PannErgy : Quarterly production report and EBITDA plan for 2021

PannErgy Nyrt.

QUARTERLY PRODUCTION REPORT for 2020 Q4

and

EBITDA Plan for 2021

15 January 2021

2020	PannErgy Nyrt.

Quarterly Production Report - 2020 Q4

Introduction

PannErgy Nyrt. publishes a production report on a quarterly basis, presenting green energy production and utilisation. In the report, the Company presents the green heat sales figures of its key geothermal energy production systems in the reporting period, and presents additional useful information. Each year, the production report for the fourth quarter is supplemented with a preliminary, quarterly heat sale plan for the following year and with the preliminary annual EBITDA plan, the values of which are either confirmed or adjusted, as appropriate, at the Company's annual General Meeting.

1. Consolidated production information

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January

February

March

April

May

June

July

August

September

October

November

December

2017

2018

2019

2020

Figure 1

Consolidated volume of heat sold (GJ)

The chart presents the aggregate volume of heat sold by the Miskolc, Győr, Szentlőrinc and Berekfürdő projects, in a

monthly breakdown.

	2017	2018	2019	2020	2020	2021
					TARGET	TARGET
January	172 758	205 199	209 999	209 678
February	177 533	174 300	203 484	213 855
March	194 634	199 090	215 693	189 195
Q1	544 925	578 589	629 176	612 728	621 403	660 769
April	171 294	104 033	160 548	130 407
May	79 700	56 758	129 300	89 190
June	45 936	41 641	50 780	53 394
Q2	296 930	202 432	340 628	272 991	247 988	290 438
July	44 865	51 247	52 406	45 297
August	36 709	36 794	42 415	39 205
September	61 502	53 650	63 731	64 096
Q3	143 076	141 691	158 552	148 598	164 526	160 683
October	141 270	119 652	159 888	136 460
November	204 045	180 263	206 686	205 417
December	205 251	213 267	221 248	225 688
Q4	550 566	513 182	587 822	567 565	612 739	620 679
ANNUAL TOTAL	1 535 497	1 435 894	1 716 178	1 601 882	1 646 656	1 732 569

Figure 2

Consolidated volume of heat sold, in a table format (GJ)

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2020	PannErgy Nyrt.

Quarterly Production Report - 2020 Q4

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-10	January	February	March	April	May	June	July	August	September	October	November	December
					2017	2018		2019	2020

Figure 3

Average temperatures in 2017 - 2020

The 2-8°C ambient temperature range is ideal for daily geothermal heat sales during the heating season, especially when the difference between the daily minimum and maximum temperatures is as small as possible. Essentially, the monthly averages of average daily temperatures in the period under review represented a similar Group-level heating potential as in the corresponding period of 2019.

A comparison of the 2020 Q4 heat sales figures with the data of the same period in historical years indicates that the Company realised average heat sales in the review period, while it fell short of the quarterly heat sales target by around 7.4%. The shortfall can be primarily attributed to the protracted intra-year capacity expansion projects detailed below and to unscheduled repair works.

In 2020, a number of developments were carried out in the context of the Győr Geothermal Project. For the most part, their positive effect on the Company's P&L will be perceivable in 2021. Key developments include:

1. a heat exchanger park with a higher throughput-capacity towards the district heating service provider and the related engineering development, which are

expected to increase the annual heat input by 13-16 TJ (entry of capacity expansion: September 2020);

1. as a result of the capacity expansion project of the pump-equipped production well (entry of capacity expansion: mid-November 2020) and thanks to raising the flow temperature of both production wells by 1°C and 2°C, respectively (entry of enthalpy increase: early 2021), the annual heat input is expected to increase by 50-60 TJ across the entire system.

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2020	PannErgy Nyrt.

Quarterly Production Report - 2020 Q4

In 2020, a number of developments were carried out in the context of the Miskolc Geothermal Project, the effect of which was already perceivable in 2020. Key developments include:

1. A unit decline in electricity consumption resulting from the transformation of the engineering system beside the production wells, especially in the period outside of the heating season (operational: in January 2020);

1. Reduction of the temperature fall on the heat exchanger as a result of the transformation of the heat exchanger of one of the production wells, which implies a 5-8 TJ increase in annual thermal energy transmission (operational: in October 2020).

The regulated district heating producer tariffs (heat supply tariffs) to be applied from 1 October

2020 - also applicable to subsidiaries subject to PannErgy's district heating price regulation -

were announced by the Minister for Innovation and Technology in Decree No. 32/2020 (IX. 30.),

published in Volume 215 of 2020 of the Magyar Közlöny (the Hungarian Official Journal) as

follows:

validity:	until 30 September 2020	from 1 October 2020
Szentlőrinci Geotermia Zrt.	HUF 3,654/GJ	HUF 3,654/GJ
Miskolci Geotermia Zrt.	HUF 2,695/GJ	HUF 2,626/GJ
KUALA Kft.	HUF 2,695/GJ	HUF 2,626/GJ
Arrabona Koncessziós Kft.	HUF 3,204/GJ	HUF 3,204/GJ

Regulated district heating tariffs were reduced by 2.6% in the case of the Miskolc subsidiaries and remained unchanged in the case of other projects.

The Company fell slightly (by 2.7%) short of its planned, updated cumulative heat sales target for 2020 (see Figure 2 above) published as part of the proposals of the Annual General Meeting closing the business year of 2019. However, partly due to the positive impact of the capacity expansion and efficiency improving projects on 2020 figures, based on the processing of preliminary data, the Company has achieved its published, HUF 2,530 - 2,600 million annual EBITDA target; in fact, it has outperformed the upper limit of the target by a few percentages.

1. EBITDA projection for 2021

Management has defined a preliminary consolidated EBITDA target in the range of HUF 2,800 - 2,880 million under the IFRS for the business year of 2021. The planned quarterly heat sale volumes assigned to the target are presented in the table of Figure 2.

The abovementioned EBITDA target range for 2021 represents an increase of around 11% compared to the target range of the base period, primarily reflecting the effect of the previously described capacity expansion and efficiency improving projects throughout the year.

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