TAURON Group’s net profit after Q3 2011

• TAURON Group’s revenues in Q1-3 2011 amounted to approx. PLN 15.2 billion. After recalculation to make it comparable¹ the Group’s revenues would amount to approx. PLN 11.9 billion, which is an increase by 8.4% in comparison to the same period of 2010 when TAURON achieved almost PLN 11 billion revenues.
  
• Increased EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization) by 9.8% to almost PLN 2.4 billion in Q1-3 2011 from almost PLN 2.2 billion a year ago. EBITDA margin amounted to 15.6%, and after recalculation to make it comparable¹ 20%. In the previous year, after 9M 2010 the Group recorded 19.7% margin.
  
• Net profit increase by 23.7% from PLN 825 million after three quarters 2010 to PLN 1.02 billion over the same period of 2011. Now merely 3% of net profit is attributable to minority shareholders, while a year ago it was 15%.
  
• Operational cost reduction programme by PLN 1 billion in the years 2010-2012 is executed in almost 60%; PLN 78 million savings were achieved in Q3 2011.
                   
• Electricity generation in Q1-3 2011 increased by 4.9% in comparison to the same period a year ago, from 15.5 TWh to 16.3 TWh (Generation and RES segments). 
  
• Increased volume of electricity supplied by the Distribution segment. In the period of Q1-3 2011 the volume was over 28.8 TWh, i.e, by 3.1% more than a year ago.
  
• Retail electricity supply rose by 6.8% from 25.4 TWh in the period of Q1-3 2010 to more than 27.1 TWh over the same period this year; increased supply volume achieved thanks to the existing clients and acquisition of new ones.
  
• Further growth in the number of clients in the Distribution segment. At the end of September 2011 TAURON had almost 4.14 million clients, by 8 thousand more than a year ago.
  
• Value of investments increased by over 60% to more than PLN 1.4 million in 9M 2011, with debt at a low level; planned investment projects in most of the segments are in progress.

“The results achieved in the third quarter and in the nine months of this year are in line with not only our expectations. That gives a reason to feel satisfied. Predictability in unpredictable times is an advantage that yields us actual profits. It is particularly important in view of our development plans connected, among others, with currently executed investments or acquisitions. We will also continue to carry out the programs connected with restructuring and cost efficiency improvement”, said Dariusz Lubera, President of the Management Board at TAURON Polska Energia.

Key operational data and financial results

Revenues

In Q1-3 2011 the TAURON Group recorded revenues of approx. PLN 15.2 billion. After recalculation to make the data comparable1 the Group’s revenues would amount to approx. PLN 11.9 billion, which makes an 8,4% increase in comparison to the same period a year ago when the Group recorded almost PLN 11 billion revenues. Higher revenues result mainly from higher volume of generated and supplied electricity as well as revenues from electricity distribution. Revenues from termination of LTC have been falling from the beginning of this year. They amounted to approx. PLN 276 million at 2.3% share in recalculated revenues1, against PLN 350 million and 3.2% share in revenues in the period of Q1-3 2010. This trend is steady, which confirms that the TAURON Group becomes independent from this source of revenue.

“The results achieved by the TAURON Group are slightly higher than the consensus, which gives us great satisfaction. We are still working to increase our efficiency, which is confirmed by higher EBITDA margin at growing scale of operations. In the recent months we could see acceleration of investments. Of course, in short-term it generates costs, but we want to minimize them by using the best possible fund raising methods, including preferential fund raising. Our good financial standing helps us significantly in this respect”, said Krzysztof Zawadzki, vice-president of the Management Board, CFO at TAURON Polska Energia.

EBITDA and net profit

TAURON Group’s EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization) in Q1-3 2011 amounted to almost PLN 2.4 billion, which means almost 10% increase as compared to almost PLN 2.2 billion in the same period last year. EBITDA margin amounted to 15.6%, and after recalculation to make it comparable – 20.0%, i.e. by 0.3% more than in the same period of 2010. The Group recorded EBITDA growth in most segments. EBITDA in the Distribution segment from January to September amounted to over PLN 1 billion and was by almost 20% higher than a year ago.

Good operational results translated into TAURON Group’s net profit increase, which in Q1-3 2011 amounted to over PLN 1 billion, i.e. was by 23.7% higher than a year ago when the company recorded PLN 825 million net profit. Reduction in the share of minority shareholders in the Group’s net profit is also significant. Over a year it fell from 15% to approx. 3% from January to September 2011. In Q3 alone it amounted to approx. 1%.

Improvement of results is also an effect of systematically pursued efficiency improvement policy. The programme scheduled for the years 2010-2012 has already yielded PLN 572 million savings out of planned PLN 1 billion. In Q3 2011 the programme yielded PLN 78 million savings.

Investments and debt

The TAURON Group significantly increased the value of their investments in Q1-3 2011. They amounted to over PLN 1.4 million, which is by 62% higher than in the same period a year ago. Majority of investments (almost 90%) were carried out in the segments of Distribution and Generation. Significant CAPEX increase in the Generation segment results from increased expenditures on new generation capacities (from PLN 122 to 255 million) and other expenditures (including mainly on NOx installations and modernization of existing coal-fired boilers to biomass burning). CAPEX increase in the Distribution segment results from expenditures on modernization of existing network assets (by approx. PLN 133 million). Increase in expenditures on new connections was approx. PLN 93 million.

Investment needs are financed at low debt level, which at the end of September was comparable to that of three months ago and amounted to PLN 1.3 billion. The company recorded reduction of cash from almost PLN 1.4 billion to almost PLN 0.9 billion due to intensified investments particularly visible in Q3 (over 40% of expenditures from the beginning of the year). Net debt level to EBITDA remains low at 0.16x. Even after closing the acquisition of GZE from Vattenfall and its financing by debt in the amount of PLN 3.5 billion, net debt will remain low in comparison to similar companies from the segment. Expected net debt/ EBITDA will be 1.2.