POLENERGIA GROUP

3Q 2018 Results14 November 2018

ENERGETYKA WIATROWA ENERGETYKA KONWENCJONALNA DYSTRYBUCJA OBRÓT

▪ Continuation of the restructuring Biomass segment

• Disposal of Biomass North assets in October 2018 for 0.6m PLN

• Ongoing talks with the bank financing Biomass East and search for

an investor in the project.

Market environment1

▪ Auction on ca. 1GW for onshore wind farms took part on November 5, 2018. Polenergia submitted four projects with a total capacity of 199MW.

▪ Auction for PV is planned in November 2018. Polenergia plans to participate with a portfolio of capacity of 8MW.

▪ Increase in GC price to 134,7 PLN/MWh on 30.09.2018 and to 162,7 PLN/MWh on 6.11.2018.

▪ Slight decrease in electricity prices on spot and forward market.

▪ Still high price of CO2 emission allowances amounted to 21,2 EUR on 30.09.2018. Decrease in price to 17,6 EUR on 6.11.2018.

▪ Supreme Administrative Court decided in favour of communities in case of real estate taxes paid in 2017.

▪ Council of Ministers approved the draft amendment of Energy Law which is aimed to introduce 100% power exchange obligation for energy trading.

▪ Due to dynamic growth of energy prices, independent energy trading companies have financial problems. Six companies ceased providing electricity sales this

year (Energia dla Firm, Corrente, Elektrociepłownia Andrychów, Energetyczne Centrum, Gaspol and GOEE Energia).

Group activities2

▪ ENS received correction of the gas compensation for 2017, ca. 47,6m PLN.

▪ Completion of auction preparation for four wind farm projects with a capacity

of 199MW (auction took place on 5.11.) and PV projects with a capacity of

8MW.

2

3Q 2018 Highlights

AUCTIONS FOR NEW WIND FARMS ARE OPPORTUNITIES FOR NEW INVESTMENTS

CONTINUATION OF GREEN CERTIFICATES PRICE INCREASE

TERMINATION OF ELECTRICITY PRICE GROWING TREND

0

5

10

15

20

25

30

9,8

10

10,2

10,4

10,6

10,8

11

11,2

11,4

11,6

01/2018 02/2018 03/2018 04/2018 05/2018 06/2018 07/2018 08/2018 09/2018 10/2018 11/2018

Polish coal EUA

0

50

100

150

200

250

300

10

12

14

16

18

20

22

24

01/2018 02/2018 03/2018 04/2018 05/2018 06/2018 07/2018 08/2018 09/2018 10/2018

Volume in k [right] Share price [left]

100

150

200

250

300

350

400

40

60

80

100

120

140

160

180

01/2018 02/2018 03/2018 04/2018 05/2018 06/2018 07/2018 08/2018 09/2018 10/2018

GC price [left] EE price (IRDN24) [right]

150

200

250

300

350

01/2018 02/2018 03/2018 04/2018 05/2018 06/2018 07/2018 08/2018 09/2018 10/2018

FWD 3Q18 FWD 4Q18 FWD Cal19

*The average price of GC in 1H 2017 amounted to 37,7 PLN/MWh

Green certificates and electricity prices

3

Key indexes and market prices

Stock performance of Polenergia S.A.

thousands of

sharesPLN/share

21,7

Share price at the end of the month21,7

1 2

Electricity forward prices Polish coal and CO2 emission allowances prices3 4

PLN/GJ EUR/TPLN/MWh

134,7

209,2

PLN/MWhPLN/MWh

The average price of GC in the period - weighted by transaction volume

95,9 255,7

162,7

275,6

289,1

271,7 21,2

17,6

19,8

11,3

Quarterly

Electricity Green certificates

*The result normalised by effect of RET declaration

adjustment and partial reversal of historical costs in

Mycielin (7,3m PLN in total)

132 141

7437

178

2017

206

2018

-14%

135 133

74

35

209

20182017

168 -20%

156142

2018 Actual2017 Actual

-9%

Summary of key operational parameters – Wind energy segment

WF production (gross) and LF %1 Average cost per MW* [kPLN]

(without balancing)2 Average revenues per MWh (after balancing costs) at the Group level

[PLN/MWh]3

4

33

52

2018 Actual2017 Actual

+56%

154132

3Q 20183Q 2017

-14%

3951

3Q 2017 3Q 2018

+31%

493,5459,2

31%

2017

28%

2018

-7%

YTD Load factor (%)

YTD Production (GWh)

145,5

124,4

2018

27%

2017

23%

-15%

Q Load factor (%)

Q Production (GWh)

YTD

Electricity Green certificates

RET

Other expenses

RET

Other expenses

159

48

117

172

52

112

Heat price

(PLN/GJ)

Electricity price

(PLN/MWh)

Cogeneration

certificates price

(PLN/MWh)

+8%

+8%

-5%

36

75

38

75

Energy Sales Energy Distribution

+7%

+1%

Quarterly

Summary of key operational parameters

Distribution segment – sales

[GWh]4

Biomass segment – production

[thousand tons]5

Conventional energy segment – sales [GWh] and average prices

[PLN/MWh]6

5

YTD

3Q 2018

3Q 2017

107

222

115

223

Energy Sales Energy Distribution

+7%

0%

YTD 2017

YTD 2018

7,3

12,3

4,0 3,8

North East

-45%

-69%

3Q 2017

3Q 2018

22,4

36,5

10,5

29,0

North East

-53%

-21%

YTD 2017

YTD 2018

551

310

85

557

299

82

Cogeneration

certificates (GWh)

Sales of

electricity (GWh)

Heat

Generated (TJ)

+1%

-3%

-3%

YTD 2017

YTD 2018

159

66

117

173

70

112

Cogeneration

certificates price

(PLN/MWh)

Electricity price

(PLN/MWh)

Heat price

(PLN/GJ)

+8%

+6%

-5%169

58

15

168

59

15

Sales of

electricity (GWh)

Heat

Generated (TJ)

Cogeneration

certificates (GWh)

0%

+2%

+2%

3Q 2017

3Q 2018

54,9 64,4

+17%

2017

YTD

2018

YTD

20,68,5

-59%

136,2 121,7

-11%

392,2 427,0

+9%

130,9 151,3

+16%

2017

3 Q

2018

3 Q

Financial Highlights

Revenues (excluding

Trading segment)

▪ Increase due to higher revenues of the conventional energy and

wind power segments.

EBITDA(normalized)

▪ 3Q: Increase in EBITDA as a result of the higher EBITDA of the

conventional energy segment.

▪ YTD: lower EBITDA as a result of the loss on the Trading

segment in 1H 2018.

15,8 20,6

+30%

Net profit(normalized)

▪ 3Q: Higher net profit due to higher operating result compensated

by higher income tax.

▪ YTD: Lower net profit due to lower operating result.

6

HIGHER REVENUES AND DECREASE IN EBITDA AS A RESULT OF THE LOSS

ON ELECTRICITY TRADING CONTRACTS IN 2Q

EBITDA by operating segments

9,9

8,4

DistributionEBITDA

YTD 2017

Wind power Convent.

Energy

(1,0)

(24,5)

(1,4)

Biomass Trading

(5,9)

Unallocated

costs

0,1

Development EBITDA

YTD 2018

136,2

121,7

7

Wind power: effect of higher green certificates and electricity sales prices

and lower operating costs (mainly property tax), partially compensated by

lower production

Conventional energy: higher revenues from correction of gas compensation

for 2017

Distribution: higher cost of energy purchase compensated by lower

operating costs

Biomass: lower result due to deteriorating situation on the biomass market

which results in lower sales volume and higher price of the raw material

Trading: lower result on electricity trading as a consequence of the loss on

trading segment caused by sudden increase in electricity prices in 1H 2018

Unallocated costs: additional costs connected with sale of stake in Offshore

projects two processes of tender offers and the impact of VAT settlements

for 2017 and 2018

Development: no material variance vs last year

Comments

IMPROVEMENT IN WIND POWER SEGMENT AND CONVENTIONAL ENERGY SEGMENT COMPENSATED BY LOWER EBITDA IN

OTHER SEGMENTS – MAINLY THE EFFECT OF THE LOSS ON TRADING CONTRACTS IN 2Q

12,3

54,9

Unallocated

costs

1,1

Wind power Trading

(1,0)

Distribution

(0,2)(1,2)

Convent.

Energy

Biomass

64,4(1,3)

EBITDA

3Q 2017

Development EBITDA

3Q 2018

(0,1)

YTD

3 Q

122

38

60

CFF

(56)

YTD 2018

EBITDA

13

∆ WC

(80)

CFI

(21)

CIT

1

Other YTD 2018

NCF

(136)

64

(12)

30

CFF3Q 2018

EBITDA

(24)

∆ WC

(28)

CFI

(47)

3Q 2018

NCF

(6) (1)

CIT Other

(71)

Consolidated cash flow

• ∆ WC: mainly changes in working capital in the trading segment and

conventional energy segment

• CFI: impact of Offshore projects financing, ENS overhaul and Polenergia

Dystrybucja investment plan

• CFF: mainly debt service in the wind power segment and conventional

energy segment. Includes credit prepayment in the amount of 23,7 mPLN

due to the end of restructuring of Gawałowice, Skurpie and Rajgród farms.

8

IMPROVEMENT IN NET CASH FLOW DUE TO SETTLEMENT OF SALE OF STAKE IN OFFSHORE PROJECT

COMPENSATED BY LOAN PREPAYMENT IN WIND POWER SEGMENT

Comments

YTD

3 Q

Comments

• ∆ WC: mainly changes in working capital in the trading segment and

conventional energy segment.

• CFI: settlement of sale of 50% stake in Offshore projects compensated by

the impact of above mentioned 3Q events

• CFF: mainly debt service in the wind power segment and conventional

energy segment. Includes credit prepayment in the amount of 55,7 mPLN.

Credit prepayment

Credit prepayment

Debt in Wind Power segment

9

Debt structure as of 30 September 2018

Debt by segments

Debt by currency (EUR vs. PLN)Debt – interest rate hedging Net debt (3Q 2018 vs. 3Q 2017)

FURTHER DECREASE IN NET DEBT

NO CURRENCY RISK

INTEREST RATE RISK SECURED IN ABOUT 20%. 77% OF WIND FARMS DEBT SUCESSFULLY RESTRUCTURED

912 mPLN

912 mPLN 912 mPLN

88%

1% 2%

5%

5%

Biomass

Wind power

Distribution

Trading

Convent. Energy

97,8%

Debt in PLN

Debt in EUR2,2%

20,3%

79,7%

Debt secured

Unsecured debt

76,7% 23,3%Restructured debt The remaining debt

806 mPLN

(576)

(713)

3Q 2018 3Q 2017

10

Summary of segment results

11

Production (net), YTD

Productivity of Polenergia wind farms above average*

Wind power - production

* Based on net productivity (after own consumption and losses) due to the availability of data

Operating segments

APPLICATION OF MODERN TECHNOLOGIES, EXCELLENT LOCATIONS AND THE EXPERIENCED TECHNICAL TEAM

ALLOW FOR ACHIEVING PRODUCTIVITY ABOVE MARKET AVERAGE

Dipol TaliaAmon Gawłowice Rajgród Skurpie Mycielin Razem

2017

29%26%

2018

464,3

428,2

-8%

29,623,5

54,345,4

35,230,6

108,9

94,9

49,244,7

92,7

83,2

94,2

103,4

2,522%20%21%24%

2017

16%

20172018 20182018 2017

19%

34%

2017

30%34%

2018

30%

2017

27%

2018

32%

20172017

13%29%

2018

31%

20182018 2017

YTD Produktywność (%)

YTD Produckcja (GWh)

Krzęcin

33,4%

23,3% 22,9%

37,0%

30,6%

19,2% 17,3%

34,4%

29,3%27,0%

21,7%

39,1%

27,4%22,8%

19,0%

36,8%

26,1% 24,8%

40,7%

35,0%

22,2% 19,9%

38,9%

32,6% 30,9%

25,3%

45,4%

31,4%26,7%

20,9%

1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018

Średnia produktywność farm wiatrowych w Polsce Średnia produktywność farm wiatrowych Polenergii

YTD Production (GWh)

YTD Load factor (%)

Total

Average load factor of wind farms in Poland Average load factor of Polenergia wind farms

12

• Lower EE production volume by 20,8 GWh.

• Higher average price of green certificates and electricity (in case of projects

selling on market prices).

• Operating costs lower mainly due to lower RET in 2018 partially

compensated by higher balancing costs (higher unit price in 2018)

Operating segments

14,815,9

5,2

1,5

Volume

effect

(0,5)

Price effect3Q 2017 Balancing

costs

3Q 2018

(5,0)

Operating

costs

(0,2)

Other

+7%

18,9

15,9

9,3

Balancing

costs

(1,9)

Electricity

0,7

(11,1)

Green

certificates

Operating

costs

Other 3Q 2018

1 EBITDA build-up

2 EBITDA bridge

Comments

Wind power - 3 Q

HIGHER GREEN CERTIFICATES PRICES AND LOWER OPERATING COSTS

13

• Lower production volume by 36,0 GWh.

• Higher average price of green certificates and electricity (in case of projects

selling on market prices)

• Operating costs lower due to lower RET in 2018 and lower technical costs

(reversal of historical costs in Mycielin and the effect of the gear change in

FW Puck in 1H 2017) partially compensated by higher balancing costs

(higher unit price).

Operating segments

13,9

8,5

YTD 2017

(8,0)

Volume

effect

Price effect

(2,4)

(2,2)

Balancing

costs

Operating

costs

Other YTD 2018

55,3

65,2

+18%

70,765,2

28,4(29,6)

Electricity Green

certificates

(7,3)

3,0

Operating

costs

OtherBalancing

costs

EBITDA

YTD 2018

1 EBITDA build-up

2 EBITDA bridge

Comments

Wind power - YTD

HIGHER GREEN CERTIFICATES PRICES AND LOWER OPERATING COSTS

14

28,9

41,2

5,1

7,6

HeatEBITDA

3Q 2017

0,0

Electricity *

(0,4)(0,1)

Gas

compensation

OtherYellow

certificates

EBITDA

3Q 2018

+42%

8,0

1,70,4

Electricity *

1,4

Heat

29,7

Gas

compensation

Yellow

certificates

Other EBITDA

3Q 2018

41,2

Operating segments

• Higher margin on electricity due to higher stranded costs compensation

(impact of change in electricity price in 2019).

• Higher revenues from gas compensation due to higher adjustment for 2017

(+20,8m) announced in July 2018 in relation to adjustment for 2016

(+13,6m) announced in July 2017.

* Includes compensation for stranded costs and revenues from black-start services

1 EBITDA build-up Comments

Conventional Energy – 3 Q

2 EBITDA bridge

STABLE OPERATIONAL PERFORMANCE. HIGHER EBITDA DUE TO INCREASE IN STRANDED COSTS COMPENSTATION AND

HIGHER REVENUES FROM GAS COMPENSATION.

15

8,3

1,5

EBITDA

YTD 2017

72,3

Electricity *

(0,1)

Heat Gas

compensation

(0,6)(0,7)

Yellow

certificates

Other EBITDA

YTD 2018

63,9 +13%

8,4 3,6

9,2

Heat

72,3

Electricity *

50,0

Gas

compensation

Yellow

certificates

1,1

Other EBITDA

YTD 2018

Operating segments

• Higher margin on electricity due to higher stranded costs compensation

(impact of change in electricity, gas and CO2 prices).

• Higher revenues from gas compensation due to 1) higher adjustment for

2017 (+20,8m) announced in July 2018 in relation to adjustment for 2016

(+13,6m) announced in July 2017., 2) higher gas cost in 2018 (higher

variable price) compensated partially by lower forecasted value of Wg

index.

• Lower revenues from yellow certificates due to lower amount of certificates

(lower heat generation) and lower price.

* Includes compensation for stranded costs and revenues from black-start services

1 EBITDA build-up Comments

Conventional Energy – YTD

2 EBITDA bridge

STABLE OPERATIONAL PERFORMANCE. HIGHER EBITDA DUE TO INCREASE IN STRANDED COSTS COMPENSTATION AND

HIGHER REVENUES FROM GAS COMPENSATION.

16

Distribution – 3 Q

0,2

(0,5)

EBITDA

3Q 2017

DistributionSale of

electricity

0,3

OPEX

(0,1)

Other

4,90,0

Polenergia

Kogeneracja

EBITDA

3Q 2018

5,0

-3%

Other

4,7

Sale of

electricity

Distribution EBITDA

3Q 2018

(2,3)

OPEX

1,6

0,2

Polenergia

Kogeneracja

0,7

4,9

Operating segments

1 EBITDA build-up Comments

2 EBITDA bridge

STABLE OPERATIONAL PERFORMANCE. LOWER EBITDA DUE TO INCREASE IN ELECTRICITY PURCHASE PRICE

PARTIALLY COMPENSATED BY LOWER OPEX AND BETTER RESULT OF DISTRIBUTION SEGMENT

• Lower margin on electricity sale due to higher electricity cost.

• Higher distribution margin results from higher volume (investment plan

effect)

• Lower OPEX due to savings on external services, payroll and RET costs.

17

Distribution – YTD

Other

(1,6)

EBITDA

YTD 2017

Sale of

electricity

(0,1)

Distribution

0,6

OPEX

0,0 0,1

Polenergia

Kogeneracja

EBITDA

YTD 2018

13,0

12,0

-8%

Sale of

electricity

12,0(7,1)

13,6

Distribution OPEX

2,0

Other

0,5

Polenergia

Kogeneracja

EBITDA

YTD 2018

2,9

• Lower margin on electricity sale due to higher electricity cost.

• Lower distribution margin mainly due to lower connection fees in 1H 2018

• Lower OPEX due to savings on external services, payroll and RET costs

Operating segments

1 EBITDA build-up Comments

2 EBITDA bridge

STABLE OPERATIONAL PERFORMANCE. LOWER EBITDA DUE TO INCREASE IN ELECTRICITY PURCHASE PRICE

PARTIALLY COMPENSATED BY LOWER OPEX

18

7,5

6,3

2,5

4,7

(8,1)

EBITDA

3Q 2017

Margin -

trading

EBITDA

3Q 2018

Margin - wind

farm portfolio

Operational

costs and

provisions

Margin - other

contracts

(0,3)

-16%

Operating segments

4,7

6,35,0

EBITDA 3Q 2018Margin - other

contracts

Margin - trading

(0,7)

Margin - wind

farm portfolio

(2,8)

Operational costs

and provisions

• Higher result on trading portfolio mainly due to increase of green certificates

price.

• Lower margin on electricity sales from WF due to lower production and the

need to buy back some of the energy on the market to close the hedging

contracts and the effect of the revaluation of certificate store in 3Q 2017 with

a significant increase in price during the quarter.

• Increase in margin on other contracts due to ongoing optimization.

1 EBITDA build-up Comments

Trading – 3 Q

LOSS ON TRADING PARTIALY COMPENSATED BY INCREASE IN MARGIN ON OTHER CONTRACTS

2 EBITDA bridge

19

Operating segments

9,2

(15,3)(5,7)

(23,9)

EBITDA

YTD 2017

Margin - trading Margin - wind

farm portfolio

5,6

Margin - other

contracts

(0,5)

Operational

costs and

provisions

EBITDA

YTD 2018

• Loss on trading portfolio mainly due to sudden increase of electricity price in

1H 2018.

• Lower margin on electricity sales from WF due to lower production and the

need to buy back some of the energy on the market to close the hedging

contracts and the effect of the revaluation of certificate store in 3Q 2017 with

a significant increase in price during the quarter.

• Increase in margin on other contracts due to ongoing optimization.

1 EBITDA build-up Comments

Trading - YTD

LOSS ON TRADING PARTIALY COMPENSATED BY INCREASE IN MARGIN ON OTHER CONTRACTS

(12,3)

(15,3)

(1,1)

(8,1)

Margin - trading

6,3

Margin - wind

farm portfolio

EBITDA

YTD 2018

Margin - other

contracts

Operational costs

and provisions

2 EBITDA bridge

2,9

(0,5)

Koszt surowcaPrzychody ze

sprzedaży

(2,0)

(1,3)

Koszty operacyjne

i pozostałe

EBITDA

3Q 2018

0,5

(0,5)

Koszty operacyjne

i pozostałe

EBITDA

3Q 2018

Przychody ze

sprzedaży

EBITDA

3Q 2017

(4,0)1,6

1,5

Koszt surowca

20

Operating segments

• Lower revenues, raw material costs and operating costs caused by sale of

the Biomass South plant and lower sales volume in other plants.

• In October sale of assets of the Biomass North plant in the amount of 0.6

mPLN.

1 EBITDA build-up Comments

Biomass – 3 Q

2 EBITDA bridge

LOWER SALES VOLUME AND HIGHER RAW MATERIAL PRICES.

RESTRUCTURING PROCESS IN THE BIOMASS SEGMENT IN PROGRESS.

Sales

revenues

Cost of raw

material

Operational and

other costs

Sales

revenues

Cost of raw

material

Operational and

other costs

1,3

2,5

EBITDA

YTD 2017

Koszt surowca

1,9(6,9)

Przychody ze

sprzedaży

Koszty

operacyjne

i pozostałe

1,2

Wpływ

sprzedaży

aktywów

EBITDA

YTD 2018

0,0

13,1

(8,1)

(6,3)

Przychody ze

sprzedaży

Koszty

operacyjne

i pozostałe

Koszt surowca EBITDA

YTD 2018

1,2

Wpływ sprzedaży

aktywów

0,0

21

Operating segments

• Lower revenues, raw material costs and operating costs caused by sale of

the Biomass South plant and lower sales volume in other plants.

• At the level of EBITDA YTD visible effect of sale of assets of the Biomass

South plant above the book value allowing for the recognition of a positive

results on sales in the amount of 1.2 mPLN.

• In October sale of assets of the Biomass North plant in the amount of 0.6

mPLN.

1 EBITDA build-up Comments

Biomass - YTD

2 EBITDA bridge

LOWER SALES VOLUME AND HIGHER RAW MATERIAL PRICES.

RESTRUCTURING PROCESS IN THE BIOMASS SEGMENT IN PROGRESS.

Sales

revenues

Cost of raw

material

Operational and

other costsSale of assets

Sales

revenues

Cost of raw

material

Operational and

other costs

Sale

of assets

22

Onshore RTB (Dębsk, Szymankowo, Kostomłoty, Piekło):

• Group possess project portfolio with total capacity of 199MW which

are in final development phase and posses building permit.

• Projects took part in auctions which took place on 5 November 2018.

• Group has been waiting for auction results. Discussions on debt

financing in progress.

Offshore:

• Group develops two offshore wind farms (MFW Bałtyk II Sp. z o.o.

and MFW Bałtyk III Sp. z o.o.) located on Baltic Sea with total

capacity up to 1200 MW.

• Building term depend from implementation of proper regulation

system.

• Additionally Group analyses potential to reinstate preparation works

connected with project Polenergia Bałtyk I S.A.

• In 2Q 2018 agreement for sale of 50% stake in Offshore projects with

Equinor (Statoil previously).

PV:

• Group posses portfolio of PV project out of which 8MW will take part

in auction in November 2018

• Development works on other projects with a total capacity of 21 MW

will be continued in 2018 and 2019

Wińsko:

• Group develops biomass power plant with a capacity of 31 MW,

connected to the power grid.

• In 2Q 2018 project received Integrated Permission and decision

concerning prequalification to auction from ERO.

• Group considers disposal of the project before the auction or after

the successful auction.

Development activity

DEVELOPMENT OF OFFSHORE PROJECTS CONTINUES

PARTICIPATION IN 2018 AUCTION FOR ONSHORE (199 MW) AND PV (8 MW).