Enea Group’s performance up in Q1 2020
In the first three months of 2020, the Enea Group improved its financial performance in year-on-year terms, having recorded an increase in key indicators, including revenue (up by 14.5%), EBITDA (up by 14.3%) and net profit (up by 64.1%). The net debt/EBITDA ratio decreased to 2.11 (having improved by approx. 19%). Electricity generation from renewable sources continues to grow. Last quarter, the rate of this growth was 34%. Enea’s good performance, which was consistent with the expectations, was attained in a demanding market environment and in a situation where the Group found itself preparing for reorganization of operations due to the coronavirus epidemic. Actions taken by the Enea Group contributed to ensuring the security and stability of electricity supply.
- In Q1 2020, the Enea Group improved its financial performance in y/y terms, having recorded an increase in EBITDA, revenue from sales, other income and net profit.
- Sales of electricity in the business customer segment and the household segment increased, the Group also recorded higher y/y revenue from sales of electricity and gaseous fuel.
- The Enea Group generated almost 700 GWh of energy from renewable sources, up by 34% y/y.
- This was accompanies by growth in capital expenditures on investments related to environmental protection: PLN 51.3 million in Q1 2020 compared to PLN 33 million in Q1 2019.
The Enea Group generated PLN 4.6 billion of revenue in Q1 2020, an increase by 14.5% y/y. The Group’s EBITDA stood at PLN 913 million, having improved 14.3% compared to the corresponding period of the previous year. In the reporting period, the Group’s net profit reached PLN 459 million, up by 64.1% y/y. In the first three months of 2020, the Enea Group earmarked over PLN 564 million for investments, of which PLN 51.3 million was spent on investments associated with environmental protection.
Growth of energy production from RES in the Enea Group’s generation area
The highest EBITDA of PLN 472 million was earned in the generation area (up by PLN 72.5 million y/y). Of this amount, an increase by PLN 61.5 million y/y was recorded in the Must-Run Power Plants segment. Among the drivers of this outcome was an increase in revenue from sales of electricity and property rights. In Q1 2020, the Group generated over 5 TWh of electricity. Production from renewable sources rose 34% y/y, accompanied by a 11% y/y increase in the volume of electricity generated in the Green Unit. In February, Enea Wytwarzanie and GAZ SYSTEM signed an agreement to design a connection of the Kozienice Power Plant to the gas transmission network, which is expected to result in the creation of a design for a gas connection to be used by the power plant. In Q1 2020, Unit 11 at the Kozienice Power Plant was in operation for nearly 1,500 hours, having generated approx. 1 TWh of electricity. Sales of heat in the generation segment reached 2,056 TJ.
Stable growth of the Enea Group’s distribution area
The distribution area recorded an increase in EBITDA by PLN 58 million y/y to PLN 307 million. Sales of distribution services to end users remained stable at over 5 TWh. The number of distribution service recipients – Enea Operator’s customers – increased 1.3%. In Q1 2020, Enea Operator connected over 5,500 renewable energy sources, including micro-installations, to its network. In the same period of the previous year, the company connected slightly more than 1,000 such sources. The capacity of sources installed during the reporting period totaled nearly 177 MW, an almost seven-fold increase compared to Q1 2019.
Improved performance of the Enea Group in the trading area
The trading area posted EBITDA of approx. 8 million (up by PLN 18.5 million y/y). This result was favorably affected by an increase in the average sales price of energy despite the concurrent increase in the costs of energy purchases and environmental obligations. The volume of sales of electricity and gaseous fuel to retail customers totaled 5.6 TWh, up by 177 GWh y/y (more than 3%). The increase was recorded in sales of electricity in the business customer segment and the household segment. The sales volume of gaseous fuel also rose: by 84 GWh, or approx. 27% y/y. Total revenue from sales in Q1 2020 increased compared to Q1 2019 by PLN 188 million, or approx. 13% (without compensations). Revenue from sales of electricity and gaseous fuel improved.
High yield generated by the Enea Group’s mining area
LW Bogdanka’s consolidated revenue in Q1 2020 stood at PLN 464.1 million, EBITDA was PLN 134.8 million, operating profit reached PLN 44.9 million and net profit was PLN 33.7 million. In this period, the company attained its mining plan of 2.1 million tons (vis-à-vis 2.5 million tons the year before) and sales plan of 1.9 million tons (2.4 million tons in Q1 2019). In Q1 2020, the average yield stood at a high level of 65.7%, compared to 64.7% one year earlier. At quarter-end Q1 2020, the company maintained its market position, with a 20.6% share in the market for sales of steam coal and a 25.8% share in the market for sales of steam coal to the commercial power sector. During Q1 2020, the company sold 83% of its coal to other members of the Enea Group. In Q1 2020, 6.7 km of excavation works were completed, compared to 7.9 km a year earlier, which was in line with the expectations. In the reporting quarter, Bogdanka incurred capital expenditures of PLN 266.3 million. The largest portion of this amount, PLN 166 million, was spent on the acquisition of new longwall systems. Nearly PLN 73 million was earmarked for new excavations and modernization of existing ones.
Responsible operation of the Enea Group in epidemic conditions
The end of Q1 2020 coincided with a peculiar period of operation of the Polish economy in the shadow of the coronavirus epidemic. The Enea Group swiftly took appropriate action in response to the epidemic, in particular by changing the organization of work and by introducing special safety procedures, which secured the stable operation of the Group and the uninterrupted supply of electricity to its customers. The Group was unswerving in its efforts to assist various entities and institutions in their fight against the spread of coronavirus. Through the Enea Foundation, PLN 3.5 million was donated to dozens of healthcare centers across Poland to purchase specialist medical equipment, sanitary and personal protection supplies and other necessary items. On top of that, Lubelski Węgiel Bogdanka donated PLN 740 thousand to support medical centers in Lubelskie voivodship.
COMMENTS ON THE ENEA GROUP’S PERFORMANCE IN Q1 2020:
Paweł Szczeszek, Acting President of the Enea Management Board:
The Enea Group is adapting its operating model flexibly to the rapidly changing environment throughout the value chain. Our planned transformation of generation capacity toward low-carbon energy sources will strengthen the Group’s potential to the benefit of our customers and shareholders. Our solid financial results after Q1 2020 confirm our readiness to face challenges associated with trends that indicate the directions of development of Poland’s fuel and energy sector. The Enea Group keeps increasing the share of renewable energy sources in total electricity generation. Last quarter, this increase reached 34% y/y. In the generation segment, we are currently looking at the options to use gaseous fuel at the Kozienice Power Plant. Enea Wytwarzanie and GAZ SYSTEM signed a contract to design a connection of the Kozienice Power Plant to the gas transmission network. This step will enable the creation of a design for a gas connection to be used by our power plant, said Paweł Szczeszek, Acting President of the Enea Management Board.
Jarosław Ołowski, Vice-President of the Enea Management Board for Financial Matters:
In Q1 2020, we demonstrated solid performance by improving our key financial ratios in y/y terms and posting an increase in the Enea Group’s EBITDA, revenue and net profit. We generated the highest EBITDA – of PLN 472 million – in the generation area. Improved EBITDA results were also posted by the distribution and trading areas. Our financial standing remains stable, as has been confirmed by external international rating institutions. Fitch Ratings has published Enea’s long-term foreign- and domestic-currency issuer default ratings at ‘BBB’ with a stable outlook. The Group’s financial and operating performance in Q1 2020 coupled with its stable financial standing permit the responsible and consistent execution of our capital expenditure program across all lines of business, said Jarosław Ołowski, Vice-President of the Enea Management Board for Financial Matters.
Piotr Adamczak, Vice-President of the Enea Management Board for Commercial Matters:
In the trading area, we recorded an improvement in performance compared to the corresponding period of the previous year. Our revenue from sales of both electricity and gaseous fuel increased 13%. At the end of Q1 2020, the Enea Group found itself in a situation that was unprecedented in its history. As a result, we temporarily closed all 32 of our physical Customer Service Offices and moved and intensified our customer service activities in remote communication channels. Since mid-March, the number of accounts opened in eBOK has grown by an average of over 240% per day, while the number of e-invoices has increased 230% compared to the daily average in the preceding period. Today, our customers choose telephone and online contact channels more often and more willingly, and we thank them for their trust. Those of our customers who wish to benefit from direct contact with our company may do so in safe conditions of our reopened physical offices, said Piotr Adamczak, Vice-President of the Enea Management Board for Commercial Matters.
Zbigniew Piętka, Vice-President of the Enea Management Board for Corporate Matters:
Distribution remains a stable area of the Enea Group’s business in which ongoing large-scale investments are improving the quality of operation of our network and enhance its capacity in terms of energy collection from small distributed renewable energy sources. In Q1 2020, Enea Operator connected over 5,500 renewable energy sources, including 58 sources with a capacity of over 50 kW, with a total capacity of more than 135 MW. The number of micro-installations connected to the network in northwestern Poland increased more than five-fold. After the first three months of this year, the total capacity of the newly installed sources is almost 177 MW, which is almost seven times larger than that installed in Q1 2019. Enea Operator is also ceaselessly developing its live-line working technologies enabling the performance of a lion’s share of work on medium- and low-voltage power installations without shutting off the supply of electricity to customers. Nearly 85% of all work done on our low-voltage network is performed in live-line working mode, said Zbigniew Piętka, Vice-President of the Enea Management Board for Corporate Matters.
Artur Wasil, President of the Lubelski Węgiel “Bogdanka” Management Board:
The weaker demand for coal from our customers as a result of the warm and windy winter affected our output in the first quarter of the year as we adjusted our production level to the market situation. It would also be reasonable to point out in this context that the previous year’s comparative base was very high, because the Q1 2019 result was affected by several favorable drivers, including the record-high production in January of last year. The epidemic situation associated with the dissemination of the SARS-CoV-2 coronavirus that has been in progress since the beginning of the year, causing the disease COVID-19, did not significantly affect our operations in Q1 2020, said Artur Wasil, President of the LW Bogdanka Management Board.