Annual report 2017

We want to shape a responsible energy industry of tomorrow in our country.

Our business

What is PGE?

We are Poland's largest vertically integrated producer and supplier of electricity and largest producer of district heating. We operate across the entire value chain: we produce electricity and heat at our power plants and CHP plants, then we sell and deliver it to our clients throughout Poland, including to households, businesses and institutions.

Business model

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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

  Annual generation of electricity (GWh) Annual generation of heat (000s GJ) Installed capacity (MWe) Installed capacity (MWt)
  2017 2016 2015 2017 2016 2015 2017 2017
Lignite-based power plants 38 948 37 254 38 976 2 762 2 679 2 590 6 797 615
Hard coal-based power plants 10 398 10 709 11 042 543 468 430 2 854 204
CHP plants 3 675 3 737 3 815 15 334 15 425 15 663 1 109 2 964
TOTAL FOR PGE GiEK S.A. 53 021 51 700 53 833 18 639 18 572 18 683 10 760 3 783
Rybnik Power Plant (hard coal)* 6 598 7 256 6 962 96 91 87 1 840 57
Acquired CHP plants* 5 155 5 114 4 815 32 747 31 588 28 931 1 481 4 897
TOTAL Acquired assets* 11 753 12 370 11 777 32 843 31 679 29 018 3 321 4 954
including assets acquired from 14 November 2017 1 577 - - 7 001 - - 3 321 4 954
TOTAL Conventional Generation segment 54 598 51 700 53 833 25 640 18 572 18 683 14 081 8 737

*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

Industrial resources [million tonnes] - at year-end: 2017 2016 2015
Bełchatów –Bełchatów Field 29.7 47.5 64.6
Bełchatów –Szczerców Field 588.2 616.1 642.8
Turów 302.5 309.9 317.7
SUM 920.4 973.4 1025.1
Level of mining [million tonnes] in years: 2017 2016 2015
Bełchatów –Bełchatów Field 15.8 16.2 25.1
Bełchatów –Szczerców Field 26.8 23.9 17.0
Turów 6.9 7.5 7.3
SUM 49.5 47.7 49.4

Key financial figures

Conventional Generation

[PLN m] 2017 2016 2015
Revenue from sales, including: 13 075 11 738 12 715
EBIT 1 754 2 691 -5 732
EBITDA 4 099 4 182 4 698
Capital expenditures 4 899 6 179 6 495

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

Capital expenditures [PLN million] 2017 2016 2015
Investments in production capacities, including: 4 238 5 585 5 504
Development 2 963 4 248 3 049
Modernisation and replacement 1 275 1 337 2 455
Purchased of finished investment goods 74 85 64
Vehicles 5 6 27
Other 48 56 122
Acquired assets* 168 - -
TOTAL 4 533 5 732 5 717
Capitalised stripping costs 366 447 778
TOTAL with capitalised stripping costs 4 899 6 179 6 495

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

  Annual  electricity generation Installed capacity
Power plant  (GWh) (MWe)*
  2017 2016 2015 2017
Run-of-the-river hydro-power plants 330.4 303.1 243.7 95.8
Pumped storage plants 438.8 446.9 561.2 1 256.0
Pumped storage plans with natural in-flow* 141.7 130.3 120.8 286.7
Wind farms 1 284.2 1 083.3 822.1 549.9
Photovoltaic plant Żar 0.5 0.5 0.02 0.6
TOTAL: 2 195.6 1 964.1 1 747.8 2 189.0
**including 3.5 GWh generated in pumped storage cycle and 138.2 GWh in natural in-flow. Total production in pumped storage cycle in 2017 reached 442.3 GWh, while hydro production reached a total of 468.6 GWh

Link → click here to download an extended version in Excel

Key financial figures

Key figures in the Renewables segment

in PLN million 2017 2016 2015
Revenue from sales 724 717 761
EBIT -36 -770 107
EBITDA 364 365 391
Capital expenditures 81 144 931

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

Capital expenditures [PLN million] 2017 2016 2015
Investments in production capacities, including: 75 140 918
Development 22 79 867
Modernisation and replacement 53 61 51
Other 6 4 13
TOTAL 81 144 931

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.

Assets Unit 2017 2016 2015
Number of stations, including: item 93 493 92 837 92 258
Number of transformer stations item 93 104 92 474 91 874
Station capacity MVA 30 826 29 903 29 500
Total length of lines km 287 864 285 701 283 804
high voltage lines km 10 278 10 197 10 143
medium voltage lines km 111 588 110 798 109 938
low voltage lines km 165 998 164 706 163 723

Key financial figures

Key figures in the Distribution segment

in PLN million 2017 2016 2015
Revenue from sales 6 392 5 918 6 083
EBIT 1 166 1 104 1 387
EBITDA 2 333 2 230 2 461
Capital expenditures 1 716 1 721 1 841

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

Capital expenditures [PLN million] 2017 2016 2015
MV and LV lines 586 546 553
110/LV and MV/MV stations 177 182 223
110 kV lines 105 60 52
New customer connections 504 572 585
Purchase of transformers and meters 144 153 183
ICT, remote control and communication 132 140 157
Other 68 68 88
TOTAL 1 716 1 721 1 841

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

year 2017 2016 2015
TARIFF-A 167 171 123
TARIFF-B 11 553 11 903 11 368
TARIFF-C+R 435 771 457 310 456 522
TARIFF-G 4 731 621 4 693 459 4 664 328
TOTAL 5 179 112 5 162 843 5 132 341

Key financial figures

in PLN million 2017 2016 2015
Revenue from sales 15 662 16 014 15 783
EBIT 784 473 585
EBITDA 811 500 610
Capital expenditures 14 23 31

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.

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