PGE Credit Factbook December 2015
•
PGE Group – general information
1
Key Highlights ► PGE combines operating and financial strengths
9M 2015 EBITDA
9M 2015 Revenues
PLN 6.2bn
PLN 21 bn
Market Cap PLN ~25.2 bn (at the end of Q3 2015)
Energy production 54.84 TWh
Installed capacity 12.6 GW at the end of 2014
in 2014
no. 1 in Poland
no. 1 in Poland
Strong Credit Ratings Fitch: BBB+ Moody’s: Baa1
Number of electricity consumers 5.2 m
Q3 2015 Net Debt / EBITDA 0.01x
2
Competitive advantages Largest Polish vertically integrated utility in terms of installed capacity and electricity production active in all segments of power sector except for the highest voltage electricity transmission
EBITDA margin at 29% - highest among Polish power utilities Highly diversified and youngest generation assets in Poland Focused on baseload generation, absolute cost leader in Poland - approx. 70% of power capacity generated from own fuel (2 lignite mines)
Approx. 38% market share in generation Approx. 1/3 of EBITDA from regulated activities (distribution) under a stable and transparent framework Regulated assets operator (Dolna Odra Power Plant and pumped-storage plants) Growing renewables portfolio – 529MW in onshore wind projected at the end of 2015 (currently 441MW after commissioning of 90 MW Lotnisko wind farm in Q4 2015)
Strong investment grade credit ratings with stable outlook by Fitch and Moody’s Strategy for 2014-2020* aimed at keeping the leading position on Polish market with capex of PLN 33 billion intended for development, modernization and replacement of generation assets and PLN 50 billion in total
Plenty of headroom in the balance sheet – net debt/EBITDA at 0.01x at the end of Q3 2015 with heavy capex spending ahead
* Currently under revision 3
PGE Group in the value chain – 2014 data •
Mining •
•
Production net ca. 55 TWh Installed capacity ca. 12.6 GW Sales of heat ca. 18 million GJ 2 Lignite-fired power plants (Bełchatów and Turów) 2 Hard coal-fired power plants (Opole and Dolna Odra) Combined heat and power plants – 8 sites (Szczecin, Pomorzany, Gorzów, Bydgoszcz, Zgierz, Kielce, Rzeszów and Lublin-Wrotków) Hydroelectric power plants (Hydro ca. 97 MW, Pumped-storage ca. 1.5 GW) Wind farms - 311 MW
•
Activity of PSE S.A.
• • • • •
Power generation
•
•
Transmission
Distribution
Wholesale & Supply
2 open pit lignite mines (Bełchatów and Turów) Lignite output 50 million tons p.a.
• • •
Distribution of energy 32.54 TWh Distribution grid: 281,290 km Number of substations: 91,374
• • •
Final consumers 39.60 TWh Wholesale market 62.44 TWh Balancing market 1.10 TWh
4
Value Chain of PGE Group in 2014
Share of EBITDA recurring*
Conventional generation
Renewables
51%
5%
Supply**
Distribution
5%
37% 2,378
305
351
3,266
PLN m 6,466
EBITDA recurring*
• Competitive advantages
• •
Leader of baseload generation Cost-effective fuel base Youngest generation assets
•
Second largest wind power generation in Poland (0.64 TWh)
• • •
•
Market share
38%
11%
2014
* Excluding significant one-off items ** Supply and Wholesale presented as a one business line - Supply
Large SME and mass customer base No 2 on the market in sales volume Competences in modelling and forecasting of the energy market Asset-based trading allowing further development
30%
End customer market
• •
No 2 in Poland in number of customers Stable regulatory environment
PGE Group
26%
5
Value Chain of PGE Group in Q3 2015 Share of EBITDA recurring*
Conventional generation
Renewables
53%
4%
Supply**
Distribution
8%
35% 622
144
75
984
PLN m 1,852
EBITDA recurring*
• Competitive advantages
• •
•
Baseload generation leadership Cost-efficient resource base Relatively young generation assets
•
13.5 TWh generation
•
Onshore wind leader with 351 MW of installed capacity
• • • •
0.61 TWh generation ***
•
Leader in wholesale trade Asset backed trading with growth potential Market modeling competencies 15.43 TWh sold on the wholesale market Biggest supplier in terms of sales volume – 9.77 TWh
* Excluding significant one-off items ** As of Q1’15 Supply and Wholesale will be presented as a one business line - Supply *** Renewables generation includes biomass co-combustion
• • •
2nd biggest customer base – 5.2 million Stable regulatory environment 8.35 TWh supplied in Q3 2015
PGE Group
6
Largest and Most Profitable Energy Group in Poland 2014 28,137 EBITDA of PGE Group PLN million
18,441
Revenues PLN m
10,591
9,855 2014
8 118
2013
7,837
8 118 2012
6 791
2011
6 855
2010
6 798
3 627 EBITDA PLN m
EBITDA margin
2 307
1 915
Energa
Enea
Tauron
PGE
22%
19%
20%
29%
Source: Financial reports of PGE, Energa S.A., Enea S.A. and Tauron Polska Energia S.A. 7
PGE Group Strategy Strengthening of the leading position in electricity generation with the most effective and diversified asset portfolio assuring long term competitive advantage
Leading electricity producer in Poland
Actively pursuing identification and implementation of new growth initiatives focused on value creation
Group actively developing new business areas
1 4
Innovation
2
Preferred and reliable energy supplier
Reliability of supply as well as optimal sales and customer service processes
3 The most effective energy group in Poland
Improvement of effectiveness of Group’s operations in key areas based on best industry standards
8
PGE CAPEX Program for 2014-2020 CAPEX timeline
2014-2020 CAPEX breakdown [Nominal, net of VAT] Development and modernization of distribution networks ~PLN 12.3 bn
Others
New conventional capacity ~PLN 15.2 bn PLN bn 6.35
9% 30% 25% Modernization and restoration of existing generation assets ~PLN 16.3 bn
~PLN 50 bn 3%
New RES capacity ~PLN 1.7 bn
33%
• Between 2014 and 2019 spending on preparation for the commencement of the nuclear program will amount to ~PLN 0.7 bn
2014 2015 2016 2017 2018 2019
9
Capital expenditures in 9M 2015 PLN 163 m
Significant projects
CAPEX in 9M 2015
Construction of Opole II
PLN 1,744 m
PLN 1,138 m
TOTAL CAPEX PLN 5.9 bn (+50%) 32%
36%
PLN 2,148 m New projects
Modernization & maintenance
56%
44%
Distribution
PLN 1,866 m
3%
10%
Renewables
PLN 565 m
Conventional Generation
19%
Refurbishment and modernization in Bełchatów
PLN 578 m
Modernization of distribution assets
PLN 616 m
New developments in distribution area
PLN 523 m
Lotnisko wind farm
PLN 224 m
Resko II wind farm
PLN 192 m
Karwice wind farm
PLN 72 m
Investments in generating capacities incl. conventional generation, renewables and distribution Conventional Generation – modernization, maintenance & other
Conventional Generation - new projects
Renewables
Distribution
Supply & other
•
Opole in decisive phase of investment – intensive assembly works in progress taking advantage of favorable weather conditions
•
Comprehensive refurbishment in Bełchatów since 2010 - PLN 3.6 bn of CAPEX up to the end of Q3’15; currently 2 units in outage, project completion in Q3’16
•
Remaining three wind projects on the path to be completed till the end of 2015 and to lock in green certificates support
10
Simplified ownership structure of PGE Group PGE Dom Maklerski S.A.
100%
PGE Polska Grupa Energetyczna S.A.* the Parent, Corporate Center and Wholesale Company
Brokerage house Exatel S.A.
PGE Sweden AB (publ)
100%
100%
100%
PGE Systemy S.A. Shared Services Center
100%
Telecom operator
PGE OKK Sp. z o.o. Shared Services Center
99.96%
100%
100%
100%
70%
PGE Górnictwo i Energetyka Konwencjonalna S.A.
PGE Energia Odnawialna S.A.
PGE Dystrybucja S.A.
PGE Obrót S.A.
PGE EJ 1 sp. z o.o.
CONVENTIONAL POWER GENERATION
RENEWABLE POWER GENERATION
ELECTRICITY DISTRIBUTION
SUPPLY
NUCLEAR PROJECT
Generation segments
• 2014 and 9M 2015 brought further streamlining of the Group’s structure: • • • •
PGE S.A. received from PGE Obrót S.A. (in form of donation) packages of shares in PGE GiEK S.A. and in PGE Dystrybucja S.A.; Squeeze out of minority shares in PGE GiEK S.A. is progressing; In April 2015 PGE S.A. sold 30% of shares in PGE EJ 1 sp. z o.o. to TAURON Polska Energia S.A., ENEA S.A. and KGHM Polska Miedź S.A.; In July 2015, PGE Energia Odnawialna S.A. finalized the merger with PGE Energia Natury S.A.
• In July 2014 , the State Treasury sold 3.5% package of shares in PGE S.A. decreasing its stake holding below 60%. * Ownership of PGE Polska Grupa Energetyczna S.A.: State Treasury 58.39%, other entities 41.61% 11
•
Financials & funding
12
Financing model of PGE Group Financing model
13
Towards optimal financing structure Secured financing facilities up to H1 2015 • Eurobonds totalling EUR 638 million issued in 2014 under EUR 2 bn EMTN program • Bonds totalling PLN 1 bn under the domestic PLN 5 bn bond program • PLN 1 bn long-term loan from BGK • Current account credits from PKO BP S.A. (PLN 1 bn in April 2015) Pekao S.A. (PLN 1 bn in February 2015) and SG (PLN 250 m in July 2013 to July 2016) • Preferential credits from National and Regional Funds for Environmental Protection and Water Management
Targeted financing structure
Bonds
Acquired in Q3 2015 • Syndicated loan amounting to PLN 5.5 bn • European Investment Bank loan amounting to PLN 2 bn
Bank loans
Sources of future financing • • • •
Extension of the BGK loan + PLN 500 m Pending Eurobonds under 2 bn EMTN program In discussion with EBRD Further preferential credits from National and Regional Funds for Environmental Protection and Water Management
14
Cash Pooling Cash Pooling Signed
in December 2014
Launched
in January 2015
Involves
16 subsidiaries from PGE Capital Group and two banks: PKO BP S.A. and Pekao S.A.
•
Optimized cash flows and more efficient liquidity management
•
Lower external debt needs due to utilization of internal sources
•
Secured liquidity for entities of PGE Group.
•
Lower costs of banking services
Benefits
15
Towards optimal capital structure through leverage
From net cash to more optimal capital structure … Net cash (PLN bn)
Net debt/EBITDA
-0.06
4.1
2.5
3.1
0.9
0.01
-0.61
-0.34
-0.39
-0.11
8.2 6.7
6.0
5.5
2010 *illustrative only
2011
8.4
7.4
6.9
6.6
7.9
max. 2.5
2012
Dividends paid or proposed (PLN bn)
2013 Capex (PLN bn)
6.3
2014
Mid-term*
Cash flows from operating activities (PLN bn)
16
Financial aspirations*
•
Level of EBITDA (PLN bn)
•
Maintaining the current dividend policy***
•
Effects of planned activities relating to improvement of effectiveness – sustainable impact on EBIT
7.8
8.1
8-9**
2013
2014
2015-2020
40-50% of consolidated annual net profit
PLN 1.5 bn
PLN 0.5 bn
Efektinroku 2013 Effect Efekt po 2015 Effect 2013 after 2016
•
Maintaining long-term ratings
•
Planned CAPEX 2014-2020
•
Annual R&D spending between 2015 and 2020
Moody’s Baa1 Stable outlook
Fitch BBB+ Stable outlook
~PLN 50 bn min. 1.5% of net profit
*Source: PGE Group Strategy for 2014-2020; based on market and macroeconomic assumptions adopted by PGE ** PGE has commenced verification of macroeconomic and operational assumptions *** Policy amended, for details see slide no 24
17
Focusing on the key financial results PLNm
Q3 2015
Sales revenues
6,914
Q3 2014
6,649
y-o-y %
4%
9M 2015 9M 2014
21,158
20,857
y-o-y %
1%
9M’15 Sales
21,158 20,857
Recurring Sales
20,715 19,503
EBITDA
1,995
1,740
15%
6,214
6,813
-9%
Recurring* EBITDA
1,852
1,558
19%
5,525
4,885
13%
Recurring* EBITDA
1,029
378 172%
-4,026
3,199
n.a.
Net profit (loss) to equity
0.57
0.21 171%
1.72
1.75
-2%
Net profit (loss) to equity EPS ex. impairment**(PLN)
6,214 6,813
EBITDA
5,525 4,885
-4,026
3,199 2,651 2,022
Recurring* net profit to equity 9M 2015
Net cash from operating activities CAPEX Net debt (end of period)
3Q’15
2,255
2,849
2,505
1,627
101
462***
-21% 54%
5,217 5,837
4,433 3,859
18% 51%
Sales
6,914 6,649
Recurring Sales
6,772 6,457
EBITDA
1,995 1,740
Recurring* EBITDA
1,852 1,558
Rating
Outlook
Net profit (loss) to equity
Fitch
BBB+
Stable
Recurring* net profit
Moody’s
Baa1
Stable
Credit ratings
9M 2014
to equity
*Recurring = excluding significant one-off items (for details please see page 25) ** Basis for the dividend computation according to the amended Dividend Policy *** As at June 30, 2015
3Q 2015
1,029 378 949 567 3Q 2014
18
Composition of net debt 2011-2015
In PLN m A. Cash
September 30, December 31, December 31, December 31, December 31, 2015 2014 2013 2012 2011 903
1,327
578.3
639.6
240.9
3,489
4,587
4,970.6
3,755.2
3,622.8
0
3
4.1
3.8
5.4
4,612
5,917
5,553.0
4,398.6
3,869.1
E. Investments held to maturity and loans and receivables
124
27
100.0
10.6
2,298.4
F. Short-term debt with banks and current part of long-term debt
252
356
525.9
809.3
693.8
1
1
1.9
2.2
3.9
252
357
527.8
811.5
697.7
(4,484)
(5,587)
(5,125.2)
(3,597.7)
(5,469.9)
948
1,008
992.0
1,083.0
1,335.6
3,636
3,679
1,000.0
0.0
0.0
1
1
1.9
2.3
5.8
4,585
4,688
1,993.9
1,085.2
1,341.4
101
(899)
(3,131.3)
(2,512.4)
(4,128.5)
B. Cash equivalents C. Securities held for trading and available for sale D. Liquidity (A) + (B) + (C)
G. Other short-term financial debt H. Short-term financial debt (F) + (G) I. Short-term financial debt, net (H) - (D) - (E) J. Long-term bank loans and advances K. Bonds issued L. Other long-term loans and advances or other commitments M. Long-term financial debt (J) + (K) + (L)
N. Net financial debt (I) + (M)
19
Debt development by quarters Gross debt and net debt (PLN m) 6 000 5 000
4 660
4 802
5 045
4 811
4 822
4 838
4 000 2 706
3 000 2 000
2 405
2 522
2 718
1 586
1 000 266
462
101
0 -1 000
-1 020
-2 000 -3 000 -2 530
-1 921
-2 313 -2 922
-899
-2 386 -3 131
-4 000 Mar-13
•
Jun-13
Sep-13
Dec-13
Mar-14 Gross debt
Jun-14 Net debt
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
External long-term debt is mainly drawn by PGE Polska Grupa Energetyczna S.A. (the parent company) and PGE Sweden AB (Swedish SPV for Eurobonds issues). Some historical investments loans exist in PGE GiEK S.A. (Conventional Generation company)
20
Debt Structure and Liquidity (as at September 30, 2015) Fixed vs Floating Debt (Drawn Debt) Floating 18%
Fixed 82%
Issues under the EMTN program
Bank loans loans repayment repayment schedule schedule (PLN (PLN m)* m)* Bank 2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0
Drawn Debt by currency
PLN 28%
EUR 68%
USD 3% CHF 1%
* Illustrative only, assumption of full utilization of available bank loans (syndicated loan, BGK and EIB loans)
Value
EUR 500,000,000
EUR 138,000,000
Tenure
5 years
15 years
Maturity date
June 9, 2019
August 1, 2029
Coupon
1.625% annual
3% annual
Rating
BBB+ (Fitch); Baa1 (Moody’s)
BBB+ (Fitch)
ISIN Code
XS1075312626
XS1091799061
21
Debt maturity profile Debt maturity profile (PLN m) as at September 30, 2015
2 400
2 000
1 600
1 200
800
400
0
22
Financing structure In order to manage liquidity and capital expenditures of the PGE Group a range of external financing instruments is used: Bonds’ programs, Investment credits, Preferential credits, Current account credits
External credit lines utilisation as of September 30, 2015 (PLN m)
Current financing instruments as of September 30, 2015 (PLN m)
6 000
7 000
5 000
6 000 5 000
4 000
4 000 3 000 3 000 2 000
2 000
1 000 0
1 000 BOŚ
NFOiŚ
NIB
UBS
Drawn
WFOiŚ
Current account credit
Domestic bonds' program
Undrawn
EMTN program
Syndicated loan
BGK
0 Current account credit
Bonds Drawn
Credits (preferential)
External loans
Undrawn
23
Dividend policy and historical dividend payments New dividend policy
Distribution of profit for 2014
PGE’s dividend policy states that the company will distribute 40-50% of the consolidated net profit adjusted by the value of impairment loss for a given year.
The Annual General Meeting accepted the Management Board proposal regarding the dividend payout, i.e. PLN 0.78 per share.
Timeline Dividend day was September 24, 2015. Dividend was paid on October 15, 2015.
Policy is sustainable in the course of the investment programme and will be periodically verified.
Cash dividend
Approx. 0.89 PLN attributed to sale of Polkomtel
2.64
2.23
2.20 1.68
1.95
1.83
1.72 1.10
0.76
2009
0.86
0.78
0.65
2010
2011 Dividend per share (PLN)
2012
2013
2014
Earning per share (PLN)
24
•
Rating
25
PGE cash position provides…
… plenty of headroom in the balance sheet
Financial strength has been confirmed by rating agencies
Q3 2015
H1 2015
Gross Debt (PLNm)
4,838
4,822
Net debt (PLNm)
101
462
Net Debt/LTM EBITDA
0.01x
0.06x
Net Debt/Equity
0.003x
0.01x
Moody’s
Fitch
Long-term company rating (IDR)
Baa1
BBB+
Rating outlook
Stable
Stable
Date of rating assignment
September 2, 2009
September 2, 2009
Date of the latest rating confirmation
June 2, 2015
May 21, 2015
Senior unsecured rating Date of the latest rating change
BBB+ May 26, 2014
August 4, 2011
Date of the latest rating confirmation
May 21, 2015
Long-term national rating
AA- (pol)
Date of rating assignment
August 10, 2012
Date of latest rating confirmation
May 21, 2015
26
Key rating drivers – BBB+ stable by Fitch „…The affirmation is driven by PGE's strong market position in the Polish electricity sector and a conservative financial
profile. The ratings are constrained by the fairly low share of the regulated network business in PGE's EBITDA, limited diversification of generation sources, high average carbon dioxide (CO2) emissions per MWh and Fitch's expectations of declining margins in the company's core business of conventional generation. We project that large capex plans will increase funds from operations (FFO) adjusted net leverage to about to 2x in 2017 and close to 3x in 2020 from close to zero net leverage at end-March 2015. We view net leverage of 3x as the maximum level for the ratings. …”
RATING SENSITIVITIES Positive: Future developments that could, individually or collectively, lead to positive rating actions include: - PGE currently has large financial headroom in its ratings, although this is likely to gradually decrease by 2017 due to rising debt. A quicker than expected recovery of EBITDA from 2016 could translate into better projected credit metrics, assuming the capex plan is unchanged or lowered. Projected FFO adjusted net leverage below 2x on a sustained basis, supported by management's more conservative leverage target, could be positive for the ratings. - The ratings could be positively affected by a more diversified fuel generation mix and lower CO2 emissions per MWh, which together with planned efficiency improvements, would result in a stronger business profile.
Negative: Future developments that may, individually or collectively lead to negative action include: - Deterioration of credit ratios, including FFO adjusted net leverage above 3x and FFO fixed charge cover below 5x on a sustained basis. - Acquisitions of stakes in coal mines or other form of support for state-owned mining companies under financial pressure, such as Kompania Węglowa - leading to net leverage above 3x or substantially worsening PGE's business profile could be negative for PGE's ratings.
27
Key rating drivers – Baa1 stable by Moody’s „…PGE's rating assessment reflects the company's strong position as a dominant generator of electricity in Poland, and
as an integrated energy group. The company benefits from a low cost lignite-fueled generation fleet. However, these positives are offset by the exposure to power markets in the weak price environment and high exposure to carbon, albeit reduced due to the free carbon dioxide emission allowances. The assigned rating further takes into account an expected increase in leverage due to negative free cash flows arising from a significant capital expenditure programme…”
„WHAT COULD CHANGE THE RATING UP/DOWN Upward rating pressure is unlikely in the short to medium term given the challenges that PGE faces in terms of carrying out its capital investment programme and the anticipated decline in its credit metrics. Over the medium to long term, we would consider an upgrade in the event of improved clarity around the future shape of the energy market in Poland coupled with a successful implementation of the investment projects and a strong financial profile of the group.
Negative pressure on PGE's rating would develop if (1) power prices and spreads declined further so that rating guidance was not met; (2) the group's FFO interest coverage ratio were to fall below 5.0x, FFO/net debt were to decline below 30% on a sustainable basis; (3) there was a material adverse change in the regulatory framework in Poland; or (4) the group were to embark on the nuclear investment without adequate financial and contractual risk protections. In addition, a deterioration in the credit quality of the Government of Poland and/or reduction in the support assumptions currently incorporated into our assessment would likely put a negative pressure on PGE's ratings.”
28
•
Business details
29
Conventional Generation – Power Fleet ► PGE has the most competitive conventional power portfolio based on its own lignite resources 9M 2015 production (% change y-o-y)
Overview •
0,93
PGE is the leader in domestic generation and includes:
‒ ‒
Extraction of lignite (2 lignite mines)
(-2%)
Generation of electricity and heat from conventional sources (4 conventional power plants and 8 CHP plants)
0.54
•
The total capacity of the power generation plants amounts to 10.7 GWe
•
Power plants operate mainly in baseload thanks to cost-efficient fuel resources
•
(15%)
Fuel type
Achievable Capacity (MWe) H1 2015
Achievable Capacity (MWe) 2014
lignite, biomass
5,388
5,298
Opole
hard coal, biomass
1,532
1,492
Turów
lignite, biomass
1,488
1,499
hard coal, biomass
1,362
1,362
9,770
9,651
903
985
10,673
10,636
Power Plant
Bełchatów
Dolna Odra Total Power Plants Total CHP Total Capacity
high-methane natural gas, hard coal, biomass
(-1%)
0,30 (-12%) 0,37(-5%)
The lignite fleet remains highly profitable, while the gas and hard coal power plants margins are to a greater extend under pressure
List of Power Plants and Combined Heat and Power
Coal 8,90
Others
TOTAL 41.73 TWh (3%)
Lignite 29,39 (2%)
1,30 (225%)
30
Conventional Generation – Lignite Mining ► PGE lignite mines represent a significant competitive advantage
Lignite resources Deposit
Resources – as at the end of 2014 [million tonnes]
Output in 2014 [million tonnes]
Bełchatów – Field Szczerców
geological industrial
874 662
15.8
Bełchatów – Field Bełchatów
geological industrial
137 92
26.6
Turów
geological industrial
372 325
7.6
Lignite reserves • The Group is the leader of lignite mining, with 78% of domestic extraction • Approx. 70 % of the power capacity is generated from lignite • Power plants operate mainly in baseload thanks to cost-efficient fuel resources and are very well positioned in the merit order
Broad pipeline of long term strategic options • PGE had already secured its rights to potential future new lignite resources • Future conventional investments conditional upon CO2 policy, strategic partnerships and implemented support mechanisms
31
Renewables - overview ► PGE is growing its renewable portfolio RES generation* - Poland TWh 20 18 16 14 12 10 8 6 4 2 0 Source: ARE * incl. biomass
19.6
+58%
Overview
•
Over past 4 years PGE onshore wind installed capacity increased from 30MW in 2011 to 311 MW in 2014.
•
New support scheme will replace green certificates regime (for new projects). The auction mechanism will reward only the most efficient and cost-effective technologies.
•
PGE has a significant pipeline of wind projects aiming at 529 MW installed wind capacity till the end of 2015
•
At the moment there is still uncertainty related to the RES support as of 2016 – particularly auction final price and volume to be purchased.
16.4
16.3 12.4
2011
2012
2013
2014
PGE’s installed capacity 2014 Type
PGE – installed wind capacity
expected 529.0
MW 600 500 400
311.0 283.2
300
+10%
200 100
+70%
138.2 30.0
+105%
+361%
Wind
2012
2013
2014
2015
Installed capacity (MW)
Annual energy generation (GWh)
10
311.0
427.3
Hydro (run-of-river)
29
96.7
329.2
RES TOTAL
39
407.7
756.5
Pumped-storage power plants
2
1,216.0
521.8
Pumped-storage plants with natural flow
2
291.5
165.5
Pumped-storage TOTAL
4
1507.5
687.3
1,915.2
1,443.8
0 2011
No. Of Units Operating
TOTAL
32
Distribution segment overview ► Distribution activities provide regulated stable and predictable cash flows Electricity distribution network overview
Key operational data Operational data
Unit
Number of stations
pieces
91,374
90,685
MVA
28,714
28,178
Capacity
2014
2013
Length of power lines
km
281,290
279,704
HV lines
km
10,096
10,079
MV lines
km
109,054
108,571
LV lines
km
162,140
161,054
Grid loss ratio*
%
6.3%
6.5%
min
474
528
SAIDI ratio**
SAIDI - reduction target 600 500
Distribution Position
-10%
400
•
Operates in the area of 122.8 th sq. km and supplies electricity to over 5.2 million customers
• •
Includes supply of electricity to final off-takers through the grid Revenues are dependent on unit distribution tariffs that are accepted by the ERO President assuming full coverage of justified costs and market level of return on distribution assets
-50%
300 200 100 0 5
100
200
300 400
500
2013
2014
2020
SAIDI (in minutes) * ratio calculation: (volume of energy inducted to the grid of the Distribution System Operator –volume of energy taken from that grid)/ volume of energy inducted to the grid of the Distribution System Operator ** ratio calculation: (duration of long and very long breaks x number of off-takers exposed to the effects thereof)/number of off-takers
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Fundamentals of the distribution business RAB development* (PLNm) 1,333
14,095
13,807
RAB 2013
1,565
1,045
Regulated revenue composition* (PLNm) 5,285
1,042
14,618
CAPEX Deduction RAB 2014 CAPEX Deduction RAB 2015 recognized recognized
WACC: Remunerated RAB:
5,655
5,443
2 278
2 442
2 597
885
972
1 008
985
1 003
1 050
1 137
1 027
999
2013 2014 Return on RAB Transmission costs
2015 Amortization Other costs
2013
2014
2015
8.95%
7.28%
7.20%
2013
2014
2015
92%
100%
95%
* Based on a Tariff 34
Supply ► PGE has a large customer base and growing sales of electricity Supply branches
Supply and wholesale position
• The total size of the power supply market in Poland • • •
amounts to approx. 160TWh. The Group supplies to more than 5 million customers. Free electricity market for industrial and commercial customers. Households are ¼ of the market and customers’ prices and regulated by tariff „G” approved by the ERO.
Update of PGE’s trading strategy
• Target to maximize margin on the whole value chain. • Better risk management related to increased volatility • SUPPLY
• •
of both electricity prices and green certificates. Offer expansion both from the product and services perspective. New marketing offers including dual fuel and auxiliary services. Focus on customer: account management and support.
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Business model Centrally dispatched generating unit (JWCD) sales / purchase of energy and property rights at the regulated market
Conventional Generation Company = Segment
Regulated Market
Sale / purchase of energy and property rights directly to/from PGE
Retail and Wholesale Companies used to be presented as two distinct segments. Since Q1’15 they are being presented as a one segment „Supply”
Supply segment Wholesale Company
RES Company
Purchase of energy and property rights at the regulated market paying the market price
Sale of energy and property rights to retail business
Retail Company
production of energy from wind and water
Sale of energy to final recipients
= Segment Sale of energy and property rights to contracted parties
Other customers
*Simplified illustration – contains only the key flows
Sale of energy for covering the network losses at distribution business
Distribution Company = Segment
property rights
Final customers
energy
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Investor relations contacts
Head of IR
IR Officers
Jakub Frejlich Tel: (+48 22) 340 10 32 Mob: +48 695 883 902
Krzysztof Dragan Tel: (+48 22) 340 15 13 Mob: +48 601 334 290
Filip Osadczuk Tel: (+48 22) 340 12 24 Mob: +48 695 501 370
Małgorzata Babska Tel: (+48 22) 340 13 36 Mob: +48 661 778 955
Bernard Gaworczyk Tel: (+48 22) 340 12 69 Mob: +48 661 778 760
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Disclaimer This presentation has been prepared by the management of PGE Polska Grupa Energetyczna S.A. (the “Company” or “PGE”) and other entities and is furnished on a confidential basis only for the exclusive use of the intended recipient and only for discussion purposes. This document has been presented to you solely for your information and must not be copied, reproduced, distributed or passed (in whole or in part) to the press or to any other person at any time. By attending this meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations. This presentation does not constitute or form part of and should not be constructed as, an offer to sell, or the solicitation or invitation of any offer to buy or subscribe for, securities of Company, any holding company or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investments decision whatsoever. We operate in an industry for which it is difficult to obtain precise industry and market information. Market data and certain economics and industry data and forecasts used, and statements made herein regarding our position in the industry were estimated or derived based upon assumptions we deem reasonable and from our own research, surveys or studies conducted at our request for us by third parties or derived from publicly available sources, industry or general publications such as newspapers. This presentation and its contents are confidential and must not be distributed, published or reproduced (in whole or in part) by any medium or in any form, or disclosed or made available by recipients to any other person, whether or not such person is a Relevant Persons. If you have received this presentation and you are not a Relevant Person you must return it immediately to the Company. This presentation does not constitute a recommendation regarding the securities of the Company. This presentation and any materials distributed in connection with this presentation are not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. This presentation includes “forward-looking statements”. These statements contain the words “anticipate”, “believe”, “intend”, “estimate”, “expect” and words of similar meaning. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding the Company’s financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to the Company’s products and services) are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future. These forward-looking statements speak only as at the date of this presentation. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The Company cautions you that forward-looking statements are not guarantees of future performance and that its actual financial position, business strategy, plans and objectives of management for future operations may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. In addition, even if the Company’s financial position, business strategy, plans and objectives of management for future operations are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in future periods. The Company does not undertake any obligation to review or confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation.
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