TAURON Group: EBITDA of PLN 3 billion and increased revenue after the first 3 quarters of 2018

• Sales revenue up 3 percent year on year (to PLN 13.3 billion)
• EBITDA came in at PLN 3 billion, with EBITDA margin at 22.3 percent
• Net profit attributable to the shareholders of the parent company reached PLN 853 million
• Rising electricity distribution volume and increased number of customers connected to the distribution grid
• Capital expenditures of PLN 2.3 billion. The largest capex in the following segments: Distribution (PLN 1.2 billion) and Generation (PLN 909 million)
• Net debt to EBITDA ratio at a safe level of 2.2x

(all consolidated Q1-3 2018 data)

– TAURON Group’s financial results after the first 9 months of this year are above market expectations and in line with our plans – says Filip Grzegorczyk, CEO of TAURON Polska Energia. – It is worth emphasizing that our largest project carried out in Jaworzno is more than 80 percent completed. The works are progressing in accordance with the schedule and budget. Additionally, we are currently conducting negotiations related to the acquisition of the wind farms with the capacity of approximately 200 MW, located in the north of Poland. A potential transaction will enable us to double our current wind capacity – explains Filip Grzegorczyk.

- TAURON Group is building a position of a multi-utility champion. We are developing new businesses. Prior to the climate summit in Katowice we will launch carsharing and electric vehicles charging program. Such actions are in line with our strategy and global energy industry trends  – adds the CEO of TAURON Polska Energia.

– Our steadfastly implemented strategy and favorable trends in the macroeconomic environment are reflected in the Group’s stable financial position. Thanks to our actions aimed at diversifying the sources of financing and optimizing the debt maturity, the net debt to EBITDA ratio continues to stay at a safe level. We also have over PLN 5.3 billion financing guaranteed. The systematically implemented initiatives aimed at improving the efficiency of the entire organization’s operations have a significant impact on the Group’s stable financial position – says Marek Wadowski, CFO of TAURON Polska Energia.

Operating data

Commercial coal production reached 3.61 million tons and was 23 percent lower than in the same period of 2017 due to adverse mining and geological conditions at Janina Coal Mine. Almost half of TAURON Group’s demand for hard coal required to produce electricity and heat was satisfied with the coal coming from the Group’s own coal mines.

In accordance with the adopted trading strategy TAURON Group produced 11.9 TWh of electricity, i.e. 15 percent less than in the same period of last year (14 TWh). The volume of electricity generation from renewable energy sources came in at 0.69 TWh, i.e. 27 percent less than last year (0.94 TWh), which was due to a lower use of biomass and difficult hydrological and wind conditions.

Heat production declined 6 percent, reaching 7.42 PJ. Heat supply came in at 9.7 PJ and was 9 percent lower year on year due to lower consumer demand as a result of high outdoor temperatures.

The Distribution segment delivered 38.8 TWh of electricity in total to its customers, i.e. up 1.4 percent year on year. The number of customers connected to TAURON Distribution’s grid at the end of September went up by 62 thousand, i.e. to 5.58 million. The Supply segment companies supplied 25.4 TWh of electricity in total to 5.4 million customers, both households and businesses. The lower by 0.2 TWh electricity supply is primarily due to smaller demand among business customers.

Financial results

TAURON Group posted sales revenue of PLN 13.3 billion, i.e. 3 percent more than a year ago. The increased revenue, as compared to the same period of 2017, was significantly impacted by higher revenue from electricity sales and higher gas sales prices that allowed for mitigating the lower proceeds from distribution services (a consequence of introducing IFRS 15 as of January 1, 2018) and coal sales.

The Group generated EBITDA of PLN 3 billion, i.e. 1 percent higher year on year. The biggest contribution to the Group’s EBITDA was made by the Distribution segment (66 percent), followed by the Generation (22 percent) and the Supply (15 percent) segments. The Group’s EBITDA margin was stable, coming in at 22.3 percent. The Generation segment’s EBITDA (PLN 649 million) was 42 percent higher than a year ago (PLN 456 million), mainly due to the higher margin on electricity sales and the dissolving of the provisions related to employee benefits, worth PLN 230 million, that had taken place in Q1 2018.

TAURON Group’s net profit attributable to shareholders of the parent company reached PLN 853 million and it was 28 percent lower year on year as a consequence of booking the assets impairment charges in H1 2018. In Q3 2018 the Group’s net profit went up by 52% year on year, which was primarily a consequence of factoring in the positive exchange rate differences.

Efficiency Improvement Program

Efficiency Improvement Program, implemented by TAURON Group, brought an increase of the cumulative EBITDA by more than PLN 950 million (in the 2016 – Q3 2018 time frame). The largest share of the savings realized came from the following segments: Distribution, Other and Generation. On the other hand, savings related to the capital expenditures reached PLN 586 million and they were a consequence of more efficient asset management and optimization of the procurement processes.  

Capital expenditures

TAURON Group's capital expenditures came in at PLN 2.3 billion in the first 9 months of 2018 and they were higher by 5 percent than the outlays incurred in the same period of 2017 (PLN 2.2 billion). The growth is primarily a result of higher capital expenditures in the Distribution and Mining segments. In the Distribution segment the largest outlays were spent on upgrading  the distribution grid (PLN 637 million) and adding new connections to the grid (PLN 466 million), with the segment’s total capex standing at PLN 1.2 billion. The Generation segment’s capital expenditures (PLN 909 million) were, first of all, allocated to the construction of the 910 MW power generating unit in Jaworzno that will be commissioned in November 2019.

Debt and financing

As compared to the balance as of September 31, 2017, TAURON Group’s net financial liabilities rose 3.2 percent, reaching PLN 8.2 billion. As of the end of September 2018 the net debt to EBITDA ratio stood at 2.2x.