TAURON Group: Solid financial results - PLN 3.6 billion of EBITDA in 2019

• EBITDA of PLN 3.6 billion, EBITDA margin: 17.5 percent
• Revenue from sales and compensations: up 13 percent to PLN 20.5 billion
• 42 percent increase of electricity production from renewable sources
• Acquisition of five wind farms with the total capacity of 180 MW
• Capital expenditures up 8 percent (to PLN 4.1 billion). The largest capex in the following segments: Distribution (PLN 1.8 billion) and Generation (PLN 1.7 billion)
• PLN 5.5 billion in revenue from the capacity market over the next 17 years
• Impact of the impairment charges on the net financial result reached - PLN 838 million
• Stable level of net debt[1] to EBITDA ratio: 2.81x

(all FY 2019 consolidated data)

– We increased revenue and generated a solid EBITDA that beat market expectations in 2019. Last year our activities were focused on the implementation of the strategy related to the Green Turn of TAURON, we also put a lot of effort into environmental issues and shoring up the competitive advantage in the customer related area – says Filip Grzegorczyk, President of the Management Board (CEO) of TAURON Polska Energia. – The Green Turn of TAURON assumes investments in on-shore wind farms and solar farms as well as an involvement in the construction of off-shore wind farms. Such activities will allow for reducing the Group’s emissions by 50 percent by 2030 – adds Filip Grzegorczyk.

– TAURON Group has maintained its stable financial position as confirmed by the ”BBB" rating with a stable outlook, granted by the Fitch rating agency – says Marek Wadowski, Vice President of the Management Board for finance (CFO) of TAURON Polska Energia. – In December, we signed a loan agreement with the Intesa Sanpaolo bank worth PLN 750 million to finance expenditures related to renewable energy, investments in the distribution grids as well as to refinance the existing debt. We have also concluded a bond issue program agreement, under which we have an option to issue bonds worth up to PLN 2 billion – adds Marek Wadowski.

Operating data

TAURON Group delivered 51.73 TWh of electricity to the customers in total, in 2019. The total electricity volume delivered to the customers was flat as compared to the 2018 volume (51.97 TWh). The number of the Distribution Segment’s customers went up by 53 000, topping 5.6 million.

The Group produced 13.88 TWh of electricity in 2019, i.e. 14 percent less than a year ago, when the production volume had come in at 16.21 TWh. The reduction of the production output was a consequence of the market situation, in particular, a significant rise of electricity imports and the trading strategy adopted by TAURON.

The Group has materially increased the scale of its electricity generation from renewable energy sources. Green energy production came in at 1.38 TWh and it was 42 percent higher than the output reached in 2018 (0.97 TWh). This growth was due to the acquisition of five wind farms with the total capacity of 180 MW in the third quarter of 2019 and the prevailing favorable weather conditions.

Heat production came in at 10.85 PJ, while heat supply stood at 14.55 PJ. The heat supply and production volumes were 4 percent lower year on year. The declines of the heat production and supply volumes were the result of the lower demand from the consumers as a consequence of high outdoor temperatures.

The retail electricity supply came in at 33.73 TWh in 2019 and it was 2 percent lower than last year (34.52 TWh).

Financial results

The revenue from sales and compensations came in at PLN 20.5 bilion in 2019, i.e. it was 13 percent higher year on year. The increase of the revenue was materially impacted by the compensations for the freezing of the electricity prices (PLN 953 million) and the higher revenue from the sales of electricity resulting, first and foremost, from the higher sales prices.

TAURON Group generated EBITDA of PLN 3.6 billion. The biggest contribution to TAURON Group’s total EBITDA was made by: the Distribution segment – PLN 2.6 billion (a 72 percent share), and the Generation segment – PLN 984 million (a 27 percent share). EBITDA margin clocked in at 17.5 proc.

The results of the completed impairment tests demonstrated the validity of booking impairment charges in the Mining and Generation segments in the total amount of PLN 1.03 billion, and their impact on the net financial result reached PLN (838) million. As a consequence, the Group posted a PLN 11 million net loss attributable to the shareholders of the parent entity. The amount of the write-downs booked did not have an impact on EBITDA.

Investments

TAURON Group's capital expenditures came in at PLN 4.1 billion in 2019 and they were higher by 8 percent as compared to the outlays incurred last year (PLN 3.8 billion). The rise of the capital expenditures was primarily the result of the higher outlays in the following segments: Generation (an increase by PLN 383 million) and Mining (a rise by PLN 67 million).

The largest capital expenditures were incurred in the Distribution segment, where the total capex stood at PLN 1.78 billion, with the largest funds having been spent on upgrading (refurbishing) and replacing the distribution grid (PLN 996 million), as well as installing new connections to the grid (PLN 667 million). A similar level of capital expenditures was realized in the Generation segment, where the investment outlays stood at PLN 1.68 billion and were related, first and foremost, to the construction of the 910 MW power generating unit in Jaworzno (PLN 1.02 billion).

Debt and financing

TAURON Group is continuing to maintain a stable financial position, and its net debt to EBITDA ratio (excluding the debt under the subordinated bonds issued in the amount of PLN 1.9 billion) continues to stay at a safe level of 2.81x. TAURON concluded a loan agreement with the Intesa Sanpaolo bank worth PLN 750 million in December 2019, with the proceeds from the loan to be used to finance the Group’s capital expenditures related, among others, to renewable energy as well as an expansion and upgrades (refurbishments) of the distribution grids.

In February 2020, TAURON and Santander Bank Polska signed a bond issue program agreement, under which TAURON has an option to issue bonds worth up to the total amount of PLN 2 billion.

[1] Excluding the debt under the subordinated bonds issued in the amount of PLN 1.9 billion