TAURON Group’s

tauron.pl

Q1 2020Financial Results

May 14, 2020

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Structure of the presentation

Filip GrzegorczykCEO

Key financial and operating data Highlights Investment projects and CAPEX

Marek WadowskiCFO

Macroeconomic and market situation

Financial data and the results of the individual operating segments

Debt and financing 2020 outlook

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Key Q1 2020 data

Financial results

[PLN m] Q1 2020 vs Q1 2019

Sales revenue 5 468 3%

EBITDA 957 (22)%

Net profit* 162 (70)%

CAPEX 940 29%

Net debt/EBITDA 3.27x up 0.45x(vs 31.12.2019)

Operating data

Q1 2020 vs Q1 2019

Electricity distribution [TWh] 13.25 (2)%

Electricity production from RES [TWh] 0.57 48%

Electricity production by hard coal-fired units [TWh] 2.64 (23)%

Heat generation [PJ] 4.96 4%

Retail electricity supply[TWh] 8.86 (1)%

Commercial coal production [ton m] 1.18 (6)%

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* Attributable to the shareholders of the parent company

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Highlights Summary

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March 16 Signing of the loan agreement worth PLN 500 million with the SMBC bank to finance general

corporate purposes, excluding the financing of the coal assets

March 25 Signing of the syndicated loan agreement worth PLN 500 million to finance general corporate

purposes, excluding the financing of the new coal projects

March 23 Signing of an agreement on the terms of cooperation between TAURON and the Polish Development

Fund with respect to investments in renewable energy sources

April 29 Reaching an agreement with TAURON Wydobycie’s workforce regarding, among others, reducing work time and wages from May to July 2020

May 4Signing of an agreement with the RAFAKO-MOSTOSTAL WARSZAWA consortium regarding the construction of a 910 MW unit in Jaworzno. The estimated new date of the unit’s commissioning: by November 15, 2020.

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Macroeconomic and market situation

Source: * GUS ** Bankier.pl ***PSE 5/32

Structure of electricity production in Poland*** [TWh]

3,8%3,3% 3,6%

4,6%

3,1% 3,4%2,7% 2,7%

4,8%4,3%

5,5% 5,1% 5,2%5,3% 5,2% 4,9%4,8% 4,6%3,9%

3,2%

44464850525456

0%1%2%3%4%5%6%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2015 2016 2017 2018 2019 2020

PMIPKBPoland’s GDP growth rate* and manufacturing

PMI (quarterly average)**

GDP growth rate Manufacturing PMI

5,3%3,9%4,3%

6,0%3,0%

5,8%

2,4%1,5%

7,3%

4,2%6,4%

8,5%5,5%

7,0%5,3%5,5% 6,1%

4,2%3,3%2,4%

1,0%

-4%-2%0%2%4%6%8%

10%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2015 2016 2017 2018 2019 2020

Increase of industrial production sold*and electricity consumption (change yoy)***

Sold production growth Change of domestic electricity consumption

Electricity prices under one-year BASE contracts

20,57 19,26

11,019,16

2,823,57

5,536,07

2,78 2,71

0

10

20

30

40

50

Q1 2019 Q1 2020

Industrial power plants

Renewable energysourcesGas-fired thermal powerplantsLignite-fired thermalpower plantsCoal-fired thermal powerplants

40,7742,71

48,2%

25,8%

6,6%

13,0%

6,5%

47,2%

22,5%

8,7%

14,9%

6,6%

-6,4%

-16,8%

26,6%

-2,8%9,7%

Average electricity sales prices on the competitive market (acc. toERO):

2014: 163.58 PLN/MWh 2015: 169.99 PLN/MWh 2016: 169.70 PLN/MWh 2017: 163.70 PLN/MWh 2018: 194.30 PLN/MWh 2019: 245.44 PLN/MWh 2020 r.: 256.03 PLN/MWh (estimate)

Average price [PLN/MWh] Volume [GWh]

Y-13 191.60 108 861Y-14 160.40 142 841Y-15 168.11 146 932Y-16 166.47 147 923Y-17 160.27 76 729Y-18 165.98 65 227Y-19 237.44 133 170Y-20 265.42 134 887Y-21* 241.70 71 263Y-22* 245.10 11 195

-4,6%

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Q1 2020 financial dataNet profit attributable to the parent

company’s shareholders [PLN m]

Q1 2020 vs Q1 2019 EBITDA [PLN m]

1 232 1 1811 036

957

127

0

200

400

600

800

1 000

1 200

1 400

Q1 2019reported

Consumption of theprovision

for onerous contracts

Q1 2019comparable

Q1 2020comparable

Consumption of theprovision

for onerous contracts

Swap of CO2 purchasecontracts

Q1 2020reported

Sales revenue [PLN m]

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3 114 3 134

1 593 1 710

236 23796 5635 73238 258

 

 

 

 

 

 

Electricity Distribution and trading services Heat Coal Gas Other revenue

5 313 5 468

535

162

Q1 2019 Q1 2020

0

100

200

300

400

500

600

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Individual segments’ Q1 2020 results

[PLN ml] Distribution Generation Supply MiningOther

and exclusions*

Revenue 1 789 199 1 155 4 231 236 (2 143)EBITDA 684 121 69 182 (36) (63)EBIT 400 83 (13) 171 (84) (84)CAPEX 485 1 361 11 55 25

* Items not included in the segments presented

Individual segments’ contribution to EBITDA [%]

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-4% -4%

26%7%

57%

71%

13%

19%

2%

-7%

1 232 957

-200

0

200

400

600

800

1 000

1 200

1 400

1 600

Q1 2019 Q1 2020

Other and exclusions

Supply

Distribution

RES

Generation

Mining

PLN m

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1 232

957

49 0 0

-0 -0

-0

23,2% 38,2% 60,8% 6,0% 4,3% -15,4% 14,8% 17,5%

0

200

400

600

800

1 000

1 200

1 400

1 600

Q1 2019EBITDA

Distribution RES Generation Supply Mining Other and exclusions Q1 2020EBITDA

EBITDA Segment's increase Segment's decrease EBITDA margin

*

a

Q1 2020 EBITDA

PLN m

*Other operations segment’s EBITDA margin 8/32

PLN (275) m, (22)%

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Distribution Segment

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Distribution Segment – Q1 2020EBITDA change [PLN m]

EBIT Depreciation and impairment charges

Electricity distribution [TWh]

13,54

13,25

* Neighboring DSO and exports

Financial data [PLN m]

Higher distribution service sales revenue √

Decline of electricity distribution sales volume by 293 GWh

Higher costs of the balancing difference

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1 681 1 789

701 684404 400

351 485

0

500

1 000

1 500

2 000

Q1 2019 Q1 2020

Sales revenue EBITDA EBIT CAPEX

3,51

3,56

4,61

4,72

1,92

2,05

2,79

2,76

0,42

0,45

Q12020

Q12019

0 5 10

Group A Group B Group C2+C1+R+D Group G Other*

---

-

0

200

400

600

800

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16,9 17,5 18,3

0

5

10

15

20

2018 2019 2020

Regulatory Asset Base [PLN bn]

1,9 9,6 12,0

32,8

2,713,5

17,3

44,8

0

10

20

30

40

50

big cities city counties other cities villages

Interruption duration [min/consumer]

Q1 2019 Q1 2020

a

Distribution Segment – key parameters

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93,50%99,23%

92,58%98,63%

0%

20%

40%

60%

80%

100%

CRP gr. IV CRP gr. V

New connection installation time [%]

LTM 2019 LTM 2020

0,080,17

0,67 0,66

0,07 0,22

0,38

0,91

0,0

0,3

0,6

0,9

big cities city counties other cities villages

Frequency of interruptions [number of interruptions/consumer]

Q1 2019 Q1 2020

LTM – the period of last 12 months ending on March 31, 2020

INTERRUPTION DURATIONCTP md – big citiesCTP mp – city counties CTP m – citiesCTP w – villages

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RES Segment

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a

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RES Segment – Q1 2020

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72

12125

31

-6 -1

0

20

40

60

80

100

120

140

Q1 2019 Margin on electricity Property rights Fixed costs Other Q1 2020

• Rise of electricity production as a consequence of the purchase of wind farms with the capacity of 180 MW √

112

199

72

121

49

83

1 10

50

100

150

200

Q1 2019 Q1 2020

Sales revenue EBITDA EBIT CAPEX

• Favorable wind conditions – increase of electricity production √

• Increase of property rights prices √• Decline of electricity prices -

0,17

0,36

0,12 0,100,0

0,1

0,2

0,3

0,4

Q1 2019 Q1 2020

Wind farms Hydroelectric power plants

EBITDA change [PLN m]

Electricity production [TWh]

Financial data [PLN m]

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Generation Segment

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a

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1EBITDA change [PLN m]

315

69

11

-93 -3

-127 -330

50100150200250300350

Q1 2019 Margin onelectricity

(coal-fired units)

Margin onelectricity

(biomass-firedunits)

Margin on heat Swap of the CO2purchasecontracts

Other Q1 2020

Financial data [PLN m]

• Drop of electricity sales volume -• Decline of clean dark spread -

• Higher revenue from the cold intervention reserve and margin on electricity repurchases (buybacks) √

0,09 0,11

0,53 0,51

0,0

0,1

0,2

0,3

0,4

0,5

0,6

Q1 2019 Q1 2020

Biomass High eficiency cogeneration

Biomass-fired and high efficiency cogeneration production [TWh]

3,442,64

4,76 4,96

0,0

1,0

2,0

3,0

4,0

5,0

6,0

Q1 2019 Q1 2020

Electricity Heat

Electricity (coal-fired units) [TWh] and heat [PJ] production

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1 2771 155

315*

69231

-13

235361

-200

0

200

400

600

800

1 000

1 200

1 400

Q1 2019 Q1 2020

Sales revenue EBITDA EBIT CAPEX

• Higher margin on biomass-fired units √

Generation Segment – Q1 2020

* From January 1, 2020, the Group separated a new RES operating segment, assigning thereto the data of the subsidiaries whose

operations are related to the production of electricity from renewable sources, i.e. wind and hydro. Q1 2019 data has been brought to

comparability. Generation segment’s Q1 2019 EBITDA was PLN 387 million

*

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Supply Segment

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a

a

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3 9114 231

165 182155 1710

1 000

2 000

3 000

4 000

5 000

Q1 2019 Q1 2020

Sales revenue EBITDA EBIT

155 171

10 12

139

-79 -21 -22165 182

050

100150200250300350

Q1 2019 Electricityprice and volumen

Property rightsprice

Property rightsobligation

Other Q1 2020

Supply Segment – Q1 2020

1,11

1,30

2,62

2,50

1,46

1,53

2,71

2,69

0,95

0,91

Q1 2020

Q1 2019

0 2 4 6 8

Group A Group B Group C2+C1+R+D Group G Other

EBITDA change [PLN m]

Retail electricity supply [TWh]

8,85

8,92

Financial data [PLN m]

Increase of purchase prices and the obligation to retire PMOZE - Variable costs not fully covered by the ERO tariff -

Higher margin on electricity repurchase (buyback)

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EBIT Depreciation and impairment charges

√

A

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Mining Segment

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a

a

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Mining Segment – Q1 2020EBITDA change [PLN m] Financial data [PLN m]

1,26 1,180,970,71

0,230,18

1,20

0,89

0,0

0,5

1,0

1,5

2,0

Q1 2019 Q1 2020

Commercial coal production volume vs sales per product [Mg m]

Commercial coal production Coal dust sales Other product sales

* Total costs excluding depreciation, impairment charges, costs not directly related to coal production and costs that do not have a permanent impact on the company’s cash flow

Lower volume of coal sold

13 PLN/Mg higher unit mining cash cost* (up from 211PLN/Mg to 224 PLN/Mg) -

-

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292236

-44 -36

-96 -84

119

55

-100

0

100

200

300

Q1 2019 Q1 2020

Sales revenue EBITDA EBIT CAPEX

-44 -3619 62

-64-9-100

-80

-60

-40

-20

0

Q1 2019 Sold coal priceeffect

Sold coal volumeeffect

Direct variablecost effect

Other Q1 2020

√ Substantial increase of coal production as compared to Q3 and Q4 2019

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Debt and financing

Debt structureby interest rate

[PLN m]

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TAURON Group’s nominal debt maturity as of March 31, 2020 [PLN m]

187 336

5275

2811111 800

300

2561

270935 850

500 100 100865

0

1 000

2 000

3 000

4 000

5 000

6 000

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034

Bonds Credits and loans

*

22 36

129

3622 36

242

0

50

100

150

200

250

300

Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021

6 543 45,2%

7 916 54,7%

12 0,1%

TAURON Group’s nominal debt structure as of 31.03.2020

[PLN m]

Bonds Loans Loans from NFOŚiGW / WFOŚiGW

14 471

1 580100%

Amounts of financing available to TAURON Group as of 31.03.2020

[PLN m]

Bank loan

1 580 **

* Taking into account the maximum maturity of funds available as part of the bank loan, i.e. until 2022** The amount includes the availability of the Intesa and China Construction Bank loan after the standard suspending conditions have been met (the date of meeting the conditions is dependent on

the date the funds are used). Beside the above indicated available financings, TAURON Group is also using overdraft facilities with the maximum available limits of PLN 300m and EUR 45m

Interest rate

14 471

Collateralfloating rateDebt amount

Floating: 8 638

Fixed: 5 833 None: 4 698

IRS: 3 940

Weighted average maturity of debt as of March 31,2020 is 81 months (assuming the bank loan continuesto be drawn until 2022)

EUR denominated debt (eurobond, NSV bond and EIBbond issues) represents 27% of the total debt

Net debt/EBITDA as of March 31, 2020 = 3.27x

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CAPEX – work progress on the key projects

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Investment project Capacity (MWe)

Capacity (MWt)

Work progress(percentage)

Completion date

Construction of the generating unit in Jaworzno 910 - 98 2020

Construction of the CCGT unit at Stalowa Wola Combined Heat and Power Plant 450 240 89 2020

Implementing heat production at the 460 MW ŁagiszaPower Plant – modernization of the turbine, construction of the heating station, as well as the peaking and back-up (auxiliary) boilers

- 150+144 95 2020

Adaptation of TAURON Wytwarzanie’s generating units to the BAT conclusions - - 39 2021

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CAPEX – by segments

Capital expenditures by segments* [PLN m]

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22 39119 55

235 361

351

485

Q1 2019 Q1 2020Distribution Generation Mining Other segments

29% 940

727

* Expenditures do not include equity investments (in accordance with the presentation in the financial statements). Expenditures, excluding financial costs, reached: PLN 690m in Q1 2019 and PLN 881m in Q1 2020.

Key investment projects implemented in Q1 2020:

Distribution:- Grid assets upgrades (refurbishments) and replacements (PLN 231m)- Installing new connections (PLN 226m)

Generation:- Construction of the 910 MW unit in Jaworzno (PLN 219m) - Adaptation of the generating units to BAT (PLN 33m)- Replacement and refurbishment related outlays as well as overhaul

components (PLN 29m)- Implementing heat production at the 460 MW unit at Łagisza Power

Plant (PLN 6m) - Restoration of the demineralized water treatment station (PLN 3m)- New facility connections (PLN 7m)- District heating networks’ maintenance and expansion (PLN 3m)

Mining:- Brzeszcze Coal Mine’s CAPEX program (PLN 7m) - Construction of the Grzegorz shaft at Sobieski Coal Mine (PLN 4m) - Construction of the 800 m level at Janina Coal Mine (PLN 19m)- Production preparation (PLN 21m)

Other segments:- Deployment of the broadband internet as part of the POPC III Program

(PLN 9 million)

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2020 outlook

SegmentEBITDA 2020

outlook versus 2019 Key factors

Distribution decrease Lower volume of electricity delivered year on year – a consequence of reduced consumption of electricity by

the consumers (COVID-19) Increase of RAB from PLN 17.5 billion to PLN 18.3 billion in 2020 Lower WACC year on year (5.5 percent vs 6.0 percent in 2019) resulting in the lower return on capital

RES increase Significantly higher total volume of electricity production from RES – a consequence of the acquisition of wind

farms with the capacity of 180 MW Better wind conditions, worse hydrological conditions Lower electricity sales prices – a consequence of the market situation

Generation decrease Lower volume of electricity production – a consequence of the market situation (high electricity imports,

COVID-19, decline of wholesale electricity prices) and the BAT related upgrades Lack of margin generated on the production of the 910 MW unit in Jaworzno Lower unit margin on electricity sales

Supply increase

Lower volume of electricity supplied – a consequence of reduced consumption of electricity by the consumers (COVID-19 and weather conditions)

Variable costs not fully covered by the ERO tariff Generation of a margin on the repurchasing (buybacks) of electricity contracted for sale on the futures market

in 2020 for the 910 MW unit in Jaworzno Risk of an increase in the write-offs related to overdue accounts receivable

Mining increase Commercial coal production volume dependent on the demand for such commodity Lower demand for coal due to the market situation (COVID-19 and weather conditions) Continuation of measures aimed at improving efficiency

CAPEX and debt

The level of capital expenditures will be adjusted depending the Group’s financial position (in particular, with respect to the value of the net debt to EBITDA ratio) on an ongoing basis

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Contact details

Investor Relations Team

Marcin Lauer marcin.lauer@tauron.pltel. + 48 32 774 27 06

Paweł Gaworzyńskipawel.gaworzynski@tauron.pltel. + 48 32 774 25 34

Mirosław Szczygielskimiroslaw.szczygielski@tauron.pltel. + 48 32 774 25 38

Katarzyna Heinzkatarzyna.heinz@tauron.pltel. + 48 516 111 038

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Legal disclaimer

This presentation serves for information purposes only and should not be treated as investment-related advice.

This presentation has been prepared by TAURON Polska Energia S.A. (“Company”).Neither the Company nor any of its subsidiaries shall be held accountable for any damage resulting from the use of this presentation or a part thereof, or itscontents or in any other manner in connection with this presentation.

The recipients of this presentation shall bear exclusive responsibility for their own analyses and market assessment as well as evaluation of the Company’smarket position and its potential results in the future based on information contained in herein.

To the extent this presentation contains forward-looking statements related to the future, in particular such terms as ”designed”, ”planned”, ”anticipated”, orother similar expressions (including their negation), they shall be connected with the known and unknown risks, uncertainty and other factors which mightresult in actual results, financial situation, actions and achievements being materially different from any future results, actions or achievements expressed insuch forward-looking statements.

Neither the Company, nor any of its subsidiaries shall be obligated to provide the recipients of this presentation with any additional information or update thispresentation.

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Thank you for your attention

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Analysts covering TAURON

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Institution Analyst

Dom Maklerski mBanku* Kamil Kliszcz

Societe Generale Bartłomiej Kubicki

Dom Maklerski Santander Paweł Puchalski

Dom Maklerski PKO BP Andrzej Rembelski

Dom Maklerski Banku Handlowego Piotr Dzięciołowski

Ipopema Robert Maj

Erste Group Tomasz Duda

Institution Analyst

Raiffeisen Centrobank Teresa Schinwald

WOOD & Company Ondrej Slama

Dom Maklerski BOŚ Jakub Viscardi

Exane BNP Paribas Michael Harleaux

Pekao Investment Banking Maksymilian Piotrowski

Beskidzki Dom Maklerski Krystian Brymora

Trigon Dom Maklerski Michał Kozak

* issuing of recommendations has been suspended

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Electricity market price trends

Electricity

Platforms: TGE, TFS2019 2020

(prices until May 5, 2020, and estimation) 2020/2019

Price (PLN/MWh) Volume (GWh) Price (PLN/MWh) Volume (GWh) Price % Volume %

Forward BASE (Y+Q+M)

Forward PEAK (Y+Q+M)

Forward (weighted average)

SPOT (TGE)

Weighted average total

Property rights (PLN/MWh)

Certificate type Market prices (Q1 2020 weighted

average)

Substitution fee and obligation for:

2019 2020

OZE (PMOZE_A) 147.76 129.78 (18.5%) 165.24 (19.5%)

RES from biogas plants (PMOZE_BIO) 300.08 300.03 (0.5%) 300.03 (0.5%)

CO2 emission allowances (EUR/t)

CO2 market analysts survey*(updated in March 2020)

2020 average

2021 average

2022 average

2020 average price forecast by TAURON

* Sources: Point Carbon, BNEF, Consus, GDF SUEZ Trading, HSE, Mkonline, Societe Generale, TAURON

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2019 BASE contract prices

Average price

[PLN/MWh]Volume [GWh]

Total 237.44 133 170

includingTGE 238.36 129 674

non-TGE 203.20 3 495

Average electricity price that takes into account 2019 one year BASE and PEAK contracts: 244.92 PLN/MWh, total 2019 BASE and PEAK contracts volume: 143 508 GWh

237,44

0

200

400

600

800

1 000

1 200

1 400

150

170

190

210

230

250

270

290

310

330GWhPLN/MWh BASE Y-19

Wolumen obrotu Notowania Średnia

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2020 BASE contract prices

Average price

[PLN/MWh]Volume [GWh]

Total 265.42 134 887

includingTGE 265.44 134 852

non-TGE 208.19 35

Average electricity price that takes into account 2020 one year BASE and PEAK contracts: 271.88 PLN/MWh, total 2020 BASE and PEAK contracts volume: 151 518 GWh

265,42

0

200

400

600

800

1 000

1 200

1 400

150

170

190

210

230

250

270

290

310

330GWhPLN/MWh BASE Y-20

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2021 BASE contract prices

Average price

[PLN/MWh]Volume [GWh]

Total 248.27 51 702

includingTGE 248.27 51 702

non-TGE 0 0

Average electricity price that takes into account 2021 one year BASE and PEAK contracts: 253.28 PLN/MWh, total 2021 BASE and PEAK contracts volume: 57 542 GWh

248,27

0

200

400

600

800

1 000

1 200

1 400

150

170

190

210

230

250

270

290

310

330GWhPLN/MWh BASE Y-21

Wolumen obrotu Notowania Średnia

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2022 BASE contract prices

Average price

[PLN/MWh]Volume [GWh]

Total 250.75 8 042

includingTGE 250.75 8 042

non-TGE 0 0

Average electricity price that takes into account 2022 one year BASE and PEAK contracts: 255.57 PLN/MWh, total 2022 BASE and PEAK contracts volume: 9 036 GWh

250,75

0

200

400

600

800

1 000

1 200

1 400

150

170

190

210

230

250

270

290

310GWhPLN/MWh BASE Y-22

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