TAURON: Improving earnings of the Mining segment

TAURON Group's Mining line of business generated EBITDA of PLN 134.7m in Q3 of 2015 versus PLN 55.3m a year ago. The good result was possible, among others, due to achieving high hard coal extraction and sales volumes and introducing more flexible approach to the provision of benefits due to former employees.

– Facing the demanding market environment and with hard coal prices hitting record low levels we are taking steps aimed at both, maximizing hard coal extraction and sales volumes, as well as introducing more flexible approach to the cost side of our mining business. I would like to emphasize that in Q3 the company achieved a very high coal extraction volume, i.e. more than 1.4m tons. Furthermore, we concluded an agreement with the representatives of the workforce that made granting of hard coal allowances for former employees dependent on the company's financial standing. This allowed us to dissolve the actuarial provision and achieve improved earnings – says Jerzy Kurella, CEO of TAURON Polska Energia.

During the first nine months of 2015 TAURON Group produced approx. 3.5 million tons of hard coal. The lower output in the first half of the year was the consequence of challenging mining and geological conditions at the Group's coal mines and the sale of the hard coal inventory.

Hard coal sales have reached 3.66 million tons since the beginning of this year versus 3.53 million tons a year ago. The main reasons for the increased sales volume are the higher sales of the medium size lump coals and the coal dust (pulverized coal). Hard coal supplied by the Janina and Sobieski coal mines satisfied 43 percent of TAURON Group's hard coal demand. The balance of the company's demand was covered by external sources.

The Mining segment's revenue reached PLN 332.8m in Q3 of 2015 versus PLN 341.4m a year ago. The lower revenue is the consequence of the declining hard coal market prices. Nevertheless the Mining segment's operating profit reached PLN 106.7m (versus PLN 29.1m a year ago), while its EBITDA was PLN 134.7m (versus PLN 55.3m a year ago).

In Q3 of 2015 the construction works were continued on the Grzegorz shaft at the Sobieski coal mine and on the 800 m level at the Janina coal mine which is already 34 percent complete. Capital expenditures reached PLN 31.3m in Q3 of 2015, while since the beginning of the year the segment's CAPEX was PLN 177.5m.

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