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Adoption of the PGE Group Strategy for 2014-2020

  • No. of the report: 23/2014
  • Report date: 13.05.2014
  • Report legal ground: Art. 56 section 1 p. 1 of Act on Public Offering – confidential information

Contents of the report

The Management Board of PGE Polska Grupa Energetyczna S.A. (“PGE”) informs that on May 13, 2014 the Supervisory Board of PGE approved “PGE Capital Group Strategy for 2014-2020” (the "Strategy") presented by the Management Board of PGE.

The Strategy has acknowledged significant changes in the PGE Group’s market environment and is based on understanding of key market trends:

- Economic recovery in Poland, leading to higher electricity demand and wholesale power prices;

- New and revised legislation: draft RES Law approved by the Government, adoption of backloading and 2030 climate policy proposals, including the EU ETS system reforms;

- Expected revision of wholesale market model – first new mechanisms already available (Operational Power Reserve, Strategic Reserve), work in progress on the new concept of electricity market organization;

- Growing competition in the retail sale market;

and on key competences and competitive advantages of PGE Group:

- PGE is the largest vertically integrated power utility in Poland with regard to energy production and installed capacity;

- PGE is leading in the cost efficient, base-load generation technologies in Poland and has the youngest generation asset base.

Key strategic objective is to maximize long-term PGE shareholder value.This will be achieved by:

- Strengthening of the leading position in electricity generation with the most effective and diversified asset portfolio assuring long term competitive advantage basing on domestic resources;

- Reliability of supply as well as optimal sales and customer service process;

- Improvement of effectiveness of Group’s operations in key areas based on best industry standards;

- Actively pursuing identification and implementation of new growth initiatives oriented on building the value of the Group;

- Continuous analysing of the market environment, identifying and using innovative solutions to create Group’s value and achieve strategic goals.

In 2020 perspective implementation of the Strategy will allow PGE to achieve following financial aspirations:

- Sustaining EBITDA level in the range of PLN 8-9 bn in 2015-2020;

- Maintaining the current policy of dividend payouts (40-50% of consolidated annual net profit);

- PLN 1.5 billion of sustained influence on EBIT after 2016 as the effect of planned activities relating to improvement of effectiveness;

- Maintaining the long term ratings;

- Approx. PLN 50 billion of CAPEX in 2014-2020;

- At least 1.5 % of annual net profit as of 2015 intended for R&D activities.

Detailed information on the Strategy is presented in the attached document.

Publication of this confidential information was delayed pursuant to art. 57 section 1 of the Act on public offering, conditions governing the introduction of financial instruments to organised trading, and public companies (Dziennik Ustaw of 2009, no 185 item 1439).

At the same time, the Management Board of PGE discloses, that the PGE Group strategy for 2012-2035, approved by the Supervisory Board of PGE on February 9, 2012, is hereby repealed as of the approval date of the Strategy.

Legal ground: Art. 56 section 1 point 1 of the Act on public offering, conditions governing the introduction of financial instruments to organised trading, and public companies (Dziennik Ustaw of 2009, no 185 item 1439).