Rom: The company’s strategy determines its development in the short and long term. How do you divide?
Remigiusz Nowakowski: We wanted to outline the direction in which the company has to follow. That’s why we go beyond the horizon of this decade, reaching 2025. The more precise we are talking about plans for 2020.
Sygnalizowaliście to opt out of some projects and divestments appear. How does this translate to the company’s financial situation?
Optimization of capital expenditures is an important element of the strategy. If it were not expenditures in the period 2016-2020 would exceed 20 billion zł. Reduce them by 2.2 billion zł. The projected budget so will reach approx. 18 billion zł. We must at the same time keep the financial discipline as one of the priorities in the first period is to ensure financial stability. Reducing spending by the indicated amount will allow us to not to exceed 2020. Covenant net debt to EBITDA of 3.5 (operating profit plus depreciation and amortization – ed.). This is our financial strategic goal. Another is to come in 2020. EBITDA more than 4 billion zł.
The market will not be surprised to freeze the project Łagisza …
This decision was the expected for some time. It means that the planned expenditure for the construction of a gas-steam power plant Łagisza in the amount of 1.5 billion zł will not be incurred until 2020. Freeze this investment does not mean, however, that in the future we will not be able to return to it. Another 0.7 billion zł will result from the rationalization of expenditure in other areas, mainly in the distribution, manufacturing and mining. However, in the case of the first of these segments it is not about resignation of a key project, affecting the quality of energy supply, but moving part of the investment beyond 2020. In turn, the mining segment – after turning Brzeszczy structures – the priority is to increase production in the mine to 1.8 million tonnes per year. Therefore, the construction of the shaft Gregory mine Sobieski can be translated in time to avoid the accumulation of expenses attributable to the years 2017 and 2018 in connection with the construction of a block in Jaworzno.
Most will go on the web.
This budget structure is not accidental. The distribution segment, where investments by 2020. Dedicate a total of 9.5 billion zł, remains for us strategically most important area. We assume that it will continue to have the greatest positive contribution to group EBITDA.
Investment in production by 2020. Absorb a total of 6.7 billion zł, most of which will be allocated on a project to build a block of 910 MW in Jaworzno . We have also decided to completing the construction of CCGT in Stalowa Wola. However, taking into account the work on the restructuring of the project, we will not be able to complete the investment before 2019. The amount for the completion of the project could reach approx. 400 million zł.
In the heat we assume a capital of 250 mln. zł for the development of district heating network within the low emission elimination program. In turn, the mining segment by 2020. Definitely want to implement a project to build 800 level in the mine and Janina new shaft in the mine Brzeszcze. In total we spend on this 1.3 billion zł. Surely we do not expect further increase the asset base in the mining segment.
Allow the possibility of separating the project in Jaworzno block off the balance sheet. Is the talks with potential partners depend covenants?
Such talks have not yet started, because this opens up the possibility of us only publication strategy. However, already we conducted preliminary market research in this respect. We do not want to give control over the project. We therefore assume the realization or formula off the balance sheet 50/50, or a sale of part of the shares but retaining at least 50 percent. own contribution.
Finding a partner and realizing it off the balance sheet would allow the group to optimize the financing of development plans and reduce debt levels. This in turn would generate a space and we estimate at over 6 billion zł potential for further development after 2020. But if we do not obtain satisfactory conditions, the current formula of the project – within the balance sheet – allows us to maintain the level of the ratio of net debt to EBITDA below 3.5.
what wykorzystalibyście these 6 billion zł?
We would like to allocate them in the years 2020 to 2025 on projects that will generate long-term value for the group.
Our main competitive advantage is a base of 5.4 million customers. Therefore now we take relatively little capital-intensive activities associated with the development of products and services for customers. But we also think about the strong development of innovative areas of energy, not necessarily resulting from the classical value chain. Because they are mostly investments which require more investment and more risky, to support us in this is called a vehicle, eg. Investment fund.
We will focus at the same time on both the development of products and services related to market electric cars (possible is eg. car sharing, assistance in obtaining financing on them in the form of leases to customers or build their infrastructure for charging stations), as well as the further development of solutions for the so-called. smart homes. In this area already we are taking the first steps, installing meters for remote reading. In a short time we will be able to share the tools, eg. Web applications that allow you to control energy consumption and optimization. We are also working to offer local governments in the field of electrification of public transport, balancing services and the development of local clusters of energy.
The strategy assumes that in 2025. New businesses will generate approx. 25 percent. the total margin or revenue from sales of segment sales.
However, in addition to investing in new areas we not shy away from a possible investment after 2020. modern conventional and renewable assets. The condition, however, is that they have a secure income, eg. With market power or auction RES. We want to get away from the model of investing dependent on the price of energy, which today is the primary risk factor and cause problems in the power industry.
We will launch new projects in the segment, if the level of the ratio of net debt to EBITDA has dropped to 2.5. In the preparation we want to achieve positive cash flows for each of our power plants by 2020.
The stabilization of the situation and development plans do not allow for the payment of dividends …
we will have limited space for profit-sharing, especially in the critical years 2016-2019, when most investments fall and also carry out intensive austerity programs. Therefore, in this period we are unlikely we will recommend a dividend, but even here we have to maintain a certain flexibility. Because it may be that the separation of Jaworzno out of balance and other initiatives will allow the payment of dividends. Generally, however, only after 2020. If you get at least 4 billion zł EBITDA, we have the potential both for further development and distribution of profits to shareholders.
Our goal is to as quickly as possible to improve the financial situation of the group and enter the growth path.
Remigiusz Nowakowski directs Tauron since December 2015. He worked in the company during the years 2006-2008. Immediately before taking up his present position for seven years, he was a manager at Fortum in Poland. He graduated from the Faculty of Management and Computer Science Wroclaw University of Economics and the Faculty of Law and Administration at the University of Wroclaw.
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