Our business

This segment includes lignite mining, generation of electricity and heat in conventional sources as well as the transmission and distribution of district heating.

Assets

PGE Group's Conventional Generation segment includes PGE GiEK S.A., based in Bełchatów, a company that has 12 branches: 2 lignite mines, 4 conventional plants and 8 CHP plants. From 14 November 2017, the Conventional Generation segment also includes some of the assets acquired from EDF, i.e. 5 companies that include 1 conventional plant and 8 CHPs, currently owned by PGE Energia Ciepła S.A.

PGE Group is the leader of the lignite mining industry (81% of domestic extraction) and the largest producer of electricity, generating approx. 43% of national net electricity output, and the largest producer of heat. Production is based on lignite that is extracted at PGE Group mines as well as on hard coal, gas and biomass.

Installed capacities and output at Conventional Generation segment branches

Table: Data on installed capacities and output at Conventional Generation segment branches

*The units' volumes are on a pro-forma basis and are presented for illustration purposes in order to adequately show the scale of the acquired assets in comparison with PGE GiEK S.A.'s generating units (without the distortion related to proportional recognition in annual results). Acquired assets: Elektrownia Rybnik, EC Gdańsk, EC Gdynia, EC Kraków, EC Wrocław, EC Czechnica, EC Zawidawie, EC Zielona Góra, EC Toruń.

Lignite extraction

Lignite resources and mining levels

Key financial figures

Conventional Generation

Key factors affecting segment results

The results reported in the Conventional Generation segment are changing under the influence of, among other things, one-off events such as revenue from LTC compensations (which added PLN 1,215 million to the 2017 result) and restatement of rehabilitation provision (which added PLN 643 million to the 2016 result). Taking into account the comparability of data between periods and their interpretation, we also calculate and publish data adjusted for one-off items. Inter-period dynamic of recurring results is shaped by a constant set of operating and market factors such as:

• Volume of electricity production – electricity is the main product of the Conventional Generation segment (and PGE Group). Production volume depends on asset availability, repair and modernisation schedules, weather conditions as well as market conditions and cost competitiveness compared to other producers from Poland and neighbouring countries.
• Structure of electricity production – PGE Group's generation assets just as other assets in the entire National Power System have different generation efficiencies and fuel costs therefore, given the same price of energy, they generate different margins. It is in PGE Group's interest to maximise the use of assets which are the most cost-effective and are based on the Group's own fuel, i.e. lignite.
• Realised electricity sale price – (this is an average weighted sale price in derivative contracts and on the spot market) in 2017, this price reached 164 PLN/MWh, compared to 167 PLN/MWh in 2016.
• Cost of fuel (purchased from external suppliers - mainly hard coal and natural gas).
• Cost of CO2 emission allowances – depends on the market price at the time allowances are purchased as well as on CO₂ emissions at the Group's units and the allocation of free-of-charge allowances under derogation.
• Revenue from the sale of property rights (mainly yellow and green certificates).

The acquisition of generation assets from EDF Group (8 CHPs and Rybnik Power Plant) substantially influenced the production volumes of electricity, heat as well as costs such as fuel costs. At the same time, recognition of these assets after November 14, 2017 (approx. 1/8th of the reporting year) means that the 2017 results do not fully reflect this acquisition's potential.   

Impairment of property, plant and equipment is recognised together with depreciation and has no impact on EBITDA, while it has impact on EBIT, gross profit and net profit.

Capital expenditures

Capital expenditures in the Conventional Generation segment in 2017, 2016 and 2015

We are the leader in producing electricity from renewable sources in Poland, with an approx. 9% market share (together with biomass). Investing since 2007, we have built up a 550-MW wind farm portfolio. Our assets include the largest pumped storage plants in Poland that contribute to system stability during peak demand for electricity as well as numerous run-of-the-river hydro-power plants.

• This segment is involved in the generation of electricity from renewable sources and in pumped storage plants.

Assets

PGE Group's operations in renewables are managed by PGE Energia Odnawialna S.A. The segment's assets include:

• 14 wind farms.
• 1 photovoltaic plant.
• 29 run-of-the-river hydro-power plants.
• 4 pumped storage plants, including 2 with natural in-flow.

Key assets in the Renewables segment

Installed capacities and output at Renewables segment branches

Data on installed capacities and output at Renewables segment branches

Link → click here to download an extended version in Excel

Key financial figures

Key figures in the Renewables segment

Key factors affecting segment results

The segment's results depend on weather and hydrological conditions as well as on electricity prices, green certificate prices and revenue from regulatory system services.

Capital expenditures

Capital expenditures in the Renewables segment in 2017, 2016 and 2015

We are the second-largest energy distributor in terms of the number of clients, with an approx. 25% share of the Polish energy distribution market. Our distribution area covers nearly 40% of Poland's territory. Using nearly 288,000 km of energy networks, we supply electricity to approx. 5.4 million clients.

Assets

PGE Dystrybucja S.A. operates on a 122,433 km² area and supplies electricity to approx. 5.4 million clients.

Key financial figures

Key figures in the Distribution segment

Key factors affecting segment results

The Distribution segment is characterised by a relative stability of financial results. Results depend on the volume of energy distributed and the level of distribution tariff set by the regulator. Moreover, results depend on the cost to cover balancing differences and on other factors.

Capital expenditures

We are one of the leading electricity sellers in Poland. In 2017, we sold 40 TWh to end customers. 

The segment covers electricity sales to end customers, wholesale trade in electricity on the domestic and foreign markets, wholesale trade in fuels and related products on the domestic and foreign markets, provision of services to PGE Group companies related to commercial management of the Group's generation capacities and of the electricity produced, alongside trade in CO₂ emission allowances and property rights.

Number of Supply segment clients

Number of clients in the Supply segment by power off-take points

Key financial figures

Key factors affecting segment results

The segment's results depend mainly on margins achieved in electricity trading. The cost of property right redemptions has a significant impact on the segment's results (i.e. colour-coded certificates that the seller of energy to end customers is required to redeem). The market prices of colour-coded certificates are characterised by volatility related to changes in the regulatory environment. The Supply segment also generates revenue from generation capacity trade management contracts, which concerns wholesale electricity trading as agent for PGE Group's production companies - revenue from this service depends on the volumes sold by the Group's companies.