PGE Polska Grupa Energetyczna S A : Presentation - preliminary results for H1 2020

H1 2020 preliminary results

August 31, 2020

Disclaimer: estimated data

The Management Board of PGE Polska Grupa Energetyczna (the "Company" or "PGE") emphasize that figures presented hereby are preliminary estimates, which may change. The financial statements of PGE Group are still in the preparation process. Consolidated report for H1 2020 will be released on September 15, 2020.

This presentation has been prepared by the Management of PGE. This presentation does not constitute or form part of and should not be constructed as an offer to sell or the solicitation or invitation of any offer to buy or subscribe for securities of the Company, any of its subsidiaries in any jurisdiction. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investments decision whatsoever.

• Estimated operating volumes and sales data

[TWh]	Q2 2020	Q2 2019	y/y	H1 2020	H1 2019	y/y
Net electricity generation, by	13.22	13.89	-5%	28.58	29.50	-3%
fuels:
Lignite	7.49	8.18	-8%	14.72	17.06	-14%
hard coal (including):	4.10	4.25	-4%	9.83	8,72	13%
Conventional Generation	3.48	3.56	-2%	7.76	6.56	18%
segment
incl. Opole 5/6 units	1.49	0.69	116%	3.33	0.69	383%
District Heating segment	0.62	0.69	-10%	2.07	2.16	-4%
natural gas	0.97	0.83	17%	2.39	2.26	6%
pumped-storage plants	0.15	0.16	-6%	0.37	0.33	12%
hydro	0.12	0.13	-8%	0.25	0.27	-7%
wind	0.28	0.26	8%	0.78	0.68	15%
biomass	0.10	0.07	43%	0.22	0.16	38%
municipal waste	0.01	0.01	0%	0.02	0.02	0%
Sales of heat [PJ]	8.00	7.69	4%	27.75	28.57	-3%
including Conventional	0.77	0.76	1%	2.67	2.88	-7%
Generation segment
Sales of electricity to final off-	9.37	10.44	-10%	20.12	21.89	-8%
takers
Distribution of electricity	8.12	8.83	-8%	17.29	18.13	-5%
Average realized wholesale price of electricity
[PLN/MWh]	Q2 2020	Q2 2019	y/y	H1 2020	H1 2019	y/y
Conventional Generation	292.0	242.3	20%	288.6	243.8	18%
segment
District Heating segment	235.4	252.9	-7%	245.8	252.8	-3%
Total (Conv. Gen. and District	285.7	243.2	17%	282.4	244.9	15%
Heating)

• Estimated key financial data

	[PLN m]	Q2 2020	Q2 2019	y/y	H1 2020	H1 2019	y/y
	EBITDA PGE Group, including:	1 035	2 597	-60%	2 805	4 395	-36%
	Conventional Generation	277	1 423	-81%	774	2 106	-63%
	District Heating	151	379	-60%	493	772	-36%
	Renewables	108	145	-26%	301	310	-3%
	Distribution	554	566	-2%	1 127	1 211	-7%
	Supply*	-31	330	n/a	187	473	-61%
	Other + consolidation adjustments	-24	-246	n/a	-77	-477	n/a
	One-off items, including:	-312	1 096		-312	1 096
	LTC compensations	41	-15		41	-15
	Change of reclamation provision	-434	-246		-434	-246
	Change of actuarial provision	-40	-36		-40	-36
	Provision for the risk of returning the	121	-		121	-
	equivalent of EUA received by ZEDO
	Additional EUA emission rights	-	1 393		-	1 393
	Recurring EBITDA	1 347	1 501	-10%	3 117	3 299	-6%

*According to accounting standards (IAS 37), Supply segment created provisions in years 2018 and 2019 for onerous contracts, resulting from the Act on electricity prices (2018) and from approval of the price of electricity for households -G Tariff for 2020 (2019). However, PGE Group made respective simultaneous adjustment on the consolidated result which reverses the impact of provision.

• Estimated CAPEX, net debt and EPS

[PLN m]	Q2 2020	Q2 2019	y/y	H1 2020	H1 2019	y/y
CAPEX*	1 547	1 549	0%	2 504	2 557	-2%
Net debt (end of period)	9 728	10 948	1 220	9 728	10 948	1 220

Consolidated net result to equity

-1 120

1 117

n/a

-688

1 702

n/a

Computation of net result to equity ex. impairments
Assets impairment (pre-tax)**	-1 075	-73		-1 106	-96
Assets impairment (after tax)**	-963	-59		-988	-78
Consolidated net result to equity - ex.	-157	1 176	n/a	300	1 780	-83%
Impairments**

Earnings per share [PLN]	-0.60	0.60	n/a	-0.37	0.91	n/a
Earnings per share - ex. impairment	-0.08	0.63	n/a	0.16	0.95	-83%

*Capital expenditures and increases in ROUA **Impairment of Property, Plant and Equipment, Intangible Assets and Right-of-Use Assets, including the impact of impairment tests in Q2 2020 in Conventional Generation segment and the loss of value of shares held in PGG. S.A. in the total amount of PLN 1 012m on the profit before tax and PLN 911m on the net profit.

• Drivers of periodic results

Key factors that influenced y/y results dynamics:

Q2 2020	H1 2020
Recurring EBITDA declined by 10% y/y	Recurring EBITDA declined by 6% y/y

• Average realized wholesale price of electricity in + Average realized wholesale price of electricity in

Conventional Generation segment higher by 50 PLN/MWh	Conventional Generation segment higher by 45 PLN/MWh
(positive effect of approx. + PLN 1.0bn according to the
(positive effect of approx. + PLN 540m according to the
volume generated in H1 2020)
volume generated in Q2 2020)
+ Higher heat prices, lower gas fuel prices in District Heating
+ Higher heat prices, lower gas fuel prices in District Heating
segment, + PLN 200m
segment, higher heat sales volumes + PLN 100m
+ Hard coal generation rose by 1.1 TWh thanks to operation
	of the new units at Opole power plant
- Lower generation from lignite, down by 0.7 TWh	- Lower generation from lignite, down by 2.3 TWh
- Cost of CO2 emission higher by approx. PLN 650m	- Cost of CO2 emission higher by approx. PLN 1.3bn
- Employment cost up by PLN 150m
- Employment cost up by PLN 50m
- Lower margin on sales of electricity in Supply segment PLN
- Lower margin on sales of electricity in Supply segment
150m
PLN 220m
- Sales volumes of heat declined by 0.8 PJ

Reported EBITDA declined by 60% y/y

Negative balance of one-offs y/y PLN -1408m impacted mainly by absence of additional EUA allowances granted in HY'19, increasing financial results by PLN +1 393m.

Reported EBITDA declined by 36% y/y

Negative balance of one-offs y/y PLN -1408m impacted mainly by absence of additional EUA allowances granted in HY'19, increasing financial results by PLN +1 393m.

7

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