TAURON Group: PLN 1.3bn of EBITDA and PLN 637m in net profit in Q1 2018

• Sales revenue up 5 percent year on year (to PLN 4.8bn)
• EBITDA up 6 percent (to PLN 1.3bn) and EBITDA margin maintained at 26.8 percent
• Stable net profit of PLN 637m
• Positive PLN 230m impact on earnings due to dissolving of the provisions related to employee benefits at TAURON Wytwarzanie (Generation)
• Increased volumes of electricity distribution (by 1 percent), electricity retail supply (by 2 percent) and heat production (by 7 percent)
• Capital expenditures of PLN 569m. The largest capex in the following segments: Distribution (PLN 273m) and Generation (PLN 243m)
• Safe net debt/EBITDA ratio level (2.3x)

(all consolidated Q1 2018 data)

- TAURON Group achieved very good financial results in the first quarter of 2018. We increased both, sales revenue as well as EBITDA of the entire Group. Additionally, the Group’s earnings were positively impacted by the agreement reached with the employee and trade unions side, which allowed for dissolving of the provisions in the Generation segment worth PLN 230m – says Filip Grzegorczyk, CEO of TAURON Polska Energia. – Jaworzno 910 MW unit construction works are progressing in accordance with the schedule and the project progress reached more than 60 percent. In April we completed a successful boiler pressure test that represented a milestone in the implementation of this project. Jaworzno unit will be commissioned in the fourth quarter of 2019 – adds Filip Grzegorczyk.

- An important highlight of the first quarter was the signing of the agreement with the Polish Development Fund defining the terms of PFR’s engagement in the Jaworzno 910 MW unit construction project. In accordance with the agreement PFR will invest up to PLN 880m in the project. We also obtained new financing for the CCGT unit construction project at Stalowa Wola as a result of  Elektrociepłownia Stalowa Wola concluding a loan agreement to be used to refinance its debt and complete the project – says Marek Wadowski, CFO of TAURON Polska Energia. – With respect to financing the Group’s operations it is worth reminding that in March we signed further amendments to the agreements with the banks the result of which was an extension of the period of the funds availability under the bond issue program – adds Marek Wadowski.

Operating data

Commercial coal production reached 1.42 million tons in Q1 2018 and it was 6 percent lower year on year due to difficult geological conditions at Janina Coal Mine and a postponement of the commissioning of one of the coal faces at Sobieski Coal Mine. Coal sales volume was close to the coal production volume, reaching 1.43 million tons. During the period under review 53 percent of TAURON Group’s demand for coal was satisfied from the Group’s own coal mines. The balance of the demand was covered using external sources.

TAURON Group produced 3.94 TWh of electricity in Q1 2018, i.e. 19 percent less than last year (4.89 TWh), which was a consequence of the adopted production and trading strategy. Electricity generation from renewable energy sources reached 0.24 Twh, i.e. 27 percent less than last year (0.33 TWh), which was due to the reduction of biomass burning.

Heat production reached 5.68 PJ in Q1 2018 and it was 7 percent higher year on year, while heat sales reached 7.69 PJ, i.e. 3 percent more than a year ago, which was a consequence of lower outdoor temperatures and the higher consumer demand related thereto.

Distribution Segment delivered 13.42 TWh of electricity in total in Q1 2018 (up 1 percent year on year) and provided distribution services for 5.55 million consumers. Increased volume of delivery to the final consumers is first of all a consequence of higher electricity consumption by industrial consumers. During the same period the Supply Segment supplied 9.27 TWh of retail electricity to 5.4 million customers, i.e. 2 percent more than in Q1 2017.

Financial results

TAURON Group posted sales revenue of PLN 4.8bn in Q1 2018 (up 5 percent year on year). The main factors impacting the reported revenue are: rising volumes in the Supply and Distribution segments, higher electricity sales prices in the Generation segment and higher electricity sales volumes outside the Group due to an increase of the so-called power exchange obligation.   

The Group’s EBITDA reached PLN 1.3bn in Q1 2018 and it was 5.7 percent higher than EBITDA posted in Q1 2017. The biggest contribution to TAURON Group’s EBITDA comes from the Distribution segment (49 percent), followed by the Generation (36 percent) and Supply (14 percent) segments.

EBITDA and EBIT margins achieved in Q1 2018 reached 26.8 percent and 18.1 percent, and they were higher than the margins generated in Q1 2017 by 0.2 pp and 0,5 pp, respectively.

Generation segment’s EBITDA was more than two times higher in Q1 2018 (PLN 465m) than in the same period of 2017 (PLN 228m). A one-off event had the most significant impact on such a strong growth – dissolving of the provisions related to employee benefits at TAURON Wytwarzanie (Generation) worth PLN 230m.

On the other hand, the decline of the Supply Segment’s EBITDA in Q1 2018 was a consequence of a one-off event in Q1 2017, namely dissolving of the provision related to the CCGT unit construction project in Stalowa Wola, which increased the result of this segment by PLN 190m.

TAURON Group’s net profit attributable to the shareholders of the parent company reached PLN 636m in Q1 2018 and it was close to the result achieved in the same period of last year (PLN 640m).

Efficiency Improvement Program

Efficiency Improvement Program implemented by TAURON Group generated PLN 1 227m in total savings (in the 2016 – Q1 2018 period).

This means that savings achieved so far represent 94 percent of the aggregate effects planned for the 2016-2018 time frame. The largest share of the savings realized came from Generation and Distribution segments.

Capital expenditures

TAURON Group's capital expenditures reached PLN 569m in Q1 2018 and they were 10.5 percent lower than outlays incurred in the same period of last year. The largest capital expenditures were spent in the Distribution Segment where the capex was allocated first of all to upgrading (refurbishing) the distribution grid (PLN 140m) and installing new connections to the grid (PLN 116m).

A substantial portion of the capital expenditures (PLN 190m) was spent on the construction of the 910 MW power generation unit at Jaworzno III Power Plant (Elektrownia Jaworzno III). Planned total outlays related to the construction of this unit will reach approx. PLN 6.2 bln and the unit will be commissioned in November 2019.

Debt and financing

As of the end of March 2018 TAURON Group’s net financial liabilities reached PLN 8.4bn (up 4.7 percent versus December 31, 2017), while the net debt to EBITDA ratio was stable at a safe level of 2.3x.

***

TAURON Polska Energia SA is the capital group’s holding company that runs its operations in such lines of business as hard coal mining and generation, distribution and supply of electricity and heat. TAURON Group is operating on 18 percent of Poland’s territory and is one of the largest business entities in Poland, including being Poland’s largest electricity distributor as well as Poland's second largest electricity supplier and generator. TAURON Group includes, among others, such subsidiaries as TAURON Wytwarzanie (Generation), TAURON Dystrybucja (Distribution), TAURON Sprzedaż (Supply), TAURON Obsługa Klienta (Customer Service), TAURON Wydobycie (Mining), TAURON Ekoenergia (Eco-energy) oraz TAURON Ciepło (Heat). The shares of TAURON Polska Energia SA have been listed on the Warsaw Stock Exchange since 2010 and they are included, among others, in the WIG20 and WIG30 indices. The company is included in the socially responsible companies' index - Respect Index.