TAURON Group: Q1 2015 EBITDA tops PLN 1bn

• Sales revenue was PLN 4.8bn, while EBITDA topped PLN 1bn
• Net profit rose to PLN 502m. EBITDA margin reached 21.5 percent, while net margin was 10.6 percent
• Segments that made the largest contribution to the company’s earnings: Distribution (EBITDA: PLN 547m), Generation (EBITDA: PLN 284m) and Supply (EBITDA: PLN 194m)
• Capital expenditures topped PLN 790m. The largest CAPEX went into Generation (PLN 423m)
• Efficiency improvement program generated another PLN 120m in savings which means cumulatively achieving 97 percent of PLN 864m planned in total savings for 2013-2015

(all the data for Q1 2015)

– In Q1 2015 we posted financial results that beat analyst forecasts. Such earnings, generated in a relatively challenging environment, confirm that our commercial strategy is very well aligned to the current market reality – says Dariusz Lubera, CEO of TAURON Polska Energia. – It is worth to emphasize once again the benefits that we gain from our presence in the entire energy value chain. This time – apart from the Distribution segment – the Generation segment had a very positive impact on the entire Group’s earnings – he adds.

– EBITDA topping PLN 1bln and EBITDA margin above 21 percent are the consequences of steadfastly undertaken measures aimed at improving profitability and efficiency. Taking into account highly unfavorable market conditions, independent from our operations, these measures are the only ones that depend on us that neutralize, to some extent, the market-related factors that have negative impact on the energy sector. Only in Q1 2015 we realized savings of PLN 120m, while the overall 2013-2015 goal is already almost 100 percent accomplished. However we are not planning to stop here. Works on another efficiency improvement program are already well advanced –says Krzysztof Zawadzki, CFO of TAURON Polska Energia.

Operating data

In Q1 2015 TAURON Group produced almost 1m tons of commercial coal. Lower volume versus last year is mainly the consequence of oversupply on the hard coal market, as well as of more challenging geological conditions in the coal mines that occurred in Q1 2015. Additionally, the lower production output was caused by the mild winter and rising electricity generation from renewable energy sources.

Taking advantage of higher realized electricity sales prices TAURON Group is steadfastly implementing its commercial strategy in the Generation segment. This is proven by an increase of electricity production by 6.5 percent year on year, while the nationwide growth rate was 2.7 percent.

Electricity distribution volume in Q1 2015 rose 2 percent year on year – to 12.5 TWh, while the number of customers connected to the Group’s distribution grid increased by roughly 30 thousand over the year. 

Financial results

Sales revenue

In Q1 2015 TAURON Group posted sales revenue of almost PLN 4.8bn, i.e. a 2.7 percent drop year on year. The declining revenue was primarily the consequence of spinning off Zakład Wytwórczy Nowa and Elektrownia Blachownia from TAURON Group’s structure and transferring these assets to TAMEH Polska, as well as of lower revenue from electricity supply. On the other hand, higher volumes and rates for the distribution service in the Distribution segment and higher revenue from the sales of property rights (12,8 percent increase of electricity generation from RES) had a positive impact on the sales revenue. 

EBITDA and net profit

In the challenging market environment TAURON Group reported EBITDA of more than PLN 1bn.

– This is a very good result taking into account the extremely difficult situation in the hard coal mining sector, and also the effect of a high base in the Supply segment last year caused by the lack of the cost of redeeming red and yellow certificates in Q1 2014 – explains Krzysztof Zawadzki. Solid earnings are, among others, the consequence of implementing an effective commercial strategy and also of the steadfastly implemented operational efficiency improvement program. In Q1 2015 alone, as a result of the implemented optimization programs, TAURON Group generated approx. PLN 120m of savings. Distribution makes the largest contribution to the Group’s EBITDA (54 percent). The significance of Generation increased as the segment contributed 28 percent to the Group’s total earnings.

Net profit attributable to the shareholders of the parent company topped PLN 500m in Q1 2015 and it was 26.8 percent higher than a year ago. This was the consequence, among others, of the growing financial revenue due to positive foreign exchange differences, and also of the settlement of the tax overpayment for the year 2013. As a result of the systematic process of buying out minority shareholders, including the acquisition of a 47.5 percent stake in TAURON Wydobycie (Mining) from Kompania Węglowa, the profit attributable to the majority shareholders has risen. Currently almost the entire net profit generated by the Group is attributable to the shareholders of TAURON Polska Energia. 

CAPEX and debt

In Q1 2015 TAURON Group’s CAPEX reached PLN 792m, i.e. an increase by 40 percent versus Q1 2014 – Rising CAPEX is in line with our announcements. We are observing strong increases in the Generation segment, among others in conjunction with the commencement of the works on the construction of a 910 MW unit at Jaworzno III Power Plant – comments Dariusz Lubera.

Planned total CAPEX related to the construction of the 910 MW unit will reach approx. PLN 6.2bn. The unit will be commissioned in 2019 and it will be generating approx. 6 TWh of electricity per annum.

Furthermore, TAURON Group continued, among others, the construction of the flue gas denitrification systems on the 200 MW units at Jaworzno III and Łaziska Power Plants. Works related to the construction of the co-generation unit at Zakład Wytwarzania Tychy and of the CCGT unit at Stalowa Wola Combined Heat and Power Plant, that is already 76 percent advanced, are underway.

TAURON is successfully acquiring external financing for its CAPEX. Last year the Group acquired PLN 1.75bn from an issue of bonds bearing the interest rate of only 0.9 percent above the WIBOR rate. The Group’s stable financial standing is confirmed by the ”BBB” long term rating with a stable outlook granted by Fitch rating agency. The net debt to EBITDA ratio is at a safe level, i.e. as of the end of March, 2015 it reached 1.91.