Strong financial and operational results for ENEA Group in H1 2019 – a rise in “green energy” generation and growing development potential of the Group

Growth in revenues (+33%), EBITDA (almost +30%) and net profit (+25%), which exceeded PLN 0.5 billion – these are the H1 2019 financial highlights of ENEA Group. The results generated by Poland’s second-largest energy group in terms of electricity generation are in line with plans and predictions. In the first six months of 2019, the Group generated 12.7 TWh of electricity and sold < 10 TWh of electricity and gaseous fuel to retail customers and < 10 TWh of distribution services to end users. Moreover, ENEA recorded a 12% rise in RES generation and spent PLN 104 million on pro-environmental investments.

In the first half of 2019, ENEA Group posted an increase of 33% in sales revenue, which reached PLN 8,020 million, i.e. up by PLN 1,980 million on the year before. The Group’s H1 2019 consolidated EBITDA was PLN 1,666 million, up by 28% y/y (a rise of approx. PLN 362 million) while the H1 2019 consolidated net profit amounted to PLN 579 million, up by 25% y/y.

ENEA Group’s H1 2019 CAPEX investments totalled PLN 1,049 million, up by 27% y/y, of which PLN 104 million were pro-environmental ones. A substantial part of the investment projects currently under implementation are related to the adaptation of Kozienice Power Plant and Połaniec Power Plant to the BAT conclusions. These projects are going to improve the environmental performance of ENEA Group’s generation assets.

The consistent implementation of ENEA Group’s CAPEX programmes aimed at upgrading and improving the efficiency of its generation units is already producing tangible pro-environmental effects. Namely, in the years 2010-2018, the emissions of nitrogen oxides (NO_x), sulphur oxides (mainly SO₂) and dust in the System Power Plants in Kozienice and Połaniec were brought down by an average of 60%, while their carbon footprint (CO₂ emissions) was reduced by more than 8%.

However, ENEA Group’s pro-environmental activities go further than just those strictly related to the energy infrastructure. The Group also undertakes projects aimed at raising awareness of environmental issues. These include signature initiatives such as ENEA EkoProjekty (EcoProjects) and voluntary actions like #TrashChallengeEnei.

In the first half of 2019, the highest EBITDA, PLN 730 million, was posted in the Generation area, up by PLN 293 million. The result of the area was positively influenced mainly by the increase in generation volumes at ENEA Wytwarzanie and the revenues from the sale of electricity and property rights. High availability of the Group’s generation sources helped to achieve stable electricity generation at the level of 12.7 TWh, which is on par with the corresponding period of the previous year. Once again, the volume of electricity generated from ENEA’s Unit 11 with a capacity of 1,075 MW grew to reach 2,981.9 GWh in H1 2019 (up by 24.6% y/y). Also, the Group recorded an increase of more than 12% in RES generation.

The Distribution area posted an EBITDA result of PLN 515 million, down by PLN 65 million y/y. It resulted from the high average prices of electricity, which contributed to higher costs of energy purchase for own needs and for covering the energy balance difference. Moreover, the result on other operating activities decreased in this area, mainly due to the change in the balance of provisions for grid assets and higher revenues from the insurer in the corresponding period of the previous year. In the first half of 2019, ENEA Operator supplied 10 TWh of distribution services to end users, which meant a slight drop in the total volume of distribution services, with a simultaneous rise in the number of users and in the sales volume of distribution services to households.

The Trading area posted an EBITDA result of PLN 35 million (up by PLN 6 million y/y). The retail trade was characterised by an increase in revenues from the sale of electricity to end customers. Wholesale trade, on the other hand, remains under the pressure of rising prices of CO₂ emission allowances, which affects the valuation of contracts and hedging instruments. At the same time, the total H1 2019 sales volume of electricity and gaseous fuel to retail customers dropped by approx. 4% vs. H1 2018, to 10.2 TWh.

The Mining area also generated a higher H1 2019 EBITDA result, which reached PLN 434 million, i.e. up by PLN 161 million y/y. The higher result of the area is due to higher production and sales volumes and a higher sales price of coal, as well as continuous work on improving the mine’s operating efficiency, especially in the area of fixed costs. In the first half of 2019, production of commercial coal exceeded 4.8 million tons, up by 6.8% y/y, with the sales volume of coal being almost on a similar level (nearly 4.8 million tons), up by 9.9% y/y. The average yield was 65.1% vs. 59.6% the year before. Moreover, 14.2 km of galleries were built in the first six months of the year. LWB further reinforced its market position, achieving a high market share of more than 28% in coal sales for the professional power industry. The company is also well on track to meet the new production target of 9.4 million tons at the end of this year, as declared earlier.

COMMENTS TO ENEA GROUP’S H1 2019 PERFORMANCE

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

– In the first half of this year, ENEA Group posted growth in key operating and financial indicators in most areas of its value chain, which was received positively by the market. ENEA Group companies reacted promptly and adapted correctly to the changes in their market environment and to the new market situation. And the results were as expected – in H1 2019, our revenues, EBITDA and net profit were up by 33%, nearly 30% and 25%, respectively. The consistent implementation of our CAPEX programme helps to build the potential of our Group. It also strengthens our market position and our readiness to take on the challenges related to the latest developments which have a huge impact on companies from the energy sector, especially in Europe. Intensive works are currently underway on the new updated ENEA Group’s Development Strategy, which we are planning to unveil till the end of this year. In the new strategy, we are placing great emphasis on designing the economically viable transition of our generation capacity towards renewable energy sources – changing the Group’s energy mix – and adapting our business model to the dynamically changing market environment and, most importantly, to the customers’ needs – said Mirosław Kowalik, President of the Board, ENEA S.A.

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

– The Groups’ sound financial performance in the first half of the year confirms our strong market position as we are consistently achieving our strategic objectives in all business areas. In the reported period, we posted growth in key financial indicators. Three business areas recorded EBITDA increases in year-on-year terms: Generation – up by PLN 293 million, Mining – up by PLN 161 million and Trading – up by PLN 6 million (standing at PLN 35 million). The good result of the Generation area was mainly due to the increased generation volume at ENEA Wytwarzanie and higher revenues from the sale of electricity and property rights. At the same time, the net debt / EBITDA ratio was at the safe level of 1.97 – commented Jarosław Ołowski, Vice-President for Financial Affairs, ENEA S.A.

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

– The first six months of this year were also a time of hard work in the areas of sales and customer service, due to the implementation of new price regulations. Moreover, we are pressing ahead with the efforts aimed at improving the quality of our customer services. We continue to modernise and streamline our contact channels with customers. We search for and introduce new solutions supporting customer information management, streamlining customer service processes and building customer satisfaction. We are convinced that we will reap the rewards of these efforts in future – stated Piotr Adamczak, Vice-President for Commercial Affairs, ENEA S.A.

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

– We keep rolling out innovative solutions across our distribution network. For instance, the implementation of the FDIR module in the SCADA system on a wider scale allows for automatic detection of failures, isolation of the failure place and restoration of deliveries to those network areas, where possible. We are also making preparations for the possibility to connect increasingly more renewable energy sources to our network in future. We are building and upgrading a number of elements of network infrastructure, such as HV, MV and LV lines and transformer stations – said Zbigniew Piętka, Vice-President for Corporate Affairs, ENEA S.A.