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PGE Key numbers
2010
key achievements
Implementation of the investment programme in 2010
PLN
20,48
bn
Consolidated revenues
of PGE Capital Group
PLN
6,83
bn
Consolidated EBITDA
of PGE Capital Group
PLN
3,63
bn
Consolidated net profit
of PGE Capital Group
PLN
3,01
bn
Net profit attributable to
shareholders of the parent
company
0,8
%
Increase in EBITDA without
compensations for LTC
(year on year)
PLN
5,32
bn
Total capital expenditures
in PGE Capital Group
PLN
1,05
bn
Capital expenditures incurred
by PGE Capital Group
in distribution segment
PLN
3,82
bn
Capital expenditures
incurred by PGE Capital
Group in mining and
conventional generation
segment
Electricity generation in PGE Capital Group (by source)
Description TWh %
Total power generation 52.73 100
Lignite-fired power plants 35.31 67.0
Coal-fired power plants 12.94 24.6
Coal-fired CHP plants 1.38 2.6
Gas-fired CHP plants 1.92 3.6
Pumped storage power plants 0.53 1.0
Hydroelectric plants 0.59 1.1
Wind power plants 0.06 0.1
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R a po RT R o cz n y 2 01 0Table of contents
Letter from the chairman of the Supervisory Board pGE polska Grupa Energetyczna S.a. ... 2
Letter from the president of the Management Board pGE polska Grupa Energetyczna S.a. ... 4
Mission/Vision ... 6
calendar of events in 2010 ... 8
Basic financial data ... 12
Governing Bodies ... 16
pGE capital Group’s segments of activity ... 20
Market environment ... 30
pGE capital Group’s strategic projects ... 32
corporate Governance ... 42
Social Responsibility ... 44
Selected financial results of pGE capital Group ... 52
Dear Sir / Madame,
For the Supervisory Board, the Management Board and all employees of the pGE capital Group, the year 2010 was a period of intensive work. The Group implemented many organisational changes, carried out the largest consolidation within poland’s power generation sector, and consistently conducted activities related to an increase in its generation capacities. With respect to the financial results, it was a period of stabilisation and the development of potential for growth in the following year. I have the pleasure of chairing the Supervisory Board of pGE polska Grupa Energetyczna S.a., which cooperated with the Manage-ment Board on all key decisions concerning the developManage-ment of the Group, observed and analysed the situation in the company as well as within the whole Group. During the year 2010 the Supervisory Board held 12 meetings during which, among other things, it familiarised itself with the course of the consolidation process in the pGE capital Group and the particular business lines, as well as the process of share conversion carried out within the Group. The Supervisory Board made also a series of decisions concerning the execution of the Group’s investment plans, strategic projects within the conventional power generation area, sponsoring related to the promotion of the pGE brand name, as well as the disposal of non-energy assets.
Within the power generation sector, 2010 was the year of progressing competition in the market, changes related to the imple-mentation of the Government’s “Energy policy for poland until 2030” and the adjustment of poland’s power generation sector to the EU’s climate package.
Letter from the Chairman
of the Supervisory Board
PGE Polska Grupa Energetyczna S.A.
our greatest success was the consolidation of the pGE capital Group. It was implemented successfully because of the employees involvement and the priority status assigned to this project by the Management Board. on completing the formal consolidation process, pGE polska Grupa Energetyczna started to function within the new business model and structures related to it. I would like to extend my thanks to all those who have contributed to this success. I owe my thanks also to the Management Board of pGE polska Grupa Energetyczna S.a. and members of the Supervisory Board.
Within the European Union, we can observe activities aimed at the creation of a common liberalised energy market. Being the largest investor in poland’s energy market and constantly increasing its value by the implementation of its long-term strategy, pGE will be able to compete with the largest entities on the European market, and thus ensure the security of energy supply. I am glad that thanks to constructive cooperation between the Supervisory Board and the Management Board, in 2010 we man-aged to deal successfully with all challenges faced by the company. Thank you very much for your involvement. I believe that our common work will contribute to a further increase in the value of the pGE capital Group in 2011 and the subsequent years. yours respectfully,
Marcin zieliński
Within the financial area, the year 2010 was a period of the continuing high profitability recorded in the previous reporting periods. after excluding the influence of the compensations for the early termination of long-term power purchase agree-ments, our revenues increased by 0.3% year on year and EBITDa by 0.8%. Thanks to this, the EBITDa margin yet again exceeded a level of 30%, which makes us one of the most profitable power companies in Europe. I would like to draw your attention to changes in our balance sheet and improved proportion between profit allocated to the shareholders of the parent company and non-controlling interests. In 2011, due to the buyout of the non-controlling interests in our operating companies carried out at the end of December 2010, this proportion will be even higher, which means an increase in terms of comparative earnings per share. However, our financial results as well as all other achievements and successes in 2010 would not have been possible if it had not been for the hard work of a few dozen thousand employees of the pGE Group. Therefore, first of all, I would like to thank them for their commitment and work for implementation of the Group’s strategy.
as a modern and dynamically developing company, we are not going to slow down in the following year. We are executing investment projects related to the construction of new, and the modernisation of older, generation capacities and distribution grids. according to the schedule, we are gradually moving through the successive stages in poland’s most important power sector investment project, i.e. the construction of the first nuclear power plants. We conduct all our activities always keeping in mind the interests of our shareholders as well as customers. our priority is to ensure a secure and reliable supply of energy. I wish you a pleasant reading of the report, which describes how we pursued this objective in 2010.
yours respectfully,
Tomasz zadroga President of the Management Board PGE Polska Grupa Energetyczna S.A.
Letter from the President
of the Management Board
PGE Polska Grupa Energetyczna S.A.
Dear Sir / Madame,
on behalf of the Management Board od pGE polska Grupa Energetyczna S.a., I am pleased to present you the second common annual Report of the pGE capital Group. The report describes the achievements and selected consolidated financial results of the Group for the year 2010. It’s already been over a year since our Ipo on the Warsaw Stock Exchange, and during this period we have been working intensively on strengthening the Group’s value. We have taken further steps on the way towards the creation of the leading power generation group in this part of Europe, we have been observing and actively participating in changes taking place in the power generation sector in our region.
First and foremost in 2010 was the implementation of the formal and legal consolidation process of our business. Work on the complete integration of the Group had been initiated soon after the establishment of pGE in 2007. It resulted from the neces-sity to eliminate internal competition and ensure the possibilities of cooperation between various companies belonging to the pGE Group within particular specialised business areas. Last year we managed to consolidate about forty companies into four concerns responsible for the particular business lines. The new business model and structures related to it allow for the effective management and proper utilisation of competitive advantages. The consolidation of the pGE Group is the largest undertaking of this type in poland. Thanks to the consolidation process, we have become a market company ready to respond to further challenges in a constantly changing environment.
We are changing and strengthening our position in order to be prepared for the common European energy market, which was the subject of numerous discussions last year. on the one hand, the European Union is witnessing the progressing liberalisa-tion of the gas and energy markets, on the other hand, wide-ranging consolidaliberalisa-tion processes are being conducted. Within the environment of dynamic competition developing simultaneously to the creation of the common energy market, the winners will be only large companies prepared to meet the strict and costly requirements included in the EU’s climate package. another highly important venture, which is yet to see full success, was the conclusion of agreement for the purchase of shares in Energa. Taking advantage of the available legal remedies, we appealed against the decision of the office for competition and consumer protection preventing this transaction. We await a verdict of the court for competition and consumer protection. We believe in the essential power of our arguments. We hope that thanks to this transaction, pGE polska Grupa Energetyczna S.a. will strengthen its position and will be able to compete with the leaders of the energy market in the European Union.
Mission/Vision
PGE’s Mission
PGE’s Mission is to build shareholder value by satisfying its clients’ energy needs.
PGE is operating in an increasingly competitive environment, both domestically and internationally. In order to meet the requirements of competition while ensuring a high level of customer service, it is the company’s priority to focus on customers and their satisfaction.
PGE is a commercial law company and its shares are publicly-traded. That is why building shareholder value is one of the pillars of PGE’s strategy.
PGE’s Vision
PGE’s Vision is to become the leading energy company in Central Europe.
Advantageous p
ositioning in the market (supply i
s at constant level, independently of the growing d
emand). Vertical integration of the Capital G
roup. Consolidated Capital Group with
a new business m
odel, which influences efficient management.
Co
m
pet
i
ti
ve
adva
n
t
ag
e
s
Leader a mong p ow er prod ucers in Po land. Own l ignite r esou rces, c overing ⅔ of the d emand for b asic f uel, ensuring a r elatively l ow c ost b ase. Relati vely young gen erati on as sets in c omp arison w ith c omp etitors.The Group generat
es more power than it supp
lies to its end customers
(“long position”).
Consistent increase of installed capacity.
Calendar
of events
in 2010
January
25–27 January
The companies belonging to the pGE capital Group approved the merger plans prepared within the scope of the pGE cG’s consolidation programme. The development and approval of the plans by the management boards of all companies consti-tuted the beginning of formal and legal actions aimed at the integration and establishment of four companies consolidated in the most important operating segments.
28 January
pGE EJ 1 Sp. z o.o. with the registered office in Warsaw was entered in the records of the national court Register. The new company in pGE’s nuclear programme will deal with the direct preparation of the investment process, conducting location studies and obtaining all the necessary permits needed for the construction of nuclear power plants.
March
22 March
pGE polska Grupa Energetyczna S.a. shares were included in the composition of the WIG20 and the Viennese cEcE indices. pGE’s participation in both prestigious indices is re-lated, among other things, to an opportunity to attract the attention of investment fund managers, analysts as well as individual investors.
30 March
polskie Sieci Elektroenergetyczne operator S.a. and pGE Ele-ktrownia opole S.a. signed an agreement providing for the connection of two new power generation units at the opole power plant to the national electricity power system. Under this agreement, the Transmission System operator undertakes to perform the necessary investments ensuring the evacua-tion of power from the new generaevacua-tion sources.
april
8 April
pGE Elektrownia opole S.a. completed the process of commissioning poland’s first flue gas denitrification plant (Denox plant) installed on its coal-fired power generation unit.
May
5 May
pGE Elektrownia Bełchatów S.a. signed a grant agreement for the project called “The construction of an installation for the capture, transport and geological storage of co2”. a grant of EUR 180 million will be spent on one of the three key com-ponents of the ccS system i.e. the co2capture component. The grant comes from community funds available under the European Economic plan for Recovery (EEpR).
25 May
pGE polska Grupa Energetyczna S.a. signed a naming rights agreement with Biuro Inwestycji Euro Gdańsk 2012 Sp. z o.o. pGE polska Grupa Energetyczna S.a. acquired the rights to the name of the Gdańsk stadium (pGE arena Gdańsk) for the period of five years. It is the largest naming Rights project in poland.
June
1 June
pGE polska Grupa Energetyczna S.a. submitted a preliminary, non-binding bid for the purchase of an 84.19% shareholding in Energa S.a. put up for sale by Ministry of Treasury. This decision is an element of the strategy assuming an increase in the value of pGE capital Group, inter alia, by acquisitions both in poland and abroad.
9 June
The Management Board of pGE polska Grupa Energetyczna S.a. entered into an agreement with the trade unions of the lignite mines – pGE KWB Bełchatów S.a. and pGE KWB Turów S.a. – –under which the Social partner representing the employees
accepted the pGE capital Group consolidation programme presented by the Management Board of pGE polska Grupa Energetyczna S.a.
11 June
pGE polska Grupa Energetyczna S.a. was admitted to the audit of the books of the company Energa S.a. in connection with its planned sale by the Ministry of Treasury.
16 June
pGE polska Grupa Energetyczna S.a. was one of the enti-ties establishing a scientific and industrial consortium called “The carbon Fuel cell”. The organisation’s objective is to increase the efficiency of power generation by developing carbon fuel cell technologies.
18 June
pGE polska Grupa Energetyczna S.a. acquired from Kopalnia Węgla Brunatnego “Konin” S.a. 100% of shares in the company pWE Gubin Sp. z o.o. The company’s objective is the prepara-tion of a development plan for lignite deposits located near
Gubin, in the Lubuskie province. These deposits as well as the Legnica deposits are considered to be of strategic importance for the use of lignite in the polish power generation industry.
21–22 June
pGE polska Grupa Energetyczna S.a. signed an agreement with the Social partner representing the employees of the Retail and Distribution companies. The Social partner approved the pGE cG consolidation programme.
28 June
The Management Board of pGE polska Grupa Energetyczna S.a. approved the document called “The Business Model of pGE capital Group”. This document streamlines business processes and determines the responsibilities of particular segments of activities of pGE cG. The new business model was developed within the activities related to the consolidation programme.
30 June
pGE KWB Bełchatów S.a. was granted a license for the per-formance of exploratory and research work on the złoczew lignite deposits. The złoczew lignite deposits are included as prospective sources of lignite in The concept of the country’s zoning plan until 2033.
July
16 July
The representatives of the Management Board of pGE polska Grupa Energetyczna S.a. entered into an agreement with the trade unions of the power plants, cogeneration plants and heating companies of the conventional power Genera-tion business area. The signing of the document crowned an important stage in the dialogue conducted with the Social partners in connection with the implementation of the pGE capital Group consolidation programme.
a n n U a L R Ep o RT 2 01 0
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20 OctoberpGE polska Grupa Energetyczna S.a. filed an application to the competition and consumer protection office (UoKiK) for a consent to buy from the Ministry of Treasury Minister 84.19% of Energa S.a. shares.
20 October
The Management Boards of pGE polska Grupa Energetyczna S.a. and pGE Electra S.a. adopted a plan for the merger of both companies. Within the pGE capital Group’s consolidation programme and the introduction of a new business model, pGE Electra S.a. was incorporated into pGE polska Grupa Energetyczna S.a. as a strategic business unit.
november
9 November
pGE Górnictwo i Energetyka Konwencjonalna S.a. signed two agreements for the modernisation of six power generation units operated by the Branch Elektrownia Bełchatów. The modernisation work will be performed in the years 2010–2016. The scope of work to be performed will extend their operating lifetime by another twenty-five years.
9 November
pGE polska Grupa Energetyczna S.a. entered into two agreements providing for the establishment of a bond issue programme. The programme’s maximum amount is set at pLn 10 bn.
December
1 December
The first drilling rig at the złoczew lignite deposits. pGE Górnict-wo i Energetyka Konwencjonalna S.a. Branch KWB Bełchatów commenced work related to the examination and exploration of the złoczew lignite deposits.
8 December
The shareholders present at the Extraordinary Sharehold-ers Meeting of pGE S.a. adopted a resolution concerning the merger of pGE polska Grupa Energetyczna S.a. with pGE Electra S.a.
22 December
pGE Energia Jądrowa S.a. signed an agreement concerning the pre-feasibility study for the construction of the first two nuclear power plants.
28 December
pGE polska Grupa Energetyczna S.a. purchased from the State Treasury blocks of shares in the following operating companies: pGE Górnictwo i Energetyka Konwencjonalna S.a., pGE obrót S.a. and pGE Dystrybucja S.a. The transaction concerned minority shareholders in the key companies of the pGE capital Group, as a part of the ownership structure streamlining process.
22 July
The Management Board of pGE polska Grupa Energetyczna S.a. decided to introduce nearly 100 percent of its generated power to power exchange trade, in accordance with the mode specified in article 49a of the Energy Law (power generated in power plants).
august
3 August
at the Extraordinary Shareholders Meeting of pGE S.a., the company’s shareholders adopted a resolution concerning the merger of pGE polska Grupa Energetyczna S.a. (the ac-quiring company) with pGE Górnictwo i Energetyka S.a. and pGE Energia S.a. (the companies Being acquired) within the pGE capital Group’s consolidation programme. The aim of the merger is to create a corporate centre, whose task will be to manage the whole pGE capital Group.
16 August
pGE polska Grupa Energetyczna S.a. submitted a bid for 84.19% of Energa S.a. shares in the next stage of the privatisation of the company.
31 August
Registration of the formal-legal mergers under the consolida-tion programme of the pGE capital Group. Within the new business model, the pGE capital Group will operate with pGE polska Grupa Energetyczna S.a. as the parent company with five subsidiaries responsible for the particular segments.
September
28 September
pGE Elektrownia opole S.a. received two preliminary bids for the construction of power units 5 and 6.
29 September
pGE polska Grupa Energetyczna S.a. and the Ministry of Treas-ury entered into an agreement for the purchase of Energa S.a. shares, constituting 84.19% percent of the company’s share capital. The merged companies – pGE polska Grupa Ener-getyczna S.a. and Energa S.a. – will have a bigger potential for the implementation of investment projects ensuring in a long-term perspective the reliability of energy supply in poland and a diversification of fuel structure.
october
12 October
The Management Board of pGE polska Grupa Energetyczna S.a. received a notification from the Ministry of Treasury Minister informing about the change in the number of votes held by the State Treasury in the company. on 8 october 2010, the State Treasury sold 186 978 000 ordinary shares, constituting 9.99% of the company’s share capital.
18 October
139.7 million merger shares of the c and D series were in-troduced to trading at the Warsaw Stock Exchange. The c and D series shares were issued as a result of the merger of pGE polska Grupa Energetyczna Sa with pGE Górnictwo i Energetyka S.a. with pGE Górnictwo i Energetyka S.a. and pGE Energia S.a.
20 October
pGE Górnictwo i Energetyka Konwencjonalna S.a. announced a tender for the construction of a new power generation unit in the Branch Elektrownia Turów. The new power generation unit is to have the capacity of approx. 460 MW and meet all legal requirements effective in the European Union.
The pGE capital Group’s consolidated EBITDa for 2010, ex-cluding compensation for long-term contracts (LTc), was pLn 6.50 billion as compared to pLn 6.45 billion in the previ-ous year.
Sales revenues, excluding LTc compensations, reached the level of pLn 20.14 billion (pLn 20.09 billion in 2009). net profit (including LTc compensations) attributable to equity holders in the parent company amounted to pLn 3.014 billion in 2010 as compared to pLn 3.37 billion in 2009.
Basic
financial
data
pLn 000s EUR 000s 12 months ended 31.12.2010 12 months ended 31.12.2009 12 months ended 31.12.2010 12 months ended 31.12.2009 Sales revenues 20 476 465 21 623 350 5 113 491 4 981 602 Operating profit/loss 4 185 333 5 344 729 1 045 184 1 231 322Gross profit/loss (before taxation) 4 276 250 5 378 534 1 067 888 1 239 110
Net profit/loss 3 627 087 4 337 223 905 775 999 212
TOTAL INCOME 3 628 924 4 296 508 906 234 989 832
net cash on operating activity 6 610 960 7 298 888 1 650 924 1 681 523 net cash on investment activity - 7 468 274 - 3 628 590 - 1 865 017 - 835957 net cash on financing activity - 4 111 761 1 898 319 - 1 026 811 437 336
Movement in the net balance of cash and cash
equivalents - 4 969 075 5 568 617 - 1 240 904 1 282 902
net profit per share (in pLn/EUR per share) 1.70 2.23 0.42 0.51 Diluted profit per share (in pLn/EUR per share) 1.70 2.23 0.42 0.51
Selected consolidated financial data of the pGE capital Group
The presented financial data for the years 2010 and 2009 have been converted into EUR using the following principles: * ordinary shares as at the end of the reporting period do not include treasury shares acquired by the parent company for redemption.
individual line items of assets and liabilities – according to the average FX rate published by the national Bank of poland as
at 31 December 2010 – 3.9603 pLn/EUR (as at 31 December 2010 – 4.1082 pLn/EUR),
individual line items of the statement of total income and the cash flow statement – using the rate equal to the arithmetic
average of the average rates published by the national Bank of poland as at the last day of each month of the financial period from 1 January 2010 to 31 December 2010 – 4.0044 pLn/EUR (for the period from 1 January 2009 to 31 December 2009 – 4.3406 pLn/EUR).
pLn 000s EUR 000s
Balance as at
31.12.2010 Balance as at 31.12.2009 Balance as at 31.12.2010 Balance as at 31.12.2009
Non-current assets 44 137 422 41 964 446 11 144 969 10 214 801
Current assets 7 328 945 12 477 640 1 850 603 3 037 252
Group’s assets classified
as for sale 7 572 5 712 1 912 1 390 TOTAL ASSETS 51 473 939 54 447 798 12 997 485 13 253 444 Equity 37 682 773 38 849 752 9 515 131 9 456 636 Share capital 18 697 837 17 300 900 4 721 318 4 211 309 non-current liabilities 7 199 809 9 762 322 1 817 996 2 376 302 current liabilities 6 591 357 5 835 724 1 664 358 1 420 506 Weighted average number of shares 1 776 646 943 1 513 947 249 1 776 646 943 1 513 947 249
Number of shares at the end of the
reporting period* 1 869 760 829 1 730 090 000 1 869 760 829 1 730 090 000
Book value per share
(in pLn/EUR per share) 19.83 18.02 5.01 4.39
Diluted value per share
(in pLn/EUR per share) 19.83 18.02 5.01 4.39
During the course of the year there occurred a considerable increase in the results of the Distribution segment resulting from a higher volume of distributed electricity (by about 0.6 TWh), a rising return on capital included in the tariff, and changes in the accounting for grid connection fees. The seg-ment of Renewable power Generation also recorded a growth thanks to higher volumes of electricity generated in water power plants and as a result higher revenues from so-called green certificates.
Basi
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at
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a n n U a L R Ep o RT 2 01 0The results of the conventional power Generation segment reflect the negative influence of a lower volume of sold elec-tricity and a higher level of costs at relatively stable energy prices during the course of the year. These negative factors were compensated for by the release of a property tax provi-sion. consequently, excluding LTc agreements, the financial results of the conventional power Generation Segment for 2010 were comparable to those for 2009.
Shareholder structure
as at 31 December 2010 the value of the share capital of pGE polska Grupa Energetyczna S.a. amounts to pLn 18 697 837 270 splits into 1 869 783 727 shares with a nominal value of pLn 10 each, including:
Series/
issue of sharesType of preferenceType of sharesnumber according to par valueValue of series/issue contributioncapital
A ordinary not applicable 1 470 576 500 14 705 765 000.00 contribution in kind/ cash B ordinary not applicable 259 513 500 2 595 135 000.00 cash c ordinary not applicable 73 241 482 732 414 820.00 merger with pGE GiE S.a. D ordinary not applicable 66 452 245 664 522 450.00 pGE Energia S.a.merger with
Total 1 869 783 727 18 697 837 270.00
* Shares purchased for redemption
EBITDa margin
In 2010 EBITDa margin maintained the strong level of 33.4%, and excluding LTc compensations – 32.3%.
The segments of Wholesale Trade and Retail Sales recorded slightly weaker results due to lower margins, smaller wholesale electricity volumes and higher costs related to the obligatory redemption of certificates of origin.
pGE polska Grupa Energetyczna S.a. (treasury shares)*
0%
State Treasury69.29%
1 295 637 952
other shareholders30.71%
574 122 877
22 898
EBITDa margin33.4%
32.3%
36.9%
32.1%
2010
2009
In 2010 EBITDa margin EBITDa margin excluding LTc compensations EBITDa margin excluding LTc compensationsSupervisory Board
The Supervisory Board of PGE Polska Grupa Energetyczna S.A. is composed of seven to nine members appointed and dis-missed by the Shareholders Meeting. The Supervisory Board oversees PGE Polska Grupa Energetyczna S.A.’s operations in all areas of its activity on a continuous basis.
Composition of the Supervisory Board as at 31 March 2011
Jacek Barylski – Member of the Supervisory Board
Legal advisor Graduated from the Law and administration Faculty of the University of Łódź and postgraduate Studies in Finance at the Warsaw School of Economics. currently, the director of the Guarantees and Sureties Department at the Finance Ministry. He is also the chairman of the Steering committee on Execution of the Government’s Entrepreneur-ship Support programme using the sureties and guarantees of Bank Gospodarstwa Krajowego. previously, he served, among others, on the supervisory boards of polski Monopol Loteryjny Sp. z o.o., pKp cargo S.a. and Warszawski Rolno-Spożyw czy Rynek Hurtowy S.a. Since 2003 he has been a Supervisory Board member of pKp S.a.
Małgorzata Dec – Member of the Supervisory Board
Has a phD in economics. Graduated from the Warsaw School of Economics. Since June 2009 she has been employed as head of the privatization processes coordination Sub-Department of the analyses Department at the Ministry of Treasury. Member of the Supervisory Board of Warszawski Rolno-Spożywczy Rynek Hurto wy S.a., the Supervisory Board chairwoman of nafta polska S.a. (2009–2010), and the Supervisory Board chairwoman of RUcH S.a. Since october 2010 member of the Supervisory Board of nordis chłodnie polskie Sp. z o.o. according to her representation, Ms Małgorzata Dec is af-filiated with a shareholder holding no fewer than 5% of the total number of shares at the shareholder meeting, i.e. the State Treasury by employment with the Ministry of Treasury.
Czesław Grzesiak – Member of the Supervisory Board
Mr Grzesiak graduated from the University of poznań, Faculty of Law and administration, majoring in law. He completed a programme for administrative receivers. He is a member of the Lewiatan polish confederation of private Employers and a member of the polish organization of commerce and Distribution. Since 1995 a Management Board member, and since 2004 Vice president of the Management Board of TESco polska Sp. z o.o. – his present main place of employment. Mr Grzesiak is also president of the Management Board for the following companies: SaVIa – Karpaty Sp. z o.o., Genesis Sp. z o.o., promesa Sp. z o.o. and member of the Management Board at Jasper Sp. z o.o.
Grzegorz Krystek – Member of the Supervisory Board
He graduated from the Warsaw University of Technology, the Faculty of Electrical Engineering, majoring in power plant operation. In 2005 Mr Krystek completed a postgraduate MBa programme conducted at the Warsaw University of Technology jointly by the London Business School, HEc School of Manage-ment in paris and the norwegian School of Economics and Business administration in Bergen. He is a co-author of the national Emission Reduction plan and an expert in the council of European Energy Regulators (cEER). Since 2004 Vice presi-dent of the Management Board of Hasbrouck Sp. z o.o., in the years 2005–2006 commercial Director at Vertis Environmental Finance poland Sp. z o.o. and in the years 2001–2003 Director for power Generation, Director for Strategy and Development at Elektrim S.a. Membership in supervisory boards: zE paK S.a., Elektrim Megadex S.a., Elektrim-Volt S.a., EM yachts Sp. z o.o. His present main place of employment is a company under the business name partner.
Katarzyna Prus – Secretary of the Supervisory Board
Legal advisor. Graduated from the Law and administration Faculty of Warsaw University and the European Integration Studies in the national School of public administration in Warsaw. Since 1996 employed by the Ministry of Treasury; currently, she is employed as Head of the Legal Representation Department. Since 2001 member of examination committees
for testing candidates to become supervisory board members in companies with a State Treasury shareholding. She was also the Supervisory Board chairwoman, among others, of zespół Elektrociepłowni poznańskich S.a., przedsiębiorstwo Spedycji Międzynarodowej c. Hartwig – Katowice S.a., and also a Super-visory Board member of południowy Koncern Energetyczny S.a. Since october 2005 Supervisory Board member and then chairwoman of Fabryka Elementów złącznych S.a. according to her representation, Ms Katarzyna prus is affiliated with a shareholder holding no fewer than 5% of the total number of shares at the shareholder meeting, i.e. the State Treasury by employment with the Ministry of Treasury.
Zbigniew Szmuniewski – Member of the Supervisory Board
Graduated from the Law and administration Faculty of the Ma-ria curie-Skłodowska University in Lublin. He holds a diploma from the International School of commerce and a Diploma as a Ukrainian Stock Exchange Broker. For thirteen years he was a director in the provincial office. For two years he was the president of the Management Board of Bank BDK Ukraina Ltd. and the chief specialist at pKo S.a. In the years 1995–1998 and 2004–2007 he was commercial advisor for the polish Embassy in Kiev. also, in the years 2003–2004 he was the Supervisory Board chairman of UnIMoR S.a.
Krzysztof Żuk – Member of the Supervisory Board
He holds a phD in economics, he graduated from the Econom-ics Faculty at the Maria curie-Skłodowska University in Lublin. an author and co-author of over 70 scientific publications, including 8 monographs. Since December 2010 he has been the Mayor of the city of Lublin – his present main place of employment. In the years 1992–1996 he was director of the Representative office of the Ministry of ownership Transfor-mations in Lublin. In the years 1996–2006 he was director of the Representative office of the Ministry of Treasury in Lublin. In the years 2006–2007 he was Deputy Mayor of the city of Lublin, and in the years 2007–2009 – Undersecretary of State at the Ministry of Treasury. He was a supervisory board member of companies with a State Treasury shareholding. currently, he is a Supervisory Board member of polskie LnG S.a.
Governing Bodies
Marcin Zieliński – Chairman of the Supervisory Board
Graduated from the Law and administration Faculty of Warsaw University and postgraduate Studies in Finance at the Warsaw School of Economics. In the years 2003–2004 he completed legislative training. Since February 2008 he has been the director of the 3rd corporate Governance and privatization Department at the Ministry of Treasury. currently, he is the director of the privatization Department at the State Treas-ury Ministry. From May 2009 to February 2010 he was the Supervisory Board Deputy chairman of pHz Baltona S.a. He also was a Supervisory Board member in Stocznia Gdynia S.a. and Elektrownia Wodna Żarnowiec S.a. according to his rep-resentation, Mr Marcin zieliński is affiliated with a shareholder holding no fewer than 5% of the total number of shares at the shareholder meeting, i.e. the State Treasury by employment with the Ministry of Treasury.
Maciej Bałtowski – Vice-Chairman of the Supervisory Board
professor ordinary at the Economics Faculty at the Maria curie-Skłodowska University in Lublin. coauthored several draft amendments to the act on commercialization and pri-vatization. previously, supervisory board chairman of, among others, Wschodni Bank cukrownictwa S.a., Lubelska Fabryka Wag FaWaG S.a. and Miejskie przed siębiorstwo Wodociągów i Kanalizacji Sp. z o.o. In the years 1999–2007 he was a partner in centrum Kształcenia Menedżerów przemysłowych Sp. z o.o.
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a n n U a L R Ep o RT 2 01 0Management Board
The Management Board of PGE Polska Grupa Energetyczna S.A. consists of from two to seven members, including President. The remaining members fulfil the functions of Vice Presidents. Members of the Management Board are appointed for a joint three-year term of office.
Composition of the Supervisory Board as at 31 March 2011
Marek Trawiński – Vice President of the Management Board for Operating Affairs – dismissed on 16 March 2011
appointed as Vice president of the Management Board on 28 July 2008. Graduated with honours from the Electric Engi-neering Faculty of the Wrocław University of Technology and MBa studies at the European University in Montreux. also completed several post-graduate studies including a course for English translators in science and technology at the University of Wrocław, a course on management finance and account-ing at Wrocław college of Management and Finance, and a course on business communication and pR at the Warsaw School of Economics. Former president of the Management Boards of international and domestic companies, such as: aBB Instal Sp. z o.o., alstom T&D protection & control S.a., Energetyka Sp. z o.o., MpWiK Sp. z o.o. He was a supervisory board member and supervisory board chairman of several commercial law companies.
Wojciech Topolnicki – Vice President of the Manage-ment Board for Finance – dismissed on 5 January 2011
appointed as Vice president of the Management Board on 1 July 2008. Graduated from the Management and Econom-ics Faculty of the Gdańsk University of Technology and Ecole Superieure de commerce in Rouen (MBa studies). Has ex-tensive professional experience in finance management. He worked, among others, as deputy financial director and fi-nancial controller in EaDS pzL Warszawa-okęcie S.a. and as Senior Manager in the audit and Economic consulting Department in arthur andersen Sp. z o.o. He also conducted his own business activity in corporate finance. The companies for which he worked included, among others: MicroStrategy poland Sp. z o.o. (as financial director), GreenVenture S.a. and polish Energy partners S.a.
Piotr Szymanek – Vice President of the Management Board for Corporate Affairs
appointed as Vice president of the Management Board on 21 July 2008. Graduated from the Law and administration Faculty of the Warsaw University and the programme entitled Enterprise Management on the European Union Market at the Warsaw School of Economics. Legal advisor. He also ran his own Legal advisor’s office which catered to important entities in the insurance and financial sector. He acquired professional experience in legal affairs in energy utilities by providing legal assistance and in legislation by working for Stołeczne przedsiębiorstwo Energetyki cieplnej S.a. and for polskie Sieci Elektro energetyczne S.a. He was also a manager in various financial institutions, such as: powszechny zakład Ubezpieczeń S.a., Bank Współpracy Europejskiej S.a., Bank pekao S.a. and polski Bank Inwestycyjny S.a.
Wojciech Ostrowski – Vice President of the Management Board for Finance
appointed as Vice president of the Management Board for Finan ce on 17 March 2011. Graduated from the Warsaw School of Economics in Warsaw, majoring in the following fields: Busi-ness Value Management and The oil Sector Management, and production Economics. previously he was Vice president of the Management Board and financial director at Unipetrol S.a., with a registered office in prague. He was a member of the Management Board in Share Service center Sp. z o.o., Unipetrol Rpa Sp. z o.o. and czeska Rafinerska S.a.
The other members of the Management Board of pGE polska Grupa Energetyczna S.a.
in the year 2010
Tomasz Zadroga – President of the Management Board
appointed as president of the Management Board on 1 august 2008. Graduated from the International Economic and politi-cal Relations programme at the Economic and Social Faculty of the University of Łódź and The association of chartered certified accountants (acca). He has broad professional experience in corporate restructuring, strategic planning and finance management. His career to-date included serving on the management boards of commercial companies in a variety of industries, e.g. Inter cars, Ic Development & Finance, and adidas polska. He was also the financial director of papyrus-Stora Enso polska and aBB polska.
Marek Szostek – Vice President of the Management Board for Development
appointed to the position of Vice president of the Manage-ment Board as of 3 august 2009. Graduate of Economics and organisation of Transport at the Faculty of Domestic Trade of central School of planning and Statistics in Warsaw (presently, the Warsaw School of Economics). In the course of his profes-sional career he was responsible for managing the key opera-tional areas of commercial and production companies such as aSIcS polska Sp. z o.o., adidas poland Sp. z o.o., nike poland Sp. z o.o., Makton Sp. z o.o., Eurosmak Sp. z o.o., Fedrus S.a. In these companies he held management functions as Vice president of the Management Board, general director, sales and market development director and commercial direc-tor. He has also worked for the Treasury chamber in Warsaw.
Paweł Skowroński – Vice President of the Management Board for Operating Affairs
appointed as Vice president of the Management Board for operating affairs on 17 March 2011. He graduated from the Warsaw University of Technology, the Faculty of power and aeronautical Engineering, specializing in power generation systems, and obtained the title of phD in technical science,
as well as from Institut d’administration des En terprises aix-en-provence Marseille (MBa). previously, he was the Director for Strategy and Development in Vattenfall poland Sp. z o.o., the president of the Management Board of BoT Górnictwo i Energetyka S.a. and the president of the Management Board in Stołeczne przedsiębiorstwo Energetyki cieplnej S.a.
PGE Capital
Group’s
segments of
activity
Branches Branches**Branches* Special purpose
Vehicles Branches
pGE capital Group
is the largest producer
and provider of electricity
in poland and one of the
biggest in central
and Eastern Europe.
one of the essential strengths of the pGE capital Group is its vertical integration and presence in nearly the whole value chain in the power generation business (with the exception of electricity transmission, which is the responsibility of the company pSE operator S.a. – an independent transmission system operator). The activities of the pGE capital Group are divided into the following segments:
Mining and conventional power Generation,
Renewable power Generation,
nuclear power Generation, Distribution, Wholesale Trade, Retail Sales.
The objective of the consolidation programme is the restruc-turing of pGE capital Group’s structure and processes resulting in the effective use of resources and cooperation among the particular business segments. on 28 June 2010 the Manage-ment Board of pGE polska Grupa Energetyczna S.a. adopted “a Business Model of the pGE capital Group” determining the functions of the particular operating segments as well as the division of tasks and responsibilities along the whole value chain of the pGE capital Group. The so-far independ-ent companies were consolidated into four subsidiaries of pGE polska Grupa Ener getyczna S.a.
The integration of operations within the particular business segments is the responsibility of the consolidated compa-nies and pGE Energia Jądrowa S.a., while the integration of operations along the whole value chain and the segment of Wholesale are managed by pGE polska Grupa Energetyczna S.a.
* The process of the merger of pGE Elektrownia opole S.a. with pGE Górnictwo i Energetyka Konwencjonalna S.a. is pending. currently, 85% of shares in pGE Elektrownia opole S.a. is held by pGE polska Grupa Energetyczna S.a. ** The process of the consolidation of Elektrownia Wiatrowa Kamieńsk with pGE Energia odnawialna S.a. is in progress.
pGE polska Grupa Energetyczna S.a. corporate centre + Wholesale Trade
pGE Górnictwo i Energetyka Konwencjonalna S.a. pGE Energia odnawialna S.a. pGE Energia
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a n n U a L R Ep o RT 2 01 0 Wholesale Trade Retail Sales Lignite MiningGeneration of Electricity and Heat
provision of Regulatory System Services
Distribution of Electricity and Heat
Core-Activities Processes:
Strategic Management Business Supervisionplanning and controlling
organisation and Shareholder Supervision Regulatory Management Investor Relations
Management Processes:
Investment ManagementResearch and Development
Financial Management accounting and Taxes
IT Management
purchases
Human Resources Management Internal audit Risk Management Marketing and pR administration
Supporting Processes:
pGE polska Grupa Energetyczna S.a. – corporate centre
the determination of objectives for the central Headquarters
of the consolidated companies and the coordination of work on the implementation of the pGE capital Group’s strategy in the particular business segments,
the development and updating of the business model,
the integration of the activities of the subsidiaries within
the scope of the value chain,
supervision over the activities of the particular business
segments,
the determination of a transfer prices policy,
the standardisation and harmonisation of solutions
effective in the pGE capital Group. pGE polska Grupa Energetyczna S.a. – The corporate centre
is responsible for the overall management of the pGE capital Group, including the formulation of strategy and supervision over the activities of pGE cG.
The corporate centre’s major tasks will include the following:
the building of the pGE capital Group’s value for
shareholders,
the development and updating of the pGE capital Group’s
strategy,
Segment: Wholesale Trade
pGE Electra S.a., previously responsible for wholesale trade, was merged with pGE polska Grupa Energetyczna S.a. on 8 December 2010 the shareholders present at the Extraor-dinary Shareholders Meeting of pGE adopted a resolution concerning the merger of pGE polska Grupa Energe tyczna S.a. (the acquiring company) with pGE Electra S.a. (the company Being acquired) within the scope of the pGE capital Group’s consolidation programme. In consequence of the merger, the company Being acquired was dissolved without any liquidation proceedings. The merger was carried out by way of transferring all assets of pGE Electra S.a. to pGE polska Grupa Energetyczna S.a. (merger by acquisition) without any increase in the share capital of pGE polska Gru pa Energetyczna S.a. and without any exchange of shares in pGE Electra S.a. for shares in pGE polska Grupa Energetyczna S.a.
pGE Electra S.a. dealt with wholesale trade in electricity and related products (e.g. property rights, emission allowances) within the pGE capital Group. It was also a company entering into transactions with entities from outside the pGE capital Group, e.g. it was responsible for the purchase of coal.
at the time of the registration of the mergers all competences of pGE Electra S.a. were taken over by pGE polska Grupa Ener-getyczna S.a. on foreign power exchanges, pGE polska Grupa Energetyczna S.a. is represented by Electra Deutschland GmbH. In 2010 total sales revenues in the segment of Wholesale Trade equalled pLn 11 805.8 million, or a 7% drop in comparison to the results for 2009.
The segment’s EBIT in 2010 was pLn 173.1 million, and EBITDa – – pLn 202.4 million. In the previous year EBIT had reached
a level of pLn 439.4 million, and EBITDa – pLn 465.0 million. a lower value of 2010 EBIT in the segment of Wholesale Trade as compared to that of 2009 resulted mainly from lower mar-gins achieved on electricity sales on the wholesale market. Furthermore, in 2010 the wholesale trade companies’ sales volume was by approximately 4.2 TWh lower than that in 2009.
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a n n U a L R Ep o RT 2 01 0Cogeneration plants belonging to the PGE Capital Group
pGE GiEK S.a. Branch Elektrociepłownia Lublin Wrotków,
pGE GiEK S.a. Branch Elektrociepłownia Kielce,
pGE GiEK S.a. Branch Elektrociepłownia Rzeszów,
pGE GiEK S.a. Branch Elektrociepłownia Gorzów,
pGE GiEK S.a. Branch zespół Elektrociepłowni Bydgoszcz,
pGE GiEK S.a. Branch Elektrociepłownia zgierz.
In 2010 gross sales revenues together with flows among the segments within the segment of Mining and conventional power Generation equalled pLn 12 287.5 million, which was an 8% drop in comparison to the 2009 results.
The segment’s EBIT for 2010 was pLn 2 981.7 million, and EBITDa – pLn 4 476.5 million. In the previous year EBIT had reached a level of pLn 4 026.3 million, and EBITDa – – pLn 5 550.2 million. a fall in EBIT resulted mainly from
a pLn 1 198.1 million drop in revenues from LTc compensa-tions. a lower level of revenues from LTc compensations was partly compensated by an increase in other operating revenues related mainly to the release of balance sheet provisions.
Trade on power exchanges
In 2010 pGE polska Grupa Energetyczna S.a. and pGE Electra S.a. were involved in trade in electricity generated by the com-panies belonging to the pGE capital Group and sold on the domestic or foreign markets or to retail sales companies within the Group. Under the provisions of the Energy Law, electricity sales transactions were concluded directly first of all on the polish power Exchange.
The organisation of electricity wholesale trade within the pGE capital Group underwent necessary modifications with a view to its adjustment to the requirements of the amended Energy Law (article 49a clauses 1 and 2 of the Energy Law), introducing the so-called exchange trade obligation.
Since the effective date of the amended Energy Law all energy produced by pGE cG and covered by the provisions of article 49a clauses 1 and 2, has been sold on power exchanges. Selling its electricity output mostly on power exchanges (with the exception of renewable energy and cogeneration), the pGE capital Group contributes to the development of transparent price indexes in the domestic electricity market. pGE intends to build a transparent and competitive energy market in poland.
Segment: Mining and conventional power Generation
With a 40% market share, the pGE capital Group is a leader in the domestic electricity generation market.
pGE capital Group’s activities within the segment of Mining and conventional power Generation are conducted by the company pGE Górnictwo i Energetyka Konwencjonalna S.a.
PGE Górnictwo i Energetyka Konwencjonalna S.A. (pGE GiEK S.a.)
is focused on the generation of electricity and heat. The company’s tasks include also the assurance of the availability of generation units, the execution of investment projects related to the modernisation of the current and construction of new generation capacities as well as the restructuring of disposable assets.
With its headquarters in Bełchatów, the company’s branches are located in eight provinces. The headquarters functions as the company’s administrative, strategic and decision-making centre.
pGE GiEK S.a. is responsible for the coordination of the activi-ties of its eleven branches, including the following:
Lignite mines belonging to the PGE Capital Group
pGE GiEK S.a. Branch KWB Bełchatów,
pGE GiEK S.a. Branch KWB Turów.
Conventional power plants belonging to the PGE Capital Group
pGE GiEK S.a. Branch Elektrownia Bełchatów,
pGE GiEK S.a. Branch Elektrownia Turów,
pGE GiEK S.a. Branch zespół Elektrowni Dolna odra,
pGE Elektrownia opole S.a. – the process
of consolidation with pGE GiEK S.a is in progress.
Segment: Renewable power Generation
Within the pGE capital Group, investments in the devel-opment of renewable power generation are managed by pGE Energia odnawialna S.a.
PGE Energia Odnawialna S.A. provides system services
sup-porting the security of the national power system as well as generates and supplies electricity of the highest quality generated by means of environment-friendly technologies utilising renewable primary energy sources.
PGE Energia Odnawialna S.A. coordinates the activities of four branches:
pGE Energia odnawialna S.a. Branch czymanowo,
pGE Energia odnawialna S.a. Branch Dychów,
pGE Energia odnawialna S.a. Branch Solina
pGE Energia odnawialna S.a. Branch Międzybrodzie
Bialskie.
The priority of Renewable power Generation segment is the implementation of the renewable energy sources development policy. The company is actively involved in the promotion of renewable energy sources and pro-ecological education.
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a n n U a L R Ep o RT 2 01 0 WATERpGE Energia odnawialna S.a. is responsible for the develop-ment of 29 hydro power plants (out of 36 such facilities oper-ated within the pGE capital Group), locoper-ated on such rivers as the odra, San, Bóbr, Soła and nysa Łużycka. They are:
four pumped storage hydro power plants (including
two plants with natural water inflows),
twenty-five run-of-river power plants.
WIND
Wind power generation is an essential element in the develop-ment strategy of pGE Energia odnawialna S.a.
Elektrownia Wiatrowa Kamieńsk Sp. z o.o. is currently undergo-ing a process of consolidation with pGE Energia odnawialna S.a. it will become the company’s fifth branch. The wind power plant is located on the Kamieńsk Mountain near Bełchatów. It comprises fifteen generation turbines with a combined capacity of 30 MW. It is the first investment project of this type within the pGE capital Group. according to its investment policy, pGE Energia odnawialna S.a. is currently involved in advanced preparatory work for the construction or acquisi-tion of further wind farms all over poland.
The company is also conducting activities related to invest-ments in off-shore wind farms. However, the execution of such investment projects depends on the implementation of necessary legal regulations.
In 2010 gross sales revenues together with flows among the segments within the segment of Renewable power Generation equalled pLn 631.1 million as compared to pLn 547.2 million in 2009.
The segment’s EBIT in 2010 was pLn 154.0 million, and EBITDa – – pLn 280.2 million. In the previous year EBIT had reached
the level of pLn 77.6 million, and EBITDa – pLn 203.0 million. an increase in EBIT in 2010 as compared to that in 2009 re-sulted mainly from a higher level of revenues from the sale of electricity and certificates of origin.
Segment: nuclear power Generation
currently, nuclear power generation offers the best prospects for meeting the rising demand for electricity. Besides economic efficiency and the absence of co2 emissions, it ensures also independence of conventional energy sources.
The Government’s decision to entrust pGE polska Grupa Ener-getyczna S.a. with the mission to develop nuclear power gen-eration in poland was determined by the pGE capital Group’s experience in the execution of large investment programmes as well as its stable economic position and financial potential. The plans of pGE polska Grupa Energetyczna S.a. in the area of nuclear power generation provide for the construction of two nuclear power plants, each with a capacity of 3000 MW. according to the schedule, the first reactor is to be commis-sioned by the end of 2020.
Tasks within the organisational structure of the segment of nuclear power Generation are divided as follows:
PGE Energia Jądrowa S.A. conducts operating activities,
including the management of the segment of nuclear power Generation within the pGE capital Group, executes strategic tasks related to the preparation and construction of nuclear power plants, develops bases for the making of strategic decisions, conducts preliminary location analyses, cooperates with potential business partners and suppli-ers as well as international organisations and institutions,
PGE EJ 1 Sp. z o.o. is responsible for the direct
prepara-tion of an investment process, the conduct of locaprepara-tion studies, and the acquisition of all necessary decisions determining the construction of a nuclear power plant. pGE EJ 1 Sp. z o.o. is also responsible for conducting a pro-cedure for the selection of a technology for the future nuclear power plants.
Furthermore, pGE polska Grupa Energetyczna S.a. is responsi-ble for operations and activities at the strategic level, includ-ing cooperation with the Government and the assurance of financing for the investment project.
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a n n U a L R Ep o RT 2 01 066%
Mining and conventional power Generation
4 476.5
4%
280.2
Renewable power Generation Wholesale Trade3%
202.4
Distribution21%
1 441.2
Retail Sales3%
213.5
other activities3%
206.9
In 2010 the company served over 5.1 million customers,25 000 customers more than in the previous year.
In 2010 gross sales revenues together with flows among the segments within the segment of Retail Sales equalled pLn 12 464.6 million, which was a 1% drop in comparison to the 2009 results.
The segment’s EBIT in 2010 was pLn 204.5 million, and EBITDa – – pLn 213.5 million. In the previous year EBIT had reached the
level of pLn 397.7 million, and EBITDa – pLn 404.7 million. a 49% fall in EBIT in the segment of Retail Sales in 2010 as compared to the results of 2009 was caused mainly by higher costs resulting from the property rights redemption obligation (related to electricity origin certificates).
The influence of the particular segments of activities on EBITDA (PLN million)
Segment: Distribution
The major task of the pGE capital Group in the segment of Distribution is to guarantee a high quality of electricity de-liveries to millions of customers, to ensure access to the grid for new customers, and to reduce grid losses.
Within the pGE capital Group, the distribution of electricity to end users is the responsibility of PGE Dystrybucja S.A., which fulfils the function of the Distribution System operator (DSo). The company’s structure comprises eight branches:
pGE Dystrybucja S.a. Branch Białystok,
pGE Dystrybucja S.a. Branch Lublin,
pGE Dystrybucja S.a. Branch Łódź-Miasto,
pGE Dystrybucja S.a. Branch Łódź-Teren,
pGE Dystrybucja S.a. Branch Rzeszów,
pGE Dystrybucja S.a. Branch Skarżysko-Kamienna,
pGE Dystrybucja S.a. Branch Warszawa,
pGE Dystrybucja S.a. Branch zamość.
The company supplies electricity to over five million custom-ers over an area of 122 400 km2. The combined length of its
distribution lines is 272 239.4 km.
pGE Dystrybucja S.a., is responsible for the following:
the network load in the distribution system,
the operation, maintenance and repairs of the
distribu-tion grid,
the extension of the distribution grid,
cooperation with other power grid system operators
or power distribution companies with a view to ensuring the operating cohesion of various power systems and the coordination of their development.
In 2010 gross sales revenues together with flows among the segments within the segment of Distribution equalled pLn 5 064.9 million as compared to pLn 4 668.7 million in 2009. The segment’s EBIT in 2010 was pLn 566.7 million, and EBITDa – – pLn 1 441.2 million. In the previous year EBIT had reached the
level of pLn 263.2 million, and EBITDa – pLn 1 093.2 million. an increase in EBIT by about 115% resulted mainly from an increase in the volume of sold distribution services related to a 0.6 TWh rise in the volume of distributed electricity, a higher return on capital approved in the tariff, and a rise in revenues from grid connection fees (a change in accounting principles).
Segment: Retail Sales
Within the pGE capital Group, electricity retail sales are the responsibility of PGE Obrót S.A. The company provides its services to over five million customers such as communes, institutions and households.
pGE obrót S.a. is a decision-making entity responsible for the management and integration of the segment of Retail Sales. The company achieves its objectives by the constant improve-ment of the customer service standards, the impleimprove-mentation of state-of-the-art solutions and continuous improvement of the quality of provided services.
The company actively adjusts its offer to the changing needs of its customers and the requirements of the market, and strives to broaden the range of its services on the basis of particular products.
The company’s structure comprises seven branches:
pGE obrót S.a. Branch Białystok,
pGE obrót S.a. Branch Lublin,
pGE obrót S.a. Branch I Łódź,
pGE obrót S.a. Branch II Łódź,
pGE obrót S.a. Branch Skarżysko-Kamienna,
pGE obrót S.a. Branch Warsaw,
The pGE capital Group is the key player in the power gen-eration sector and an important element in poland’s energy security system. It holds the position of the unchallenged leader of the polish power generation market with respect to installed capacity, the volume of generated electricity and the number of end users.
The combination of its own fuel (lignite) resources, power generation facilities and distribution networks, guarantee a safe and reliable power supply to over 5 million customers.
Besides pGE cG, the domestic power generation market com-prises the following major players: Tauron polska Energia S.a., Enea S.a., and Energa S.a., in the area of electricity distribu-tion: RWE polska S.a. and Vattenfall Distribution poland S.a. There are also smaller power plants and cogeneration plants operating within the ownership structures of such european power concerns as EdF, EnBW aG, E.on, GDF Suez, Fortum, Vattenfall and Dalkia.
apart from these, the smallest players on the market com-prise local companies generating and trading in electricity and heat. They are owned mainly by local governments and private entrepreneurs.
PGE Capital Group’s
strategic projects
The strategy of pGE defines 4 major directions of activities, which are to ensure
an increase in the value of the pGE capital Group:
expansion in the domestic and foreign markets,
the building of an integrated company,
the improvement of effectiveness,
the improvement of competitiveness and the regulatory environment.
consolidation – a long-term increase in the value of the pGE capital Group
Mining and conventional power Generation (previously: mining and generation),
Renewable power Generation,
Distribution,
Retail Sales,
as well as the merger of pGE Górnictwo i Energetyka Kon-wencjonalna S.a. and pGE Energia S.a. with pGE polska Grupa Energetyczna S.a.
another stage in the consolidation programme was the acqui-sition of pGE Electra S.a., a company dealing with electricity wholesale trade, by pGE polska Grupa Energetyczna S.a. Within the scope of the consolidation activities, the Group established a Shared Services centre and transferred a part of IT task to this new organisational unit. Employees shares were converted from the operating entities to the level of the mother company.
Furthermore, as part of the reorganisation of the ownership structure, pGE polska Grupa Energetyczna S.a. acquired from the State Treasury three minority shareholdings in the Group’s key companies in which the State Treasury was a shareholder in consequence of the implementation of the share conver-sion process in the power sector, i.e. 69 582 441 (10.69%) shares in pGE Górnictwo i Energetyka Konwencjonalna S.a., 686 389 (13.87%) shares in pGE obrót S.a., and 14 299.180 (1.47%) shares in pGE Dystrybucja S.a.
after the completion of the activities related to the initial public offering, the consolidation of its entities became the pGE capital Group’s top priority. Within the context of the initial public offering and the assumptions presented in the share issue prospectus, the consolidation process is the effect of the pursuit of an increase in the value of the pGE capital Group and the company pGE polska Grupa Energetyczna S.a. The consolidation is to allow the Group to take full advantage of opportunities created by its presence on the stock exchange.
What PGE CG looked like before the Consolidation Programme:
a complicated structure of business and capital relations among the companies belonging to the Group,
a duplication of functions resulting from the lack of a coherent allocation of responsibilities,
unused centralisation opportunities and economies of scale.
The objective of the pGE capital Group’s consolidation pro-gramme was the adjustment of the Group’s ownership and management structure to the activities conducted in its major business segments and the achievement of a situation where in each of the segments there is just one company holding all assets and controlling all operating activities.
as a result of the consolidation programme in 2010 there was a formal and legal merger of the entities in the following business segments:
a consistent implementation of strategy increases the value of the pGE capital Group and strengthens its position in both the domestic and foreign markets.
In 2010 the most important strategic projects implemented in pGE cG included the pGE capital Group’s consolidation programme, the management of non-energy assets, a consistent implementation of the investment programme as well as activities related to the construction of poland’s first nuclear power plant.
