TAURON Groups H1 2018 Financial Results August 23, 2018 H1 2018 - - PowerPoint PPT Presentation

TAURON Group’s H1 2018 Financial Results

August 23, 2018

H1 2018 key data

Net profit attributable to the shareholders of the parent company

TAURON Group’s H1 2018 results

[PLN m]

H1 2018 vs H1 2017

Sales revenue

9 202 5%

EBITDA

2 194 2%

Net profit*

567 (44)%

CAPEX

1 480 (1)%

Net debt/EBITDA

2.30x

up 0.03

(vs 31.12.2017)

TAURON Group’s H1 2018 operating data

H1 2018 vs H1 2017

Commercial coal production [tonne m]

2.53 (24)%

Electricity generation [TWh]

7.55 (20)%

Heat production [PJ]

6.73 (5)%

Electricity distribution [TWh]

26.01 1%

Electricity retail supply [TWh]

17.20

• up 0.13

(vs 30.06.2017)

2 of 34

Q2 2018 key data

Net profit attributable to the shareholders of the parent company

TAURON Group’s Q2 2018 results

[PLN m]

Q2 2018 vs Q2 2017

Sales revenue

4 377 5%

EBITDA

902 (3)%

Net profit*

(69)

• CAPEX

912 6%

Net debt/EBITDA

2.30x

up 0,03

(vs 31.12.2017)

TAURON Group’s Q2 2018 operating data

Q2 2018 vs Q2 2017

Commercial coal production [tonne m]

1.10 (39)%

Electricity generation [TWh]

3.62 (21)%

Heat production [PJ]

1.05 (41)%

Electricity distribution [TWh]

12.59 2%

Electricity retail supply [TWh]

7.93 (2)%

up 0,13

(vs 30.06.2017)

3 of 34

Highlights Summary

March 8 Obtaining of the new financing to complete the construction of the CCGT unit at Stalowa Wola March 9 Extending the period of availability of funds under the Bond Issue Program until 2022 March 28 Signing of the agreement with the Polish Development Fund defining the terms of engagement in the construction of the 910 MW unit at Jaworzno III Power Plant worth up to PLN 880 million April 6 Dissolving of the provisions related to employee benefits at TAURON Wytwarzanie – a positive impact on Q1 2018 EBITDA: PLN 230 million April 23 910 MW unit at Jaworzno III Power Plant completes a successful pressure test June 13 TAURON and PFR establish the first Corporate Venture Capital fund for developing innovations

4 of 34

Macroeconomic and market situation

Source: * GUS ** Bankier.pl ***PSE

Electricity prices under one year BASE contracts

Average price [PLN/MWh] Volume [GWh] Y-13 191.60 108 861 Y-14 160.40 142 841 Y-15 168.11 146 932 Y-16 166.47 147 923 Y-17 160.27 76 729 Y-18 165.98 65 227 Y-19 197.40 65 534 Y-20 202.87 4 480 40,01 39,96 26,55 24,19 3,17 4,79 8,14 7,33 5,14 5,01 20 40 60 80 100 H1 2017 H1 2018 Industrial power plants Renewable energy sources Gas-fired thermal power plants Lignite-fired thermal power plants Hard coal-fired thermal power plants 81,27 83,01

48,2% 32,0% 3,8% 9,8% 6,2% 49,2% 29,8% 5,9% 9,0% 6,2%

• 0,1%
• 8,9%

+51,0%

• 2,6%
• 10,0%
• 2,1%

Structure of electricity generation in Poland*** [TWh]

3,8% 3,3% 3,6% 4,6% 3,1% 3,4% 2,7% 2,7% 4,4% 4,0% 5,2% 4,9%5,2% 5,1%

50 52 54 56 58 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 2018 PMI PKB

Poland’s GDP growth rate* and manufacturing PMI (quarterly average)**

GDP growth rate Manufacturing PMI

5,3% 3,9% 4,3% 6,0% 3,0% 5,7% 2,5% 1,5% 7,3% 4,2% 6,4% 8,5% 5,5% 7,0%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 2018

Increase of industrial production sold* and electricity consumption (change yoy)***

Sold production growth rate Average electricity sales prices on the competitive market (acc. to ERO):

• 2014:

163.58 PLN/MWh

• 2015:

169.99 PLN/MWh

• 2016:

169.70 PLN/MWh

• 2017:

163.70 PLN/MWh

• 2018:

184.94 PLN/MWh (estimate)

5 of 34

H1 2018 key financial data

1 004 567 H1 2017 H1 2018 200 400 600 800 1 000 1 200

Net profit attributable to the parent company’s shareholders [PLN m] H1 2018 EBITDA vs H1 2017 EBITDA [PLN m]

2 152 2 004 1 964 2 194

• 203
• 230

55 500 1 000 1 500 2 000 2 500 Reported H1 2017 EBITDA One-off bonus - agreement with the workforce Dissolving of the ECSW provision Comparable H1 2017 EBITDA Comparable H1 2018 EBITDA Dissolving of the provision related to employee benefits in the Generation segment Reported H1 2018 EBITDA

• 2,0%

4 373 4 759 372 348 3 253 3 379 334 278 426 438 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 10 000 H1 2017 H1 2018

Electricity Heat Distribution and trading services Hard coal Other revenue

8 758 9 202

Sales revenue [PLN m]

6 of 34

Q2 2018 key financial data

364

• 69

Q2 2017 Q2 2018

Net profit attributable to the parent company’s shareholders [PLN m] Q2 2018 EBITDA vs Q2 2017 EBITDA [PLN m] 930 972 902 902

• 13

55 200 400 600 800 1 000 1 200 Reported Q2 2017 EBITDA One-off bonus - agreement with the workforce Dissolving of the ECSW provision Comparable Q2 2017 EBITDA Comparable Q2 2018 EBITDA Reported Q2 2018 EBITDA

• 7,2%

2 106 2 342 120 90 1 562 1 601 178 124 Q2 2017 Q2 2018

Electricity Heat Distribution and trading services Hard coal Other revenue

4 167 4 377

Sales revenue [PLN m]

7 of 34

Key segments’ H1 2018 results

[PLN m] Mining Generation Distribution Supply

Other and exclusions*

Segment’s revenue

679 2 119 3 464 6 615 (3 675)

EBITDA

(66) 592 1 336 326 6

EBIT

(866) 741 796 323 (39)

CAPEX

91 570 793 4 22

Items not included in the segments presented

• 0,2%
• 3%

17% 27% 56% 61% 25% 15% 2% 0,3%

2 152 2 194

• 500

500 1 000 1 500 2 000 2 500 3 000 H1 2017 H1 2018

Other and exclusions Supply Distribution Generation Mining

PLN m 2%

Individual segments’ contribution to EBITDA [%]

8 of 34

Key segments’ Q2 2018 results

[PLN m] Mining Generation Distribution Supply

Other and exclusions*

Segment’s revenue

294 947 1 675 3 161 (1 700)

EBITDA

(76) 126 698 149 5

EBIT

(843) 369 425 147 (19)

CAPEX

51 327 520 4 9

* Items not included in the segments presented

3%

• 8%

15% 14% 64% 77% 18% 16% 1% 1%

930 902

Q2 2017 Q2 2018

Other and exclusions Supply Distribution Generation Mining

PLN m (3)%

Individual segments’ contribution to EBITDA [%]

9 of 34

H1 2018 EBITDA

1 296 955 857 1 239

227 133

• 61
• 219
• 38

2 152

2 194

24,6%

• 9,7%

27,9% 38,6% 4,9% 21,4% 23,8% 500 1 000 1 500 2 000 2 500 3 000 H1 2017 EBITDA Mining Generation Distribution Supply Other and exclusions H1 2018 EBITDA

EBIT Depreciation and write-offs Segment's increase Segment's decrease EBITDA margin PLN m

PLN 42m, 2%

* *Other operations segment’s EBITDA margin

10 of 34

Q2 2018 EBITDA

485 79

445 822

102

• 101
• 11
• 16
• 2

930 902

22,3%

• 25,9%

13,3% 41,7% 4,7% 22,4% 20,6% 200 400 600 800 1 000 1 200 Q2 2017 EBITDA Mining Generation Distribution Supply Other and exclusions Q2 2018 EBITDA

EBIT Depreciation and write-offs Segment's increase Segment's decrease EBITDA margin PLN m

PLN (28)m, (3)%

* Other operations segment’s EBITDA margin

11 of 34

782 679

• 5
• 66
• 66
• 866

56 91

• 1 000
• 800
• 600
• 400
• 200

200 400 600 800 1 000 H1 2017 H1 2018 Sales revenue EBITDA EBIT CAPEX

Mining Segment – H1 2018

Financial data [PLN m] EBITDA change [PLN m] 1

0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 H1 2018 H1 2017

Commercial coal production volume vs sales per product [Mg m]

Commercial coal production Large size lump coal sales Medium size lump coal sales Intra-Group coal dust sales Coal dust sales outside the Group Coal sludge sales

• 5
• 66

133 10 54

• 250
• 8
• 300
• 250
• 200
• 150
• 100
• 50

H1 2017 Hard coal sales volume Hard coal sales price Coal production cost Change of inventory level Other H1 2018

√

• Increase of the sold coal unit price
• Decline of commercial coal production
• 37.6% higher mining cash cost* (up from 170 PLN/Mg

to 234 PLN/Mg)

Total costs excluding depreciation, impairment charges, costs not directly related to coal production and costs that do not have a permanent impact on the Company’s cash flow

12 of 34

Mining Segment – Q2 2018

Financial data [PLN m] EBITDA change [PLN m] 1,10 1,81 1

0,13 0,22 0,08 0,11 0,71 1,17 0,09 0,21 0,07 0,06 1,07 1,77 0,0 0,2 0,4 0,6 0,8 1,0 1,2 1,4 1,6 1,8 2,0 Q2 2018 Q2 2017

Commercial coal production volume vs sales per product [Mg m]

Commercial coal production Large size lump coal sales Medium size lump coal sales Intra-Group coal dust sales Coal dust sales outside the Group Coal sludge sales

25

• 76

51 14 0,1

• 161
• 4
• 160
• 140
• 120
• 100
• 80
• 60
• 40
• 20

20 40 Q2 2017 Hard coal sales volume Hard coal sales price Coal production cost Change of inventory level Other Q2 2018 398 294 25

• 76
• 6
• 843

27 51

• 1 000
• 800
• 600
• 400
• 200

200 400 Q2 2017 Q2 2018 Sales revenue EBITDA EBIT CAPEX

• Increase of the sold coal unit price

√

• Decline of commercial coal production
• 78.5% higher mining cash cost* (up from 151 PLN/Mg

to 269 PLN/Mg)

• Total costs excluding depreciation, impairment charges, costs not directly related to coal production and costs that do not have a permanent impact on the Company’s cash flow

13 of 34

365 592

16 230 18

• 16
• 21

H1 2017 Margin on electricity Margin on heat CO2 costs Provisions for employee benefits Other H1 2018

Generation Segment – H1 2018

Financial data [PLN m]

2 285 2 119

365 592

139 741 814 570

500 1 000 1 500 2 000 2 500 H1 2017 H1 2018 Sales revenue EBITDA EBIT CAPEX

0,18 0,11 0,23 0,19 0,25 0,20 0,81 0,75

0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 H1 2017 H1 2018 biomass hydro wind cogeneration

0,66 RES and cogeneration production [TWh] 0,51

EBITDA change [PLN m] 8,80 7,05 7,09 6,73

1 2 3 4 5 6 7 8 9 10 H1 2017 H1 2018 Electricity (excl. RES) Electricity (RES) Heat

9,46 7,55 Gross production of electricity [TWh] and heat [PJ]

• Favorable impact of dissolving provisions

related to employee benefits

√

• Increase of electricity prices

√

• Increase of CO2 emission allowances

prices

• Increase of coal prices
• 14 of 34

137 126

7 17

• 15
• 20

20 40 60 80 100 120 140 160 Q2 2017 Margin on electricity Margin on heat CO2 costs Other Q2 2018

Generation Segment – Q2 2018

Financial data [PLN m]

1 064 947

137 126

9 369 479 327

200 400 600 800 1 000 1 200 Q2 2017 Q2 2018 Sales revenue EBITDA EBIT CAPEX

0,08 0,09 0,13 0,08 0,12 0,09 0,21 0,10

0,0 0,1 0,2 0,3 0,4 Q2 2017 Q2 2018 biomass hydro wind cogeneration

0,33

RES and cogeneration production [TWh]

EBITDA change [PLN m] 4,24 3,35 0,33 0,27 1,80 1,05

1 2 3 4 5 Q2 2017 Q2 2018 Electricity (excl. RES) Electricity (RES) Heat

4,56 3,62 Gross production of electricity [TWh] and heat [PJ]

• Increase of electricity prices

√

• Lower costs of the real estate tax for wind

farms

√

• Lower heat sales volume
• Increase of coal prices
• 15 of 34

677 796 526 539

85 18 75

• 32
• 1
• 13

1 203 1 336

200 400 600 800 1 000 1 200 1 400 1 600 H1 2017 Price Volume Purchase of the DSO/TSO services Cost of grid losses Other distribution services Other H1 2018

Distribution Segment – H1 2018

7,04 6,90 9,10 8,70 3,67 3,66 5,19 5,18

1,00 1,27

H1 2018 H1 2017 5 10 15 20 25 30 Group A Group B Group C2+C1+R+O Group G Other*

EBITDA change [PLN m]

EBIT depreciation and impairment charges

Electricity distribution [TWh]

26,01 25,70

*Neighboring DSO and exports

• Decrease of the average tariff by 1.2%, i.e.1.54 PLN/MWh
• Higher electricity distribution services sales volume by 307

GWh, mainly in the manufacturing industry in correlation to GDP growth

√

• One-off dissolving of the provision related to the adjustment

(112 GWh)

√

• Decline of fixed costs due to lower labor costs and the assets

maintenance costs

√

Financial data [PLN m]

3 368 3 464 1 203 1 336 677 796

605 793 1 000 2 000 3 000 4 000 H1 2017 H1 2018 Sales revenue EBITDA EBIT CAPEX

16 of 34

Distribution Segment – Q2 2018

3,52 3,52 4,45 4,24 1,64 1,62 2,49 2,48

0,50 0,53

Q2 2018 Q2 2017 2 4 6 8 10 12 14 Group A Group B Group C2+C1+R+O Group G Other*

EBITDA change [PLN m]

EBIT depreciation and impairment charges

Electricity distribution [TWh]

12,40 12,59

*Neighboring DSO and exports

• Decrease of the average tariff by 1.2%, i.e.1.54 PLN/MWh
• Higher electricity distribution services sales volume by 193

GWh (1.6%) as a result of favorable economic conditions

√

• Lower balancing difference indicator by 1.24 pp, decrease of

the balancing electricity volume by168 GWh

√

• Decline of fixed costs

√

332 425 265 273

28 12 21 58

• 17
• 1

596 698

100 200 300 400 500 600 700 800 Q2 2017 Price Volume Purchase of the DSO/TSO services Cost of grid losses Other distribution services Pozostałe Q2 2018

Financial data [PLN m]

1 635 1 675 596 698 332 425

343 520 500 1 000 1 500 2 000 Q2 2017 Q2 2018 Sales revenue EBITDA EBIT CAPEX

17 of 34

Distribution Segment – key parameters

15,6 16,3 16,9 2 4 6 8 10 12 14 16 18 2016 2017 2018

Regulatory Asset Base [PLN bn]

150 150 143 137 20 40 60 80 100 120 140 160 180 200 2016 2017 Q1 2018 H1 2018

Customer connection time [days]

177,1 263,0 25,8 59,1 204,0 188,0 148,0 148,0 110,0 50 100 150 200 250 300 2016 2017 Q1 2018 H1 2018 2020

SAIDI [min.]

SAIDI SAIDI target 2,82 3,50 0,47 1,11 3,16 3,00 2,23 2,23 1,67 1 2 3 4 2016 2017 Q1 2018 H1 2018 2020

SAIFI [number]

SAIFI SAIFI target

18 of 34

540 323

5 4 80 7

• 74
• 25
• 203
• 3

100 200 300 400 500 600 H1 2017 Electricity volume and price Property rights price Property rights

• bligation

Result on

• ther products

sales ECSW provision Other H1 2018

545 326

Supply Segment – H1 2018

Financial data [PLN m]

EBITDA change [PLN m] *includes sales to cover the balancing difference and to the intra-Group final consumers

EBIT Depreciation and impairment charges

Retail electricity supply [TWh]

6 677 6 615 545 326 540 323

1 000 2 000 3 000 4 000 5 000 6 000 7 000 H1 2017 H1 2018 Sales revenue EBITDA EBIT

3,07 3,48 4,87 4,55 2,67 2,66 5,02 5,03 1,55 1,48

H1 2018 H1 2017 5 10 15 20 Group A Group B Group C2+C1+R+D Group G Other*

17,20 17,19

• Increase of the cost of purchasing electricity

−

• Change of the statutory obligation to redeem property rights

−

• Positive effect of PM OZE settlement

√

19 of 34

163 147

2 2 37 6

• 28
• 13
• 13
• 6

50 100 150 200 250 Q2 2017 Electricity volume and price Property rights price Property rights

• bligation

Other commercial products ECSW provision Other Q2 2018

165 149

Supply Segment – Q2 2018

Financial data [PLN m]

EBITDA change [PLN m] *includes sales to cover the balancing difference and to the intra-Group final consumers

EBIT Depreciation and impairment charges

Retail electricity supply [TWh]

3 060 3 161 165 149 163 147

1 000 2 000 3 000 4 000 Q2 2017 Q2 2018 Sales revenue EBITDA EBIT

1,54 1,82 2,37 2,21 1,16 1,17 2,41 2,41 0,44 0,46

Q2 2018 Q2 2017 2 4 6 8 10 Group A Group B Group C2+C1+R+D Group G Other*

8,08 7,92

• Increase of the cost of purchasing electricity

−

• Change of the statutory obligation to redeem property rights

−

• Positive effect of PM OZE settlement

√

20 of 34

Debt and financing

110 2020 340 340 1888 281 261 199 199 2366 170 803 829 500 1 000 1 500 2 000 2 500 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 … 2034 Bonds Credits and loans

• Financial debt (nominal value of debt due to bonds, credits and

loans) as of 30.06.2018 is PLN 9 806m

• Weighted average maturity of debt as of 30.06.2018 is 81 months

(assuming bonds rollover until 2022)

• EUR denominated debt (eurobond issue, NSV and EIB bond issues)

represents 38% of the total debt

Debt structure based on interest rate [PLN m] TAURON Group’s debt maturity as of 30.06.2018 [PLN m]

37 73 37 22 37 1924 500 1 000 1 500 2 000 2 500

3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019

Bonds Credits and loans 8 792 89,7% 981 10,0% 33 0,3%

TAURON Group’s debt structure as

• f 30.06.2018 [PLN m]

Bonds EIB loans NFOŚiGW / WFOŚiGW loans

300 6% 5 070 94%

Financing available to TAURON Group as of 30.06.2018 [PLN m]

Cash pool Bond issue programs

9 806 5 370

* Assuming rollover of bonds issued as part of the Bond Issue Program (maturity date in accordance with issue terms and conditions is 2020, rollover until the end of the funds availability period, i.e. until 2022) collateral Interest rate debt amount

9 806 floating rate 5 083 IRS 2 100 none 2 983 fixed rate 4 723

Net/EBITDA ratio = 2.30x

21 of 34

CAPEX – key projects’ work progress

Investment project

Capacity (MWe) Capacity (MWt) Work progress (percentage) Planned completion date Construction of the hard coal-fired unit at Jaworzno III Power Plant

910

• 71

2019

Construction of the CCGT unit at Stalowa Wola Combined Heat and Power Plant*

450 240 86 2019 Adapting TAURON Wytwarzanie’s generating units to the

• perational conditions in force past 2021 (BAT)
• 2

2021

Construction of the 800m level at Janina coal mine

• 60

2021

Construction of Grzegorz shaft at Sobieski coal mine

• 23

2023

CAPEX program at Brzeszcze coal mine

• 32

2025 Low Emission Elimination Program

• 180

9 2023 Implementing heat generation at Łagisza Power Plant by modernizing the 460 MW turbine, construction of the heating station as well as the peaking and back-up boilers

• 150+144

21 2020

22 of 34

CAPEX – by segments

56 91 814 570 605 793 21 26 200 400 600 800 1 000 1 200 1 400 1 600

H1 2017 H1 2018 Mining Generation Distribution Supply and other

)%

* including financial costs H1 2017: PLN 45m, H1 2018: PLN 80m

Capital expenditures by segments [PLN m]

(excluding equity investments)

1 480 1 495

Key investment projects implemented in H1 2018: Mining:

• Brzeszcze coal mine CAPEX program (PLN 33m)
• Construction of the Grzegorz shaft at Sobieski coal mine

(PLN 31m)

• Construction of the 800 m level at Janina coal mine (PLN

15m)

Generation:

• Construction of 910 MW of new capacity at Jaworzno

(PLN 437m)

• Replacement and refurbishment outlays as well as
• verhaul components (PLN 34m)
• Connections of new facilities (PLN 9m)
• Maintenance and expansion of the district heating

networks (PLN 5m)

Distribution:

• Grid asset upgrades (refurbishing) and replacements

(PLN 436m)

• Construction of new connections (PLN 288m)

23 of 34

Effects of the Efficiency Improvement Program from 2016 until H1 2018 +

PLN 62m PLN 279m PLN 195m PLN 1m

Mining Generation Distribution Other EBITDA: PLN 831m CAPEX: PLN 537m PLN 266m

(2016)

PLN 375m

(2017)

PLN 191m

(H1 2018)

+ +

PLN 215m

(2016)

PLN 236m

(2017)

PLN 87m

(H1 2018 r.)

+

PLN 150m PLN 189m PLN 266m PLN 226m

Mining Generation Distribution Other

• Rationalizing employment costs: PLN 407m
• Optimizing assets: PLN 114m
• Reorganizing processes: PLN 310m

 Improving distribution efficiency  Reducing IT costs  Reducing customer service costs

• More efficient asset management: PLN 362m
• Optimizing procurement: PLN 175m

EBITDA: PLN +831m (cumulative 2016-H1 2018 value) / PLN +400m per annum (recurring value from 2018) CAPEX: PLN 537m (2016-H1 2018 savings on capital expenditures)

24 of 34

Effects of the Strategic Initiatives from 2017 until H1 2018

EBITDA: PLN +736m (cumulative 2017-H1 2018 value) / PLN +300m per annum (recurring value from 2020) CAPEX: PLN 1 021m (2017-H1 2018 savings on capital expenditures) EBITDA: PLN 736m PLN 320m

(2017)

PLN 416m*

(H1 2018)

CAPEX: PLN 1 021m PLN 617m

(2017)

PLN 405m

(H1 2018)

Mining Generation Other

• Rationalizing employment costs in the mining and

generation lines of business: PLN 248m

• Optimizing and making operating expenses more flexible

and improving process efficiency: PLN 259m

• Improving profitability of the lines of business by taking

actions aimed at increasing revenue: PLN 229m

• Stopping capital expenditures in the Generation segment: PLN 735m
• Optimizing capital expenditures related to replacing distribution assets

and focusing on improving grid reliability and implementing modern solutions PLN 159m

• Optimizing capital expenditures related to the power plants’ and

combined heat and power plants’ production assets: PLN 102m

• Optimizing capital expenditures related to managing assets in the other

lines of business: PLN 25m

+ +

PLN 30m PLN 627m PLN 79m PLN 27m PLN 103m PLM 159m PLN 732m

Mining Generation Distribution Other

* including PLN 230m due to dissolving the provision related to employee benefits in the Generation segment in Q1 2018

25 of 34

Thank you – Q & A Investor Relations Team

Marcin Lauer marcin.lauer@tauron.pl

• tel. + 48 32 774 27 06

Paweł Gaworzyński pawel.gaworzynski@tauron.pl

• tel. + 48 32 774 25 34

Mirosław Szczygielski miroslaw.szczygielski@tauron.pl

• tel. + 48 516 112 858

Magdalena Wilczek magdalena.wilczek@tauron.pl

• tel. + 48 723 600 894

Katarzyna Heinz katarzyna.heinz@tauron.pl

• tel. + 48 32 774 25 38

26 of 34

Legal disclaimer

This presentation serves for information purposes only and should not be treated as investment-related advice. This presentation has been prepared by TAURON Polska Energia S.A. (the “Company”). Neither the Company nor any of its subsidiaries shall be held accountable for any damage resulting from the use of this presentation or a part thereof,

• r its contents or in any other manner in connection with this presentation.

The recipients of this presentation shall bear exclusive responsibility for their own analyses and market assessment as well as evaluation of the Company’s market position and its potential results in the future based on information contained in herein. To the extent this presentation contains forward-looking statements related to the future, in particular such terms as ”designed”, ”planned”, ”anticipated”, or other similar expressions (including their negation), they shall be connected with the known and unknown risks, uncertainty and other factors which might result in actual results, financial situation, actions and achievements being materially different from any future results, actions or achievements expressed in such forward-looking statements. Neither the Company, nor any of its subsidiaries shall be obligated to provide the recipients of this presentation with any additional information or update this presentation.

27 of 34

Analysts covering TAURON

Institution Analyst

Dom Maklerski mBanku Kamil Kliszcz Societe Generale Bartłomiej Kubicki Dom Maklerski BZ WBK Paweł Puchalski Dom Maklerski PKO BP Stanisław Ozga Dom Maklerski Banku Handlowego Piotr Dzięciołowski Ipopema Robert Maj Erste Group Tomasz Duda

Institution Analyst

Raiffeisen Centrobank Teresa Schinwald Trigon Krzysztof Kubiszewski WOOD & Company Bram Buring Dom Maklerski BOŚ Jakub Viscardi Exane BNP Paribas Michael Harleaux Pekao Investment Banking Maksymilian Piotrowski

28 of 34

Electricity market price trends

Electricity Platforms: TGE, TFS, GFI, GPW-POEE 2017 2018 (prices until July 2018 + estimation) 2018/2017 Price (PLN/MWh) Volume (GWh) Price (PLN/MWh) Volume (GWh) Price % Volume % Forward BASE (Y+Q+M) 160.10 104 921 178.14 113 220 11.3% 7.9% Forward PEAK (Y+Q+M) 208.87 11 417 224.20 13 140 7.3% 15.1% Forward (wighted average) 164.88 116 338 182.64 126 360 10.8% 8.6% SPOT (TGE) 158.14 25 210 212.84** 27 000 34.6% 7.1% Weighted average total 163.68 141 548 187.96 153 360 14.8% 8.3% Property rights (PLN/MWh) Certificate type

Market prices

(H1 2018 weighted average)

Substitution fee and obligation for:: 2017 2018 OZE (PMOZE_A) 68.89 300.03 (Jan-Sep) 92.03 (Sep-Dec) (15.4%) 48.53 (17.5%) RES from biogas plants (PMOZE_BIO) 316.59 300.03 (0.6%) 300.03 (0.5%) Coal-fired cogeneration (PMEC-2017) 9.80 10.00 (23.2%) 9.00 (23.2%) Gas-fired cogeneration (PMGM-2017) 117.51 120.00 (7.0%) 115.00 (8.0%) Methane-fired cogeneration (PMMET-2017) 55.39 56.00 (1.8%) 56.00 (2.3%) CO2 emission allowances (EUA/t) CO2 market analysts survey*

(updated in July 2018)

Price (EUR/t) 2017 average 5.84 EUR/t 2018 average 15.37 EUR/t 2019 average 19.0 EUR/t 2018 average price forecast by TAURON

(**updated in July 2018)

15.00-16.50 EUR/t

* Sources: Point Carbon, BNEF, Consus, GDF SUEZ Trading, HSE, Mkonline, Societe Generale, TAURON ** Average price in the January - July 2018 time frame + TPE analysts’ estimation

29 of 34

2018 BASE contract prices

Average price [PLN/MWh] Volume [GWh]

Total 165.98 65 227

including

• n TGE

166.64 52 148 non TGE 163.35 13 079 Average electricity price that takes into account 2018 one year BASE and PEAK contracts: 171.29 PLN/MWh, total 2018 BASE and PEAK contracts volume: 73 108 GWh 165,98 100 200 300 400 500 600 700 800 900 1 000 145 150 155 160 165 170 175 180 185 GWh PLN/MWh

BASE Y-18

Wolumen obrotu Notowania Średnia

30 of 34

2019 BASE contract prices

Average price [PLN/MWh] Volume [GWh]

Total 197.16 64 973

including

• n TGE

197.47 62 012 non TGE 190.72 2 961 Average electricity price that takes into account 2019 one year BASE and PEAK contracts: 200.16 PLN/MWh, total 2019 BASE and PEAK contracts volume: 68 177 GWh 197,16 200 400 600 800 1 000 1 200 1 400 150 160 170 180 190 200 210 220 230 GWh PLN/MWh

BASE Y-19

Wolumen obrotu Notowania Średnia

31 of 34

2020 BASE contract prices

Average price [PLN/MWh] Volume [GWh]

Total 202.31 4 392

including

• n TGE

202.40 4 366 non TGE 187.25 26 Average electricity price that takes into account 2020 one year BASE and PEAK contracts: 202.61 PLN/MWh, total 2020 BASE and PEAK contracts volume: 4 434 GWh 202,31 50 100 150 200 250 300 150 160 170 180 190 200 210 220 230 240 GWh PLN/MWh

BASE Y-20

Wolumen obrotu Notowania Średnia

32 of 34

Generation segment’s capacity balance and potential

460 4 033 201 133 145

Modern coal technology Conventional generation Wind farms Hydroelectric power plants Biomass-fired units

145 133 201 3 073 1370

2018 - 4 972 MWe 2020 - 4 922 MWe

• Total installed capacity 4 972 MWe / 2 435 MWt
• 5 power plants and 3 combined heat and power plants
• 4 wind farms (201 MWe)
• 34 hydroelectric power plants (133 MWe)
• 842 km of district heating networks
• 18.4 TWh of gross electricity production in 2017
• Modernized (refurbished) generation fleet
• Shutdown (retirement) of 8 x 120 MW class generating units
• Comparison of the parameters of Jaworzno III Power Plant’s 910

MW generating unit with the 120 MW class units:  30% lower fuel consumption => savings of PLN 263m per annum  Emission reductions: SO2 by 87%, NOx by 80% and CO2 by 32% => savings of PLN 174m per annum

33 of 34

Thank you for your attention

34 of 34