ENEA Group announces its results for Q1 2018 – strong financials and higher energy generation

Good operating and financial results of ENEA Group and significantly higher energy generation in the first quarter of 2018 demonstrate the effects of last year's investments in generation assets. The increase in the Group's overall EBITDA along with the improvement in the EBITDA results in three areas confirm the consistent development of the modern energy and resources conglomerate. The strategic goal of increasing the sales of electricity to end users is being implemented as planned. Thanks to its stable financial standing, the Group responsibly executes its investment policy.

In the first quarter of 2018, the Group’s overall EBITDA amounted to PLN 702 million and grew by 5.4% on the corresponding period of the previous year, whereas net sales revenues reached PLN 2,988 million, up by 10.3% respectively. The Group improved its EBITDA in three areas of operations. The highest EBITDA, PLN 297 million, was generated in the distribution area (an increase of 13.4%). A substantial EBITDA result was also achieved in the generation area – PLN 227 million (higher by 12.3%). The main growth factor in this area was higher generation capacity due to the acquisition of Połaniec Power Plant and the launch of Unit No. 11 with 1,075 MW capacity at Kozienice Power Plant. The EBITDA result in the trading area was 53 million (up by 4.9%). Only the mining area, where temporary geological difficulties were encountered in the first quarter of the year, had a worse result than in the previous year. Net profit in the reporting period was PLN 254 million, as compared to PLN 321 million a year earlier.

The results for the first quarter clearly show the effects of acquisitions and investments in generation assets and prove the validity of the decisions taken. ENEA is meeting its target of increasing sales of electricity to end users as planned. The volume of electricity and gas fuel sold to retail customers grew by 574 GWh, i.e. by 11.4% y/y, which translated into an increase in total sales revenue of PLN 116 million, i.e. by over 10% on the corresponding period of 2017. In this period, heat sales also increased to reach 2,737 TJ (up by 30.8% y/y).

In the first quarter of 2018, ENEA Group generated 6.3 TWh of electricity, i.e. 68.7% more than in the first quarter of 2017, of which 5.9 TWh was generated from conventional sources. There was also an increase in renewable energy production of 165 GWh. Sales of distribution services to end users amounted to 5.2 TWh, i.e. up by 4.2% on the corresponding period of the previous year. ENEA Group spent PLN 437.4 million on investments, with the net debt/EBITDA ratio remaining at the safe level of 2.0.

The first three months of this year were the first quarter of operation of the newly-launched Unit No. 11 at Kozienice Power Plant. From commissioning to the end of March, the unit produced more than 1.5 TWh of electricity, operating more than 2,100 hours in that period. The unit is highly flexible – the maximum capacity variation within 15 minutes amounts to 160 MW. On 7 May, the planned warranty inspection of the unit commenced. The periodic inspection of the installations and systems along with other works which can be executed only when the unit is at a standstill will last until 27 May.

In the first quarter of 2018, LW Bogdanka generated consolidated revenues of PLN 398.7 million, i.e. 14.3% lower than in the previous year. Consolidated EBITDA was PLN 127.5 million, while the operating profit reached PLN 28.5 million and the net profit stood at PLN 23.2 million. The results were affected by geological and hydrogeological factors, which translated into a temporarily lower yield rate and, consequently, lower production and sales. On the other hand, the financial result was positively influenced by clearance of the settlement between the company and the consortium of Mostostal Warszawa and Acciona Infraestructuras. The positive impact on operating profit and EBITDA of this one-off event was approx. PLN 28.7 million.

The production of commercial coal in the first quarter of 2018 amounted to nearly 2.1 million tonnes, compared to 2.4 million tonnes in the corresponding period of last year. Coal sales stood at 2.0 million tonnes, on 2.4 million a year earlier. The average yield reached 56.7% (66.7% a year ago). The company's share in the thermal coal market in Poland after Q1 2018 was 16.5%, while the share of coal deliveries to the power industry was 22.7%.

In May, Bogdanka filed an application for the mining licence for the “K-6 and K-7” deposit. The operable resources covered by the Deposit Development Project are estimated at 66 million tonnes during the term of the licence applied for by LWB, i.e. until 2046. Subsequently, Bogdanka plans to apply for an extension of the licence, which would allow to increase the level of resources by another 60-70 million tonnes. The first wall of the “K-6 and K-7” deposit may be opened in 2022, provided that the licence is granted later this year.

COMMENTS ON THE Q1 2018 RESULTS OF THE ENEA GROUP

Mirosław Kowalik, President of the Board at ENEA

–  After a very good year 2017, which was in many respects a breakthrough year for ENEA Group, in the first quarter of 2018 we continued to implement the tasks and goals set out in our Development Strategy. Our responsible investment policy has strengthened the Group's position in the energy market and the country's energy security. We continue our efforts to develop optimal synergies between the segments and to improve our operating efficiency. We increase expenditure on environmental protection and the share of renewable energy in our production. Rapid technological progress and new market regulations mean that we will place greater emphasis on diversification of our investment projects.

We actively participate in the construction and development of electric vehicle (EV) charging infrastructure in Poland. We strengthen the Group's competence and monitor the plans of local authorities across our distribution network in order to be able to offer them activities in the field of further development of electromobility. We intend to build a network of EV charging stations in north-western Poland. We have already started cooperation with Railway Communication Works (RCW). ENEA Serwis will be a certified distributor, installer and service provider for networks of EV charging stations constructed by RCW – said Mirosław Kowalik, President of ENEA.

Piotr Olejniczak, Vice-President of ENEA for Financial Affairs

– The Group's financial position is safe, thanks to, among others, constant cost discipline, search for process optimisation and care for appropriate use of its resources. The achieved quarterly results – a 5.4% increase in the Group's EBITDA, an 11.4% rise in the volume of energy and gas sales, a 10.3% growth in net sales revenues and a stable financial situation – allow us to implement our investment programme responsibly and consistently across all areas of our operations. The first quarter of this year as well as the improved results generated in three areas of our business demonstrate the effects of recent investments in the generation and distribution areas. We are well on track to achieving the goals and ratios set out in the Group's Development Strategy until 2030 – commented Piotr Olejniczak, Vice-President of ENEA for Financial Affairs.

Piotr Adamczak, Vice-President of ENEA for Commercial Affairs

– In the trading area, our activities continue to focus on increasing revenues from the sale of electricity and gas fuel. Thanks to the constantly developing product offer, new customers are acquired and the volume of electricity and gas sold increases - in the first quarter of 2018, we recorded an 11.4% increase compared to the same period last year. Our response to today's market challenges is a customer-oriented business model. In addition to electricity, the newly-launched ENEA Smart and ENEA Eco products provide access to new technologies and innovations. We identify new trends and familiarise our customers with them, fulfilling our mission of being an innovative power conglomerate. In addition, the ENEA Eco offer promotes greater consumption of electricity at night, thus supporting the fight against smog. We intend to develop both of our product lines in the following quarters of this year – stated Piotr Adamczak, Vice-President of ENEA for Commercial Affairs.

Zbigniew Piętka, Vice-President of ENEA for Corporate Affairs

– The first months of operation of the new power unit at Kozienice Power Plant have already shown us the benefits of our latest investment. Unit No. 11 proved highly reliable and flexible, making it possible to react quickly to the changing demand within the grid. From the moment of commissioning to the end of the first quarter, the unit generated over 1.5 TWh of electricity. As of 7 May, a planned warranty inspection is underway, during which the installations and systems are checked, adjusted and calibrated, and the filters and oils are replaced. We invariably invest in network modernization and redevelop strategic power stations. For example, in January this year ENEA Operator completed a several-stage reconstruction of the Main Transformer Station (GPZ) in Kostrzyn-upon-Oder. We are continuously working on improving the grid operation reliability and developing IT tools supporting the management of our distribution network – said Zbigniew Piętka, Vice-President of ENEA for Corporate Affairs.

Artur Wasil, President of Lubelski Węgiel Bogdanka

– The difficulties we encountered in the past quarter were of temporary nature. Since March, production has been proceeding as planned. We uphold this year's extraction plan at a level not lower than 9 million tonnes. We are currently focusing on preparations for opening, through the existing underground infrastructure, the Ostrów deposit, for which we obtained a mining license in November last year. The first wall is planned to be put into operation around 2020 – commented Artur Wasil, President of LW Bogdanka.