Pge Polska Grupa Energetyczna S.a. · GPW:PGE
Pge Polska Grupa Energetyczna — FY2014 Earnings Presentation
56 slides from Pge Polska Grupa Energetyczna's earnings presentation, Feb 18, 2015
Slide 1: Q4 & FY 2014 Financial and Operating Results
PGE ~ Energeyecha Q4 & FY 2014 Financial and Operating Results February 18, 2015
Slide 2: Q4 & FY 2014 Financial and Operating Results
Q4 & FY 2014 Financial and Operating Results Y. - President and CEO >
Slide 3: Highlights of FY 2014
Highlights of FY 2014 54.8 TWh Financial PLN 8.1 bn results EBITDA Opole II CAPEX on track Operations PLN 6.3 bn net cash from operations Tur6w initiated Dec 2014 generation (-4% y-0-y) 32.5 TWh Distribution volume (+2%y-0-y) PLN 1.7 bn One-offs Wind capacity: 311 MW Pipeline by 2015YE: 218 MW PLN 3
Slide 4: Poland Germany
240 230 210 220 190 200 170 180 150 130 160 110 140 Poland 90 Germany 120 70 4
Slide 5: Taking action for long-term success - OPOLE II and TUROW projects
Taking action for long-term success - OPOLE II and TUROW projects Opole II (2x~S00 Mwe) Turow (~490 Mwe) Project in line with adopted schedule; e FY2014 developments: - excavation for boilers and turbine halls #5 and #6 completed; - excavation for cooling tower #5 started; - foundation stone for #6
Slide 6: Taking action for long-term success - wind farms
Taking action for long-term success - wind farms ¢ Commissioned to ¢Karwice 40 MW exploitation in March under construction: 2014; - commissioning : ¢ Capacity 28 MW. Q3 2015, Lotnisko 90 MW. under construction: - commissioning : 04 2015; Resko Il 76 MW under construction: - commissioning : RES in 20
Slide 7: Distribution network - key focus to assure grid reliability
Distribution network - key focus to assure grid reliability Focus on customer _—————. * Decrease of ¢ca, 32 ths new interruption time for customers’ connections; end customers - by 11%: ca, 1,667 km- new MV and LV grid lines; ¢ Lower ratio of network losses - from 6.9% in ca. 120 km—new AV 2011 to 6
Slide 8: Ongoing restoration and modernization of existing assets
Ongoing restoration and modernization of existing assets ) (- » ¢ Desulphurization ¢ Desulphurization ¢ Opole installations for installations for a : - Modernization in #3-#12 units; #4-#6 units; units #1, #2 and #4: ¢ Commissioning: 2015; ¢ SO, emission to be under 200 me/Nma - NO, emission to be ¢
Slide 9: Q4 & FY 2014 Financial and Operating Results
Q4 & FY 2014 Financial and Operating Results Magdalena Bartos - Managing Director, CFO
Slide 10: Focusing on the key financial results
Focusing on the key financial results FY diff. | 04 04 diff. FY 2014 PLNm FY 2014 y-o-y | y-o-y 2013 % | 2014 2013 % Sales revenues Soe Fata Sales 28,137 30,145 -2% ' 7,280 7,563 4% ; revenues Recurring* sales {BB 44 EBITDA 8,118 7,837 4% | 1,386 1,476 6% | | ----- nro nnn rn no --4 ! EBITDA Recurri
Slide 11: Summary of generation performance
Summary of generation performance Q4 2014 production (% change y-o-y) FY14 production (% change y-o-y) 1.26 Coal 3.01 (+4%) (+22%) TOTAL 14.42 TWh (1%) TOTAL 54.84 TWh (-4%) (+5%) | | Lignite | Hard coal | | Gas || Pump-storage | Hydro | Wind | Biomass ° Lower production from lignite after decommiss
Slide 12: 7.35 -10% 7.20 7.05 6.90 6.75 6.60 6.45 6.30 6.15 6.00
7.35 -10% 7.20 7.05 6.90 6.75 6.60 6.45 6.30 6.15 6.00 12
Slide 13: Development of EBITDA by major value drivers
Development of EBITDA by major value drivers aD Adjustments | 4az Wholesale price of electricity Margin on retail market Volume of electricity* Cost of fuel (hard coal and biomass) New wind assets** Adverse hydro conditions Cogeneration support Other 2014 EBITDA RECURRING iia * Excluding effects fro
Slide 14: Recurring FY 2014 EBITDA - composition and development
Recurring* FY 2014 EBITDA - composition and development 6,466 3,266 ale 188 , 1 485 35 — . : Conventional Renewables Wholesale Distribution Supply Other EBITDA FY 2014 3,266 351 485 2,378 -180 166 6,466 Share in FY 2014 EBITDA (%) 51% 5% 8% 37% -3% 3% FY2013 3,982 386 983 2,299 411 218 8,279 Change
Slide 15: Capital expenditures in FY 2014
Capital expenditures in FY 2014 PLN 175m PLN 1,508 m TOTAL CAPEX PLN 6.35 bn incl. adj. PLN 374m PLN 914m PLN 3,448 m Modernization & maintenance New projects 39% Investment in conventional generation, renewables and distribution Significant projects a Refurbishment and modernization in Betchatow PL
Slide 16: Fueling company growth with healthy financing structure
Fueling company growth with healthy financing structure Eurobonds program LT loan from BGK Cash pool _ _ rr (- (— >) EUR 2 bn EMTN PLN 1 bnloan ¢ Non-return real cash ¢ Registered in program established agreement with BGK pool; October 2014; inMay 2014, oe in December Operational as of ¢ Incl. 32 co
Slide 17: Division EBITDA & CAPEX outlook for 2015
Division EBITDA & CAPEX outlook for 2015 2015 outlook vs 2014 Main drivers Conventional Generation Recurring higher Wholesale blended price throughout the year to increase by approx. 8-10 PLN/MWh Volumes on lignite and hard coal stable with no major decomissions and comparable modernization times Hi
Slide 18: Additional information
Q4 & FY 2014 Financial and Operating Results Additional information 18
Slide 19: 46,091 45,383 12,642 12,519 22,774 22,314 21,693 44,217 12,073 19,638 18,871 11,306 17,485 41,277
46,091 45,383 12,642 12,519 22,774 22,314 21,693 44,217 12,073 19,638 18,871 11,306 17,485 41,277 41,195 10,938 10,648 39,977 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 19
Slide 20: Economics of the lignite generation remain sound with positive outlook
Economics of the lignite generation remain sound with positive outlook from the forward market CO, allowance (EUA_DEC14) EUR/t ——ep—,,, 59 61 53 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 04114 Hard coal USD/t1 87.2 ee, EO 83.9 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 04/14 PGE average wholesale pri
Slide 21: Key Financials
Key Financials Selected consolidated financial data, IFRS Q4 2014 04 2013 04'14 FY14 FY13 FY14 PLNm PLNm vs. PLN m PLN m vs. Data restated Q4'13 Data restated FY13 Sales 7,280 7,563 -4% 28,137 30,145 -7% including LTC compensations -185 232 nm. -1,539 -301 411% Recurring* Sales 7,094 7,795 -9% 26,59
Slide 22: Computation of recurring EBITDA and recurring net profit to equity
Computation of recurring EBITDA and recurring net profit to equity Summary of one-off adjustments Computation of recurring EBITDA key one-off items 4Q 2014 4Q 2013 FY14 FY13 LTC compensations -185 232 -1,539 -301 LTC adjustment 0 -85 -246 -337 Voluntary Leave Program 237 ie} 404 1 Fixed Assets impai
Slide 23: Key Operating Data
Key Operating Data Net electricity generation by sources (TWh) a, 8 WEE oe ES Lignite-fired power plants 10.07 10.55 -5% 39.22 41.36 -5% Hard coal-fired power plants 2.81 2.68 5% 11.35 11.57 -2% Coal-fired CHPs 0.32 0.29 10% 1.10 111 -1% Gas-fired CHPs 0.76 0.16 375% 1.16 111 5% Biomass-fired CHP 0.
Slide 24: Capital expenditures
Capital expenditures CAPEX for Q4 and Y 2014 (PLN m) Bt, MORES vane vers YS Segment Conventional Generation 1,565 850 84% 4,362 2,722 60% Distribution 738 521 42% 1,508 1,335 13% New clients connection 171 185 -8% 499 542 -8% Distribution grid 328 200 64% 595 473 26% Renewables 132 89 48% 374 196 91
Slide 25: Recurring Q4 2014 EBITDA - composition and development
Recurring* Q4 2014 EBITDA - composition and development 588 3 849 5 - 60 —— bs -29 Conventional Renewables Wholesale Distribution Supply Other 042014 849 60 98 588 -29 35 Share in Q4 2014 EBITDA (%) 53% 6% 37% -2% 2% Q4 2013 1,028 263 560 145 Change (PLNm) -179 -165 28 -110 Change (%) -17% ower elec
Slide 26: Detailed segmental revenues and costs
Detailed segmental revenues and costs Conventional Generation (PLN m) 042014 042013 v6 re FY14 FY13 vena Sales, including 3,339 2,870 16% 12,906 12,211 6% Sale of electricity 2,688 2,670 1% 9,844 10,536 -7% LTC compensations 185 -232 nm. 1,539 301 412% Sale of heat 231 214 8% 675 696 -3% sale roun 1
Slide 27: Detailed segmental revenues and costs
Detailed segmental revenues and costs Renewables (PLN m) 04 2014 04 2013 yobs cota FY14 FY13 veya Sales, including 166 196 -15% 722 734 -2% Sale of electricity 82 86 -5% 325 274 18% Sale of certificates of origin 39 51 -24% 182 217 -16% Cost by kind, including 154 163 6% 586 548 7% D&A 54 56 -3% 212
Slide 28: Detailed segmental revenues and costs
Detailed segmental revenues and costs Wholesale (PLN m) 942014 942013 eee FY14 FY13 vena Sales, including 2,669 3,218 -17% 9,722 12,489 -22% Sale of electricity 1,868 2,661 -30% 7,233 10,252 -29% Sale of certificates of origin 251 210 20% 1,042 904 15% Cost by kind, including 81 95 -15% 282 288 -2%
Slide 29: Detailed segmental revenues and costs
Detailed segmental revenues and costs Distribution (PLN m) 042014 042013 v6 os FY14 FY13 ve ees Sales, including 1,522 1,463 4% 5,775 5,616 3% Revenues from distribution 1,423 1,365 4% 5,439 5,251 4% Other operating revenues 26 30 -13% 107 121 -11% Cost by kind, including 1,267 1,182 7% 4,581 4,361
Slide 30: Detailed segmental revenues and costs
Detailed segmental revenues and costs Supply (PLN m) 042014 042013 woos 2013 FY14 FY13 vena Sales, including 3,213 3,324 -3% 12,371 13,028 -5% Sale of electricity 2,162 2,258 -4% 8,305 8,877 -6% Revenues from distribution 1,042 1,048 1% 4,028 4,085 “1% Cost by kind, including 372 256 45% 1,398 1,112
Slide 31: Conventional Generation - EBIT FY14
Conventional Generation - EBIT FY14 Key Changes in EBIT (PLN m) 4,500 - 4,000 |} a 3,500 | -- =s 3,000 b — =z —_ || 2,500 | 2,000 | 1,500 | 1,000 | 500 + tt) Sale of . Sale of Sale of Cost and Fixed costs . Result one-off electricity electricity sae ee yelow sale of ng Cost of Coster release of at p
Slide 32: Conventional Generation - EBIT Q4 2014
Conventional Generation - EBIT Q4 2014 Key Changes in EBIT (PLN m) 400 - 350 | = 300 | = 250 | 200 | “_ i 100 | 50 |} 0 -50 | -100 © Sale of Saleof — Result of Sale of Cost and Other Other Result electricity- electricity- electricity Revenues produced Sale of Cost of fuel release of Personnel operat
Slide 33: Renewables - EBIT FY14
Renewables (PLN m) - EBIT FY14 Key Changes in EBIT (PLN m) 250 - 200 | oy = 100 | 50 + 0 Revenues Sale of Sale of Sale of from Result electricity - property electricity- Sale of property agreement Fixed Result Fy013 wind rights - wind hydro rights - hydro. with TSO Costs Other FY14 Change 33 10 6 -4
Slide 34: Renewables - EBIT Q4 2014
Renewables (PLN m) - EBIT Q4 2014 Key Changes in EBIT (PLN m) rights - wind rights - hydro. Revenues from agreement with TSO 4 90 86 Result Q4 2014 40 - 30 + 20 + 10 | ol Sale of Result electricity Q4 2013 - wind Change 8 Q4 2013 35 40 042014 32 AA PGE 34
Slide 35: Distribution - EBIT FY14
Distribution (PLN m) - EBIT FY14 Key Changes in EBIT (PLN m) 1,600 - — [| 1,400 - i 7 — 1,200 - 1,000 - 800 - 600 | 400 - 200 | 0 babies Revenue Other Result One-off service - ° from distrib. distribution Energy Transmission Other Result FY13 items difference in service - difference related consumpt
Slide 36: Distribution - EBIT Q4 2014
Distribution (PLN m) - EBIT Q4 2014 Key Changes in EBIT (PLN m) 350 300 250 200 150 100 Z Revenue Revenue Other - from cist. fromaistr. distribution ; Transmission Operating difference difference ete consumption - other in volume in price 33 23 9 -44 1315 116 751 1371 125 795
Slide 37: Wholesale - EBIT FY14
Wholesale (PLN m) - EBIT FY14 Key Changes in EBIT (PLN m) 1,200 - 1,000 - 800 - 600 - bl 400 - 200 | 0 Result Sale of Management Other Result FY13 electricity service FY14 Change -486 -16 1 FY13 965 676 481 193 FY14 190 465 192 464 37
Slide 38: Wholesale - EBIT Q4 2014
Wholesale (PLN m) - EBIT Q4 2014 Key Changes in EBIT (PLN m) 300 , 250 | 200 | 150 | 100 | es 50 | 0 Result Result Sale of Management 94 2013 electricity service Other 04 2014 Change 178 5 3 04 2013 257 193 124 60 042014 15 129 7 87 PGE 38
Slide 39: Supply - EBIT FY14
Supply (PLN m) - EBIT FY14 Key Changes in EBIT (PLN m) 500 400 300 200 100 — (1) -100 200 7 -300 Cost of redemption Cost of redemption Results Margin of green of other property Other Results Change FY13 on electricity certificates rights FY14 299 6 -252 46 FY13 403 1,460 789 a7 24d FY14 1,161 795 27
Slide 40: Supply - EBIT Q4 2014
Supply (PLN m) - EBIT Q4 2014 Key Changes in EBIT (PLN m) 90 - 70 | 50 | 30 + 10 + -10 - -30 - -50 - Margin Result on Q4 2013 electricity Change 34 Q4 2013 38 274 Q4 2014 308 Property rights redemption costs -115 162 277 Operating costs 1 94 95 Result Q4 2014 AL “BCE 40
Slide 41: Debt Structure and Liquidity (as at December 31, 2014)
Debt Structure and Liquidity (as at December 31, 2014) Fixed vs Floating Debt (Drawn Debt) Available Lines of Credit (PLN m) Debt Maturity Profile (Drawn Debt PLN m) Floating 1,400 2400 20% 1,200 2,000 1,000 1,600 800 1,200 600 400 800 200 400 50% ° oS Sees a heeeeree ® oS) SISANREH SARE 80% SESS SE
Slide 42: Debt development by quarters
Debt development by quarters Gross debt and net debt (PLNm) 6,000 5,045 5,000 4,000 3,000 1,897 2,706 2,000 1,000 1586 -899 -2,512 =2,530 2405 2522 aie | -1,020 -2,313 -2,386 -2,922 -3,131 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 mGross debt mNet debt Dec-14 re €xternal long-term debt is mai
Slide 43: Operational model
Operational model Centrally dispatched generating unit (JWCD) -sales / purchase of energy and property rights at the regulated market lod >| |<. | Purchase of energy and COMVENTIOMAL | eh Regulated property rights at the Generation jt Market regulated market paying the market price A Sale of energy
Slide 44: Fundamentals of the distribution business
Fundamentals of the distribution business RAB development* (PLNm) 1,333 = 1,045 1565 1,042 ret Regulated revenue composition* (PLNm) 5,655 5.285 5,443 2,278 2,442 2,597 Remunerated RAB: RAB 2013 CAPEX Deduction RAB 2014 CAPEX Deduction RAB 2015 2013 2014 2015 recognized recognized = Return on RAB =
Slide 45: Q4 2014 Key business flows
Q4 2014 Key business flows Key business flows (illustrative only) Households 14.42 TWh 18.65 TWh 14.26 Twh (04 2013) 1871 Twh (04 2013) Regulated market 2.34 TWh Electricity from power 2.36 TWh (04 2013) plants (under ,exchange |—— | Power exchange 23% obligation’) Electricity from PGE 10.27 TWh co-
Slide 46: PGE cash position provides plenty of headroom in the balance sheet
PGE cash position provides... .. plenty of headroom in the balance sheet Financial strength has been confirmed by rating agencies 2014 9M 2014 Gross Debt (PLNm) 5,045 4,802 Net Cash (PLNm) 899 1,020 Net Debt/LTM EBITDA -0.11x -0.13x Net Debt/Equity -0.02x -0.02x Moody’s Fitch Long-term company ratin
Slide 47: CO2 allowances - regulations and settlement
CO, allowances - regulations and settlement Regulations in the Ill Settlement Period ° As of 2013 only carbon allowances for heat production are received free of charge * Carbon allowances for electricity production are granted free of charge conditionally on investments realized that were included
Slide 48: Pozostałe przychody
• • • • Pozostałe przychody operacyjne • • 48
Slide 49: LTC compensations - current status of court disputes
LTC compensations - current status of court disputes s ied ion in 2011-2013 bi ti Status of court cases: Generators from the PGE Capital Group are in disputes with the ERO President regarding stranded cost compensations in years 2008-2010. Year Opole PP Turéw PP Gorz6w CHP Rzeszéw CHP 2008 Caselat t
Slide 50: Land reclamation accounting policy change (1) - the overburden
Land reclamation accounting policy change (1) - the overburden overburden removal of the overburden lignite excavation reclaimed overburden _ lignite belt conveyors fo} < oO g oO c = a oO =) ! ot a om 3 rel) mul oO =. o [o} < oO a ‘<. =) oa ow zx 2. oul om a iw) U [o} Z. + ome 3 [o} un + a [o} 3 3 [
Slide 51: Land reclamation accounting policy change (2) - the summary
Land reclamation accounting policy change (2) - the summary On January 29, 2015 PGE notified about the change of accounting policy* The rationale behind the change: The drawback of previous method was the sensitivity of financial results to actuarial assumptions, particularly severe in the dynamic m
Slide 52: Land reclamation accounting policy change (3) - the provision in FY14
Land reclamation accounting policy change (3) - the provision in FY14 (PLNm) Provision for land reclamation = present value of costs projected in years 2023 - 2064 PLN 2,926m (FY14 eop)* DRIVERS: + Decline of the discount rate - Decline of inflation Changes in technologic assumptions + Period’s extr
Slide 53: Land reclamation accounting policy change (4) - the impact
Land reclamation accounting policy change (4) - the impact (PLN m) For the Ceteris Paribus summary of accounting change impact on the consolidated figures, please refer to the table below: Impact on the financial results 2013 2014 acc. acc. PLN million prev. chng. restated chng. method impact (new m
Slide 54: • • • • • • • • • • • • • •
• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 54
Slide 55: Investor relations contacts
Investor relations contacts Head of IR Jakub Frejlich aD Tel: (+48 22) 340 10 32 Mob: +48 695 883 902 IR Officers 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 Matgorzata Babska Tel: (+48 22) 340 13 36 Mob: +48 661 778 955 B
Slide 56: Disclaimer
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 pr
PGE Polska Grupa Energetyczna — FY2014 Earnings Presentation on 6ix