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TAURON Group’s Q1 2018
Financial Results
May 17, 2018
2
Q1 2018 key data
* Net profit attributable to the shareholders of the parent company
TAURON Group’s Q1 2018 results
Q1 2018
vs Q1 2017
Sales revenue [PLN m] 4 826 5%
EBITDA [PLN m] 1 292 6%
Net profit [PLN m]* 636 (1)%
CAPEX [PLN m] 569 (11)%
Net debt / EBITDA 2.28x up 0.01(vs 31.12.2017)
TAURON Group’s Q1 2018 operating data
Q1 2018
vs Q1 2017
Commercial coal production [tonne m] 1.42 (6)%
Electricity generation [TWh] 3.94 (19)%
Heat production [PJ] 5.68 7%
Electricity distribution [TWh] 13.42 1%
Electricity retail supply [TWh] 9.28 2%
3
Highlights Summary
January 18Conclusion of the coal purchase agreement with Polska Grupa Górnicza for 2018-2021 with an estimated net value of PLN 2.15
billion
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
March 28Signing of the agreement with the Polish Development Fund defining the terms of engagement in the construction of the 910 MW
unit at Jaworzno III Power Plant worth up to PLN 880 million
April 6Dissolving of the provisions related to employee benefits at TAURON Wytwarzanie – a positive impact on Q1 2018 EBITDA: PLN
230 million
April 23 910 MW unit at Jaworzno III Power Plant completes a successful pressure test. Work progress on the project exceeded 60 percent
4
Q1 2017 Q1 2018
Industrial power plants
Renewable energysources
Thermal gas-firedpower plants
Thermal lignite-firedpower plant
Thermal hard coal-firedpower plants
43,5444,29
48,8%
31,7%
3,6%9,6%
6,4%
50,2%
28,2%
6,0%
9,2%
6,4%
+1,0%
-12,5%
+64,7%
-1,1%
-5,1%
-1,7%
Macroeconomic and market situation
Source: * GUS ** Bankier.pl ***PSE
Structure of electricity generation in Poland*** [TWh]
5,3%
3,9% 4,3%
6,0%
3,0%
5,7%
2,5%
1,5%
7,3%
4,2%
6,3%
8,0%
5,6%
0%
2%
4%
6%
8%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2015 2016 2017 2018
Increase of industrial production sold* and electricity consumption (change yoy)***
Sold production growth rate Domestic electricity consumption change
Electricity prices under one year BASE contracts
Average price [PLN/MWh] Volume [GWh]
Y-13 191.60 108 861
Y-14 160.40 142 841
Y-15 168.11 146 932
Y-16 166.47 147 923
Y-17 160.27 76 729
Y-18 165.98 65 227
Y-19 185.43 35 574
Y-20 187.94 2 310
Average electricity sales prices on the competitive market (acc. to ERO)::
2013: 181.55 PLN/MWh
2014: 163.58 PLN/MWh
2015: 169.99 PLN/MWh
2016: 169.70 PLN/MWh
2017: 163.70 PLN/MWh
2018: 177.91 PLN/MWh (estimate)
3,8%
3,3%3,6%
4,6%
3,1% 3,4%
2,7% 2,7%
4,4%4,0%
5,2% 4,9% 5,1%
50
52
54
56
58
0%
1%
2%
3%
4%
5%
6%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2015 2016 2017 2018
PMIPKB
Poland’s GDP growth rate* and manufacturing PMI (quarterly average)**
GDP growth rate Manufacturing PMI
5
Q1 2018 key financial data
Q1 2017 Q1 20180
100
200
300
400
500
600
700
Net profit attributable to the parent company’s
shareholders [PLN m]
Q1 2018 EBITDA vs Q1 2017 EBITDA [PLN m]
1 222
1 032 1 062
1 292
- 230-190
0
200
400
600
800
1 000
1 200
1 400
Reported Q1 2017 EBITDA Dissolving of ECSW provision Reported Q1 2017 EBITDA Comparable Q1 2018 EBITDA Dissolving of employee benefitsprovision in the Generation
segment
Reported Q1 2018 EBITDA
EBITDA Change
3%
Sales revenue [PLN m]
2 267 2 417
1 6911 777
252258156
15567
70158
147
0
1 000
2 000
3 000
4 000
5 000
Q1 2017 Q1 2018
Electricity Distribution and trading services Heat Hard coal Gas Other revenue
4 591 4 826
6
Key segments’ Q1 2018 results
[PLN m] Mining Generation Distribution SupplyOther and
exclusions*
Segment’s revenue 385 1 172 1 789 3 454 (1 974)
EBITDA 10 465 638 178 1
EBIT (23) 372 372 176 (20)
CAPEX 39 243 273 0.2 13
Items not included in the segments presented
-2%1%
31%
14%3%0,1%
1 222 1 292
-200
0
200
400
600
800
1 000
1 200
1 400
1 600
Q1 2017 Q1 2018
Other and exclusions
Supply
Distribution
Generation
Mining
PLN m
6%
Individual segments’ contribution to EBITDA [%]
7
Q1 2018 EBITDA
40
237 31
-202 -36
26,6% 2,6% 39,7% 35,7% 5,2% 20,4% 26,8%
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
Q1 2017 EBITDA Mining Generation Distribution Supply Other and exclusions Q1 2018 EBITDA
EBITDA Segment's increase Segment's decrease EBITDA margin
PLN m PLN +70m, +6%
*
* Other operations segment’s EBITDA margin
8
384 385
-2910
-60-23
29 39
-100
0
100
200
300
400
500
Q1 2017 Q1 2018
Sales revenue EBITDA EBIT CAPEX
Mining Segment – Q1 2018
Financial data [PLN m] EBITDA change [PLN m]
1,42
1,51
1
0,14
0,19
0,09
0,09
0,95
1,24
0,16
0,21
0,10
0,05
1,43
1,79
0,0 0,5 1,0 1,5 2,0
Q1 2018
Q1 2017
Commercial coal production volumevs sales per product [Mg m]
Commercial coal production Large size lump coal salesMedium size lump coal sales Intra-Goup coal dust salesCoal dust sales outside the Group 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
• 22.4% increase of the sold coal unit price √
• 6.0% decline of commercial coal production
• 7.0% higher unit mining cash cost* (up from 193 PLN/Mg to 206 PLN/Mg) -
-29
10
54
-4
83
-90
-4
-140
-120
-100
-80
-60
-40
-20
0
20
Q1 2017 Coal sales - volume Coal sales - price Coal productioncost
Change of inventorylevel
Other Q1 2018
9
228
465
31 3
230 2
- 28
0
100
200
300
400
500
Q1 2017 Electricity margin Heat margin CO2 costs Provisions relatedto employee
benefits
Other Q1 2018
Generation Segment – Q1 2018
Financial data [PLN m]
1 221 1 172
228
465
129
372
335 243
0
200
400
600
800
1 000
1 200
1 400
Q1 2017 Q1 2018
Sales revenue EBITDA EBIT CAPEX
0,100,02
0,10
0,11
0,13
0,11
0,60 0,65
0,0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
Q1 2017 Q1 2018
Biomass Hydro Wind Cogeneration
0,33
RES and cogeneration production [TWh]
0,24
EBITDA change [PLN m]
4,573,70
0,33
0,24
5,30 5,68
0
1
2
3
4
5
6
Q1 2017 Q1 2018
Electricity (excl. RES) Electricity (RES) Heat
4,89
3,94
Gross production of electricity [TWh] and heat [PJ]
• Beneficial impact of dissolving provisions related to employee benefits √
• Increase of electricity prices √
• Increase of CO2 emission allowances prices -
• Increase of coal prices -
10
3,53
3,38
4,66
4,45
2,02
2,03
2,71
2,70
0,50
0,74
Q1 2018
Q1 2017
0 5 10 15
Group A Group B Group C2+C1+R+O Group G Other*
Distribution Segment – Q1 2018
EBITDA change [PLN m]
EBIT depreciation and impairment charges
Electricity distribution [TWh]
13,42
13,31
346 372
261266
57 7 17
-16-12
-22
607 638
0
100
200
300
400
500
600
700
Q1 2017 Distributionservices sales
price
Sales volume Purchase ofTSO services
Otherdistribution
services
Cost of gridlosses
Other Q1 2018
Financial data [PLN m]
1 733 1 789
607 638
346 372
262273
0
1 000
2 000
Q1 2017 Q1 2018
Sales revenue EBITDA EBIT CAPEX
å Higher electricity distribution services sales volume by 114
GWh (0.9%), mainly in the manufacturing industry (groups A and B) in correlation to GDP growth
• One-off dissolving of the provision related to the adjustment (112 GWh)
-• Increase of the balancing difference indicator by 0.50 pp,
increase of the price of balancing electricity within the Group by 2.5%
√
• Drop of approved tariff by 1.54 PLN/MWh (1.2)% -
* Neighboring DSO and exports
11
Distribution Segment – key parameters
15,616,3
16,9
0
2
4
6
8
10
12
14
16
18
2016 2017 2018
Regulatory Asset Base [PLN bn]
WRA
150 150143
0
20
40
60
80
100
120
140
160
180
200
2016 2017 Q1 2018
Customer connection time [days]
Consumer connection time
177
263
37 26
204188 188
148
110
0
50
100
150
200
250
300
2016 2017 Q1 2017 Q1 2018 2020
SAIDI [min.]
SAIDI for the period SAIDI target for the year
2,82
3,50
0,680,47
3,163,00 3,00
2,23
1,67
0
1
2
3
4
2016 2017 Q1 2017 Q1 2018 2020
SAIFI [number]
SAIFI for the period SAIFI target for the year
12
377
176
3
2
43
3
- 46- 12
- 190
0
50
100
150
200
250
300
350
400
Q1 2017 Electricity- volumeand price
Property rights- price
Property rights- obligation
ECSW provision Other Q1 2018
178
380
Supply Segment – Q1 2018
Financial data [PLN m] EBITDA change [PLN m]
* Includes sales to cover the balancing difference and to the intra-Group final consumers
EBIT Depreciation and impairment charges
Retail electricity supply [TWh]
3 6173 454
380178377
176
0
1 000
2 000
3 000
4 000
Q1 2017 Q1 2018
Sales revenue EBITDA EBIT
1,54
1,65
2,50
2,34
1,51
1,49
2,61
2,62
1,11
1,02
Q1 2018
Q1 2017
0 2 4 6 8 10
Group A Group B Group C2+C1+R+D Group G Other*
9,12
9,27
• Increase of the cost of purchasing black energy −
• Change of the obligation to redeem property rights: for PM OZE from 15.4% to 17.5% , for PM OZE-BIO from 0.6% to 0.5%, for PMGM from 7% to 8% and PMMET from 1.8% to 2.3%
−
• Lower purchase prices of PM OZE to be redeemed √
13
Debt and financing
155
2020
340 340
1888
281 261 199 199
2289
170
777
0
800
0
500
1 000
1 500
2 000
2 500
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 … 2034
Bonds Credits, loans and leases
Financial debt (nominal value of debt due to credits, loans, leases
and bonds) as of 31.03.2018 is PLN 9 719m
Weighted average maturity of debt as of 31.03.2018 is 83 months
(assuming bonds rollover until 2022)
EUR denominated debt (eurobond issue, NSV and EIB bond issues)
represents 37% of the total debt
Debt structure based on interest rate [PLN m]
TAURON Group’s debt maturity as of 31.03.2018 [PLN m]
45 37 73 3… 22 37
1924
0
500
1 000
1 500
2 000
2 500
2Q2018
3Q2018
4Q2018
1Q2019
2Q2019
3Q2019
4Q2019
Bonds Credits, loans and leases
8 661 89,1%
1 001 10,3%
34 0,3%
23 0,2%
TAURON Group’s debt structure as of 31.03.2018 [PLN m]
Bonds EIB loans NFOŚiGW / WFOŚiGW loans Leases
3006%
5 07094%
Financing available to TAURON Group as of 31.03.2018 [PLN m]
Cash pool Bond issue programs
9 719 5 370
* Assuming rollover of bonds issued as part of the Bond Issue Program (maturity date in accordance with
issue terms and conditions is 2020, rollover until the end of the funds availability period, i.e. until 2022)
*
*
collateralinterest ratedebt amount
9 719
floating rate
5 107
IRS
2 100
none
3 007 fixed rate
4 612
Net debt/EBITDA 2.28x
14
CAPEX – key projects’ work progress
Investment projectCapacity
(MWe)
Capacity
(MWt)
Work progress
(percentage)
Planned
completion
date
Construction of the hard coal-fired unit at Jaworzno III
Power Plant910 - 61 2019
Construction of the CCGT unit at Stalowa Wola
Combined Heat and Power Plant*450 240 86 2019
Construction of the 800m level at Janina coal mine - - 58 2020
Construction of Grzegorz shaft at Sobieski coal mine - - 20 2023
CAPEX program at Brzeszcze coal mine - - 29 2025
15
29 39
335
243
262
273
10
13
Q1 2017 Q1 2018
Mining Generation Distribution Supply and other
(10,5)%
CAPEX – by segments
Key investment projects implemented in Q1 2018:
Mining:
- Brzeszcze coal mine CAPEX program (PLN 16m)
- construction of the Grzegorz shaft at Sobieski coal mine
(PLN 13m)
- construction of the 800 m level at Janina coal mine (PLN
7m)
Generation:
- construction of the 910 MW unit at Jaworzno III Power
Plant (PLN 190m)
- replacement and refurbishment outlays as well as
overhaul components at TAURON Wytwarzanie (PLN
8m)
- connections of new facilities (PLN 4m)
- maintenance and expansion of district heating network
(PLN 2m)
- connections of facilities heated using low emission
sources to district heating networks (PLN 2m)
Distribution:
- grid asset upgrades (refurbishing) and replacements
(PLN 140m)
- construction of new connections (PLN 116m)
Capital expenditures by segments [PLN m](excluding equity investments)
569636
16
Efficiency Improvement Program
Segment
Financial effects
realized in 2016 –
Q1 2018
Financial effects
planned in 2016-
Q1 2018
Progress % Main initiatives
Mining PLN 180m PLN 255m 71%
Employment restructuring, reduction of labor costs and increasing their flexibility,
organizational measures
Use of electronic auctions in the purchasing process
CAPEX plan optimization
Generation
(including RES and
Heat)
PLN 449m PLN 367m 122%
Optimization of upgrades and of other asset maintenance costs
Employment restructuring
Purchasing efficiency improvement
Optimization of the carburizing and de-ashing systems’ operation services
Maintenance services costs control
CAPEX plan optimization
Distribution PLN 402m PLN 390m 103%
Reorganization and restructuring of employment
Asset maintenance costs control
Purchasing efficiency improvement
Reorganization of storage services
Sale of redundant real estate
Other PLN 195m PLN 291m 67%
Employment restructuring,
Reduction of the scope of IT services
Customer service costs and overhead (administration) costs control
Optimization of the costs of promotional and sponsoring activities
Total PLN 1 227m PLN 1 303m 94%
Under the Voluntary Redundancy Programs, being part of the Efficiency Improvement Program, TAURON Group’s headcount was
reduced by 1 065 FTEs in the period from 2016 until March 31, 2018.
17
Thank you – Q & A
Investor Relations Team
Marcin Lauer
tel. + 48 32 774 27 06
Paweł Gaworzyński
tel. + 48 32 774 25 34
Mirosław Szczygielski
tel. + 48 516 112 858
Magdalena Wilczek
tel. + 48 723 600 894
Katarzyna Heinz
tel. + 48 32 774 25 38
18
Legal disclaimer
This presentation serves for information purposes only and should not be treated as investment-related advice.
This presentation has been prepared by TAURON Polska Energia S.A. (“the Company”).
Neither the Company nor any of its subsidiaries shall be held accountable for any damage resulting from the use of this presentation or a part thereof,
or its contents or in any other manner in connection with this presentation.
The recipients of this presentation shall bear exclusive responsibility for their own analyses and market assessment as well as evaluation of the
Company’s market position and its potential results in the future based on information contained in herein.
To the extent this presentation contains forward-looking statements related to the future, in particular such terms as ”designed”, ”planned”,
”anticipated”, or other similar expressions (including their negation), they shall be connected with the known and unknown risks, uncertainty and other
factors which might result in actual results, financial situation, actions and achievements being materially different from any future results, actions or
achievements expressed in such forward-looking statements.
19
Analysts covering TAURON
Institution Analyst
Dom Maklerski mBanku Kamil Kliszcz
Societe Generale Bartłomiej Kubicki
Dom Maklerski BZ WBK Paweł Puchalski
Dom Maklerski PKO BP Stanisław Ozga
Dom Maklerski Banku Handlowego Piotr Dzięciołowski
Ipopema Robert Maj
Erste Group Tomasz Duda
Institution Analyst
Raiffeisen Centrobank Teresa Schinwald
Trigon Krzysztof Kubiszewski
WOOD & Company Bram Buring
Dom Maklerski BOŚ Jakub Viscardi
Exane BNP Paribas Michael Harleaux
Pekao Investment Banking Maksymilian Piotrowski
20
Electricity market price trends
Electricity
Platforms: TGE, TFS, GFI,
GPW-POEE
2017 2018 (prices until April 2018 + estimation) 2018/2017
Price (PLN/MWh) Volume (GWh) Price (PLN/MWh) Volume (GWh) Price % Volume %
Forward BASE (Y+Q+M) 160.10 104 921 169.26 101 755 5.7% -3.0%
Forward PEAK (Y+Q+M) 208.87 11 417 216.82 12 222 3.8% 7.1%
Forward (weighted
average)164.88 116 338 174.05 113 978 5.6% -2.0%
SPOT (TGE) 158.14 25 210 194.75** 27 000 23.2% 7.1%
Weighted average total163.68 141 548 178.02 140 978 8.8% -0.4%
Property rights (PLN/MWh)
Certificate type Market prices(Q1 2018 weighted
average)
Substitution fee and obligation for:
2017 2018
OZE (PMOZE_A) 63.04
300.03 (Jan-Sep)
92.03 (Sep-Dec)
(15.4%)
48.53 (17.5%)
RES from biogas plants
(PMOZE_BIO)318.07 300.03 (0.6%) 300.03 (0.5%)
Coal-fired cogeneration
(PMEC-2017) 9.82 10.00 (23.2%) 9.00 (23.2%)
Gas-fired cogeneration
(PMGM-2017)117.55 120.00 (7.0%) 115.00 (8.0%)
Methane-fired cogeneration
(PMMET-2017)55.39 56.00 (1.8%) 56.00 (2.3%)
CO2 emission allowances (EUA/t)
CO2 market analysts survey*(updated in April 2018) Price (EUR/t)
2017 average 5.84 EUR/t
2018 average 11.51 EUR/t
2019 average 13.86 EUR/t
2018 average price forecast by
TAURON (**updated in April 2018 )
11.00-12.00 EUR/t
* Sources: Point Carbon, BNEF, Consus, GDF SUEZ Trading, HSE, Mkonline, Societe Generale, TAURON
** Average price in the January - April 2018 time frame + TPE analysts’ estimation
21
2018 BASE contracts
Average price
[PLN/MWh]Volume [GWh]
Total 165.98 65 227
including
TGE 166.64 52 148
non TGE 163.35 13 079
Average electricity price that takes into account 2018 one year BASE and PEAK contracts: 171.29 PLN/MWh, total 2018 BASE and PEAK volume: 73 108 GWh
165,98
0
100
200
300
400
500
600
700
800
900
1 000
145
150
155
160
165
170
175
180
185
GWhPLN/MWhBASE Y-18
Wolumen obrotu Notowania Średnia
22
2019 BASE contracts
Average price
[PLN/MWh]Volume [GWh]
Total 183.68 31 711
including
TGE 184.05 29 994
non TGE 177.23 1 717
Average electricity price that takes into account 2019 one year BASE and PEAK contracts: 185.33 PLN/MWh, total 2019 BASE and PEAK volume: 32 916 GWh
183,68
0
200
400
600
800
1 000
150
160
170
180
190
200
210
GWhPLN/MWhBASE Y-19
Wolumen obrotu Notowania Średnia
23
2020 BASE contracts
Average price
[PLN/MWh]Volume [GWh]
Total 185.30 1 950
including
TGE 185.27 1 924
non TGE 187.25 26
Average electricity price that takes into account 2020 one year BASE and PEAK contracts: 186.17 PLN/MWh, total 2020 BASE and PEAK volume: 1 988 GWh
185,30
0
20
40
60
80
100
120
140
160
180
200
150
160
170
180
190
200
210
GWhPLN/MWhBASE Y-20
Wolumen obrotu Notowania Średnia
24
Thank you for your attention
