18.02.2015

PGE Group reported financial and operating results for 2014 in line with expectations. The management says it will continue with the current investment programme and further improvement of performance indicators from an operating perspective as well as from a managerial angle.

The Company's EBITDA reached approx. PLN 8.1 billion (up 4% from 2013), while net profit attributable to equity holders of the parent was approx. PLN 3.6 billion (down 8% from the previous year), translating into earnings per share of PLN 1.95.

The highest contribution to EBITDA came from conventional generation (PLN 5 billion). The distribution segment generated an additional PLN 2.3 billion, renewables contributed PLN 350 million, while the combined wholesale and retail supply businesses brought in nearly PLN 300 million.

Adjusted EBITDA was PLN 6.5 billion, a level comparable with net cash flows from operating activities, which amounted to approx. PLN 6.3 billion and were down 20% from the previous year. Non-cash one-off events contributed a total of PLN 1.7 billion.

"Despite challenging market conditions, PGE generated strong returns in 2014 and is continuing to deliver on its flagship projects included in the Group's strategy until 2020, such as the construction of new units at Opole and Turów, a modernisation programme for our existing power plants as well as development in the renewables segment. We are also continuing a large-scale modernisation and development plan in the distribution segment, aiming to enhance the reliability of supplies to our existing and future clients," says Marek Woszczyk, PGE Group CEO.

Net output of 54.8 TWh was lower by 2 TWh than in 2013 and goes in line with our expectations for 2014, reflecting decommissions made throughout the year as well as the overhaul schedule. Lignite-fuelled assets accounted for 38.8 TWh of electricity generated, hard coal for 12.0 TWh and natural gas for 1.2 TWh. The renewables segment generated 2.3 TWh. In comparison with 2013, the volume of electricity supply to end customers increased by 7% (39.6 TWh), while distribution volume grew 2% (32.5 TWh).

"Taking into consideration one-off events, we maintained high profitability of our generation business despite deteriorating wholesale electricity prices. Distribution business performance was as planned, both from an operating and financial perspective. Shifting retail-market conditions, margin erosion and changes in the cogeneration support system all had a adverse impact on the supply segment's profitability," says Marek Woszczyk.

Capital expenditure in 2014 was a record PLN 6.3 billion, up 46% from the year before. This was due to PGE's ambitious investment programme, totalling about PLN 50 billion. The programme consists of building up new capacity and modernising existing assets in the conventional generation segment, among others. Thanks to the investments that are currently underway, PGE will reduce its environmental impact, including through limiting CO2, SO, NO and dust emissions. This will be possible also in part due to the planned commissioning of more than 200 MW in new wind capacity by the end of 2015. The programme also includes investments in the distribution business. Improving the quality of electricity supply is one of PGE Group's priorities.

"In 2014, the Group took action to improve the quality of its financial reporting. The changes in our accounting policy smooth out the impact of shifting macroeconomic conditions on results, making them more sustainable and predictable for our shareholders," says Magdalena Bartoś, managing director and CFO at PGE Group.

The new methodology provides for capitalisation of the present value of future reclamation costs connected with removal of overburden, which is the layer of soil and rock that is removed in order to gain access to lignite deposits. Estimated changes to provisions relating to overburden reclamation are now initially recognised in the relevant item of non-current assets. Recognised directly in EBITDA are only those changes that concern the volume of extracted coal.

The Company underscores that it is well-positioned to continue delivering on its strategic prerogatives and has secured diversified external resources allowing for safe growth.

"We have successfully entered the Eurobond market, secured a long-term credit facility from BGK and introduced centralised liquidity management, or cash pooling," says Magdalena Bartoś.

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