Enea 2014 Q1

Warsaw, 13 May 2014

ENEA CG builds its position through the implementation of area strategies

Q1 2014

Krzysztof Zamasz President of the Board

Dalida Gepfert Vice-President of the Board for Financial Affairs

Paweł Orlof Vice-President of the Board for Corporate Affairs

Grzegorz Kinelski Vice-President of the Board for Commercial Affairs

2

Agenda

Energy market and key operating data

ENEA CG's results in Q1 2014

Area strategies

New power unit in Kozienice

Grzegorz Kinelski Vice-President of the Board for Commercial Affairs

Volatile market and regulatory environment affected the situation on the energy market

4

• Higher average price of baseload yoy by 1.3%

• SPOT market was under the influence of higher prices of allowances for emissions of CO2 and a high, taking into account the weather conditions, demand in the Public Power System.

• A greater number of failures was noted and unplanned deficiencies in the generating capacity, which strengthened higher price levels on SPOT market

• From the beginning of the year energy prices on the futures market increased slightly (impact of allowances for emissions of CO2)

• The prices strengthened almost till the end of February 2014

Energy prices were affected by power deficiency and growths on the CO2 market

130

140

150

160

170

180

190

200

210

220

230

I II III IV V VI VII VIII IX X XI XII

PLN

/kW

h

Average electricity prices on SPOT market on PPE

Baseload - 2012 Baseload - 2013 Baseload - 2014

140

146

152

158

164

170

176

182

188

194

200

0

20

40

60

80

100

120

140

160

180

200

04/10/2012 13/03/2013 05/06/2013 06/08/2013 01/10/2013 19/11/2013 14/01/2014 20/02/2014 28/03/2014

PLN

/MW

h

MW

Transaction prices and volumes - baseload for 2015

trade volumes weighted average price

5

• Low prices of coal on external markets

• Decrease in coal prices in Q1 2014 to almost the lowest values in the presented time slot (comparable to prices from June to August 2013)

• The market of allowances for emissions of CO2 was strongly dependant on political decision made in the European Union

• Despite backloading still a great surplus of EUA in EU ETS

• Price drops in March resulted mainly from the allocation of free allowances

From the beginning of 2014 coal prices are in the downward trend

0

2

4

6

8

10

IIIIIIXIIXIXIXVIIIVIIVIVIVIIIIIIXIIXIXIXVIIIVIIVIVIVIIIIII

2 01420132012

EU

R/t

EUA and CER quotations - closing prices on SPOT market

EUA 3 Phase EUA 2 Phase CER

70

80

90

100

110

120

I II III IV V VI VII VIII IX X XI XII I II III IV V VI VII VIII IX X XI XII I II III

2012 2013 2014

USD

/t

Monthly indices of coal prices (globalCOAL)

Richards Bay (RSA) Newcastle (Australia) Amsterdam-Rotterdam-Antwerpia

6

[GWh] Q1 2013 Q1 2014 Change

Total generation of energy, including: 3 039.2 3 141.7 3.4% √

Conventional generation 2 802.5 2 866.0 2.3% √

Generation from RES 236.7 275.7 16.5% √

Higher energy production in ENEA CG

ENEA CG in Q1 2014 increased energy production both form conventional sources and RES

7

2014 2015 2016

Hedging prices 155 - 165 PLN/MWh 160 - 170 PLN/MWh 165-175 PLN/MWh

0%

20%

40%

60%

80%

100%

2014 2015 2016

% of hedged electricity

29-34%

0-5%

100%

Ca. 1/3 volumes on generation for 2015 is contracted

8

Agenda



Area strategies


Dalida Gepfert Vice-President of the Board for Financial Affairs

ENEA CG's results are compliant with market expectations

10

[PLN mln] Q1 2013 Q1 2014 Change

Net sales revenues 2 380.3 2 373.7 -0.3%

EBITDA 549.9 461.5 -16.1%

Net profit 296.8 209.3 -29.5%

Net debt/EBITDA -0.8 -0.4 -

The results were negatively affected by: a drop in the average selling price to end users and lower prices of energy on the wholesale market

11

EBITDA in Q1 2014 was under the pressure of lower energy prices and a high base of application of Q1 2013 to the segment of trade

5.8% 37.5% 15.1% 13.9% 19.4% 23.1% [PLN mln]

355.2

266.7

194.7 -51.2

5.4

-39.8 -0.9 -2.0

194.7

0,0

100,0

200,0

300,0

400,0

500,0

600,0

EBITDA 1Q 2013 Trade Distribution Generation Other activity Exclusions* EBITDA 1Q 2014

549.9

461.5

-10.5% 1.9% -46.8% -24.3%

* Includes undistributed expenses of the whole Group and exclusions

EBIT

Amortisation/ depreciation

Growth in segment

Drop in segment

Change in segment yoy [%]

EBITDA margin [%]

12


Generation 163.4 123.7 -24.3%


Trade 109.6 58.3 -46.8%

EBITDA in Q1 2014 was under the pressure of lower energy prices and a high base of application of Q1 2013 to the segment of trade

Segment of trade Lower EBITDA by PLN 51.2 mln (-46.8%) • lower average purchase price of energy

by 12% √ • higher sale volumes by 544 GWh √ • lower average selling price by 16.8%

Segment of distribution Higher EBITDA by PLN 5.4 mln (1.9%) √ • lower average purchase price of electricity for

covering book-tax difference by 27% and lower purchase volumes by 24.7 GWh √

Segment of generation Lower EBITDA by PLN 39.8 mln (-24.3%) • lower margin on generation of conventional

electricity - Segment of System Power Plants


Distribution 287.2 292.6 1.9%

13

The Group's financial standing is stable, supported with a significant amount of cash

1 573

209

195

-542

175

-321

1 289

500

1 000

1 500

2 000

Cash1.01.2014

Net profit Amortisation/depreciation

CAPEX External funding Other Cash 31.03.2014

[PLN mln]

14

ENEA CG adjusts to the demanding situation on the energy market

The generated financial results are compliant with market expectations

Higher strength of the Group as a result of widening of the Corporate Strategy with area strategies

Consistently implemented CAPEX programme: PLN 542 mln capital expenditures with a favourable value of net debt/EBITDA ratio -0.4

15

Agenda



Area strategies


Krzysztof Zamasz President of the Board

The implementation of area strategies has a direct impact on the growth in the value of ENEA CG

17

The Group's organisation DNA is the key to an efficient management

development of a homogeneous economic body in which the key role is played by ENEA S.A.

introduction of a statutory management mechanism of the Group Companies

shortening of the decision-making process

shortening of the paths of communication between the parent company and daughter companies

shortening of times of preparation of financial statements and executive information

The approval of the new corporate governance and ENEA Capital Group management plan will allow for:

New organisational and functional

shape of ENEA CG oriented on market and Customer

18

Compliant with the Corporate Strategy for 2014-2020, ENEA CG is five basic areas of operations

ENEA S.A.

ENEA Wytwarzanie

ENEA Trading ENEA Operator ENEA Centrum

Generation Wholesale

trade Distribution Support

Trade

19

Distribution: The area strategy will ensure safety, quality, reliability and cost efficiency

Intelligent network development programme

Book-tax difference reduction programme

Better efficiency of the process of connecting Customers to the network

Development and implementation of the fixed cost programme

Implementation of a programme for better reliability and reduction in the failure rates of the network

Effective operation within operation and development of the network

Development and unification of IT tools supporting the network management

CAPEX 2014-2020

PLN 5.9 bn

20

Generation: Efficient generating portfolio will guarantee energy supply reliability

Development of renewable energy sources (RES)

Development of cogeneration sources

Higher sales of network heat

Realisation of environmental investments

Construction of the power unit No. 11

Realisation of modernisation projects

Implementation of initiatives relating to better efficiency

CAPEX 2014-2020

PLN 13.6 bn:

Conventional sources: PLN 5.9 bn

RES: PLN 4.5 bn

Cogeneration sources: PLN 3.2 bn

21

SSC: ENEA Centrum is a Shared Service Centre rendering support services for ENEA CG Companies

Reimplementation and development of SAP, upgrade IFS

Development of the billing and CRM

Decentralised IT infrastructure

Development of the Call Center platform

Mass Correspondence Centre for ENEA CG

SSC projects: SSC IT, SSC Accounting and Remuneration, SSC Common Customer Service, SSC HR, SSC Logistics, SSC Legal

Common Internet service for the Group

ENEA Operator Sp. z o.o.

ENEA Trading Sp. z o.o.

ENEA Wytwarzanie S.A.

ENEA S.A.

ENEA Centrum Sp. z o.o.

Accounting Customer

Service Logistics

HR IT

22

Wholesale trade: In ENEA CG we concentrate the competences and commercial authorisations in one place

Development of operations within origination type products

Development of trade operations on conterminous markets

Strengthening of the leader position

on the trading market

Commencement of trading operations within ICE

Development of operations within trade in gas

Fuel area integration

Optimisation of fixed costs

Integration and development of trading systems

The superior goal of ENEA Trading is

the first contribution

margin management in the whole value

chain of ENEA CG

23

Sales: Our goal is a growth in the share in the electricity market

Sales on the area of the whole Poland

Attractive offer of products and services

Integrated sponsoring and marketing activities

Activity within origination type products

Growth in margin

New operating model of Customer service

24

Agenda



Area strategies


Paweł Orlof Vice-President of the Board for Corporate Affairs

2014 is a key year as regards the implementation of the project of the construction of a new unit

26

All the tasks planned for realisation for Q1 2014 were precisely performed

The main concreting and foundation works were realised,

Construction of the cooling tower is on the schedule, all the concrete structures are already ready

Construction of the unit No. 11 is on the schedule,

The progress at the end of Q1 2014 is ca. 30%.

0%

20%

40%

60%

80%Scope of works to be performed in 2014

65%

30%

2013 Q1 2014 Q2-Q4 2014 2015

ENEA CG builds its position through the implementation of area strategies

Q1 2014

[email protected]

Additional information

29

-56.9

163.4

14.9 2.3 123.7

0

100

200

EBITDAIQ 2013

SegmentElektrownieSystemowe

SegmentCiepło

SegmentOZE

EBITDAIQ 2014

Attachment No. 1 – A drop in the segment of generation results from a lower margin on energy generation in the segment of System Power Plants

[PLN mln] Generation – EBITDA Q1 2014 bridge

EBITDA Q1 2013

Segment of System Power Plants

Segment of Heat

Segment of RES

EBITDA Q1 2014

Growth

Drop

30

[PLN mln] Trade – EBITDA Q1 2014 bridge

Attachment No. 2 – Lower first contribution margin charged the result of the segment of trade in Q1 2014

109.6

58.3

0

20

40

60

80

100

120

EBITDAIQ 2013

Marżapierwszego

pokrycia

Kosztywłasne

Pozostałeczynniki

EBITDAIQ 2014

-3.1 -8.3

-39.9

EBITDA Q1 2013

First contribution margin

Costs of sales Other factors EBITDA Q1 2014

Growth

Drop

31

Attachment No. 3 – In the segment of distribution a lower average price and lower volumes of energy purchases for the coverage of the book-tax difference covered the increase in provisions for employee benefits

Distribution – EBITDA Q1 2014 bridge [PLN mln]

287.2 292.6 14.3 1.3

-8.2 -2.0

0

100

200

300

400

EBITDAIQ 2013

Regulacja Mająteksieciowy

Organizacja Pozostałe spółki EBITDAIQ 2014

EBITDA Q1 2013

Regulated area Gird assets Organisation Other factors EBITDA Q1 2014

Growth

Drop

Investor Relations

Enea 2014 Q1