PGE Polska Grupa Energetyczna S A : Analysts kit - Q3 2021

Investor Release Q3 2021

November 23, 2021

Details of the webcast from the meeting with CEO & CFO November 24, 2021 (Wednesday), 10.00 AM CET

Link to the webcast:https://infostrefa.tv/pge/

Questions for Q&A session allowed via email: [e-mail]

Investor relations contact: Filip Osadczuk, Head of IR tel.: [phone]mob: [phone]

e: [e-mail]

Operations: Generation volume at record levels triggered by export of electricity

Financials: Strong EBITDA drove up by generation volume and higher SPOT prices

• Q3 2021: PGE power generation 3.3TWh, +23% y/y increase, boosted by higher prices of electricity on foreign markets
• Positive effect of record-high volumes and revenues from capacity markets in Conventional Generation
• Sharply rising SPOT prices drove up results of Renewables
• Strong EBITDA at PLN 2.1bn in comparison to PLN 1.5bn in Q3 2020. Net profit to equity at PLN 0.6bn (+105% y/y)
• Net debt declined by ca. PLN 3.4bn q/q to PLN 2.6bn as CO2 had been hedged with forward contracts

Generation volume at record-high levels

Sharp rebound of lignite generation at 9.7TWh (+26% y/y) and hard coal generation at 6.6TWh (+38% y/y) stems both from the economic recovery (GDP +5.1% y/y in Q3 2021) which pushed up domestic demand (+2.0TWh y/y) and the situation on European markets as foreign trade balance changed from net import of 3.7TWh in Q3'20 to net export of 1.0TWh in Q3'21. RES generation was at 0.5TWh (+22% y/y) mainly as a result of higher biomass generation (Szczecin CHP plant).

Heat volumes (+7% y/y) reaching 4.1PJ were supported by lower average external temperatures in September. Volumes of electricity distributed (9.3TWh vs. 9.0TWh in Q3 2020) with 4% improvement follow the rise in domestic demand due to post-covid recovery. Sales to end-users at 9.2TWh declined by -11% y/y in effect of reviewed commercial assumptions.

Another quarter of strong EBITDA

Strong reported EBITDA (PLN 2.1bn, +36% y/y) supported by revenues from the capacity market, record-high generation volumes, higher SPOT prices, distribution volumes and restoration of retail margins. Positive impact of one-offs y/y PLN +197m mainly as a result of change in the balance of reclamation provision (PLN -508m) and effect of rollover of the EUA contracts (PLN +641m). Recurring EBITDA at PLN 1.9bn (+23% y/y). EUA rollover effect to be neutralised in Q4 2021.

PLN 0.8bn- Conventional Generation segment EBITDA significantly higher (+56% y/y) on positive impact of record-high generation volumes and revenues from capacity market.

District Heating EBITDA at PLN 0.2bn (+32% y/y) supported by one-off (rollover of EUA contracts). Operating results impacted negatively by decline in generation volume due to higher gas prices.

RES segment EBITDA came at PLN 0.2bn (+95% y/y) mainly as result of higher electricity prices on SPOT market and revenues from capacity market that superseded payments from ancillary services in pumped-storage power plants.

Supply segment result came out slightly better (+6% y/y) PLN 0.3bn as the improvement in retail margins is almost offsetting the release of provision for onerous contracts in Q3'20.

Distribution EBITDA at PLN 0.7bn (+9% y/y) as an effect of higher volumes and lower cost of balancing electricity.

CAPEX: A new investment cycle is still on the horizon

Expenditures on investments (on an accrual basis) in PGE Group dropped to ca. PLN 0.8bn (-35% y/y) as major projects in Conventional Generation (capex at PLN 0.3bn, -51% y/y) were completed. Lower Distribution CAPEX at the level of PLN 0.3bn (-23% y/y) mainly as an effect of decline in distribution grid outlays. New projects (offshore, district heating, CCGT units in Dolna Odra power plant, grid grounding, smart metering ) are ahead.

Net debt declined on upbeat operating cash flow.

Net debt declined significantly to PLN 2.6bn, (PLN -3.4bn q/q) and (PLN -5.6 y/y) on strong operating cash flow as CO2 had been hedged with forward EUA contracts. Net debt/LTM EBITDA stands q/q at 0.3x (1.5x as of Q3 2020).

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Q3 2021 Investor Release

November 23, 2021

Key Financials

PLNm	Q3 2021	Q3 2020	y/y [%]	9M 2021	9M 2020	y/y [%]
Sales	10 942	10 320	6%	32 850	33 096	-1%
EBITDA	2 110	1 546	36%	7 364	4 351	69%
Recurring EBITDA	1 941	1 574	23%	6 160	4 691	31%
EBIT	972	469	107%	4 130	740	458%
Recurring EBIT	866	620	40%	3 058	1 827	67%
Net profit (to equity)	561	273	105%	3 251	-415	n/a
Net profit (to equity) ex. impairments	612	201	204%	3 358	501	570%

EBITDA by segments

PLNm	Q3 2021	Q3 2020	y/y [%]	9M 2021	9M 2020	y/y [%]
Conventional Generation	754	484	56%	2 803	1 258	123%
District heating	152	115	32%	867	608	43%
Renewables	214	110	95%	596	411	45%
Distribution	665	611	9%	2 047	1 738	18%
Supply	316	299	6%	1 022	486	110%

EBIT by segments

PLNm	Q3 2021	Q3 2020	y/y [%]	9M 2021	9M 2020	y/y [%]
Conventional Generation	193	37	422%	1 266	-630	n/a
District heating	-9	-47	n/a	387	146	165%
Renewables	122	24	408%	359	176	104%
Distribution	360	311	16%	1 127	813	39%
Supply	307	291	5%	997	460	117%

Key operating data

TWh	Q3 2021	Q3 2020	y/y [%]	9M 2021	9M 2020	y/y [%]
Net Generation Volume	17.60	14.27	23%	50.54	42.85	18%
Sales to End-users	9.17	10.34	-11%	27.92	30.46	-8%
Electricity Distribution Volume	9.30	8.98	4%	27.94	26.27	6%
Sales of Heat [PJ]	4.05	3.79	7%	36.16	31.53	15%

Electricity generation by source

TWh	Q3 2021	Q3 2020	y/y [%]	9M 2021	9M 2020	y/y [%]
Lignite-fired power plants	9.73	7.72	26%	27.31	22.40	22%
Hard coal-fired power plants	6.09	4.28	42%	14.90	11.70	27%
Coal-fired CHPs	0.52	0.51	2%	3.09	2.97	4%
Gas-fired CHPs	0.63	1.23	-49%	3.09	3.62	-15%
Biomass-fired CHPs	0.12	0.04	200%	0.27	0.25	8%
Waste-to-energy CHPs	0.01	0.01	0%	0.03	0.03	0%
Pumped-storage	0.14	0.13	8%	0.50	0.50	0%
Hydro	0.09	0.08	13%	0.37	0.33	12%
Wind	0.27	0.27	0%	0.98	1.05	-7%
TOTAL	17.60	14.27	23%	50.54	42.85	18%
incl. renewable generation	0.50	0.41	22%	1.67	1.68	-1%
incl. biomass co-combustion	0.01	0.01	0%	0.02	0.02	0%

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Q3 2021 Investor Release