PGE Polska Grupa Energetyczna : Group with very good financial and operating results after three quarters of 2017

The company's EBITDA for the first three quarters of 2017 surpassed PLN 6.1 billion (PLN 6.108 billion), up by 28% from the previous year. EBITDA adjusted for one-off items, which largely took place last year, was PLN 4.889 billion, i.e. 11% more than in the preceding year. This was driven by higher generation volumes and a very favourable fuel structure related to a larger share of own fuels (lignite) as well as higher returns on distribution services and lower costs of certificate redemptions in the retail segment.

The conventional generation segment had the largest contribution to PGE Group's EBITDA after the first three quarters of 2017, with close to PLN 3.401 billion. The distribution segment closed the reporting period with over PLN 1.807 billion in EBITDA. The supply segment generated PLN 614 million and the renewables segment PLN 239 million.

'We recorded 6% growth in electricity output, largely thanks to higher lignite-based generation. Good operating results allowed us to maintain stable and satisfactory financial results. This is confirmed by our EBITDA and net profit after this year's first three quarters, of over PLN 6 billion and nearly PLN 3 billion, respectively,' said Henryk Baranowski, CEO of PGE Polska Grupa Energetyczna.

In the first three quarters of 2017, the Group generated 41.46 TWh of energy, including 29.83 TWh from lignite. This results from a lighter overhaul schedule at Bełchatów power plant, the return of units 3 and 6 after 'medium' overhauls and the return of unit 10, which was undergoing modernisation during the base period.

Hard coal-based production reached 8.26 TWh, down by 1% y/y. A heavier overhaul schedule at Dolna Odra power plant was offset during the reporting period by higher output at Opole power plant.

Wind farm output grew by 21% y/y, reaching 0.85 TWh, on the back of favourable weather conditions. The volume of production at gas-fired plants went up by 13% to 1.69 TWh. This was mainly the result of as new gas-and-steam unit at Gorzów CHP being commissioned in January 2017. The volume of electricity distribution after this year's first three quarters came to 26.2 TWh.

For PGE Group, 2017 is a time of consistent development and pursuit of objectives from its updated business strategy. On October 27, 2017, all conditions precedent were met in a transaction to sell EDF's assets in Poland to PGE Group. At the end of October, PGE received notice from EDF companies on the non-use of the right of pre-emption by the Director General of the National Agriculture Support Centre.

Earlier, EDF had received approvals from the relevant government authorities in France, while PGE had received approval for the transaction from the Minister of Energy and condition approval from the Office of Competition and Consumer Protection. The transaction is expected to be completed on November 13, 2017. Thanks to this independent acquisition of eight CHP plants in the largest agglomerations, such as the Tri-City (i.e. Gdansk, Gdynia and Sopot) area, Wrocław and Cracow, located in five voivodships, as well as the Rybnik plant in Silesia and close to 400 km of district heating network in four cities, PGE Group will cement its top position on the Polish power market and become the largest supplier of eco-friendly district heating.

PGE is continuing its comprehensive cooperation with startups. PGE Ventures, a corporate venture capital fund established by PGE Group to invest in the area of new technologies, launched a far-reaching scouting programme in September, intended to reach as large a group of young entrepreneurs as possible and to select projects that most closely fit PGE Group's business needs. According to the plan, agreements with start-ups that will receive support from this year's budget will be signed by the end of the year. PGE Nowa Energia, also established this year, will be responsible for early-stage project incubation and acceleration.

'We are opting to develop through acquisitions, as shown by the agreement to acquire EDF's assets, which is being finalised now, as well as to develop new business areas, which is mainly manifested by our involvement in supporting start-ups and creating an electromobility ecosystem in Poland. We are the energy market leader and we will soon be the district heating market leader but we also want to be the leader in innovations and dynamic growth. We are well on the way to achieving this objective,' said Henryk Baranowski.

PGE Group is continuing to implement its key development projects. Expenditures on investments in this year's first three quarters reached PLN 4.2 billion and were 25% lower than in the same period last year. Work progress on the construction of two units at Opole power plant with total capacity of 1800 MW has exceeded 85%. A turbine generator was installed at unit 5 and a leak test for the boiler's pressure elements at unit 6 was conducted several weeks ahead of schedule.

Irrespective of the on-going work, the General Contractor has proposed to PGE new deadlines for the new units' commissioning. The proposed schedule includes a 5-month and 4-month shift from the initially planned deadlines, respectively. This documentation is currently being analysed, and talks with the General Contractor on the optimal schedule are under way.

The construction of a 490 MW unit in Turów is also steadily progressing. A cooling tower structure, currently being built, is expected to reach its targeted height in the fourth quarter. Turbo-set assembly has commenced, and overall work progress at the construction site has surpassed 40%. The Group is also continuing work at Rzeszów CHP, where a Thermal Processing Installation with Energy Recovery is being built. Work is also under way on the assembly of auxiliary systems, and a turbo-set has been delivered to the site.

In this year's third quarter, PGE Group's Investment Committee, having taken into account economic considerations and the plant's specific location as well as changes in market and regulatory surroundings, selected natural gas as the most beneficial fuel for a new power unit at Dolna Odra power plant. This project is in its preparatory phase, which will last until the end of the second quarter of 2018 and will include a feasibility study as well as administrative procedures to obtain an environmental permit. A further schedule for the construction of this new unit, including the start and end dates for the investment, will be available once this work is completed.

Investments in distribution infrastructure are also being continued. The most important investment put into service this year, in September, is a new 110/15 kV station in Czosnów. The newly-built station in Czosnów together with grid infrastructure makes up a modern facility, which will significantly improve the security of energy supplies in the entire area north of Warsaw. The estimated value of all of the investments planned for the Czosnów hub is approx. PLN 130 million.

Commentary on the published results from Henryk Baranowski, CEO of PGE Polska Grupa Energetyczna: https://www.youtube.com/watch?v=tdPVEjXVHUM