Financial results

The increase in the energy prices was translated into an increase in sales. The reported EBITDA profit was higher by 12% YOY. A direct reason were the non-recurring events which contributed additional PLN 504m (sale of additional CO₂ rights added approx. PLN 1 400m PLN, on the other hand increase in rehabilitation and actuarial provision lowered the profit by PLN 900m. EBITDA profit adjusted by one-off events declined by 1% YOY.

Consolidated profit and loss account

Financial results achieved in 2019 were in the negative territory due to impairment of fixed assets in the amount of approx. PLN 7.5bn (impairments related mainly to lignite power plants: Bełchatów and Turów). Impairment loss was a non-cash item and did not affect operating cash flow, which amounted to PLN 6.8bn.

37,627PLN m

Sales revenue

(2,507)PLN m

Gross profit (loss) on sales

(4,175)PLN m

Operating profit (loss)

(4,703)PLN m

Profit (loss) before tax

The results of the impairment tests indicate the scale of the challenges the PGE Group is facing and how the energy sector is changing as a result of changes in the business environment. Maintaining the Group’s financial position requires strong cost discipline and focus on investment projects with the most effective rate of return

Paweł Strączyński
Vice-President for Finance

xls

[PLN m]	2019	2018 restated data	y/y
SALES REVENUE	37,627	25,946	45%
Cost of goods sold	-40,134	-21,044	91%
GROSS PROFIT/ (LOSS) ON SALES	-2,507	4,902	-151%
Distribution and selling expenses	-1,361	-1,406	-3%
General and administrative expenses	-1,099	-984	12%
Net other operating income/expenses	792	-30	-2740%
OPERATING PROFIT/(LOSS)	-4,175	2,482	-268%
Net finance costs	-471	-361	30%
Share of profit / (loss) of entities accounted for using the equity method	-57	71	-180%
PROFIT/(LOSS) BEFORE TAX	-4,703	2,192	-315%
Current income tax	-572	-350	63%
Deferred income tax	1,347	-331	-507%
NET PROFIT/(LOSS) FOR THE REPORTING PERIOD	-3,928	1,511	-360%
attributable to equity holders of the parent company	-3,961	1,498	-364%
attributable to non-controlling interests	33	13	154%
EARNINGS PER SHARE (PLN)	-2.12	0.8	-365%
EBITDA	7,141	6,375	12%

Balance of one-off events (EBITDA)

One-off events in 2019 have positive impact on the reported result (unlike in the prior year). The scale of one-off events was greater than in 2018.

xls

[PLN m]	2019	2018
LTC adjustment (including court verdicts)	-8	-120
Change of reclamation provision	-835	-146
Change of actuarial provision	-99	-71
Additional EUA allowances	1,446	–
One-off items – EBITDA level	504	-337
Recurring EBITDA	6,637	6,701

* Revenues from green certificates and FIT/FIP system
** Including network losses

xls

Key segment data	2019	2018	y/y
EBITDA [PLN million], including:	7,141	6,375	12%
Conventional Generation	2,880	2,101	37%
District Heating	1,186	852	39%
Renewables	517	463	12%
Distribution	2,306	2,463	-6%
Supply	280	227	23%

Increase of EBITDA +37% y/y in Conventional Generation and +39% y/y in District Heating was supported by additional allocation of EUA rights valued at PLN 1 061m for Conventional Generation and PLN 281m for District Heating.

xls

Key segment data	2019	2018	y/y
EBITDA [PLN million], including:	-4,175	2,482	-268%
Conventional Generation	-7,109	379	-1976%
District Heating	595	196	204%
Renewables	657	205	220%
Distribution	1,101	1,277	-14%
Supply	247	203	22%

xls

[PLN million]	2019	2018	y/y
One-off items – EBITDA level	504	-337	-250%
Impairments of TFA and IA* (pre-tax)	-7,520	-402	1771%
One-off items – EBIT level	-7,016	-739	849%
Recurring EBIT	2,841	3,221	-12%

* TFA and IA – tangible fixed assets and intangible fixed assets

Consolidated balance sheet (main categories)

An increase in the balance sheet total is mainly a result of the on-going investment programme. The value of fixed assets decreased by PLN 2.6 billion YoY as a result of impairment of fixed assets (PLN -7.5bn YoY). The development was funded by both operating cash flow (PLN +6.8 billion YoY) and obtained external resources (increase in net debt of PLN +1.8 billion).

xls

[PLN m]	31 December 2019	31 December 2018	31 December 2017
NON-CURRENT ASSETS, including:	65,055	66,765	62,650
Property, plant and equipment	59,690	62,274	59,010
Intangible assets	735	1,046	1,032
Financial receivables	180	168	158
Derivatives and other assets measured at fair value through profit or loss	93	117	222
Shares accounted for using the equity method	715	776	634
Other non-current assets	676	528	524
CO2 emission allowances for captive use	240	1,203	402
Deferred income tax assets	1,318	552	571
CURRENT ASSETS, including:	12,593	9,131	9,519
Inventories	4,509	2,699	1,890
CO2 emission allowances for captive use	965	408	1,040
Trade and other financial receivables	4,815	4,102	3,522
Other current assets	605	458	396
Cash and cash equivalents	1,313	1,281	2,552
TOTAL ASSETS	77,650	75,905	72,183
Share capital	19,165	19,165	19,165
Reserve capital	19,669	19,872	15,328
Retained earnings	3,779	7,743	10,556
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT	42,289	46,727	45,128
Equity attributable to non-controlling interests	848	1,074	1,250
TOTAL EQUITY	43,137	47,801	46,378
NON-CURRENT LIABILITIES, including	22,687	15,578	16,945
Non-current provisions	9,652	6,428	5,651
Loans, borrowings, bonds and lease	10,859	6,361	8,557
Deferred income tax liabilities	920	1,616	1,302
Deferred income and government grants	616	611	1,038
CURRENT LIABILITIES, including:	11,826	12,526	8,860
Current provisions	4,366	2,608	1,991
Loans, borrowings, bonds and leases	1,449	4,347	1,488
Trade and other financial liabilities	3,636	3,613	3,231
Other non-financial liabilities	1,865	1,747	1,733
TOTAL LIABILITIES	34,513	28,104	25,805
TOTAL EQUITY AND LIABILITIES	77,650	75,905	72,183

In 2019, the investment expenditure amounted to PLN 7.0 billion and was focused on the Conventional Power Engineering and Distribution segments.

xls

[PLN m]	2019	2018	y/y
Investment expenditure, including:	7,009	6,856	2%
Conventional Generation	4,018	4,122	-3%
District Heating	548	775	-29%
Renewables	151	103	47%
Distribution	2,225	1,853	20%
Supply	30	14	114%

xls

[PLN m]	2019	2018	y/y
Operating	6,820	5,102	34%
Investment	-6,865	-6,465	6%
Financial	77	91	-15%
Change in cash and its equivalents	32	-1,272	-103%

xls

[PLN m]	EOP 2019	BOP 2018	∆ 2019
Cash and equivalents	1,313	1,281	32
Short term deposits	8	7	1
Restricted cash (adjustment)	-428	-180	-248
Disposable cash of PGE Group	893	1,108	-215
Short term financial debt	-1,449	-4,461	2,898
Long term financial debt	-10,859	-6,247	-4,498
Total financial debt (gross)	-12,308	-10,708	-1,600
Net debt*	-11,415	-9,600	-1,815

The net debt amounted to PLN 11.4 billion at the end of the year and was 1.6 times higher than the annual EBITDA profit. During 2019, the net debt increased by PLN 1.8 billion. Reported debt increased mainly due to change in lease accounting as PGE implemented IFRS 16 (approx. PLN 900m). Other factors constituted increase of stakes in Group companies (approx. PLN 300m) and increase in restricted cash (PLN 250m).

See: perspectives