/MWh Q1 2016 Q1 2017 2015: 169.99 PLN/MWh 2016: 169.53 PLN/MWh (forecast) Source: * GUS ** Bankier.pl ***PSE 4 4 z 40
Q1 2017 key financial data Sales revenue [PLN m] Net profit attributable to the parent company’s PLN m 4 590 4 565 shareholders [PLN m] 5 000 700 78 206 183 156 4 500 600 57 18 4 000 238 252 640 500 3 500 1 587 1 691 3 000 400 2 500 300 2 000 323 1 500 200 2 421 2 267 1 000 100 500 0 0 Q1 2016 Q1 2017 Q1 2016 Q1 2017 Electricity Distribution and trading services Heat Property rights Hard coal Other revenue Q1 2017 vs Q1 2016 EBITDA [PLN m] 1 400 1 200 13,9 1 000 995 800 600 1 185 874 400 874 200 0 Q1 2016 reported Q1 2016 comparable Q1 2017 comparable ECSW provision dissolving Q1 2017 reported EBITDA Increase Decrease 5 5 z 40
Q1 2017 key segments results Other [PLN m] Mining Generation Distribution Supply and exclusions* Segment’s revenue 384 1 219 1 733 3 617 (2 365) (29) 191 607 380 37 EBITDA (60) 92 346 377 18 EBIT 29 335 262 0,2 10 CAPEX Individual segments’ contribution to EBITDA [%] PLN m 1 600 1 400 1 185 874 36% 1 200 3% Other and exclusions 1 000 32% Supply 4% 19% 800 Distribution 600 51% 62% 400 Generation 200 Mining 22% 16% 0 -7% -2% -200 Q1 2016 Q1 2017 6 * Items not included in the segments presented 6 z 40
Q1 2017 EBITDA PLN 311m, 36% 1 600 1 400 * 19,2% -7,7% 15,6% 35,0% 10,5% 18,3% 25,8% 212 1 1 200 412 64 1 000 35 417 800 774 600 400 457 200 0 Q1 2016 EBITDA Mining Generation Distribution Supply Other and exclusions Q1 2017 EBITDA EBIT Depreciation and write-downs Segment's increase Segment's decrease EBITDA margin 7 *Other segment’s EBITDA margin 7 z 40
Mining segment – Q1 2017 EBITDA change [PLN m] Financial data [PLN m] 384 80 130 400 254 40 - 27 200 63 29 0 0 -29 2 -29 -65 -60 -104 -40 -69 -65 -200 Q1 Q1 2016 2017 -80 Q1 2016 Sold coal volume Coal production cost Inventory level change Other Q1 2017 Sales revenue EBITDA EBIT CAPEX Commercial coal production volume vs sales per product [Mg m] √ 1,21 • 24.8% production volume increase Q1 2016 1,22 0,11 0,06 0,92 0,06 • 46.5% sales volume increase √ 1,51 √ • 15.5% mining cash cost decrease Q1 2017 1,79 0,19 0,09 1,24 0,21 0,05 1 • Lower headcount (down 279 FTEs on average) √ 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 8 8 z 40
Generation segment – Q1 2017 Financial data [PLN m] EBITDA change [PLN m] 1 400 250 1 272 1 219 1 200 26 200 9 1 000 - 12 191 191 - 23 800 150 600 100 335 400 256 200 89 92 50 191 191 0 Q1 2016 Q1 2017 0 Q1 2016 Electricity margin Heat margin CO2 costs Other Q1 2017 Sales revenue EBITDA EBIT CAPEX RES and cogeneration production Gross production of electricity [TWh] and heat [PJ] 6 0,7 4,89 √ • Electricity and heat sales volumes increase 5 4,31 0,6 0,33 √ 0,41 • CO2 prices decrease 4 0,5 0,41 0,4 0,33 − 3 • Electricity prices decrease 0,13 5,30 4,84 0,3 0,60 4,56 0,13 2 0,51 3,90 0,09 − • RES property rights prices decrease 0,2 0,10 1 0,1 0,20 0,10 0 0,0 Q1 2016 Q1 2017 Q1 2016 Q1 2017 electricity electricity - RES heat biomass water wind cogeneration 9 9 z 40
Distribution segment – Q1 2017 EBITDA change [PLN m] Financial data [PLN m] 800 41 2 000 700 607 1 733 102 8 22 3 1 616 543 600 -5 -107 500 262 252 400 1 000 262 328 300 607 543 200 346 346 292 292 100 0 0 Q1 2016 Distribution Sales volume TSO services' Grid losses Other Tax on grid Other Q1 2017 Q1 2016 Q1 2017 service sales purchase cost distribution assets price services Sales revenue EBITDA EBIT CAPEX EBIT depreciation and impairment charges √ • Increase of approved tariff by 7.2 PLN/MWh (6%) Electricity distribution [TWh] • Higher electricity distribution services sales volume by 572 √ Q1 2016 3,46 4,21 1,96 2,64 12,73 GWh (4.5%), mainly in correlation to the GDP growth rate 0,46 • 67% increase of the transition fee rate included in the cost of − purchasing the transmission services and the RES fee (none in Q1 2017 3,38 4,45 2,03 2,70 13,31 Q1 2016) 0,74 0 5 10 15 • 0.72 pp decrease of the balancing difference indicator, 10 √ PLN/MWh decline of the Group’s electricity balancing price Group A Group B Group C2+C1+R+D Group G Other* *neighboring DSO and export 10 10 z 40
Distribution segment – key parameters Regulatory Asset Base [PLN bn] Customer connection time [in days] 18 200 180 16 16,3 160 15,6 14 14,9 160 140 150 150 12 120 10 100 8 80 6 60 4 40 2 20 0 0 2015 2016 2017 2015 2016 Q1 2017 RAB Customer connection time SAIDI [min.] SAIFI [number] 300 4 276,8 250 3,54 3 3,16 3,00 200 2,93 2,82 204,0 188,0 177,1 177,1 150 2 1,67 100 110,0 1 50 0 0 2015* 2016 Q1 2017 2020 2015* 2016 Q1 2017 2020 SAIDI SAIDI target SAIFI SAIFI target * Method used to calculate the indicators in 2015 was different than the method used under the quality based regulation – 11 11 z 40 the calculation in 2015 took into account the low voltage distribution grid outages
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