A dynamic growth of an innovative commodity and energy company - Enea Group summarises the year

PLN 11,256 million net sales revenue, EBITDA amounting to PLN 2,328 million and net profit totalling to PLN 849 million - these are the fundamental results of Enea Group for the previous year. The Group has been consistently implementing the objectives of the new Development Strategy investing in modern energy generation sources, strengthens the market position in the mining and generation area and enhances its activity in the area of innovation. Enea’s activities increase the Polish energy security and reliability of energy supplies to Customers.

2016 for Enea is a dynamic development of the commodity and energy company based on solid foundations. The Group has generated over PLN 9 million tonnes coal net and 13.6 TWh electricity. In the same period Enea sold almost 18 TWh electricity and gas to retail consumers and 18.7 TWh distribution services to end users. The Group translated these operating results into solid financial performance.

One of the major events in 2016 was the adoption by the Group of a new Development Strategy. The document presents strategic goals to be achieved by the Capital Group in all the areas of the value chain, becoming part of the economic policy and increasing at the same time the Polish energy security. The approved Development Strategy is a reply to volatile economic and regulatory environment of the company, which is to secure its sustainable development until 2030.

– The digital revolution, growing competition, fast technological progress and scheduled changes in the energy market structure will require transformation of the existing business models from companies so that they can better adjust to Customers’ expectations. Enea Capital Group is a flexibly operating process-based organisation which actively becomes a part of the positive changes occurring in the Polish economy. It is not only a reliable seller on the electricity market, but also a leading provider of integrated services for a wide range of Customers appreciated for the quality, comprehensiveness and reliability – said Mirosław Kowalik, president of Enea.

Enea invests in modern generation sources and increases the potential and reliability of electricity supply

In 2016 Enea implemented an over PLN 2.7 billion worth of an investment programme. The events of the major importance in this field include: in the area of generation - completion of boring works by bore holes on Ostrów deposit; in the area of distribution - modernisation, extension and automation of grid assets; in the area of generation - modernisation and investments in the environmental protection in Kozienice Power Plant and the construction of the new power unit drawing to the end. Enea also invests in constant enhancement of the Customer service quality.

- Commissioning of a modern supercritical 1,075 MW unit in Kozienice Power Plant is our priority. The progress of the whole investment, comprising ca. 30 thou. detailed tasks, is currently 95%  – underlined president Mirosław Kowalik..

– We have been consistently investing and building our potential in order to strengthen our market position. The investments commenced at the end of 2016, i.e. the acquisition of Połaniec Power Plant completed in March 2017 and announcement of the tender for the project realised together with Energa relating to the construction of Ostrołęka C Power Plant are important for the attainment of strategic goals foreseen in Enea Group’s Strategy – added president Kowalik.

Incorporating Połaniec Power Plant under the Group, Enea increases the annual energy generation to ca. 24 TWh. Due to that, the production and sales of electricity will be balanced in the Group. It is also connected to the implementation of one of the goals of the Development Strategy which foresees increasing sales of electricity to end users to the level of 20.1 TWh in 2025. The transaction will also guarantee sales of the volume of coal extracted in Enea Group - Połaniec Power Plant annually consumes ca. 3.9 mln tonnes of the material coming mainly from LW Bogdanka. Thus, the Group develops a cost- and operation-efficient Kozienice-Bogdanka-Połaniec mining and generation area based on its own raw material.‑

Ostrołęka C Power Plant with the new ca. 1,000 MW unit and efficiency of at least 45% will be another, stable, highly-efficient and low-emission source of energy based on the Polish commodity in the Public Power System. The new technologies foreseen in the project will allow to fulfil the current Community requirements related to the environmental protection.   and experience gained on the construction of the new unit in Kozienice Power Plant.

In 2016 Enea Group in the area of distribution realised an intense programme of modernisation, upgrading and development of the distribution network. PLN 920 million was allocated to that objective.

- These activities substantially contributed to the improvement of the energy security in the whole region serviced by the Group, i.e. north-western Poland. The implemented investments improved the indices which qualitatively define the duration and number of interruptions in energy supply: SAIDI - by 44% yoy and SAIFI - by 30% yoy – said Wiesław Piosik, vice-president of Enea for corporate affairs.

The Group focuses on new technologies

Enea wants to be the co-author of the innovation ecosystem in Poland. An example of such an approach is a potential investment in a modern unit in the technology of clean coal, the so-called IGCC  (Integrated Gasification Combined Cycle) with the capacity totalling to 300–500 MW. The implementation of the project in Poland based on this innovative technology would contribute to the establishment of a new market for coal and would impact the growth in the energetic independence of the Polish economy. The unit could be installed near LW Bogdanka - Enea, as a result of closing the transaction of acquiring Połaniec Power Plant, obtained a plot of land of the area of 26 ha located near Bogdanka, which may be used for that purpose.

 - Poland holds rich resources of bituminous coal, its gasification is one of the most far-reaching energy technologies based on this fuel. The Company also takes an active part in the activities for the development and building of the e-mobility infrastructure in Poland Electromobility is one of the areas which will have impact on the future shape of the electricity market, thus the decision on the establishment, jointly with PGE, Energa and Tauron, a dedicated company - ElectroMobility Poland. We are joining works over the development of the base infrastructure for charging electric vehicles in Polish agglomerations in order to increase e.g. the possibility of using electric buses. Apart from works over technical solutions, we need regulations over which the Ministry of Energy is currently working, and which are to contribute to the proper development of the infrastructure for electromobility. These are huge challenges, many stakeholders and the  number of business model proposals, which relate both to companies from the fuel and energy and transport sectors, and local governments. Additionally, quick technological advances, e.g. in energy storing, must be taken into account – underlined Mirosław Kowalik, president of Enea.

Process optimisation and flexible adaptation to changes of the market environment are reflected in the solid financial performance

In 2016 Enea Group generated good financial results: PLN 11,256 mln net sales revenue, PLN 2,328 mln EBITDA and PLN 849 mln net profit. EBITDA yoy comparability was affected by the following one-offs:

settlement of the revenue from LTPPA in Q3 2015 in the amount of PLN 293 mln, establishment of the provision related to the estimation of the value of shares in  Eco-Power sp. z o.o. for the amount of PLN 129 mln in Q4 2016 and establishment of the provisions for the new Generation Change Programme for the amount of PLN 54 mln in Q4 2016. After their exclusion the consolidated EBITDA grew from PLN 1,837 mln in 2015 to PLN 2,510 mln in 2016, i.e. by 36.7%.

In the reporting period, the highest EBITDA, PLN 1,111 mln (almost 50% of the Group’s EBITDA), was generated in the area of distribution. The area of mining generated PLN 612 mln EBITDA, which constitutes the greatest yoy growth - by PLN 456 mln - related to the consolidation of results of LW Bogdanka CG from 1 November 2015. The yoy comparability of the results of the area of generation was affected by the aforementioned settlement of revenue from LTPPA and the provision related to the estimation of the value of shares in Eco-Power Sp. z o.o. EBITDA, excluding one-offs of this area, was on the level of PLN 646 mln - growth by PLN 44 mln, i.e. 7.3% yoy. The area of trade's EBITDA, after a growth by 22.1% yoy, amounted to PLN 154 million.

Net debt/EBITDA as at the end of 2016 was on a safe level of 1.9.

– In 2016 Enea Group demonstrated that it is able to cope well in a difficult market and regulatory environment. Building synergies between particular business areas, we are increasing the Group’s efficiency. We have been consistently investing in its development, and also using the market opportunities which occur.  We are building an optimum model of operation which strengthens the Group’s position on the market. It is also reflected in the financial results generated by the Group – underlined Mikołaj Franzkowiak, vice-president of Enea for financial affairs.

LW Bogdanka after 2016 - solid operating and financial performance despite durable difficult situation on the market

The Capital Group of Lubelski Węgiel Bogdanka generated sales revenue on the level of almost PLN 1.8 billion and net profit in the amount of PLN 182 mln in 2016. EBIT in the reporting period amounted to over PLN 237 mln, and EBITDA to PLN 606.5 mln. The generated financial results were significantly affected by the coal prices which still remained low on an annual basis, despite a relevant stabilisation in Q4 2016.

The Company deems the generated results good and distinctive on the background of the Polish mining sector. Maintaining high profitability ratios, despite decreases in the volumes of sold coal by over 10% yoy, were possible due to a continuous cost control and optimisation of capital expenditures. In consequence, EBITDA profitability in 2016 was maintained on an over average level for the global industry, namely 34%.

In 2016 commercial coal production totalled to over 9 mln tonnes, and also sales remained on the similar level (PLN 9.1 mln) in the said period. The length of corridor excavations performed in the previous year amounted to 23.8 km, which means a growth by 19% as compared to 2015.

The Company maintains a strong market position. After 2016, its share in the market of steam coal sales was on the level of 15.9% and in steam coal for commercial power industry market on the level of 25.4%. It means a return to the levels close to 2014, after turbulences on the coal market in Poland in 2015.

In relation to the development strategy of LW Bogdanka SA - Area of Mining of Enea Group until 2025, with the perspective to 2030, announced in February 2017 and the scenario of flexible development it presents - production plans for 2017-2025 foresee the average annual production of coal on the level of ca. 9.2 mln tonnes.

– The mining output and sales realised in 2016 translated into solid financial results. We are even more proud since they were generated in the persistent difficult market environment - for our sector the previous year characterised with oversupply and drops in coal prices on the Polish market. On the world’s markets the prices grew substantially during the year, but the growth was not reflected in the situation in Poland in 2016. Despite that fact it was a positive signal for our sector – said Krzysztof Szlaga, president of Lubelski Węgiel Bogdanka.

– 2016 was the first full year in which we operated within Enea Group. During that time we generated a range of synergy effects, which are reflected in the further improvement of our cost efficiency which has been the highest in the sector for years. The integration with the Group and resultant operating and cost benefits enable attainment of purported and good financial and operating indicators. Important achievements of the previous year include also a significant improvement of the long-term security of mining in Bogdanka. It was possible due to the execution, in H2 2016, of important annexes to agreements with our key recipients - Enea Group and Połaniec Power Plant, and also Azoty Group and ENERGA Elektrownie Ostrołęka. Due to that fact, we have sound foundations in the coming years to plan our production, employment and preparatory works on a long-term basis. This in turn will enable cost control, on which we strongly focus – added Krzysztof Szlaga.

Multi-service Enea of the future

A growing importance of the civil power engineering and Customer’s position affects Enea’s offer. Despite a competitive price of energy, continuous improvement of the quality of provided services the Group extends the portfolio with additional packages. Already now, Customers may select from the variety of packages with additional services, such as electrician assistance or medical care which are being offered together with electricity sales. In November 2016 Enea introduced a new Energy+ Photovoltaics offer which covers a comprehensive service for Customers along with an audit and selection of an optimum  photovoltaic installation.

– Enea will be a multi-service company and our offer for Customers will be the same. We wish to create a diversified portfolio of services adjusted to Customer needs. One of the elements of the realisation of this direction is launching the loyalty programme “Purchase Zone” for individual Customers which we intend to develop this year – announced Piotr Adamczak, vice-president of Enea for commercial affairs.

Enea also wishes to be an active participant of the process of development and operation of energy clusters, firstly on the area of Enea Operator’s operations. Clusters constitute a chance for the development of new services provided by Enea Group and a possibility of preparing it for future market needs.

Human potential. Corporate Social Responsibility. Dialogue with the Community

Enea sees the Group’s future and strength in the further development of the human potential. Thus, the Generation Change Programme was launched with the objective to build a systemic process securing the appropriate level of inflow and maintenance of the capacities in the Group during the next years. Through functional changes Enea is pursuing the development of an organisational culture which will not only support the corporate development but will also meet Employees’ expectations as regards raising the competence and satisfaction of work in Enea Group.

– We wish to develop stable and attractive places of work for the present and future Employees in Enea Group. We are building an organisation based on expertise, and our greatest capital is Employees. We also foresee a strong support of the local growth and building lasting local social relations, which are an important element of the responsible business policy for us – said president Mirosław Kowalik.

The Group will take care for the development of individual regions in Poland, acting as an attractive employer, but also as an entity strengthening the social development, supporting local vocational education. One of Enea’s priorities is also continuation of the open and constructive dialogue with the Society which enables building a wide social consensus around values and issues fundamental for the development of an innovative commodity and energy company.

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 Enea Group is a vice-leader of the Polish power market as regards electricity. It manages the complete value chain on the electricity market: from fuel, through electricity generation, distribution, sales and Customer service. It is responsible for safe supplies of energy to 2.5 mln Customers. Enea Operators owns the distribution network in north-western Poland (ca. 1/5 of the area of Poland). In whole Poland, the Group employs 15.7 thousand Employees who create the innovative commodity and energy company. Two important system power plants belong to Enea Group: Kozienice Power Plant and Połaniec Power Plant. The Group includes also Lubelski Węgiel Bogdanka - the mine is the major supplier of the commodity to power plants belonging to the Group. Enea Group’s operations include also heat energy engineering in plants in Białystok, Oborniki and Piła.

Enea Group in numbers:

5.2 GW installed electric power

3 mining fields

121.3 thou. distribution lines with connections

15.7 thou. Employees

2.5 mln Customers