The strategy implementation strengthens Enea Group’s position - solid performance of an innovative commodity and energy group for Q1 2017

Enea Group’s net profit grew by 10.6% as compared to the same period of the previous year and amounted to PLN 321 mln. The innovative commodity and energy corporation generated PLN 2,710 mln net sales revenue in Q1 2017 and PLN 666 mln EBITDA. The Group wishes to co-create the ecosystem of innovations in Poland and undertakes related initiatives. Enea’s activities aim at increasing the Polish energy security and reliability of energy supplies to Customers.

In Q1 2017 Enea Group reported a growth in operating results. In that period the Group generated 3,756 GWh electricity, which is by 12.1% more compared to Q1 of the previous year. The commodity and energy group reported also growths in sales of distribution services to end users by 5.2% yoy, which amounted to 4,975 GWh. The Company increased also the sales volumes of electricity and gas to retail customers by 120 GWh, which is by 2.4% yoy. The Group may also boast with a growth in sales of coal by 205 thou. tonnes, i.e. by 9.4% yoy.

- We are building an optimum model of the Group’s operation which strengthens its power and market position. We are conducting a rational investment programme taking at the same time care for the financial security and stability. We are focusing on establishing synergies and costs efficiency. Our financial performance is on the anticipated level, we are achieving growths in sales and production in the whole value chain. We are consistently implementing our Development Strategy, and due to that we are taking care for the Polish energy security, stability and reliability of supplies to our Customers – said Mirosław Kowalik, president of Enea.

Enea Group concentrates both on the organic growth and through acquisitions being market opportunities. Such a development model enhances Enea’s market power and allows the Group for building durable competitive advantages in the demanding environment.

In Q1 2017 the Group spent PLN 1,841 mln on investments, of which PLN 1,347 mln was allocated to equity investments, including the settlement of the transaction of acquiring one of the most efficient electricity generators in Poland - Połaniec Power Plant - in the amount of PLN 1,264 mln. On the acquisition of Połaniec Power Plant Enea used mainly own funds, including also the funds obtained as part of the first public issue and the issue of bonds available within the programme guaranteed by Bank Gospodarstwa Krajowego.

– The process of integration of Enea Połaniec with the Group which commenced just after the transaction is in progress. Due to that the Group will be able to fully effect the synergies which derive from the investment and Kozienice-Bogdanka-Połaniec mining and generation area created by Enea – emphasised Mirosław Kowalik.

Capital expenditures in the area of generation during the first three months of the year amounted to PLN 245 mln. On the other hand, in the area of distribution they amounted to PLN 150 mln.

In Q1 2017 on the construction site of the 1,075 MW supercritical power unit in Kozienice Power Plant a cold start-up was performed of the starting boiler room, raw water pumping station and electrostatic precipitator. The so-called hot start-up of the carburising system within coal unloading to coal storing sites - 12 thousand tonnes of coal were unloaded. A report on the readiness of 400 kV field for power supply was issued and 400 kV power was supplied to BAT 10-30, BBT 10-20 transformers. The whole investment, comprising ca. 30 thou. detailed tasks, is already 98% advanced.

Enea’s goal is co-authoring the ecosystem of innovations in Poland

The Group’s priority is innovativeness in all the links of the value chain. A confirmation of such an approach is Enea’s engagement in the development of electromobility. In April 2017 Enea became a member of the cluster entitled “Polish Electric Bus - electromobility supply chain”. The cluster was established on the initiative of Solaris in November 2016 and universities, scientific centres and enterprises commenced collaboration. The goal of the cluster is cooperation for electromobility development, in particular e-buses and components used for their construction, which will be based on technical solutions elaborated in Poland. The draft electromobility act, which is planned to enter into force in January 2018, foresees that as of 2028 30% of the urban bus fleet will be composed of electrical vehicles. As seen from the power sector the anticipated development of e-mobility will affect the growth in demand for electricity and future operation of the power system.

Appearing new technologies, growing expectations of Customers and volatile economic environment in Poland and the world, affect the changes in the method of operation of Operators of the Distribution Systems. Enea Operator dealing with the area of distribution in the Group successfully implements innovative solutions, focusing on the modernisation and extension of the distribution network in accordance with the leading trends in the energy sector which include e.g. development of smart grids and modern IT systems, supporting the grid management, or new institutional and technical solutions such as clusters, energy co-operatives, or the prosumer market.

A sample investment in line with the trends is a modern Power Dispatch Centre launched in March 2017 which allows for managing the high-voltage grid owned by Enea Operator in the north-western Poland from one place. PDC will enable flexible, fast and comprehensive response to events occurring on 110 kV grid. The investment considerably contributes to guaranteeing the continuity of electricity supplies to Customers.

Enea Group generates satisfactory financial results in the demanding market and regulatory environment

In Q1 2017 Enea Group generated PLN 2,710 mln net sales revenue. Consolidated EBITDA amounted to PLN 666 mln. Net profit, after a growth by 10.6% yoy amounted to PLN 321 mln.

In the period of January - March 2017, the highest EBITDA, PLN 262 mln, was generated in the area of distribution. The greatest growth in EBITDA, totalling to PLN 33 mln, was generated in the area of trade, which in Q1 2017 closed with EBITDA amounting to
PLN 51 mln. EBITDA of the area of generation amounted to PLN 202 mln in the reporting period, and of the area of mining, after a growth by 18.6% yoy, to PLN 178 mln.

- The Group’s operations are under the pressure of the market and regulatory environment. Our goal is a flexible adaptation to its conditions. We are conducting active optimisation operations in each link of our value chain, pursuing to build new and maximally use the existing synergy effects. It is reflected in the generated financial results – said Mikołaj Franzkowiak, vice-president of Enea for financial affairs.

LW Bogdanka after Q1 2017 - good financial and operating performance despite durable low coal prices

The Capital Group of Lubelski Węgiel Bogdanka in Q1 2017 generated sales revenue on the level of almost PLN 465.2 mln (growth by 10.6% yoy) and net profit in the amount of PLN 68.2 mln (growth by 25.2% yoy). EBIT in the reporting period amounted to PLN 89.7 mln (growth by 13.8% yoy), and EBITDA to PLN 179.8 mln (growth by 3.7% yoy).

LW Bogdanka assesses the generated financial results as good. Maintenance of high profitability ratios, despite a low level of coal prices was possible due to a growth in sales, with a concurrent consistent cost control and capital expenditure optimisation. EBITDA profitability in Q1 2017 amounted to 38.7%, which means that is remains one of the highest in the industry.

In Q1 2017 the production of commercial coal reached the level of over 2.4 mln tonnes. Sales in that period were reported on the similar level, which means that it grew by 9.4% yoy. The length of corridor excavations performed in the first three months of 2017 amounted to over 7.9 km, which means a growth by 23.4% as compared to the same period of 2016.

Bogdanka maintains a strong market position. After Q1 2017, its share in the market of steam coal sales was on the level of 17.8% and in steam coal supplied to the commercial power industry market on the level of 25.7%.

– I assess LW Bogdanka’s financial results generated after the first quarter of 2017 as good, taking into account the durable low coal prices. Their generation was possible due to the realisation of production and sale objectives - including sales of coal higher by 9.4% - and consistent cost control and capital expenditure optimisation. We have been maintaining a strong position, with large market shares and we remain the most efficient and most modern bituminous coal mine in Poland – said  Krzysztof Szlaga, president of Lubelski Węgiel Bogdanka.

The most important events of the previous quarter include the announcement by Bogdanka of the development strategy for the Area of Mining in Enea Group until 2025, with outlook to 2030, which foresees two development scenarios: base and flexible development, which assumes the average annual coal production on the level of ca. 9.2 mln tonnes.

- Having in mind the current and anticipated market situation we are implementing the scenario of flexible development. We are planning ca. PLN 9 mln production this year. In the presented strategy the initiatives which we deem key include a close cooperation and synergy accomplishment within Kozienice-Bogdanka-Połaniec area of mining and generation, doubling the base of operating resources and also implementation of a range of key innovative strategic initiatives. Pursuant to the dividend policy presented in the Strategy, at the end of April as Bogdanka’s Management Board we issued a recommendation of distributing dividend from profit for 2016 amounting to PLN 1 per share – added Krzysztof Szlaga.

Enea Group enhances the level of Customer satisfaction

The Customer is always in the centre of Enea’s attention, therefore the Group focused on the possibly best matching of the offer with their needs. The innovative commodity and energy group must think ahead so that to provide Customers, on time, with what they need - such is the role of energy groups in the contemporary world.

Enea undertakes actions each day to strengthen the relations with the existing Customers and encourage prospective Customers to benefit from the offer. One of the activities which serves this purpose is development of a loyalty programme entitled “Purchase Zone”. Customers joining it have a possibility of ordering products of reputable brands at attractive prices.

A new campaign for Customers also continues – “You win in Enea”. Its objective is encouraging Customers to a regular contact and checking the newest offers and proposals. Next, from the beginning of May, a new Customer Service Standard has come into force in Customer Service Centres. It is a fresh look at Customer care principles in Enea’s locations. In Q1 2017, we also strengthened the examination of Customer needs at the initial stage of a dialogue with them.

Enea Group’s priority is sustainable development based management

Enea has conducted numerous projects for years and has supported various initiatives within corporate social responsibility. Recently, the Company has joined the Responsible Business Forum Partnership Programme. It is a long-term and comprehensive programme of cooperation with companies - leaders of the responsible business which through their engagement and activities contribute to the promotion of the idea of responsible business in Poland and creating a good climate among various groups of stakeholders. Strategic partners are companies which hold experience in social responsibility and sustainable development.

The Group, as one of the elements of corporate social responsibility, particularly in the power sector, understands the importance of supporting vocational education. An example of such an activity of the Group within this scope in Q1 2017 is an agreement signed in March by Enea Operator on cooperation with Centrum Kształcenia Zawodowego i Ustawicznego (Professional Development Centre) in Złotów. The cooperation is to contribute to enhance the attractiveness of school graduates on the labour market and to facilitate Enea Operator in searching for specialised technical Employees.

Unalterably, Enea’s priority is development of the human potential. Skills, knowledge and experience of ca. 15.7 thou. Employees employed by the Group in many regions of Poland, is Enea’s strength and most valuable capital. It is also a commitment - Enea as a responsible employer through corporate development, caring for its financial condition is building a stable working environment for its Employees.