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TAURON Group results for 2010 Disclaimer This presentation is for - - PowerPoint PPT Presentation

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15 March 2011 TAURON Group results for 2010 Disclaimer This presentation is for information purposes only and should not be treated as an investment-related advice. This presentation has been prepared by TAURON Polska Energia S.A. (the

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TAURON Group results for 2010

15 March 2011

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SLIDE 2

1

Disclaimer

This presentation is for information purposes only and should not be treated as an investment-related advice. This presentation has been prepared by TAURON Polska Energia S.A. (“the Company”). Neither the Company nor its subsidiaries shall be held responsible for any damage resulting from use of this presentation or a part thereof or from its contents or in any other manner in connection with this presentation. The recipients of this presentation are solely responsible for their analyses and market evaluation as well as evaluation of the Company’s market position and possible results of the Company in the future. made based

  • n information contained herein.

This presentation includes forward-looking statements such as “planned”, “anticipated”, “estimated” and other similar expressions (including their negations). These expressions involve known and unknown risks, uncertainties and other factors that may result in the actual results, financial condition, actions and achievements of the Company and the industry’s results being materially different from any future results, actions or achievements included in the forward-looking statements. Neither the Company nor any of its subsidiaries are obliged to update this presentation or provide any additional information to the recipients of this presentation.

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  • IPO value: PLN 4.2 billion
  • Over 230 thousand of individual investors; a wide circle of Polish and foreign institutional investors
  • Second largest IPO of a utility company in Europe
  • Opening bid: PLN 5.13 – increase of capitalization by PLN 3.3 billion from PLN 8.2 billion on the first

day of listing to PLN 11.5 billion at the end of 2010

  • Presence in MSCI Poland – since 14 July 2010
  • Presence in WIG20 – since 17 December 2010
  • Capital restructuring of the Group – activities in the scope of restructuring the capital structure and

implementing a business model

  • Launching cost efficiency improvement programme in the amount of PLN 1 billion for 2010-2012
  • Obtaining the status of a participant of many significant trading platforms and energy exchanges: WSE

Commodity Market, Bluenext and EPEX Spot SE in Paris, EEX in Leipzig and Power Exchange Central Europe (PXE) in Prague

  • Contribution by the State Treasury of the remaining shares in subsidiary companies: PKE, Enion,

EnergiaPro, ESW to TAURON in October 2010

  • Resolution of Extraordinary Shareholders’ Meeting of 10 November 2010 to decrease share capital by

decreasing share par value from PLN 9 to PLN 5 to restructure equity capital

  • End of employee shares’ conversion - 13 August 2010
  • 16 December 2010 signing an agreement with Bank Handlowy, ING Banki Śląski, PKO BP, BRE Bank,

Pekao, Nordea Bank Polska

  • Five-year bonds issuance programme of the value of PLN 1.3 billion; 29 December 2010 issuing bonds
  • f the value of about PLN 850 million
  • Objective: to refinance TAURON Group companies’ liabilities, decrease structurally subordinate debt

within the Group, finance general corporate needs

  • Rating assigned on 8 April 2010 by Fitch Ratings
  • Long-term local and foreign currency rating: BBB, outlook: stable

Major events in 2010

IPO and floatation

  • n WSE

Rating assignment Bonds issuance programme Group restructuring Strategy implementation

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SLIDE 4

Entity Price

Bache Commodities 22 Barclays Capital 18.3 Deutsche Bank 18 MF Global 15 Nomisma Energy 16.6 Point Carbon 22 Sagacarbon 17 Societe Generale/orbeo 15.4 UniCredit 16.5

average EUA price in 2011 17.9

TGE, TFS, GFI

BASE PEAK Weighted average SPOT Weighted average

Price PLN/MWh Volume GWh Price PLN/MWh Volume GWh Price % Volume %

186,26 37 034 193.35 86 028 3.8% 132.3% 208,22 4 432 218.51 13 398 4.9% 202.3% 188,62 41 466 196.74 99 426 4.3% 139.8% 191,86 13 061 195.61 19 592 2.0% 50.0% 189,40 54 527 196.55 119 018 3.8% 118.3%

Price trends on electricity market

Electricity CO2 credits - analysts (EUR/t) Property rights (PLN/MWh) December 2011 Market prices estimates

Compensatory payment

RES (green) 268.46 274.92 Cogeneration (red) 27.54 29.58 Gas cogeneration 123.90 127.15

2010 2011 2011/2010

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SLIDE 5

Group Restructuring

In the scope of ownership structure

  • Process of contributing by the State Treasury to TAURON

minority blocks of shares in PKE, ESW, ENION, EnergiaPro

  • Incorporating by TAURON Polska Energia of ENION

Zarządzanie Aktywami and Energomix Servis

  • Sales of shares in nine companies not connected with core
  • perations
  • Process of acquiring shares of PKW and PE-PKH from

PKE; scheduled completion – 2011

  • Process of integrating medical business in PŚZiPZ ELVITA;

scheduled completion – H1 2011

  • Sale of PŚZiPZ ELVITA – H2 2011
  • Carrying out of:
  • three mergers of companies; scheduled completion - 2011,
  • two processes of making in-kind contributions; scheduled

completion – H1 2011

  • Sale of shares in seventeen companies conducting non-

core operations; scheduled completion – 2011

  • Process of restructuring RES generation assets –

separating RES assets from ENION Energia and contributing them to TAURON Ekoenergia

  • Integration of end-consumer sales process in TAURON

Sprzedaż

  • Integration of client service process in TAURON

Obsługa Klienta

  • Implementation central financing model in the TAURON

Group

  • Process of distribution assets integration; scheduled

completion – Q3 2011

  • Process of generation assets integration (conventional);

scheduled completion – Q3 2011

  • Process of heating assets integration; scheduled

completion – Q3 2011

  • Process of taking over ʺBolesław Śmiały” coal mine and

PKW shares from Kompania Węglowa; scheduled completion – Q4 2011 In the scope of business model implementation 4 Completed Ongoing

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  • Capacity – 50 MWe / 182 MWt
  • Scheduled completion date – mid 2013

Bielsko-Biała – new heating unit

  • Capacity – 50 MWe / 86 MWt
  • Scheduled completion date – end of 2015 (new unit) and end
  • f 2012 (boiler reconstruction)

Tychy – new cogeneration unit and fluidized boiler reconstruction (biomass burning)

  • Capacity – 40 MWe
  • Scheduled completion date – 2012

Wind farm - Wicko

Implementation of investment programme

  • Capacity – 50 MWe / 45 MWt
  • Scheduled completion date – 2012

Jaworzno III – new fluidized boiler (biomass burning) As of 31 December 2010:

  • Investment carried out according to schedule – construction

works under way As of 31 December 2010:

  • Investment carried out according to schedule – construction

works under way As of 31 December 2010:

  • An international Consortium submitted an initial offer,

negotiation process under way

  • 24 December 2010 public tender was announced for the

contract engineer (pre-qualification stage) As of 31 December 2010

  • Process of selecting the contractor and contract engineer

under way Wind farm - Marszewo

  • Capacity – 100 MWe
  • Scheduled completion date – 2014

As of 31 December 2010:

  • On 5 November negotiations were completed on the

purchase of special purpose vehicle which has a 100 MW farm construction design

  • Purchase of special purpose vehicle on 15 December 2010

Stalowa Wola – K-10 boiler modernization (biomass burning)

  • Capacity – 20 MWe
  • Scheduled completion date – 2012

As of 31 December 2010:

  • Investment carried out according to schedule – works on

the construction design have been completed

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SLIDE 7
  • Scope – adaptation of six OP-650k boilers to lower

nitrogen oxides emission standards which will be binding in Poland from 2018.

  • Commencement of works – July 2010, scheduled

completion date – January 2016 Jaworzno III – modernization of boilers

  • Capacity – 910 MWe
  • Scheduled completion date – 2016

Jaworzno III – new coal-fired unit

Implementation of investment programme (2)

  • Capacity – 400 MWe / 240 MWt
  • Project commencement – 2010; scheduled completion

date – 2014 Stalowa Wola – new steam and gas unit As of 31 December 2010:

  • Second stage of selecting the general contractor has been

started As of 31 December 2010:

  • Investment carried out according to schedule – procedures

connected with preparing to construct installation have been completed, agreement has been signed with the contractor As of 31 December 2010:

  • Process of selecting the contractor and contract engineer

under way

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  • Capacity – 135 MWe / 90 MWt
  • Scheduled completion date – 2015

Katowice – new steam and gas unit As of 31 December 2010:

  • Process of obtaining corporate permissions under way
  • Capacity – 800-910 MWe
  • Scheduled completion date – 2016

Blachownia – new unit As of 31 December 2010:

  • Analytical works are under way in relation to the final

choice of technology of the new unit. Variants of coal or gas fuel are considered

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SLIDE 8

Key operational data

Q4 2009 Q4 2010 Change (dynamics) 2009 2010 Change (dynamics) Hard coal mining (million tones)

1.42 1.12 78.8% 4.9 4.5 91.2%

Electricity generation (net production) (TWh)

5.28 5.78 109.6% 18.6 21.3 114.4%

Including RES

0.25 0.25 100.0% 0.98 1.10 112.7%

Heat generation (PJ)

6.00 6.49 108.1% 16.6 18.3 110.1%

Distribution (TWh)

9.63 9.45 98.0% 36.4 37.5 103.0%

Supply (TWh)

8.19 8.95 109.3% 30.4 34.3 112.8%

Number of clients (Distribution)

4 092 4 115 100.6% 4 092 4 115 100.6% 7

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SLIDE 9

Financial results for 2010

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13 634 15 429 13695

5 000 10 000 15 000 20 000 2009 2010

TAURON Group revenues (PLN million)

13.2%

1 260 1 399 1321

500 1 000 1 500 2009 2010

TAURON Group EBIT (PLN million)

11%

899 991 948

400 800 1 200 2009 2010

TAURON Group net profit (PLN million) 10%

Made to make comparable Reevaluation in Distribution segment is connected mainly with the change of approach to settling revenues from new connections

500 1000 1500 2000 2500 3000 2009 2010

Mining Generation RES Distribution Supply Other

7.2% 2 641 2 767

EBITDA by segments [PLN million]; EBITDA structure

10% 4% 45% 44% 3% 4% 30% 41% 12% 3% 2% 3%

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SLIDE 10

Financial results for Q4 2010

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Made to make comparable Reevaluation in Distribution segment is connected mainly with the change of approach to settling revenues from new connections

3603 4478 3664

500 1000 1500 2000 2500 3000 3500 4000 4500 5000 Q4 2009 Q4 2010

TAURON Group income (PLN million)

193 271 254

50 100 150 200 250 300 Q4 2009 Q4 2010

TAURON Group EBIT (PLN million)

40%

122 166 171

20 40 60 80 100 120 140 160 180 Q4 2009 Q4 2010

TAURON Group net profit (PLN million) 36%

  • 100000

100000 200000 300000 400000 500000 600000 700000 Q4 2009 Q4 2010

Mining Generation RES Distribution Supply Other

16.9 581 608

EBITDA by segments [PLN million]; EBITDA structure [%]

  • 1%

4% 54% 45% 3% 5% 35% 47%

  • 7%

5% 6% 5%

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1 321 1 399

44 180 212 141 175 136 94 74

200 400 600 800 1 000 1 200 1 400 1 600 1 800

Financial results for 2010 - EBIT

Change in EBIT vs. operating factors (PLN million) 10

EBIT Increase Decrease

EBIT 2009

ADDITIONAL OBLIGATIONS - CERTIFICATES ENERGY SUPPLY VOLUME VOLUME AND PRICE OF DISTRIBUTION SERVICES (without RAB) RETURN FROM CAPITAL (RAB) ENERGY SUPPLY PRICES ENERGY PURCHASE PRICES DECREASE OF OUTPUT

EBIT 2010

OTHER

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SLIDE 12

500 1 000 1 500 2 000 2 500 3 000 3 500

Financial results for 2010 - EBITDA

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DISTRIBUTION MINING SUPPLY OTHER GENERATION RES ITEMS UNASSIGNED

EBITDA 2009 EBITDA 2010

(142.4) 17.2 38.5 351.3 24.2 37.5 (209.9)

  • 56.3%

+50.5% +44.7% 1.5%

  • 68.5%

+39.1%

  • 2 641

2 767

14.4% 20.7% 10.2% 0.8% 25.1% 68.7%

  • EBIT

Amortization Increase in segment Decrease in segment Change in the segment (%) EBITDA margin

1 320 1 321 1 368 1 399

Change in EBITDA by segments (PLN million and %), EBITDA margin per segment (%)

19.3% 17.9%

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Group’s debt

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2 231 1 899 1 492 950 1 032 1 474

500 1 000 1 500 2 000 2 500 31.12.2008 31.12.2009 31.12.2010 Financial debt Cash

Net financial debt (PLN million), net financial debt / EBITDA (x)

0.8x 0.3x 0.01x

Net financial debt/ EBITDA

  • Decreasing the level of financial debt by PLN 407 million in total parallel to an increase in cash by PLN 442

million resulted in decreasing the level of net financial debt by PLN 849 million (in comparison to the end of December 2009)

  • Noticeable effects of introducing cash-pooling
  • Gradual increase of cash surplus generated by the Group from operational activity over capital expenditure
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Compensations for termination of long-term Power Purchase Agreements

  • Indexed advanced payments under PPA Termination Act
  • Annual adjustments of these advance payments
  • Part of final adjustment

30 74 145 147 164 129 145 88 100 200 300 400 500 600 2009 2010 PLN million IQ IIQ IIIQ IVQ Revenue from compensation

Share in TAURON Group revenue

3.5% 2.8%

484 438

  • 9,5%

Revenue from compensation includes:

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Reduced heat losses Reduced employment costs Reduced energy purchase costs Reduced lateral development costs Increased production efficiency Increased by-product utilization Reduced expenditure related to emission of pollution As at the end of 2010, 834 persons participated in the programme, out of which 558 terminated their employment contracts. Savings resulting from reduced employment have been included in the amounts shown for individual segments Purchase costs optimization Improvement of management and operating processes Optimization of balance sheet differences Change of consumers settlement system Optimization of mail service costs

Efficiency improvement programme

TAURON Group implements cost efficiency improvement plan The savings programme for the years 2010-2012 which assumes operational costs reduction by

  • approx. PLN 1 billion has been implemented according to the plan

GENERATION – result in Q4 2010: PLN 22 million; in 2010 – PLN 198 million RES+OTHER – result in Q4 2010: PLN 1 million; in 2010 – PLN 5 million MINING – result in Q4 2010: PLN 6 million; in 2010 – PLN 23 million VOLUNTARY REDUNDANCY PROGRAMME SUPPLY – result in Q4 2010: PLN 2 million; in 2010 – PLN 5 million DISTRIBUTION – result in Q4 2010: PLN 29 million; in 2010 – PLN 64 million

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Strategy update Obtaining financing Increased Group’s value Potential acquisitions

  • Continuation of costs efficiency improvement programme
  • Achieving synergies from integration of areas
  • Implementing liquidity management policy in the Group
  • Revision of the implemented corporate strategy
  • Adopting the strategy to changing legal and market conditionings
  • Scheduled completion – March 2011
  • Obtaining financing for possible acquisition of Vattenfall assets
  • Obtaining financing for execution of Jaworzno and Bielsko-Biała

projects

  • Obtaining financing for execution of Stalowa Wola project
  • Interest in Vattenfall and Zespół Elektrowni Wodnych Niedzica

assets

Growth prospects – most important factors

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Thank you – Q&A

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SLIDE 18

TAURON Polska Energia S.A., ul. Lwowska 23, 40-389 Katowice phone:+48 32 774 27 06, fax +48 32 774 25 24

Investor Relations Section Marcin Lauer marcin.lauer@tauron-pe.pl phone (32) 774 27 06 Paweł Gaworzyński pawel.gaworzynski@tauron-pe.pl phone (32) 774 25 34 Magdalena Wilczek magdalena.wilczek@tauron-pe.pl phone (32) 774 25 38

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Additional information

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BASE contract award procedures for 2011

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PEAK contract award procedures for 2011

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Mining – key financial data

Change in revenue, EBITDA, EBIT in the segment (in PLN million) 1 167 1 081 253 111 147 6 200 400 600 800 1 000 1 200 1 400 2009 2010 Revenues EBITDA EBIT

315 273 31 22 5

  • 2
  • 50

50 100 150 200 250 300 350 Q4 2009 Q4 2010

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SLIDE 23

Generation from conventional sources – key financial data

Change in revenue, EBITDA, EBIT in the segment (in PLN million) 5 339 5 863 1 181 1 212 677 656 1 000 2 000 3 000 4 000 5 000 6 000 7 000 2009 2010

Revenue EBITDA EBIT

1 519 1 789 312 276 175 129 200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 Q4 2009 Q4 2010 22

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Generation from renewable sources – key financial data

Change in revenue, EBITDA, EBIT in the segment (in PLN million) 123 167 77 115 55 89 20 40 60 80 100 120 140 160 180 2009 2010

Revenue EBITDA EBIT

28 47 15 32 9 24 5 10 15 20 25 30 35 40 45 50 Q4 2009 Q4 2010 23

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Distribution – key financial data

Change in revenue, EBITDA*, EBIT* in the segment (in PLN million) 4 146 4 509 782 1 132 156 509 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 5 000 2009 2010

Revenue EBITDA EBIT

1 096 1 184 206 285 63 144 200 400 600 800 1 000 1 200 1 400 Q4 2009 Q4 2010 24

*Made to make comparable Reevaluation in Distribution segment is connected mainly with the change of approach to settling revenues from new connections

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Sales – key financial data

Change in revenue, EBITDA, EBIT in the segment (in PLN million) 11 522 12 094 306 97 302 88 2 000 4 000 6 000 8 000 10 000 12 000 14 000 2009 2010

Revenue EBITDA EBIT

2 940 3 401

  • 4
  • 41
  • 5
  • 44
  • 500

500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 Q4 2009 Q4 2010 25

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Other – key financial data

Change in revenue, EBITDA, EBIT in the segment (in PLN million) 518 598 64 86 7 36 100 200 300 400 500 600 700 2009 2010

Revenue EBITDA EBIT

174 193 30 34 14 21 50 100 150 200 250 Q4 2009 Q4 2010 26