TAURON Group: EBITDA of PLN 3.4 billion and revenue of PLN 18.1 billion in 2018

• Sales revenue up 4 percent year on year (to PLN 18.1 billion)
• EBITDA came in at PLN 3.4 billion, with EBITDA margin at 18.6 percent
• Electricity distribution volume up 1 percent (51.97 TWh)
• Capital expenditures of PLN 3.7 billion. The largest capex in the following segments: Distribution (PLN 2 billion) and Generation (PLN 1.3 billion)
• Work progress on the 910 MW unit construction project in Jaworzno exceeded 85 percent
• Capacity market auctions: PLN 4.8 billion in revenue over 17 years
• Increase of the number of customers by 65 thousand (to 5.6 million)
• Net debt[1] to EBITDA ratio at 2.54x

(all consolidated 2018 data)

– FY 2018 financial results are in line with our plans and market expectations. We increased sales revenue, while our EBITDA came in at PLN 3.4 billion. The net profit was significantly charged with one-off non-cash events, such as the booking of the write-downs due to the impairment of assets – says Filip Grzegorczyk, CEO of TAURON Polska Energia.

– TAURON Group is currently working on updating its strategy that will take into account changes to the regulatory and market environment. Our priority is to complete the key investment projects, including, first of all, the 910 MW generating unit at Jaworzno, develop sustainable and partnership relations with the customers and deliver innovative solutions that are getting ever more aligned with their needs –  adds Filip Grzegorczyk.

– In 2018 we continued our works on the initiatives aimed at supporting the Group’s financial stability. We signed an agreement with the Polish Development Fund (PFR) under which PFR will invest up to PLN 880 million in the 910 MW generating unit construction project at Jaworzno. We also obtained new financing for the CCGT unit construction project at Stalowa Wola and we concluded amendments to the agreements with the banks, resulting in the extension of the funding availability period under the bond issue program. The outcome of such activities is the guaranteed financing in the region of almost PLN 5.8 billion – says Marek Wadowski, CFO of TAURON Polska Energia.

Operating data

TAURON Group produced 16.2 TWh of electricity in 2018, i.e. 12 percent less than in the same period of last year (18.4 TWh). The reduction of the electricity production volume was a consequence of the adopted production and trading strategy.

Heat production came in at 11.3 PJ (down 7 percent year on year). Heat supply showed a similar pattern, reaching 15.2 PJ in the same period. The decline of the heat production and supply was due to the lower consumer demand as a result of high outdoor temperatures

The total volume of electricity delivered to the customers reached 52 TWh, i.e. 1 percent more year on year, while the number of customers connected to TAURON’s grid went up by 65 thousand over the year (to 5.6 million).

The retail electricity supply by the Supply segment’s subsidiaries came in at 34.5 TWh in 2018 and it was flat versus 2017.

Commercial coal production reached 5 million tons in 2018 and it was 22 percent lower year on year. The production volume was a consequence of difficult geological and mining conditions at TAURON Group’s coal mines. During the period under review 45 percent of the demand for hard coal required to produce electricity and heat was satisfied with the coal coming from the Group’s own coal mines. The balance of the demand was covered from the external sources.

Financial results

TAURON Group posted sales revenue of PLN 18.1 billion in 2018, i.e. 4 percent more than in 2017. This item was significantly impacted by 15 percent higher electricity sales revenue and a 44 percent increase of the gas sales revenue.

TAURON Group’s EBITDA came in at PLN 3.4 billion (down 7 percent year on year). The biggest contribution to the Group’s EBITDA was made by the Distribution segment (75 percent). This segment’s EBITDA posted a 10 percent increase year on year and reached PLN 2.5 billion. The second most significant segment in this respect was the Generation segment (22 percent) with its EBITDA of PLN 731 million, i.e. 36 percent higher year on year. The decline of the Group’s EBITDA was primarily due to a 62 percent lower EBITDA of the Supply segment as a result of setting up a provision in the amount of PLN 214 million due to the estimated impact of the legal regulations related to stabilizing electricity prices for the consumers in 2019.

The Group’s EBITDA margin stood at 18.6 percent (i.e. down 2.2 pp).

TAURON Group’s net profit attributable to the shareholders of the parent company came in at PLN 205 million and it was 85 percent lower year on year. It was primarily a consequence of booking the write-downs due to the impairment of assets in the amount of PLN 855 million. This value is due to recognizing the impairment charges in the following segments: Generation and Mining, as well as dissolving some of the write-downs booked earlier, mainly related to the renewable energy sources. As a result the EBIT margin and the net profit margin were significantly lower than the margins posted in 2017.

Efficiency Improvement Program

Efficiency Improvement Program implemented by TAURON Group brought an increase of the cumulative EBITDA by more than PLN 1.07 billion in the 2016-2018 time frame. The largest share of the savings realized came from the following segments: Distribution and Generation. The savings related to the capital expenditures reached PLN 652 million and they were a consequence of a more efficient asset management and the optimization of the procurement processes.

Capital expenditures

TAURON Group's capital expenditures came in at PLN 3.7 billion in 2018 and they were higher by 6 percent than the outlays incurred in 2017 (PLN 3.5 billion). The growth of the capital expenditures was primarily the result of higher outlays in the following segments: Distribution and Mining. In the Distribution segment, with its total capex standing at PLN 2 billion, the largest outlays were spent on upgrading (refurbishing) the distribution grid (PLN 1.1 billion) and installing new connections to the grid (PLN 676 million). Meanwhile the Generation segment’s capital expenditures (PLN 1.3 billion) were primarily allocated to the construction of the 910 MW power generating unit in Jaworzno.

Debt and financing

As of the end of December 2018 TAURON Group’s net financial liabilities rose 6.4 percent, reaching PLN 8.6 billion. As of the end of 2018 the net debt (excluding the debt under the subordinated bonds issued in the amount of PLN 1.54 billion) to EBITDA ratio stood at 2.54x.

[1] Excluding the debt under the subordinated bonds issued in the amount of PLN 1.54 billion