PBG Group s financial performance in Q1 2012

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1 PBG Group s financial performance in Q Warsaw, May 16th

2 Key events at the PBG Group in Q and YTD MONTH EVENT January 2012 Mr Jerzy Wiśniewski, PBG s CEO, acquired 135,670 shares of PBG S.A. Following the transactions, Mr. Wiśniewski increased his interest in the Company to 27.15%, and in the total vote at PBG s general meeting to 42.33%. Merger of Hydrobudowa Polska with its subsidiary, Hydrobudowa 9. Payment of the third and final instalment of the price for acquisition of 100% of shares in MULTAROS Trading Company Limited. On January 5th 2012, PBG paid to ARGUMENOL of Nicosia, a company organised under the laws of Cyprus, the third and final instalment of the price for 100% of shares in MULTAROS Trading Company Limited, of PLN 160m. Closing of the tender offer for RAFAKO shares: Summary of the tender offer for RAFAKO shares As part of the tender offer for RAFAKO shares called on November 18th 2011, and following the settlement of the transactions on January 20th 2012, PBG acquired all the shares tendered for sale. Following the settlement of the tender offer, PBG holds: a. indirectly, through MULTAROS 34,800,001 RAFAKO shares, representing % of the company's share capital and carrying the rights to 34,800,001 votes (or % of the total vote) at RAFAKO s general meeting; b. directly 11,135,999 RAFAKO shares, representing 16.00% of the company's share capital and carrying the rights to 11,135,999 votes (or 16% of the total vote) at RAFAKO s general meeting; c. jointly with MULTAROS 45,936,000 RAFAKO shares, representing 66% of the company's share capital and carrying the rights to 45,936,000 votes (or 66% of the total vote) at RAFAKO s general meeting. RAFAKO S.A. and JP ЕPS Belgrade PD Termoelektrane Nikola Теsla (TENT) d.o.o. Оbrenovac (Serbia) executed a contract for the production and delivery of boiler equipment, parts and components, as well as provision of monitoring and maintenance services for Unit B1 boiler - the first of four stages of the project. The value of the contract is PLN 58,727, (VAT exclusive). February 2012 A consortium comprising: RAFAKO S.A. (leader), Polimex-Mostostal S.A. and Mostostal Warszawa, executed a contract with PGE Elektrownia Opole S.A. providing for the engineering design, construction, assembly and start-up, on a turn-key basis, of power unit No. 5 and power unit No. 6 at PGE Elektrownia Opole S.A., with auxiliary equipment and facilities, including related buildings and structures. The total value of the contract is PLN 9,397,000, (VAT exclusive). RAFAKO's share in the consortium is 34.6%. 2

3 Key events at the PBG Group in Q and YTD MONTH March 2012 April 2012 EVENT Changes in PBG S.A.'s shareholder structure. Clients of Pioneer Pekao Investment Management S.A. Notification date Holding threshold Number of shares Votes at the GM (%) March 16th < 13% 2,373, % March 16th < 11% 1,829, % Negotiated settlement between the consortium comprising HYDROBUDOWA POLSKA S.A. (leader), PBG S.A., ALPINE BAU Deutschland AG, ALPINE BAU GmbH, ALPINE Construction Polska, and Narodowe Centrum Sportu, governing settlements between the consortium and the principal, including payments to sub-contractors. Under the settlement, the principal promptly paid the final instalment of the consortium's remuneration under the master contract. The value of the settlement was PLN 58,857, (VAT exclusive). Value of additional works: PLN 24,099, (VAT exclusive). Value of additional works covered by cost estimates submitted by the consortium: approximately PLN 23.4m (VAT exclusive). Extraordinary General Meeting - adoption of a resolution to issue Series A1 through A12 bonds convertible into Series H shares; to issue Series H shares as a part of a conditional share capital increase; to waive pre-emptive rights of the existing shareholders with respect to Series A1 through A12 bonds convertible into Series H shares and Series H shares. The resolution enables PBG S.A. to issue bonds convertible into shares. The bonds may be issued in tranches (no more than twelve) and be subscribed for by trade or financial investors. The par value of the bonds is PLN 100, per bond, with the total par value of bonds to be issued of PLN 1,200,000, Registration by the District Court of Poznań of a conditional share capital increase at PBG S.A. by up to PLN 14,295,000.00, through the issue of no more than 14,295,000 Series H ordinary bearer shares with a par value of PLN 1.00 per share. Negotiations between the PBG Management Board and the banks providing financing to the PBG Group, with a view to: setting the terms of restructuring the Company's bank debt under the existing financing agreements; execute a standstill agreement on temporary and conditional suspension of enforcement of debt covenants and a relevant restructuring agreement; providing bridge financing to the Company. Execution of the standstill agreement will enable PBG S.A. to continue negotiations on refinancing the debt incurred to finance the acquisition of RAFAKO shares. Loan agreement with Jerzy Wiśniewski, PBG's CEO. Under the agreement, Mr Jerzy Wiśniewski will provide a PLN 50m loan to PBG, of which PLN 36m has already been transferred to the Company, while the remaining PLN 14m will be paid by June 15th Contract for the construction of a 10 MW Wicko Wind Farm executed by Betpol, a PBG subsidiary - contract value in excess of EUR 15.4m (over PLN 64m, VAT-exclusive). May 2012 Standard & Poor's Ratings Services lowered PBG S.A.'s long-term rating from BB- to B+ with the possibility of further lowering the rating due to tighter liquidity. The rating was also put on Credit Watch with negative implications. Conclusion of negotiations and execution of a standstill agreement with the financing banks, providing for temporary and conditional suspension of enforcement of debt covenants ("Standstill Agreement"). The Standstill Agreement became effective as of May 14th Mr Wiesław Mariusz Różacki appointed Vice-President of PBG S.A. Management Board. 3

4 PBG Group s financial position 2011 income statement Commentary Revenue growth was driven by the execution of highway and stadium construction contracts and expansion of the Group. Consolidation of RAFAKO's results as of November 1st 2011 revenue: PLN 228m, operating profit: PLN 18m, net profit: PLN 18.5m. Consolidation of Energomontaż Południe's results - revenue: PLN 192m, operating profit: PLN 6.4m, net profit: PLN 8.8m. Gross margin fell on the back of a higher share of low-margin segments (highways, stadiums) in the revenue structure. Finance costs increased as a result of higher debt incurred to finance working capital requirements (mostly road construction contracts). Change of the policy governing the classification of transactions to operating or financing activities (financing activities should include only those transactions which are related to raising financing, while the results of investing activities involving investment and allocation of funds to the benefit of the Group s entities should be recognised as operating activities). Financial results PLN y-o-y change Revenue 3,670,739 2,739, Cost 3,321,545 2,398, Gross profit/(loss) 349, , Distribution costs 9, Administrative expenses 128, , Profit/(loss) 211, ,315-8 Other income 121, ,506-4 Other expenses 63,643 72, Operating profit/(loss) 269, ,380-6 Finance costs 57,887 49, Share of profit /(loss) of associates accounted for using the equity method -7,181-7,686 - Profit/(loss) before tax 204, , Income tax expense 33,586 48, Net profit (loss) attributable to: 170, , owners of the Parent 160, , non-controlling interests 9,775-6,098 - Margins (%) PLN y-o-y change (pp) Gross margin Operating margin Net margin Other income PLN Interest on loans advanced as part of 20,656 33,781 operating activities Compensation and penalties paid 11,284 5,013 Gain on investments in related entities 19,697 2,209 Other expenses PLN Allowance for credit losses on receivables 34,009 17,968 Compensation and penalties paid 4,969 19,292 Interest on liabilities 4,585 2,057 Finance income PLN Foreign exchange gains 16,074 11,399 Interest on financial instruments 8,782 6,130 Other Finance costs PLN Interest on bonds 42,494 34,413 Interest on bank borrowings Interest on bank overdrafts 10,411 23,179 24,730 10,040 4

5 Changes in the PBG Group's 2011 financial statements Wyszczególnienie IV Q nr korekty Wartość korekty roczne Continuing operations Revenue 3,733,829 1;4 (63,091) 3,670,738 Cost of sales (3,317,416) 2;4 (4,129 (3,321,545) Gross profit (loss) 416,413 (67,220) 349,193 Administrative expenses (138,829) 1,346 (137,483) Other income 113,391 1, ,323 Other expenses (54,776) (1,817) (56,593) Operating profit (loss) 336,199 (65,759) 270,440 Finance costs (60,148) 1,133 (59,015) Share in profit of entities accounted for with equity method (4,744) 3 (2,437) (7,181) Profit (loss) before tax 271,307 (64,626) 204,244 Income tax expense (49,113) 5 15,527 (33,586) Net profit (loss) from continuing operations 222,194 (49,099) 170,658 Discontinued operations Profit (loss) from discontinued operations - - Net profit (loss) 222,194 (49,099) 170,658 Net profit (loss) attributable to: - owners of the Parent 206,471 (45,588) 160,883 - non-controlling interests 15,723 (5,947) 9, Adjustment of recognised contract revenue: adjustment of revenue recognised on the Malczyce barrage contract (PLN 6.1m), adjustment of revenue recognised on the LNG contract (PLN 1.7m), adjustment of revenue recognised on the Trasa Słowackiego contract in Gdańsk (PLN 19.1m), adjustment of revenue recognised on the Włocławek-Toruń section of the A1 motorway (PLN 17.0m), consolidation adjustment of revenue recognised in connection with the sale of a licence to a subsidiary (approx. PLN 10m). 2. Increase of provisions for losses on construction contracts: recognition of a provision for loss on the Trasa Słowackiego contract PLN 8.9m, recognition of a provision for loss on a road construction contract PLN 6.7m, application of zero margin on the JV S5 contract, which resulted costs being recognised on new project launches PLN 6.3m. 3. Correction of accounting for the result of an associate (PLN 2.437m). 4. Presentation adjustment of "revenue from rendering of services" and "cost of services rendered" (PLN 24.95m). 5. Income tax on the above listed items. 5

6 PBG Group s financial highlights (PLN 000) for and actual performance vs. forecast for ,406,976 2,091,425 REVENUE 2,572,509 2,739,166 3,670, , NET PROFIT 209, , , , % 103% ,335 OPERATING PROFIT - EBIT 223, , , , % Forecast item 9.9% Actual performance vs. forecast in 2011 Forecast (PLN'000) 12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% Upward revision of forecast (PLN'000) OPERATING MARGIN 10.7% 11.1% 10.4% 7.3% Actual (PLN'000) Actual vs. forecast (%) Revenue ,3% Operating profit ,1% Net profit ,0% 6

Key financial ratios for Q1 2012 Revenue Gross profit (loss) EBITDA PLNm PLNm PLNm 11.1% 10.

Energomontaż Południe and RAFAKO Gross margin down (resulting in a gross loss) due to a large share of road

The acquisitions of Energomontaż Południe and RAFAKO marked the beginning of an important shift in the

7 Key financial ratios for Q Revenue Gross profit (loss) EBITDA PLNm PLNm PLNm 11.1% 10.6% A 50% y-o-y revenue growth, driven mainly by the highway construction projects and consolidation of Energomontaż Południe and RAFAKO Gross margin down (resulting in a gross loss) due to a large share of road construction projects in total revenue (the road construction segment contributed PLN 149m to the top line) The acquisitions of Energomontaż Południe and RAFAKO marked the beginning of an important shift in the Group s business and its repositioning towards power engineering (the power engineering segment added PLN 317m to total revenue) 7

8 PBG Group s financial position Q income statement Commentary HBP S.A.: Upward revision of costs and an increase in the anticipated loss on the Trasa Słowackiego (Task 2) contract (PLN 30m) Aprivia S.A.: Upward revision of costs and an increase in the anticipated loss on the Toruń Stryków section of the A1 Motorway (PLN 20m) PBG S.A.: Upward revision of costs and adjustment of revenue on the Malczyce barrage contract, which has not been extended (approximately PLN 8m) Other factors which further contributed to PBG's loss include higher finance costs resulting from a change in financing arrangements (higher share of bonds in the financing structure - debt service costs are higher in on bonds than on bank borrowings) and exchange rate fluctuations causing foreign exchange losses (Q1 2012: PLN -10m; Q1 2011: PLN -2.5m). Financial performance y-o-y change (%) Revenue 715, , Cost 729, , Gross profit/(loss) -13,650 55, Distribution costs 15,862 1,198 0 Administrative expenses 40,128 25, Profit/(loss) -69,640 28, Other income 54,890 19, Other expenses 26,746 2, Operating profit/(loss) -41,496 45, Finance costs 31,112 15, Share of profit /(loss) of associates accounted for using the equity method Profit/(loss) before tax -71,984 30, Income tax expense 6,232 6, Net profit (loss) attributable to: -65,752 24, owners of the Parent -60,499 24, non-controlling interests (5,253) 177-2,968 Margins (%) y-o-y change (pp) Gross margin Other income Compensation and penalties received 15,725 1,931 Gain on measurement of 14,889 2,722 financial instruments Interest on loans 9,481 4,152 Other expenses Net exchange differences on 12,816 - operating activities Compensation and penalties paid 3, Running costs of investments 3, Finance income Net foreign exchange gains 5, Interest on deposits and other financial 4,552 2,177 assets Gain on measurement of financial instruments Finance costs Interest on bonds 19,562 10,029 Interest on bank overdrafts Interest on bank borrowings 14,518 4,183 3,136 2,901 Operating margin Net margin

9 PBG Group s assets statement of financial position Statement of financial position PLNm Q Non-current assets 1,590 2,306 2,348 Cash and cash equivalents Further decline in liquidity in Q caused by large working capital needs relating to road construction projects and acquisition of RAFAKO payment of PLN 193m (third instalment and tender offer). Other current assets 2,446 3,644 3,737 Total assets 4,745 6,507 6,392 Interest-bearing debt¹ 1,449 2,019 2,446 Other liabilities 2 1,482 2,217 2,354 Includes in particular trade and other receivables (PLN 785m), amounts due from customers from construction contract work (PLN 1,273m) and inventories (PLN 442m). Equity 1,814 2,271 2,058 Total equity and liabilities 4,745 6,507 6,392 Net debt 740 1,462 2,139 Net debt / EBITDA 3 2.2x 3.99x 6,75x ¹ Interest-bearing debt includes Borrowings, Bonds and Finance Lease. 2 Including: Trade and other payables and Amounts due to customers for construction contract work in the amount of PLN 1.04bn. 3 Ratio calculated based on a formula agreed upon with financial institutions. Debt increase driven by capitalintensive projects and acquisitions in Debt expected to fall upon completion of the projects and reversal of the working capital build-up. Increase in net debt under bank borrowings by PLN 427m (PBG Group: PLN 560m incurred vs. PLN 133m repaid; RAFAKO Group: PLN 190m incurred vs. PLN 5m repaid). 9

10 PBG Group s economic standing Cash flows PLNm Q Profit before tax (72) Adjustments and other Net changes in working capital Cash from (used in) operating activities 189 (693) (384) 434 (498) (445) Operating capex (144) (179) (13) Other cash flows from investing activities Cash from (used in) investing activities Cash from (used in) financing activities (386) 23 (176) (530) (156) (189) Net change in cash 48 (153) (249) Cash at beginning of period Cash flows Loss before tax of PLN 72m a historical low. Large needs in Q owing to road construction projects and completion of the National Stadium project. PBG: PLN -43.2m; RAFAKO Group: PLN m; HBP Group: PLN m; APRIVIA Group: PLN -53.7m Replacement capex, in line with the adopted strategy. Payment of the final instalment for the acquisition of RAFAKO (PLN 160m) and closing of the tender offer for RAFAKO shares (PLN 33m). Cash from (used in) financing activities resulting from new borrowings of PLN 560m and repayment of PLN 132m, as well as interest expenses of PLN 34m (RAFAKO incurred PLN 190m of new borrowings). Cash at end of period Further decline in liquidity in Q due to capital-intensive road construction projects and the final stage of the RAFAKO acquisition. 10

11 PBG s stand-alone performance Q income statement Commentary Declining average margin in the Gas, oil and fuels segment due to a low share in total revenue of the high-margin Wierzchowice contract (project nearing completion) (compared with the corresponding period of 2011) Upward revision of costs and adjustment of revenue on the Malczyce barrage contract, which has not been extended (approximately PLN 8m) Revenue nearly halved relative to Q1 2011, resulting in significantly lower operating profit, which did not cover administrative expenses (higher by approximately 36%) Other factors which further contributed to PBG's loss include higher finance costs resulting from a change in financing arrangements (higher share of bonds in the financing structure - debt service costs are higher in on bonds than on bank borrowings) and exchange rate fluctuations causing foreign exchange losses (Q1 2012: PLN - 10m; Q1 2011: PLN -2.5m). Financial performance y-o-y change (%) Revenue 78, , Cost 76, , Gross profit/(loss) 2,179 28,268 Distribution costs Administrative expenses 9,098 6, Profit/(loss) -6,919 21,639 Other income Other expenses ,753 18, ,550 3, Operating profit/(loss) 7,284 36,041 Finance income Finance costs 25,202 15, Other gains/(losses) on investments Profit/(loss) before tax -17,918 20, Income tax expense 3,260 3, Net profit -14,658 17, Margins (%) (%) Q Q y-o-y change (pp) Gross margin Operating margin Net margin Other income Interest on loans 13,684 9,150 Profit/(loss) on derivative 8,431 3,347 instruments Interest on cash in current bank account reserved for operating activities 1,917 2,536 Other expenses Exchange differences on items relating to operating activities 10,048 3,117 Interest on trade and other payables Loss on disposal of non-financial assets Finance income Interest income 991 1,856 Foreign exchange gains Gain on measurement of financial instruments ,877 Finance costs Interest on bonds 19,733 16,947 Interest on bank borrowings 3,041 1,695 Interest on bank overdrafts 3,

PBG Group s financial performance in Q1 2012 and

Industrial and residential construction Roads

OTHER GROSS MARGIN IN Q1 2011 (%) 18.5 21.4 7.

12 PBG Group s financial performance in Q and Q1 2011, by segments Gas, oil and fuels Water Industrial and residential construction Roads Power engineering Other SEGMENTS GAS, OIL AND FUELS WATER INDUSTRIAL AND RESIDENTIAL CONSTRUCTION ROAD CONSTRUCTION POWER ENGINEERING OTHER GROSS MARGIN IN Q (%) GROSS MARGIN IN Q (%)

PBG Group's order book Key information Our core segments account for nearly 70% of the

4x of revenue Road segment s share and significance to decrease Key contracts in the

4bn A4 highway; 2010-2012; PLN 1.4bn Order book by segments Order book (PLNm) (PLNbn) 1.

9bn The key advantage of our order book is its excellent visibility in revenues going

13 PBG Group's order book Key information Our core segments account for nearly 70% of the order book The order book represents 2.4x of revenue Road segment s share and significance to decrease Key contracts in the order book Construction of power units in Opole; ; PLN 9.4bn LNG Terminal; ; PLN 2.1bn LMG crude oil and natural gas production facility; ; PLN 1.4bn A4 highway; ; PLN 1.4bn Order book by segments Order book (PLNm) (PLNbn) 1.1x 1.4x 2.4x Order book as at April 1st 2012: PLN 8.9bn The key advantage of our order book is its excellent visibility in revenues going forward, which is additionally enhanced by a significant increase of the order book's value, resulting from execution of the Opole contract. # Order book/ Revenue in 2011 Order book VALUE [PLNm] 8, Apr 1-Dec YEARS 2013 and beyond 3, ,

14 Strategy of the PBG Group PBG'S STRATEGIC PLANS FOCUS ON HIGH-MARGIN CORE SEGMENTS, ON STRENGTHENING THE LEADERSHIP, AND ON DELEVERAGING Expansion in the Polish power engineering market Placing RAFAKO S.A. as the leader of the PBG Group's power engineering segment Strategic cooperation with major players on the global power engineering market to facilitate joint acquisition and execution of contracts in Poland Building up own competences and credentials through winning and execution of contracts of increasingly larger unit values Strengthening the Company's position as the leader in the gas and oil sector in Poland Winning the largest contracts in Poland Expanding the range of credentials through continuous development of engineering skills, improvement of project management skills and execution of increasingly more complex projects Participation in the infrastructure and specialist construction market Presence in the waste management plants construction market Presence in the waste incineration plants construction market Presence in the hydro-engineering market Deleveraging Disposal of non-core assets Reduction of exposure to non-core sectors requiring substantial capital expenditure 14

15 Structure of the PBG Group GAS, OIL AND EPC SERVICES POWER ENGINEERING GENERAL CONSTRUCTION, ENVIRONMENTAL PROTECTION, HYDRO- ENGINEERING ROAD CONSTRUCTION RESIDENTIAL CONSTRUCTION FOREIGN OPERATIONS 66.00% 63.05% 64.84% 98.49% 99.99% PBG UKRAINA 99.95% AGGREGATE QUARRIES WSCHODNI INVEST 99.56% 70.00% ENERGOPOL UKRAINA 51.00% 81.69% BATHINEX in company voluntary arrangement filed for company voluntary arrangement 15

16 End note This presentation was prepared by PBG S.A. Data and information contained in the slides are for information purposes only and do not constitute full financial analysis. For a detailed description of PBG's operations and financial situation, please refer to current and periodic reports available at All data contained herein is based on sources which we deem reliable and trusted. This presentation has not been audited. This presentation and related slides may contain forward-looking statements. Such statements must not be construed as the Company's forecasts or guarantees of its future performance. 16

PBG Group s presentation

PBG Group s presentation Warsaw, March 6, 2012 1 Agenda Information on the PBG Group I PBG Group s strategy II Financial results for 4Q2011 III 2 We are a leading provider of specialty construction & engineering