– The highlight of the first half of 2013 was the strong improvement of the Group’s margins – in spite of the continuing low electricity prices and still difficult macroeconomic environment the EBITDA margin increased to 21.1 percent, and the net margin rose to 9.2 percent. This is first of all the result of the strategy of electricity production in Generation and of its purchasing for the Group’s needs, but also of the Group’s efficiency improvements in its other lines of business. The Group’s solid profit, achieved in spite of the lower revenue, was primarily the consequence of very good results in the following segments: Mining, Distribution and Supply – says Dariusz Lubera, CEO of TAURON Polska Energia. – In Mining we observed revenue increase by approximately 12.7 percent as a consequence of the growing volume of coal sold, the implementation of the pricing strategy and the introduction of the post-sales activities which resulted in a 6 percent rise of EBITDA year-on-year. In Distribution and Supply EBITDA went up by 8.3 and 136 percent, respectively, mainly due to lower operating expenses. A very strong improvement of earnings in Supply is in particular the result of the declining prices of green certificates and a lack of the obligation to redeem yellow and red certificates, and favorable relationships between electricity purchase and sale prices.
|
Key operating parameters |
Unit |
H1 2013 |
H1 2012 |
2013/2012 |
Q2 2013 |
Q2 2012 |
2013/2012 |
|
Commercial coal production |
Mg m |
3.00 |
2.57 |
116.7% |
1.48 |
1.36 |
108.8% |
|
Electricity generation |
TWh |
9.75 |
9.24 |
105.5% |
4.60 |
4.25 |
108.2% |
|
RES net production |
TWh |
0.28 |
0.28 |
100% |
0.16 |
0.14 |
114.3% |
|
Electricity generation from the Group’s renewable sources |
TWh |
0.60 |
0.65 |
92.3% |
0.31 |
0.34 |
91.2% |
|
Group’s heat generation |
PJ |
9.43 |
9.72 |
97.0% |
1.94 |
1.93 |
100.5% |
|
Electricity distribution |
TWh |
23.98 |
24.18 |
99.2% |
11.56 |
11.48 |
100.7% |
|
Electricity retail sales (by segments: Supply, Generation and Heat) |
TWh |
20.85 |
22.70 |
91.9% |
9.92 |
10.81 |
91.8% |
|
Number of customers – Distribution |
‘000 |
5 313.3 |
5 288.8 |
100.5% |
5 313.3 |
5 288.8 |
100.5% |
|
Key financial data (PLN m) |
H1 2013 |
H1 2012 |
% change |
Q2 2013 |
Q2 2013 |
% change |
|
Sales revenue |
9 705 |
12 314 |
78.8% |
4 542 |
5 859 |
77.5% |
|
EBITDA |
2 052 |
2 081 |
98.6% |
831 |
1 106 |
75.1% |
|
EBIT |
1 188 |
1 253 |
94.8% |
400 |
695 |
57.6% |
|
Net profit |
891 |
890 |
100.1% |
311 |
496 |
62.7% |
|
Net profit attributable to shareholders of the parent company |
848 |
857 |
98.9% |
290 |
476 |
60.9% |
In the first half of 2013 TAURON generated PLN 9.7bn in sales revenue which means a 21.2 percent drop year-on-year (PLN 12.3bn in H1 2012). This is first of all the consequence of the change of the structure of the Generation segment’s electricity sales. In 2013 we observed an increase of sales of electricity generated by this segment to TAURON Group’s subsidiaries and such sales were subject to the consolidation exclusion at the Group level, whereas in 2012 almost all volume of electricity generated was sold through the so-called external public market which increased the Group’s consolidated revenue. Furthermore, the H1 2012 revenue included PLN 276.6m of the compensation due to the so-called stranded costs arisen as a result of the termination of long-term power purchase contracts. In H1 2013 TAURON Group generated higher year-on-year sales revenues in Mining (by 12.7 percent), Supply (by 3.1 percent), Heat (by 5.1 percent) and Customer Service (by 39.7 percent). The lower revenues in the other lines of business are related to the decline of the prices of electricity and certificates. Moreover, due to the economic slowdown a fall in the distribution service volume was observed during the first half of this year (Distribution).
EBITDA and net profit
In spite of the Group’s lower revenue in H1 2013 EBITDA during that period was PLN 2.05bn which means a slight drop year-on-year – by 1.4 percent only. The Group’s net profit was PLN 890.57m versus PLN 890.22m last year (net profit attributable to shareholders of the parent company was PLN 847.93m versus PLN 857m in H1 2012).
EBITDA margin increased by 4.2 percent in H1 2013 (year-on-year) – to 21.1 percent, and the net margin increased by 2 percent - to 9.2 percent. The improvement of margins is first of all the consequence of the significant reduction (by approximately 22.8 percent) of operating expenses. This is mainly due to the lower operating expenses in Generation and Heat, related to the lower fuel prices and the implementation of the efficiency improvement program. Whereas in Supply the lower costs are primarily the result of a lack of the obligation to redeem yellow and red certificates, the declining prices of green certificates and the lower cost of electricity purchases (similar as in case of revenue the intra-Group electricity purchases in H1 2013 were subject to the consolidation exclusion, whereas in H1 2012 electricity was purchased on the market).
– EBITDA and net profit in Q2 and in the entire H1 2013 were significantly impacted by the impairment charge taken against the Generation segment’s generation assets. The test for impairment conducted in accordance with the regulations in force and to the best of our knowledge indicated a loss of value of some units which, as a consequence, led to the approx. PLN 240m charge hitting the Group’s EBITDA and the approx. PLN 190m charge hitting the net profit. The total installed capacity of the generation units that the write-down is applicable to is approx. 1 200 MW with the overwhelming majority being 120 MW units for which the variable cost per unit of electricity generation is highest – informs Krzysztof Zawadzki, CFO of TAURON Polska Energia. – However, I would like to emphasize that in spite of the operating loss the results of Generation from business operations in H1 2013 should, in the context of the current market situation, be deemed satisfactory. I think this segment of TAURON Group’s operations will face a big challenge in 2014.
CAPEX and debt
The Group’s CAPEX was approximately PLN 1.35bn in H1 2013 which means an increase by approx. 9.7 percent year-on-year. The investment program carried out was, to a large degree, related to Distribution (approximately 47 percent of the total CAPEX), but also to the construction and upgrades of generation capacity and installation of the NOx emission reduction systems in Generation and the construction of wind farms in RES. Among others the construction of the 50 MWe and 106 MWt cogeneration heat unit adapted to generate electricity and heat at the site of Zespół Elektrociepłowni Bielsko-Biała (ZEC Bielsko-Biała) was completed and the construction of the biomass fired units in Jaworzno (50 MW), Stalowa Wola (20 MW) and Tychy (40 MW) was completed during this period. The completion of the construction of wind farms – with the capacity of 40 MW in Wicko and 82 MW in Marszewo – is planned in the second half of this year.
The Group’s net debt at the end of H1 2013 was PLN 5,03bn versus PLN 4.44bn a year ago. This increase is the result of the rising investment outlays and the lower cash balance of the Group at the end of the period – due to the paid-out dividend. The Group’s debt and liquidity ratios continue to be on the safe level: net debt to EBITDA: 1.31, and the current liquidity ratio: 1.20.
