ENEA Group posts EBITDA, revenues and profit growth in Q1 2019

In Q1 2019, ENEA Group improved its financial performance. From January to March, the Group’s consolidated net sales revenue increased by more than PLN 1 billion (up by 34.2%) on the year before. Also, the volume of electricity generated from renewable energy sources grew significantly – by 39.2% y/y. ENEA’s positive results were achieved in a challenging market environment while the Group continued to invest in pro-environmental projects.

ENEA Group’s Q1 2019 net sales revenue reached PLN 4,010 million, up by 34.2% y/y, with the consolidated EBITDA of PLN 799 million, i.e. higher by 13.8% than in the corresponding period of the year before. The Group’s net profit in the reporting period amounted to PLN 280 million, up by 10.1% y/y. In the first three months of 2019 only, ENEA spent more than PLN 560 million on capital expenditure (up by 28.8% y/y), including PLN 33 million on exclusively pro-environmental investment.

The Group’s EBITDA grew in two business areas. The highest EBITDA – PLN 399.8 million – was posted in the Generation Area (up by 75.9%). The Area’s result was positively affected by higher market prices of electricity and green certificates and by the operation of ENEA Group’s generation assets going as planned, including the Green Unit in Połaniec Power Plant and the 1,075 MW Unit No. 11 in Kozienice Power Plant. The net electricity generation volume of Unit No. 11 alone reached 1,555 MW, up by 16% y/y. In particular, a significant EBITDA growth was recorded in the System Power Plants Segment (up by PLN 144.8 million) and in the RES Segment (up by PLN 50.4 million). Also, a strong EBITDA – PLN 222.9 million – was posted in the Mining Area (up by 74.8%). The higher result of the Area was due to higher net coal production (up by 20.9% y/y), LW Bogdanka’s improved operational efficiency and the higher price of coal sale.

In Q1 2019, ENEA Group generated a total of 6,108 GWh of electricity, slightly less than the year before (down by 227 GWh or 3.6% y/y). This was due to the planned shutdowns of the units subject to upgrades under the adaptation programme of ENEA Group’s generation units to the BAT conclusions. At 5,417 GWh, the sales volume of electricity and gaseous fuel to retail customers also dropped slightly on Q1 2018 (down by 3.2% y/y) while the sales volume of distribution services to end users remained virtually unchanged at 5,413 GWh (down by 0.8%). ENEA consistently utilises the potential of the Group’s installed RES generation capacities. In Q1 2019, the electricity generation from renewable sources grew by 39.2%, with the generation volume of the Green Unit alone exceeding 350 GWh.

LW Bogdanka Group’s Q1 2019 consolidated sales revenue reached PLN 540.8 million (up by 35.6%), with an EBITDA of PLN 222.9 million (up by 74.8%), an operating profit of PLN 128 million (up by 348.9%) and a net profit of PLN 110 million (up by 374.6%). In the reported period, LW Bogdanka incurred capital expenditures of nearly PLN 80 million. The largest part of this amount – PLN 62.4 million – was spent on new excavations and modernization of the existing ones.

In Q1 2019, Bogdanka built 7.9 km of galleries. Commercial coal production amounted to over 2.5 million tonnes, up by approx. 21% y/y, while coal sales reached almost 2.4 million tonnes, i.e. 20% higher than the year before. The average yield was 64.7%, compared to 56.7% a year earlier.

In Q1 2019, Bogdanka strengthened its market position, achieving a high 26% market share in coal sales for commercial power industry while the market share in total steam coal sales reached 20%. Approx. 85% of the coal sold in Q1 2019 was delivered to ENEA Wytwarzanie and ENEA Połaniec.

From January to March 2019, ENEA Group companies also continued their pro-environmental activities. In March, ENEA started cooperation with BOŚ (Bank for Environmental Protection) and with its investment outfit – BOŚ Eko Profit – with view to furthering RES development. The initiative is aimed at diversification of the fuel mix, as well as development of distributed energy sources and increasing the share of the RES Segment in ENEA Group’s electricity generation. On behalf of ENEA, the letter of intent was signed by ENEA S.A. and ENEA Wytwarzanie; under the project, the latter one will cooperate with local governments. Investments related to the adaptation of the Group’s power units to the BAT conclusions are also underway, thanks to which ENEA’s system power plants will once again significantly reduce the emission intensity of electricity generation. ENEA, the raw material and energy concern, monitors the environment and upcoming megatrends in the global power industry on an ongoing basis. Hence the Group’s interest in energy storage technology, which found effect in the execution an agreement with ENEA and Electric Power Research Institute (EPRI) on cooperation in research projects related to energy storage and distributed generation.

Mirosław Kowalik, President of the Board at ENEA:

– The financial results generated by ENEA Group in Q1 2019 demonstrate its stable market position and optimal use of assets in the main areas of the value chain. The growth in revenues, EBITDA and net profit indicate that we are able to achieve our objectives in a demanding and dynamically changing market environment. It should be emphasised that the good Q1 2019 result was generated on the back of the higher results posted in the Mining and Generation Areas and the on-target results of the Distribution Area, which for many years has been an important foundation of the Group’s potential. This is another quarter in which the new Unit No. 11 at Kozienice Power Plant posted good performance – it generated 1,555 GWh of net electricity and over PLN 85 million of operating profit. This is testament to the financial and operational efficiency of our modern, highly efficient generation units. We are consistently building solid foundations for further sustainable development of the Group and we are preparing for further adaptation of our resources and assets to the changing market environment, also in a strategic perspective – said Mirosław Kowalik, President of ENEA.

– While focusing on our business objectives, we also pursue many CSR initiatives for the benefit of the environment in which we operate. Our efforts are noticed not only by the direct beneficiaries of our projects. ENEA’s non-financial reporting practices were recognised by the Ministry of Finance as four of our actions were indicated as good practices worth recommending to other market participants. Moreover, 33 initiatives of ENEA Group were awarded in the Responsible Business Forum’s “Responsible Business in Poland. Good practices” report – Mirosław Kowalik, President of ENEA added.

Jarosław Ołowski, Vice-President of ENEA for Financial Affairs:

– The growth of net sales revenues of 34.2%, an EBITDA growth of 13.8%, a net profit growth of 10.1% – these figures allow us to assess the financial results of our Group for Q1 2019 as good, which is also confirmed by market opinions. Particularly satisfying are the results of the Generation and Mining Areas, whose EBITDA growth exceeded 70% each, which in turn is reflected in the consolidated results of the entire Group. Our financial standing is invariably stable and enables us to continue the Group’s development, subject to constant cost discipline and process optimisation. In Q1 2019, the net debt / EBITDA ratio remained at a safe level of 2.6 – commented Jarosław Ołowski, Vice-President of ENEA for Financial Affairs.

Piotr Adamczak, Vice-President of ENEA for Commercial Affairs:

– We are changing for our Customers by introducing sector-wide innovative solutions. In order to simplify the procedures and reduce the number of printed documents, we are currently conducting a pilot implementation of an electronic pen for signing contracts in our Customer Service Centre in Gorzów Wielkopolski. We have also launched a modernised electronic Customer Service Centre, which is more friendly and easier to use. Moreover, we are about to complete a modernization programme, which will help to standardise the appearance and functionality of our Customer Service Offices, so that all outlets offer the consistently highest standard of service. As in previous quarters, the Trading Area remained under the same pressure as the rest of the industry, resulting from the situation on the CO₂ emission allowances market – stated Piotr Adamczak, Vice-President of ENEA for Commercial Affairs.

Zbigniew Piętka, Vice-President of ENEA for Corporate Affairs:

– In Q1 2019, we completed a number of investments related to the expansion and modernisation of ENEA Operator’s power grids. The two largest investments are the redevelopment of the 110kV overhead line between Morzyczyn and Drawski Młyn on the Żukowo – Choszczno II section and the redevelopment of the 110kV line between Wałcz – Wałcz Północ – Mirosławiec. In the Ostrołęka C project carried out jointly with Energa, at the end of April we concluded a memorandum of understanding on financing the construction of the new power unit. By means of the memorandum, ENEA and Energa decided to specify in more detail the financing terms of the Project. ENEA made a commitment to provide the funds for the implementation of the Project in the amount of PLN 819 million starting from January 2021 – said Zbigniew Piętka, Vice-President of ENEA for Corporate Affairs.

Artur Wasil, President of Lubelski Węgiel Bogdanka:

– We entered the year 2019 well prepared, which found a reflection in very good Q1 results. The improvement of financial results in this period was driven by growth in production and sales, as well as by higher contracted prices, starting from January 2019. We stand by our declaration of raising our production to 9.4 million tonnes this year. Our priority is also to continue our works on further cost optimisation and on achieving operational excellence, as well as preparation for the opening of the Ostrów field, which we want to put into operation at the end of next year. Given the sound standing of the company, we decided to recommend a PLN 0.75 dividend per share, with 49.4% of the company’s FY 2018 standalone net profit earmarked for this purpose – commented Artur Wasil, President of LW Bogdanka.