Pge Polska Grupa Energetyczna S.a. · GPW:PGE
Pge Polska Grupa Energetyczna — H1 2015 Earnings Presentation
49 slides from Pge Polska Grupa Energetyczna's earnings presentation, Aug 31, 2015
Slide 1: H1 & Q2 2015 Financial and Operating Results
H1 & Q2 2015 Financial and Operating Results August 31, 2015
Slide 2: Key takeaways
H1 & Q2 2015 Financial and Operating Results Key takeaways Marek Woszczyk - President and CEO 2
Slide 3: Highlights of H1 & Q2 2015
Highlights of H1 & Q2 2015 Q2 PLN 2.1 bn PLN 1.7 bn PLN 1.1 bn PLN 1.7 bn Financial EBITDA net cash NP to equity recurring from excluding results EBITDA operations impairment 13.1 TWh 8.0 TWh 9.4 TWh Q2 Net Distribution Sales to end operations generation volume users (+0% y-o-y) (+4% y-o-y) (-2% y-o
Slide 4: Dividend – PGE trademark
Dividend – PGE trademark New policy adopted: Dividend to be paid from consolidated net profit adjusted by impairments Healthy cash generation Strong balance sheet Ability to pay considerable dividend Low leverage Dividend from 2014 profit • AGM approved Management’s proposal of PLN 0.78 per share di
Slide 5: External indicators behind impairment tests
External indicators behind impairment tests. Negative impact on conventional generation margins Fossil fuel prices • Global decline of fossil fuels prices persisting in medium term • Hard coal as marginal fuel drives the electricity prices down • Merit order flattening resulting in lower margins in
Slide 6: Macroeconomic environment
Mixed macroeconomic impact (decent GDP but weak commodities) Macroeconomic environment Q2 2015 Q2 2014 H1 2015 H1 2014 Real GDP growth (y-o-y) 3.3% 3.6% 3.4% 3.6% Domestic Electricity Consumption growth (y-o-y) 2.4% 0.9% 1.8% -0.3% Domestic Electricity Consumption 38.15 37.26 79.91 78.49 Poland’s St
Slide 7: PGE Strategy facing new market challenges
PGE Strategy facing new market challenges • Market and regulatory situation requires review of the key aspirations and strategic activities • In particular, it is necessary to implement a profound restructuring and far-reaching efficiency improvement of the Group aiming at preserving ability to acco
Slide 8: PGE outlook on current generation assets portfolio
PGE outlook on current generation assets portfolio Lignite • Lignite extraction and generation potentially most affected mainly due to climate policy • Lignite units are more carbon intensive • Projected unit efficiency supportive but still under regulatory pressure (CO2 and BAT/BREF) Hard coal • St
Slide 9: Construction sites developments
Construction sites developments Turów (~490 MWe) Opole II (2x~900 MWe) Opole II project • Works in progress, in • Project accelerates - line with schedule current overall progress at 20% level; • Current site developments: • Current site developments: - demolition of foundations of old - Lifting up
Slide 10: Expansion in renewables, further developments in modernizations
Expansion in renewables, further developments in modernizations Modernizations Renewables Bełchatów Pomorzany CHP • Unit no. 11 & 12 in Bełchatów • Karwice 40 MW: commissioned, - commissioned in July modernization of unit no. 2015 9 & 10 started; • Lotnisko 90 MW: • Pomorzany and - internal roads an
Slide 11: Detailed financial and operating results
H1 & Q2 2015 Financial and Operating Results Detailed financial and operating results Magdalena Bartoś - Managing Director, CFO 11
Slide 12: Focusing on the key financial results
Focusing on the key financial results PLNm Q2 Q2 y-o-y H1 H1 y-o-y H1’15 Sales revenues 14,244 14,208 2015 2014 % 2015 2014 % Recurring Sales 13,943 13,046 Sales revenues 6,692 7,279 -8% 14,244 14,208 0% EBITDA 4,326 5,073 EBITDA 2,079 3,350 -38% 4,326 5,073 -15% Recurring* EBITDA 3,779 3,328 Recurr
Slide 13: Impairments at Conventional Generation
Impairments at Conventional Generation • Commitment to idea of high quality financial reporting. • Balance sheet altered to reflect the most accurate estimates of the value of assets. • Book value of the assets linked to the expected cash flows to be generated in future years. Summary of impairment
Slide 14: Summary of generation performance
Summary of generation performance Q2 2015 production (% change y-o-y) H1 2015 production (% change y-o-y) 0.66 0.33 (+2%) (-3%) Coal Coal 2.69 0.39 5.59 (-17%) (+15%) (-12%) 0.16 (+14%) 0.27 (+13%) TOTAL TOTAL 0.13 (-7%) Others 13.10 0.22 (-21%) Others 27.63 Lignite Lignite 0.08 (-11%) TWh (0%) 9.38
Slide 15: Focusing on performance indicators
Focusing on performance indicators Generation assets Lignite Hard coal CHPs Wind assets Availability 85.9% 90.5% 92.5% 98.8% H1 2015 Availability 80.9% 85.2% 92.1% 98.0% H1 2014 Load factor 85.3% 65.6% 78.5% 29.0% H1 2015 Load factor 85.7% 69.7% 70.5% 26.6% H1 2014 Distribution assets Network losses
Slide 16: Development of EBITDA by major value drivers
Development of EBITDA by major value drivers PLN m Q2 2014 EBITDA REPORTED 3,350 One-offs 1,889 Q2 2014 EBITDA RECURRING* 1,461 Wholesale price of electricity 136 Volume of electricity** 41 Hard coal with transport 89 CO2 cost 32 Margin on retail market 76 RES support 33 Cogeneration support 59 Retu
Slide 17: Capital expenditures in H1 2015
Capital expenditures in H1 2015 PLN 67 m CAPEX in Significant projects H1 2015 PLN 688 m 21% Construction of Opole II PLN 1,036 m 2% 6% Refurbishment and modernization in Bełchatów PLN 338 m PLN 219 m TOTAL CAPEX Modernization of distribution assets PLN 351 m PLN 3.3 bn (+49%) 39% PLN 1,058 m New de
Slide 18: Division EBITDA & CAPEX outlook for 2015
Division EBITDA & CAPEX outlook for 2015 2015 outlook vs 2014 Main drivers + Wholesale full year average blended price in range of 173-175PLN/MWh + Volumes on lignite stable, whereas hard coal volumes lower by low double digit percentage points + Higher volumes from gas CHPs will be offset with high
Slide 19: Additional information
H1 & Q2 2015 Financial and Operating Results Additional information 19
Slide 20: Deteriorating commodity markets hit prices
Deteriorating commodity markets hit prices CO2 allowance (EUA_DEC15) Hard coal PGE average wholesale price of electricity EUR/t USD/t1 PLN/MWh +33% 83.8 -22% 176 175 7.4 78.9 174 174 7.1 75.9 74.9 75.0 6.7 72.3 6.2 6.3 61.0 58.7 166 5.5 164 4.9 5.1 162 163 +7% +7% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14
Slide 21: Impairments at Conventional Generation
Impairments at Conventional Generation Snapshot of key assumptions * (real prices): • Wholesale price of electricity to advance by 20% until 2020, milder growth in the following decade, • CO2 emission allowance price to increase 2.5 times until 2020, milder growth in the following decade, • Hard coa
Slide 22: Key Operating Data
Key Operating Data Net electricity generation by sources (TWh) Q2'15 vs. H1'15 vs. Q2 2015 Q2 2014 H1 2015 H1 2014 Q2'14 H1'14 Lignite-fired power plants 9.48 9.16 3% 19.61 18.71 5% Hard coal-fired power plants 2.54 3.13 -19% 5.14 5.95 -14% Coal-fired CHPs 0.26 0.25 4% 0.67 0.64 5% Gas-fired CHPs 0.
Slide 23: Capital expenditures in Q2 2015
Capital expenditures in Q2 2015 PLN 47 m CAPEX in Significant projects H1 2015 PLN 425 m 22% Construction of Opole II PLN 574 m 2% 8% Refurbishment and modernization in Bełchatów PLN 174 m PLN 151 m TOTAL CAPEX Modernization of distribution assets PLN 210 m PLN 1.9 bn (+58%) 38% PLN 587 m New develo
Slide 24: Capital expenditures
Capital expenditures CAPEX for Q2 and H1 2015 (PLN m) Q2 Q2 Q2’15 vs H1’15 vs H1 2015 H1 2014 2015 2014 Q2’14 H1’14 Segment Conventional Generation 1,316 885 49% 2,358 1,578 49% Distribution 425 276 54% 688 452 52% New clients connection 154 114 35% 254 202 26% Distribution grid 170 98 73% 284 152 8
Slide 25: Key Financials
Key Financials Selected consolidated financial data, IFRS Q2 2015 Q2 2014 Q2’15 H1 2015 H1 2014 H1’15 Restated vs. Restated vs. PLN m PLN m Q2'14 PLN m PLN m H1'14 Sales 6,692 7,279 -8% 14,244 14,208 0% including LTC compensations 140 1,031 -86% 301 1,162 -74% Recurring Sales 6,552 6,248 5% 13,943 1
Slide 26: 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 and recurring EBIT key one-off items Q2'15 Q2'14 H1'15 H1'14 LTC compensations -140 -1,031 -301 -1,162 LTC adjustment 0 -246 0 -246 Reclamation provision (discount rate)
Slide 27: Recurring Q2 2015 EBITDA – composition and development
Recurring* Q2 2015 EBITDA – composition and development 580 24 1,694 894 78 120 Conventional Renewables*** Supply** Distribution Other EBITDA Q2 2015 894 78 120 580 24 1,694 Share in Q2 2015 EBITDA (%) 53% 5% 7% 34% 1% Q2 2014 701 111 10 585 54 1 461 Change (PLNm) 193 -33 110 -5 -29 233 Change (%) 2
Slide 28: Detailed segmental revenues and costs
Detailed segmental revenues and costs Conventional Generation (PLN m) Q2 2015 H1 2015 Q2 2015 Q2 2014 vs. H1 2015 H1 2014 vs. Q2 2014 H1 2014 Sales, including 2,909 3,605 -19% 6,426 6,658 -3% Sale of electricity 2,452 2,310 6% 5,276 4,704 12% LTC compensations 140 1,031 -86% 301 1,162 -74% Sale of h
Slide 29: Detailed segmental revenues and costs
Detailed segmental revenues and costs Renewables (PLN m) Q2 2015 Q2 2014 Q2 2015 H1 2015 H1 2014 H1 2015 vs. vs. Q2 2014 H1 2014 Sales, including 163 196 -17% 378 415 -9% Sale of electricity 72 81 -11% 170 182 -6% Sale of certificates of origin 35 56 -38% 90 117 -22% Cost by kind, including 149 143
Slide 30: Detailed segmental revenues and costs
Detailed segmental revenues and costs Distribution (PLN m) H1 Q2 2015 Q2 2014 Q2 2015 H1 2015 H1 2014 2015 vs. Q2 vs. H1 2014 2014 Sales, including 1,461 1,363 7% 3,001 2,848 5% Revenues from distribution services 1,365 1,283 6% 2,831 2,689 5% Other revenues from core activities 70 52 35% 117 102 15
Slide 31: Detailed segmental revenues and costs
Detailed segmental revenues and costs Supply* (PLN m) Q2 2015 H1 2015 H1 Q2 2015 Q2 2014 vs. Q2 H1 2014 vs. H1 2015 2014 2014 Sales, including 3,470 3,359 3% 7,269 6,943 5% Sale of electricity 2,210 2,100 5% 4,649 4,377 6% Revenues from distribution services 981 951 3% 2,032 2,006 1% Sale of certifi
Slide 32: Conventional Generation – EBIT Q2 2015
Conventional Generation – EBIT Q2 2015 Key Changes in EBIT (PLN m) Sale of Sale of Fixed costs Sale of Sale of Hard coal - Fixed EBIT* electricity electricity Sale of Fuel - at power EBIT green yellow and fuel and Fuel – gas CO2 costs at Other** 2Q’14 difference in difference heat biomass plants and
Slide 33: Conventional Generation – EBIT H1 2015
Conventional Generation – EBIT H1 2015 Key Changes in EBIT (PLN m) Sale of Sale of Sale of Sale of Hard coal - Fixed costs at Fixed EBIT* electricity electricity Sale of Fuel - EBIT* green yellow and fuel and Fuel – gas CO2 power plants costs at Other** H1'14 difference difference heat biomass H1’15
Slide 34: Renewables – EBIT Q2 2015
Renewables (PLN m) – EBIT Q2 2015 Key Changes in EBIT (PLN m) 60 50 40 30 20 10 0 Sale of Sale of Sale of Sale of Revenues from EBIT Fixed EBIT electricity property Electricity property rights agreement Other Q2'14 costs Q2'15 - wind rights - wind - hydro - hydro with TSO Change -1 -6 -4 -15 -6 -10
Slide 35: Renewables – EBIT H1 2015
Renewables (PLN m) – EBIT H1 2015 Key Changes in EBIT (PLN m) 140 120 100 80 60 40 20 0 Revenues from Sale of Sale of Sale of Sale of EBIT agreement EBIT electricity property rights electricity property rights Fixed costs Other H1’14 with TSO H1’15 -wind - wind - hydro - hydro Change 1 -10 3 -17 -11
Slide 36: Distribution – EBIT Q2 2015
Distribution (PLN m) – EBIT Q2 2015 Key Changes in EBIT (PLN m) 500 400 300 200 100 0 Revenue from Other distrib. service – Revenue from distribution Energy Transmission EBIT EBIT difference distrib. service – related consumption services Fixed costs Other Q2'14 Q2'15 in volume difference in price r
Slide 37: Distribution – EBIT H1 2015
Distribution (PLN m) – EBIT H1 2015 Key Changes in EBIT (PLN m) 900 800 700 600 500 400 300 200 100 0 Revenue from Other Revenue from distrib. service - distribution Energy Transmission distrib. service - EBIT H1'14 difference related consumption services Fixed costs Other EBIT H1'15 difference in p
Slide 38: Supply – EBIT Q2 2015
Supply* (PLN m) – EBIT Q2 2015 Key Changes in EBIT (PLN m) 140 120 100 80 60 40 20 0 Margin EBIT Management Property rights EBIT On Other Q2'14 service redemption costs Q2'15 electricity Change 76 7 35 -8 EBIT Q2'14 3 287 109 270 123 EBIT Q2'15 363 116 235 131 113 *As of Q1’15 Supply and Wholesale w
Slide 39: Supply – EBIT H1 2015
Supply* (PLN m) – EBIT H1 2015 Key Changes in EBIT (PLN m) 300 250 200 150 100 50 0 Property Margin EBIT Management rights EBIT on Other H1’14 service redemption H1’15 electricity costs Change 87 27 5 -3 EBIT H1’14 151 694 222 522 243 EBIT H1’15 781 249 517 246 267 *As of Q1’15 Supply and Wholesale
Slide 40: Debt Structure and Liquidity (as at June 30, 2015)
Debt Structure and Liquidity (as at June 30, 2015) Fixed vs Floating Debt (Drawn Debt) Available Lines of Credit (PLN m) Debt Maturity Profile (Drawn Debt PLN m) 2 400 Floating 2 000 18% 2 000 1 500 1 600 1 000 1 200 800 500 400 Fixed 0 0 82% Issues under the EMTN program Value EUR 500,000,000 EUR 1
Slide 41: Debt development by quarters
Debt development by quarters Gross debt and net debt (PLN m) 6 000 5 045 4 802 4 811 4 822 5 000 4 660 4 000 3 000 2 706 2 718 2 405 2 522 2 000 1 586 1 000 462 266 0 -1 000 -1 020 -899 -2 000 -1 921 -2 313 -2 386 -3 000 -2 530 -2 922 -3 131 -4 000 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 De
Slide 42: PGE cash position provides…
PGE cash position provides… H1 2015 Q1 2015 … plenty Gross Debt (PLNm) 4,822 4,811 of headroom Net debt (PLNm) 462 266 in the balance Net Debt/LTM EBITDA 0.06x 0.03x sheet Net Debt/Equity 0.01x 0.01x Moody’s Fitch Long-term company rating (IDR) Baa1 BBB+ Rating outlook Stable Stable Date of rating a
Slide 43: Q2 2015 Key business flows
Q2 2015 Key business flows Key business flows (illustrative only) Generation Wholesale Households 13.10 TWh 14.25 TWh Regulated market 13.12 TWh (Q2 2014) 14.31 TWh (Q2 2014) 2.20 TWh 2.17 TWh (Q2 2014) Electricity from power plants (under „exchange Power exchange Supply 23% obligation”) Electricity
Slide 44: CO2 allowances – regulations and settlement
CO2 allowances – regulations and settlement Regulations in the III Settlement Period Free EUA recognized at a zero value – note 7, H1’15 consolidated FS • As of 2013 only carbon allowances for heat production are EUA CER/ERU Total value received free of charge Quantity Value Quantity Value • Carbon
Slide 45: EUA – accounting scheme
EUA – accounting scheme EUA inventory Provision 3. Redemption (April) P&L Cash (costs by kind) 1. Purchasing of EUA is not a cost itself, it is an exchange of assets. Accounts involved: cash and inventory. 2. The creation of provision is a cost recognition process. 3. Redemption is a settlement proc
Slide 46: LTC compensations – current status of court disputes
LTC compensations – current status of court disputes Generators from the PGE Capital Group are in disputes with the ERO President regarding stranded cost compensations in years 2008-2010. Stranded cost compensation in 2011-2014 are not subject to court disputes. Status of court cases: Year Opole PP
Slide 47: Sell-side analysts covering PGE
Sell-side analysts covering PGE Domestic analysts Foreign analysts Institution Analyst Institution Analyst • BESI • Robert Maj • Goldman Sachs • Fred Barasi • BOŚ • Michał Stalmach • HSBC • Dmytro Konovalov • BRE Bank • Kamil Kliszcz • Merrill Lynch • Denis Derushkin • BZ WBK • Paweł Puchalski • Mor
Slide 48: Investor relations contacts
Investor relations contacts Head of IR IR Officers Jakub Frejlich Krzysztof Dragan Tel: (+48 22) 340 10 32 Tel: (+48 22) 340 15 13 Mob: +48 695 883 902 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: 661 778 955 Bernard
Slide 49: 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
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