TAURON Group: EBITDA of PLN 2.2 billion and revenue of PLN 10.4 billion in H1 2019

• Sales revenue up 18 percent year on year (to PLN 10.4 billion)
• EBITDA maintained at more than PLN 2.2 billion
• Stable electricity distribution and retail supply volumes
• Acquisition of five wind farms with the total capacity of 180 MW
• Capital expenditures up 5 percent (to PLN 1.64 billion). The largest capex in the following segments: Distribution (PLN 863 million) and Generation (PLN 501 million)
• Work progress on the 910 MW unit construction project in Jaworzno at 95 percent
• Safe level of net debt[1] to EBITDA ratio: 2.60x

(all consolidated H1 2019 data)

– TAURON Group’s activities in the first half of 2019 focused on updating the strategic directions. They envisage a transition of our energy mix towards green energy. I am convinced that the strategic directions set will effectively contribute to an increase of TAURON Group’s value – says Filip Grzegorczyk, President of the Management Board (CEO) of TAURON Polska Energia. – At the beginning of September we completed a deal to acquire five wind farms located in the north of Poland. As a result of the transaction we have doubled our wind-based capacity and we are now in the second spot among Polish energy groups in terms of generation capacity installed in wind-based sources. This is the first milestone in the implementation of our strategic objectives, in line with the assumptions of the so-called TAURON’s Green Turn – adds Filip Grzegorczyk.

– TAURON Group’s financial standing and liquidity position are stable, which is confirmed by maintaining the rating of ”BBB" with stable outlook granted by Fitch rating agency. In reference to the latest acquisition of the wind farms, it is worth highlighting that as a result of that transaction we will materially increase the production of green electricity and the new assets will bring more than PLN 100 million of EBITDA per annum – says Marek Wadowski, Vice President of the Management Board for finance (CFO) of TAURON Polska Energia.

Operating data

TAURON Group’s electricity production came in at 7.2 TWh, i.e. 5 percent less than in the same period of last year (7.6 TWh). It was, above all, a consequence of the lower supply of electricity from the Group’s own production. As a result of favorable wind and hydrological conditions, as well as higher generation by the biomass-fired units, the electric output from renewable energy sources went up, reaching 0.69 TWh, i.e. 35 percent more than last year (0.51 TWh).

Heat production in the first half of 2019 came in at 6.4 PJ, i.e. it was 5 percent lower year on year, while heat supply went down 1 percent in the same period to stand at 8.8 PJ, which was a result of higher outdoor temperatures.

TAURON Group delivered 26.1 TWh of electricity to customers in the period under review, i.e. it was flat as compared to the volume of the first half of 2018 when 26.0 TWh of electricity had been delivered in total. The number of customers connected to the grid went up to reach 5.63 million.

The retail electricity supply by the Supply and Generation segments’ subsidiaries came in at 17.0 TWh in the first half of 2019 and it was 1 percent lower year on year.

Commercial coal production stood at 2.3 million tons, which means an 11 percent drop year on year. The lower production was a consequence of numerous coal face reinforcements and difficult mining and geological conditions.

53 percent of the Generation segment subsidiaries’ demand for hard coal required to produce electricity and heat was satisfied with the hard coal coming from TAURON Group’s own coal mines in the first half of 2019.

Financial results

TAURON Group generated 18 percent higher sales revenue in the first half of 2019 than a year ago. It was primarily a consequence of higher electricity sales revenue resulting from higher electricity sales prices on the wholesale and retail markets.

TAURON Group generated EBITDA of PLN 2.2 billion. The biggest contribution to TAURON Group’s total EBITDA was made by: the Distribution segment (a 61 percent share), with its EBITDA coming in at PLN 1 337 million, and the Generation segment (a 24 percent share), with its EBITDA standing at PLN 539 million.

TAURON Group’s net profit attributable to the shareholders of the parent company reached PLN 666 million, i.e. it was 17 percent higher as compared to PLN 567 million posted in the same period of last year. The net profit margin came in at 6.4 percent, i.e. it was flat versus the first half of 2018.

Investments

TAURON Group's capital expenditures came in at PLN 1.64 billion in the first half of 2019 and they were higher by 5 percent as compared to the outlays incurred in the same period of last year (PLN 1.56 billion). The growth of capital expenditures was primarily a result of higher outlays in the following segments: Distribution (an increase by PLN 90 million) and Mining (a rise by PLN 66 million). The total capex in the Distribution segment stood at PLN 863 million, with the largest funds having been spent on upgrading (refurbishing) and replacing the distribution grid (PLN 502 million), as well as installing new connections to the grid (PLN 300 million). In the Generation segment the largest capital expenditures were related to the construction of the 910 MW power generating unit in Jaworzno (PLN 254 million). The work progress at the construction site of the 910 MW power generating unit in Jaworzno surpassed 95 percent.

Debt and financing

In terms of financial liquidity TAURON Group’s position is stable and the Group has guaranteed financing up to the amount of PLN 4.23 billion. In April 2019, Fitch Ratings agency affirmed TAURON’s long term ratings in domestic and foreign currency of ”BBB" with stable outlook.

Net financial liabilities rose by 3 percent in the first half of 2019, as compared to end of 2018, and the net debt to EBITDA went up to reach 2.60x.

[1] Excluding the debt under the subordinated bonds issued in the amount of PLN 1.96 billion