Integrated Report 2018 | PGE Capital Group

Distribution

We are the second-largest energy distributor in terms of the number of clients, with an approx. 25% share of the Polish energy distribution market. Our distribution area covers nearly 40% of Poland's territory. Using approx. 290 000 km of energy networks, we supply electricity to over 5.4 million clients.

Core business of the segment includes supply of electricity to final off-takers through the grid and HV, MV and LV infrastructure.

PGE-grafiki-EN_energet-dystrybucja PGE-grafiki-EN_energet-dystrybucja

The tariff allows costs related to the distribution system operator’s on-going activities to be transferred. These are both justified operating costs, depreciation as well as costs related to the necessity to cover grid losses on electricity distribution or the purchase of transmission services from the transmission system operator. At the same time, the tariff reflects the transferred costs in fees such as the RES fee, transition fee or – starting from 2019 – cogeneration fee.

The key element shaping the distribution segment’s result is return on PGE’s invested capital. This is based on the Regulatory Asset Base (“RAB”), which is established on the basis of completed investments and taking into account asset depreciation. The Regulatory Asset Base serves as the basis for calculating return on capital, using weighted average cost of capital, which is published by the ERO President in accordance with a set formula and using as the risk free rate the average yield on 10-year State Treasury bonds with the longest maturity during the 18-month period preceding the tariff application submission, as quoted on the BondSpot treasury market. Moreover, the level of return on capital depends on achievement of individual quality targets set by the ERO President for efficiency indicators that cover: interruption time, interruption frequency, connection time and (not yet taken into account) time to provide metering and settlement data.

Segment revenue is based on a tariff for electricity distribution services, which is approved by the ERO President every year at company request and is regulated.


Assets

PGE Dystrybucja S.A. operates in the area of 122 433 sq. km and delivers electricity to approximately 5.4 million.

mapa_dystryb mapa_dystryb

Tariff Volume (TWh)* Number of customers according to power take-off points
2018 2017 2018 2017
A tariff group 5.67 5.44 108 109
B tariff group 14.15 13.51 11,739 11,423
C+R tariff groups 7.01 6.89 480,864 480,345
G tariff group 9.58 9.50 4,909,493 4,858,798
TOTAL 36.41 35.34 5,402,204 5,350,675

* with additional estimation of sales.

Operational data Unit 2018 2017 2016 2015
Number of stations, including: pieces 94,198 93,493 92,328 92,258
number of transformer stations pieces 93,764 93,104 92,474 91,874
MVA power MVA 31,570 30,826 29,903 29,500
Total length of power lines km 290,235 287,864 285,701 283,804
HV lines km 10,282 10,278 10,197 10,143
MV lines km 112,512 111,588 110,798 109,938
LV lines km 167,440 165,998 164,706 163,723
Grid loss ratio % 5.1 5.4 5.8 5.9
SAIDI ratio, including: minutes 299 557 401 442
Planned minutes 87 95 119 159
Unplanned with catastrophic minutes 212 462 282 283
SAIFI ratio, including: per customer 3.92 5.48 4.49 4.72
Planned per customer 0.47 0.48 0.61 0.7
Unplanned with catastrophic per customer 3.45 5.00 3.88 4.02
Connection time days 211 215 248 291

Key financial figures

PLN m 2018 2017
Revenue from sales 5,878 6,392
EBIT 1,277 1,166
EBITDA 2,463 2,333
Capital expenditures 1,853 1,716

Key factors affecting segment results

The Distribution segment is characterised by a relative stability of financial results. Results depend on the volume of energy distributed and the level of distribution tariff set by the regulator. Moreover, results depend on the cost to cover balancing differences.

Capital expenditures

PLN m 2018 2017  % change
Development investments 727 745 -2%
Modernisation and replacement 1,045 903 16%
Other 81 68 19%
TOTAL 1,853 1,716 8%

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