19.11.2014

Strong cash generation, higher capital spending, on-going modernisation of Poland's largest power plant in Bełchatów, completed tenders for the construction of 166 MW in new wind energy assets and an impressive dividend payout - these are the key events at PGE Group in the third quarter of 2014.

Adjusted EBITDA for the third quarter of 2014 was PLN 1.5 billion, compared with PLN 1.9 billion in the same period last year. This is yet another period with results meeting the market expectations (PLN 1.4 billion in Q2 and PLN 1.9 billion in Q1).

Consolidated revenue reached PLN 6.6 billion, against PLN 7.5 billion the year before. From an operating perspective, PGE Group's performance is in line with our estimates.

The highest contribution to EBITDA came from conventional generation (approx. PLN 900 million) and distribution (approx. PLN 600 million). Renewables contributed PLN 80 million, while the combined wholesale and retail supply businesses brought in PLN 50 million.

"Our financial results were affected by lower realised energy prices. Net electricity output of 13.8 TWh reflects a good availability of our conventional fleet. There were no surprises in the distribution segment," said Marek Woszczyk, PGE's chief executive.

Capital expenditure in the third quarter of 2014 exceeded PLN 1.6 billion, up nearly 40% on the same period last year. PLN 1 billion was allocated to the modernisation and maintenance of existing assets, while PLN 239 million was spent on construction of the lignite-powered units 5 and 6 at Elektrownia Opole. The works, commenced in February, continue on schedule. An approx. PLN 4 billion investment in the mining and generation complex at Turów is set to be launched in December.

"Positive court rulings allow us to issue the notice to proceed to our contractors on 1 December and therefore to commence the construction of a new lignite unit at Elektrownia Turów," said Marek Woszczyk.

The contractor is required to deliver the investment within 56 months from issue of the notice to proceed, i.e. in the third quarter of 2019. The construction of new coal units at Opole and Turów, which are intended to gradually replace older blocks, will have a positive impact on the environment due to a significant reduction in CO2 emissions, by as much as 25% in comparison with the older-type units.

In the renewables segment, tenders for the Lotnisko and Resko II wind farms were completed, allowing us to start on the construction of units totalling 166 MW. The Group is aiming to have 529 MW of onshore wind capacity by the end of 2015.

In September, PGE paid a dividend equal to 50% of consolidated net profit, i.e. PLN 1.10 per share. The 5.3% dividend yield is one of the highest among European utilities.

In Q3 2014, PGE Group companies signed an agreement regarding the formation of a tax group (PGK). This project is in line with the objectives in PGE Group's strategy for 2014-2020.

"The tax group is one of the mechanisms aimed at streamlining PGE Group's structure and reducing the burdens connected with financing strategic investments. We will continue to fine-tune the Group's operations in key areas using industry-leading standards so as to achieve the performance targets defined in our strategy," said Magdalena Bartoś, managing director and CFO at PGE.

The PGE Capital Group's detailed financial results for Q3 2014 are available at the following address:

http://www.gkpge.pl/media/pdf/video/2014/PGE_Q3_2014_presentation.pdf

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