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Growth in EBITDA, revenues and profit – ENEA Group posts strong financial performance in Q1-Q3 2019

ENEA Group recorded across-the-board growth in all its key Q1-Q3 2019 financial indicators. The consolidated sales revenues and EBITDA both rose by nearly 30% y/y on the corresponding period of previous year while the consolidated net profit rose by 60% y/y to reach PLN 990 million. Over the period, the Group generated approx. 19.9 TWh of electricity, and sold 15.1 TWh of electricity and gaseous fuel to retails customers and 14.8 TWH of distribution services to end users. The Group’s CAPEX programme continues to be implemented according to plans and, from January to September 2019, PLN 141 million was spent on strictly pro-environmental investment projects only. In the reported period, the electricity generation from renewable sources grew by 11.4%.

In Q1-Q3 2019, ENEA Group generated a consolidated EBITDA of PLN 2,556 million, up by 30% y/y, while the sales revenues and other income totalled PLN 12,169 million, also up by 30% y/y. At PLN 990 million, the Group’s consolidated net profit grew by 60%.

In the reported period, ENEA Group’s capital expenditures reached PLN 1,491 million, with the 2019 CAPEX Plan’s implementation reaching 90%. ENEA is consistently executing upgrade works aimed at adjusting Kozienice and Połaniec power plants to the BAT conclusions. The implemented projects not only improve serviceability of the plants’ generation units but also bring tangible economic and pro-environmental advantages, such as better generating efficiency parameters.

At PLN 1,151 million, the highest EBITDA was posted in the Generation Area. The Area’s result was positively influenced by higher revenues from the sale of electricity and property rights, despite the negative development in the costs of fuel and CO2 emission allowances. Like in the corresponding period of previous year, the Group generated nearly 19.9 TWh of electricity. The volume of electricity generation from Unit 11, with a capacity of 1,075 MW, also rose again, by 13% y/y. From January to September 2019, the unit generated 4,232 GWh of electricity in the operation time of nearly 5,400 hours. Simultaneously, ENEA recorded a significant increase of 11.4% in electricity generation from renewable sources.

The Distribution Area generated an EBITDA of PLN 804 million. High average electricity prices contributed to growing costs of energy purchases for own needs and for covering the energy balance difference. Moreover, the result on other operating activities posted in this area slightly dipped, mainly due to the change in the balance of provisions for grid assets and the effect of higher revenues from the insurer recorded in previous year (compensation payments due to the effects of storms that occurred in 2017). Also, there was a slight decrease in the sales volume of distribution services, with simultaneous increases both in the number of users and in the sales volume of distribution services to households. In Q1-Q3 2019, ENEA Operator provided 14.8 TWh of distribution services in total.

The EBITDA posted by the Trading Area was PLN 17 million. The retail trade recorded higher revenues from the sale of electricity to end users, including the estimated income from the price difference amount scheme. However, the rate of growth did not offset the growing costs of energy purchase and environmental obligations, mainly for the purchase of property rights. In the reported period, the total sales volume dropped by approx. 5% y/y. At the same time, the sales volume of electricity rose by approx. 2% in the households’ segment while the sales volume of gaseous fuel grew by approx. 6%

LW Bogdanka’s consolidated revenues stood at PLN 1,626.1 million, up by 21.8%. In Q1-Q3 2019, Bogdanka built 21.7 km of galleries, of which 7.5 km in Q3 2019 alone. From January to September 2019, production of commercial coal exceeded 7.1 million tonnes, up by 4.5% y/y, while coal sales remained stable at almost 7.1 million tonnes, i.e. 4% higher than in the previous year. The average yield at the end of September 2019 was 65% compared to 60.3% a year earlier.

In the reported period, Bogdanka further strengthened its market position, achieving a strong market share of more than 27.7% in coal sales for the professional power industry. The share in total sales of thermal coal reached 21.3%. Approx. 82% of the sales generated during Q1-Q3 2019 were made to ENEA Wytwarzanie and ENEA Połaniec.

In Q1-Q3 2019, Bogdanka’s capital expenditures reached nearly PLN 294.7 million. The largest part of this amount, almost PLN 214.4 million, was spent on new galleries and modernisation of the existing ones.

COMMENTS TO ENEA GROUP’S Q1-Q3 2019 PERFORMANCE:

Mirosław Kowalik, President of the Board, ENEA S.A.:

ENEA Group optimises the use of its assets and successfully adapts to the dynamically changing environment throughout its value chain, as evidenced by the Group’s strong financial and operating results. We consistently build the potential and solid foundations for further sustainable development of the Group. Within the first nine months of 2019, our capital expenditure reached nearly PLN 1.5 billion, and in the last quarter of the year we are planning to spend another PLN 1.0 billion on our CAPEX investment projects. The largest expenditures were made in the Distribution Area. Our investment projects not only improve Poland’s energy security, but also comprehensively support the achievement of the national target to increase the share of RES in the country’s energy mix. We develop the potential of our power grid in order to be able to receive energy from dispersed sources and produce green energy in north-west Poland. ENEA Group is also increasing its renewable energy generation, at a growth rate of 11.4% in Q1-Q3 2019. We are rationally designing the transformation of our generation capacities towards low-emission energy sources, devising a plan for the development of electromobility and related infrastructure. Later this year, we will specify the key objectives and directions of ENEA Group in our updated development strategy, which is our response to the trends and changes in the company’s environment and in the fuel and energy sector in Poland and Europe said Mirosław Kowalik, President of the Board, ENEA S.A.

Jarosław Ołowski, Vice-President for Financial Affairs, ENEA S.A.:

In the first three quarters of 2019, ENEA Group posted robust financial performance in line with market expectations. We closed the period with a 30% rise in revenues and EBITDA and a 60% rise in net profit, recording across-the-board growth in our Q1-Q3 2019 key financial indicators. The two areas whose contribution to ENEA Group’s consolidated EBITDA grew the most were Generation (PLN 1,151 million) and Mining (PLN 612 million). The result of the former was positively driven by higher revenues from the sale of electricity and property rights. The Distribution Area posted an EBITDA of PLN 804 million, while the Trading Area recorded an EBITDA of PLN 17 million. All the time, the Group is working intensively on the development of projects in the field of renewable energy sources, acquiring partners for joint activities in the area of photovoltaic investment projects. For instance, we entered into cooperation with the National Support Centre for Agriculture, whose aim is to build large-size solar farms on agricultural land said Jarosław Ołowski, Vice-President for Financial Affairs, ENEA S.A.

Piotr Adamczak, Vice-President for Commercial Affairs, ENEA S.A.:

In the first nine months of this year, ENEA Group maintained a consistently high level of generation and sales of electricity. The result of the Trading Area was positively driven by higher revenues from the sale of electricity and property rights. As in previous quarters, however, it remained under pressure from the price developments on the CO2 emission allowances market. In the Customer Service Area, over the last quarter we finalised the re-visualization project of our 32 Customer Service Centres – the last centre to be unveiled in a revamped version was our CSC in Gniezno. In addition, we completed the rollout of the ‘electronic pen’ project for signing contracts in all our Customer Service Centres. We strive to streamline the customer service process in traditional centres, including via remote channels: on the hotline and online. For the sake of the environment, we are committed to minimising the number of documents printed and sent. Thanks to the high quality of our customer service, we provide our customers with security, convenience and comfort said Piotr Adamczak, Vice-President for Commercial Affairs, ENEA S.A.

Zbigniew Piętka, Vice-President for Corporate Affairs, ENEA S.A.:

Towards the end of Q3 2019, ENEA Group successfully completed the largest grid CAPEX investment project in its history. The Morzyczyn-Drawski Młyn 110 kV high-voltage transmission line has a total length of over 240 km and runs through three voivodeships. This supra-regional investment project has significantly improved energy security and connection possibilities, also of dispersed sources, in north-west Poland. In an ongoing search for new business opportunities on the market, the Group strives to establish cooperation with new partners in order to jointly implement projects aimed at the development of electromobility and renewable energy sources. Together with Poczta Polska (Polish Post) and KZŁ, a manufacturer and supplier of railway communications systems, ENEA Group is going to develop and expand e-mobility infrastructure in Poland. In another project, ENEA Operator started cooperation with the West Pomeranian University of Technology in Szczecin, which will conduct analytical and conceptual work and provide its advisory services in such areas as development of power grids, connection of new energy sources, in particular renewable ones, as well as electromobility said Zbigniew Piętka, Vice-President for Corporate Affairs, ENEA S.A.

Artur Wasilewski, Vice-President of the Management Board for Economic and Financial Affairs, LW Bogdanka S.A.:

Such strong results achieved by Bogdanka were possible thanks to the consistent implementation of our coal production and sales targets, improved yields and higher y/y coal prices. As declared earlier, we continue to pursue and are well on track to achieve our target of raising our annual coal production to 9.4 million tonnes at the end of this year said Artur Wasilewski, Vice-President of the Management Board, LW Bogdanka S.A.