The company’s EBITDA after the first three quarters of 2018 reached PLN 5.1 billion, down by 16% from the previous year. The lower reported EBITDA resulted from a high base point due to the recognition in the third quarter of last year of revenue from a final adjustment of long-term contracts amounting to PLN 1.2 billion. Adjusted EBITDA, cleared off one-offs, reached PLN 5.2 billion, an 8% increase over the prior year.

The Conventional Generation segment (which includes PGE Energia Ciepła) made the largest contribution to PGE Group’s recurring EBITDA in the first three quarters of 2018, with nearly PLN 2.4 billion. The Distribution segment closed the reporting period with over PLN 1.9 billion. The Supply segment generated PLN 459 million, while the Renewables segment contributed PLN 354 million.

“Integrating the acquired assets should considerably contribute to improving our operating results. The heating season, which most of all affects the district heating segment’s results, is still ahead. At the same time, we are posting very solid financial results. In the third quarter alone, recurring EBITDA was comparable to last year’s, while in the first nine months it was 8% higher. Despite a demanding environment filled with challenges, the Group is maintaining stable growth across key indicators and generating a 27% EBITDA margin, which makes us one of the most profitable energy companies in Europe,” said Henryk Baranowski, CEO of PGE Polska Grupa Energetyczna.

In the first three quarters of 2018, the Group’s electricity output reached 49.09 TWh, of which 29.38 TWh, i.e. 2% less than in the previous year, was lignite-based.

Hard coal-based electricity generation reached 15.33 TWh, denoting 86% growth in comparison with the base period. This is due to the recognition of acquired CHPs (EC Kraków, EC Gdańsk, EC Gdynia, EC Wrocław, EC Czechnica), which produced 2.38 TWh in total, and Rybnik power plant, which produced 3.91 TWh, in the reported results.

Gas-based production also increased in the first three quarters of 2018, by 70%, to 2.87 TWh. This was due to PGE Energia Ciepła’s assets (EC Toruń, EC Zielona Góra, EC Zawidawie), which produced 1.25 TWh in total, being included in reporting.

Electricity distribution volume after three quarters reached 27.1 TWh, denoting 3% growth from the base period.

PGE Group is continuing to implement its flagship development projects. Investment expenditures in the first three quarters of 2018 amounted to PLN 3.8 billion. Progress at the construction of two units at Elektrownia Opole, with total capacity of 1800 MW, reached 94%. Negotiations with the General Contractor were completed in the third quarter and an annex was signed, pursuant to which the deadline for entry into service of unit 5 was set at 15 June 2019 and for unit 6 at 30 September 2019. Further project stages and milestones are in progress. Start-up work on unit 5 and further assembly work on unit 6 are under-way.

Work on the construction of a 490-MW unit at Elektrownia Turów is also successively progressing, currently focusing on closing the buildings before the winter season. A boiler pressure test is expected to be performed in mid-November this year. Overall progress at the construction site has reached approx. 75%.

As part of its strategy, PGE Group is also continuing to integrate acquired assets. Its portfolio of investments being analysed or in preparation includes the construction of gas-fired cogeneration assets at EC Kielce, EC Bydgoszcz, EC Zielona Góra, EC Zgierz and EC Czechnica, as well as development of heat generation capacity at Rybnik power plant and the construction of gas-fired heat-generating peak load boilers at EC Gorzów, EC Lublin, EC Rzeszów, EC Kielce and EC Bydgoszcz. The total capacity of all of the smaller gas-fired projects being analysed will reach 300 MW. PGE Group is also analysing the construction of a heat accumulator in Lublin.

The construction of a thermal processing installation with energy recovery is being finalised as well. The investment, which will process 100 000 tonnes of waste per year, is already fully ready to serve the local community in implementing the eco-friendly concept of circular economy. The project is in line with PGE Group’s District Heating Strategy, which calls for diversifying the fuel mix while taking into account local needs and fuel availability. 

In its transformation process, PGE Group intends to successively reduce emissions by significantly improving the efficiency of its existing assets, including by commissioning new high-efficiency units, reducing grid losses in the electricity and heat distribution process, successively modernising its generating assets and reducing energy consumption for own purposes. PGE aims to avoid 60 million tonnes of CO2 emissions in years 2016-2026. A consistent reduction in average emissions after 2025 will be driven by further development of offshore assets, reaching 2.5 GW by 2030, and the construction of additional low- and zero-emission cogeneration units. PGE’s activities are intended to constitute real support at national level for actions taken to reduce emissions in the Polish economy.

In the third quarter of 2018, PGE also signed a credit agreement with an international consortium of four banks, pursuant to which it secured a four-year revolving credit facility of PLN 4.1 billion. This funding will be used to finance PGE Group’s ambitious investment programme for 2016-2020, covering the development and modernisation of electricity and heat generation and distribution assets. The funds will also be used to re-finance financial liabilities at PGE Polska Grupa Energetyczna and at group companies. The banking consortium that will provide the credit facility to the company includes: Santander Bank Polska S.A., Powszechna Kasa Oszczędności Bank Polski S.A., Intesa Sanpaolo S.p.A. and MUFG Bank (Europe) N.V.

According to a credit opinion published on 7 November, Moody’s upheld a strong investment-grade rating for PGE at Baa1 with stable outlook. Moody’s is acknowledging PGE’s position as the largest energy undertaking in Poland, its rising share of revenue from regulated activities, resulting from the acquisition of district heating assets from EDF in 2017, as well as its strong balance sheet and a relatively low net debt to EBITDA ratio. Fitch’s rating is also at investment grade: BBB+ with stable outlook.

“The credit agreement with an international banking consortium, strong ratings and a number of other projects initiated on the Polish financial market show that PGE Group is seen as a credible and solid partner. Our aim is to build and maintain a debt structure that allows us to flexibly manage financing costs, and we are succeeding at this,” said Emil Wojtowicz, vice-president of the management board at PGE Polska Grupa Energetyczna in charge of finance.

As previously announced, PGE Group is also very active on the start-up market. At the beginning of September, PGE Ventures, a PGE Group company, together with PFR Ventures, a PFR Group company, as well as SpeedUp Group and the National Centre for Research and Development set up the fund SpeedUp Energy Innovation powered by PGE Ventures (SEI). The new corporate venture capital (CVC) fund aims to invest in start-ups at an advanced growth stage. The target capitalisation of the new fund will reach PLN 100 million.

PGE is also successively developing in the electromobility area. The Group already owns charging stations in Łódź and Warsaw and has installed five charging stations in Siedlce, where a pilot electromobility programme is under-way for medium-sized city infrastructure. In accordance with its adopted business model, PGE is also entering local health resort markets – the first charging station was launched in Krynica-Zdrój, with further stations planned in Lądek-Zdrój and Zakopane.

“The projects in Warsaw, Łódź, Siedlce, Rzeszów and Krynica-Zdrój are just the beginning of our cooperation with local authorities. Testing the project in cities of various sizes and different profiles makes it possible to determine an optimal model for cooperation and improves our offering for clients. More and more local government units are interested in developing electromobility infrastructure, and PGE Group is an ideal partner for them,” added Henryk Baranowski.

By the end of the year, the Group wants to have a total of 50 charging stations throughout Poland. Depending on the level of funding secured from the Low-Emission Transport Fund, which is currently being launched, PGE Group will be capable of opening up to 1500 charging stations by 2022.