ENEA responds to new market challenges by updating the Group’s Development Strategy

ENEA has responded to new market challenges by updating the Group’s Development Strategy, which focuses on a sustainable transformation of its generation assets to employ renewable and low emission technologies as well as investments in products and services that use state-of-the-art IT and digital solutions.

ENEA actively takes part in the transformation of Polish energy and oil sector. The company has updated the Group’s Development Strategy and its goals until 2030, with the perspective towards 2035. Implementing the updated Strategy will help achieve the climate goals both on the domestic and European level. ENEA Group has announced that in 2030 the share of zero- and low emission energy sources will constitute 41% of the total electricity generation, and in 2030 ENEA’s goal will be to raise that rate to 60% in 2035. A sustainable and responsible transformation of the Group’s energy generation assets will significantly lower the level of unit CO₂ emissions. The second pillar of the Group’s transformation will be the investments in new integrated products and services diversifying the present activity of the Group and employing state-of-the-art digital and IT technologies (such as Internet of Things, Blockchain etc.), which will create added value for both the company and its customers.

ENEA Group’s Strategy is aimed at strengthening the Group’s market position in all areas of its activities as well as at investing in new technologies, which will ensure competitive advantage, mainly in the customer service area. Furthermore, implementation of the updated Strategy also assumes:

• Sustainable and consistent growth of the Group’s value;
• Increase in electricity sales to retail customers up to 24.8 TWh in 2030, which will give the Group a 15% share in the electricity sales market;
• A fourfold increase in RES share in the electricity generation in 2030 due to the employment of state-of-the-art and economical technological solutions;
• Over PLN 64 billion CAPEX, including PLN 22 billion for transforming generation assets by 2035 while maintaining the Group’s security and financial stability;
• Increase expenditures in the Group’s CAPEX budget to 2% with a view to innovative research and development in ENEA Group in 2030;
• Further diversification of business activity and the growth in EBIDA from new business lines.

The updated Strategy responds to the dynamic changes as well as new trends in energy sector; it fits in the business operations model of a modern energy producer and is in line with the key stakeholder expectations. ENEA Group chooses sustainable and responsible transformation that entails developing zero- and low emission generation sources as well as greater diversification of the present value chain, including new business lines. By implementing advanced IT technologies and smart solutions, the Group plans to improve the operational efficiency and to optimize the increase in value of the managed assets and infrastructure in all segments. The updated Strategy entails greater flexibility as regards building relations with prospect business and technology partners to achieve the pursued goals.

As regards corporate governance, the Group will continue to build an organization founded on knowledge and effective processes, by strengthening organizational culture and development schemes.

Transformation of generation assets based on zero- and low emission sources

One of the main objects of the updated Strategy is the economically rational transformation of the generation capacities, which is to take place in such a way that the financial security and stability be maintained. Sustainable investment scheme entails optimization of the structure and sources of financing.

“We are a part of changes that are taking place in our environment, that’s why we are adapting our business model to the key market trends, using advanced and accessible technologies at all stages of the Group’s value chain. It is a considerable challenge for the company, but also an opportunity for strengthening its market position. The key assumption is the economically rational transformation of ENEA Group’s assets into a modern energy producer that provides its customers with reliable products and services as well as builds lasting relations based on respecting natural environment and common values”, says Mirosław Kowalik, President of the Board, ENEA S.A.

ENEA envisages a sustainable expansion of generation capacities and a responsible change in the energy generation mix. In 2030, 41% of the Group’s electricity generation will come from gas and RES. ENEA’s goal is to raise this rate to 60% by 2035. A great part in changing the Group’s energy generation mix will be played by renewable energy sources. The prospect RES share in the total energy generation will rise almost fourfold and will amount to 33% in 2030, with the view to stabilize by 2035. The Group will focus mainly in PV, biomass, biogas and wind farm projects.

Responsibly undertaken diversification of the Group’s generation portfolio will bring about measurable environmental results. ENEA’s goal is to achieve a 30% reduction in the unit CO₂ emissions by 2030 to 550 kg CO₂ /MWh. By 2035 this rate will drop to 434 kg CO₂ /MWh.

The Group plans to invest PLN 64 billion in total by 2035. The investments in new generation capacities, supporting the transformation of the company into a low emission energy producer, will require financing amounting to PLN 22 billion. PLN 14.7 billion will go directly to RES, and the management and development of these projects will be given to a new subsidiary – ENEA Nowa Energia. The sustainable investment scheme entails optimization of the structure and sources of financing.

The Group plans to achieve and maintain high ROE at 10% and ROA at 5% by 2030.

“Our goal is the growth of the Group’s EBITDA as compared to 2018 by 35% in 2025 and 39% in 2030. We will optimize the structure and sources of financing for our investment scheme. We plan to employ project finance technique, which will allow us to maintain a stable financial position and a safe ratio of net debt-to-EBITDA”, says Jarosław Ołowski, Vice-President for Financial Affairs, ENEA S.A.

The Group’s total installed capacity will increase consistently and will amount to 8,287 MW in 2030. Due to the implementation of the Strategy, the Group will possess 9,672 MW of installed capacity in 2035.

Target rates of installed capacity, share of zero- and low emission energy sources in the energy generation as well as unit CO₂ emission in the Group have been established taking into account the replacement of the 200 MW units 1-8 in Kozienice Power Plant with low emission units as well as the modernization of 200 MW units 2-7 in Połaniec Power Plant.

ENEA Group’s Strategy also entails an increase in the sales of electricity to retail customers to 24.8 TWh in 2030, which will give ENEA a 15% share in the electricity sales market.

Expansion of the electricity distribution network

In the capital expenditures planned for the period ending in 2030, as much as PLN 26.9 billion will be allocated to the distribution area, i.e. projects not only improving on the energy safety, but also supporting the plan of developing low emission generation capacities in ENEA Group, expanding the potential of the distribution network to receive energy from dispersed sources, including prosumers, as well as having a beneficial effect on the development of e-mobility infrastructure in Poland.

ENEA also plans to intensify its share in the research and development projects as well as preparations for implementing the development of the smart grid on a massive scale.

One of the Group’s key strategic goals is to ensure reliable and constant supply of electricity. The Group will maximize the reliability of the distribution network and will decrease the electricity distribution loss by 5%, improving SAIDI to 100 minutes and SAIFI to 2.03 in 2030. This will be achieved thanks to e.g. new investments in the network and further modernizations, the development of Live Line Working (LLW) technology and implementing modern IT tools that enable fast detection of the network’s breakdowns.

High quality, innovative products and services, new business lines

The share of ENEA Group’s expenditure on innovation and R&D in 2030 will amount to 2% of the CAPEX budget.

“Investments in developing and employing advanced technologies will allow ENEA to transform into a multiservice company, offering integrated product and service lines for our customers. We want to be active in the sales of energy service system operators, e.g. for micro-networks, developing micro- and macro-clusters as regards energy, e-mobility or prosumers. Our goal is to innovate in all areas of the Group’s activities. Diversification of the operations and well as focus on diverse products and services will change the operational model of the whole ENEA Group and contribute to the growth of EBITDA. We estimate that in 2030 the value of EBITDA from our new business lines will total PLN 360 million, which will constitute 7-12% of the Group’s EBITDA”, Mirosław Kowalik adds.

A responsible partner in sustainable management of relations

The Group plans a strong support for local development. Our goal is to maintain good relations with the local communities, which is a part of our corporate social responsibility and partnership forming policy. ENEA will take care of developing local homelands, as a multiservice company, desired employer and an entity stimulating activities and educational, health and ecological projects.

ENEA will continue to act in favour of building and fostering strong relations with the customers as well as modern communication, which will ensure effective distribution of reliable information. “As an innovative provider, we will meet our customers’ needs in a comprehensive way, by providing high quality products and services at an affordable price and at a convenient time. Activities undertaken to develop an innovative and comprehensive offer, which will meet the present market needs, will allow us to secure the position of a leading provider of innovative services for customers”, emphasizes Piotr Adamczak, Vice-President for Commercial Affairs, ENEA S.A.

“We are strengthening effective cooperation with all of ENEA Group’s subsidiaries, based on modern, transparent and ethical Corporate Governance present at all levels of the Group. We want to make an optimal use of our assets and adapt our organization to the dynamically changing environment in all stages of the value chain”, says Zbigniew Piętka, Vice-President for Corporate Affairs, ENEA S.A.

The basis for updating the long-term goals and directions of ENEA Group’s development, which were chosen in 2016, was the ambitiously implemented strategy. Many targets, which the Group had set with regard to 2025, had already been reached, including: sales of electricity to retails customers, which in 2018 totalled 20.5 TWh (vs. planned 20.1 TWh for 2025); installed generation capacity of 5.8 GW (vs. planned 5.8-6.3 GW for 2025); grid distribution loss index of 5.59% (vs. planned 5.9% in 2025) as well as ROA of 5.09% (vs. planned 5%) and ROE of 10.27% (vs. planned 10%). The previous Strategy, which has been implemented by ENEA in a consistent manner, has produced effects, such as good financial and operational results as well as strengthening of the Group’s market position.