Stable EBITDA and revenue growth – Enea Group’s performance after 3 quarters of 2020

Enea Group recorded stable financial and operational performance during the three quarters of 2020. When compared to the same period last year, the Group’s EBITDA increased by PLN 37 million and revenue from sales by PLN 1.3 billion. The net debt/EBITDA ratio decreased to 1.37. The Group’s consolidated financial statements, including its net profit, were affected by non-recurring non-cash events. The Group started the process of analyzing the Development Strategy, which will be updated by taking into account the new external conditions and will enable a responsible and ambitious transformation of the concern.

• During the three quarters of 2020, the Enea Group generated EBITDA of PLN 2.6 billion and revenue from sales of PLN 13.5 billion.
• The volume of sales of electricity and gaseous fuel to retail customers rose by 3.4% y/y to 15.6 TWh.
• The Group’s net result (loss of PLN 43.7 million) was affected by the write-offs made and provisions recognized in the amount of more than PLN 1 billion (the net profit without non-recurring events was PLN 989.3 million).
• Energy generation from renewable sources increased in the Group by 9% y/y.
• During the three quarters of 2020, nearly 27 thousand renewable energy sources (including micro-installations) with a total capacity of 376 MW were connected to Enea Operator’s distribution grid.
• ENEA signed a Letter of Intent with the State Treasury on concerning the sale of all of its shares in the nuclear plant company PGE EJ 1.

In the first three quarters of 2020, the Enea Group generated EBITDA of PLN 2.6 billion (up by PLN 37 million y/y). Revenue from sales improved by 11% y/y, reaching nearly PLN 13.5 billion. The Group posted a net loss of PLN 43.7 million, which was affected by the impairment losses recognized by the company, of which PLN 423 million consisted of an impairment allowance on Enea Wytwarzanie’s generation assets, PLN 356 million was attributable to impairments and provisions related to the Ostrołęka C Power Plant construction project and PLN 254 million was related to Polska Grupa Górnicza. These were all non-cash events and did not affect the Group’s EBITDA.

A high level of performance of the investment plan was maintained in the analyzed period of 2020. The Group made capital expenditures of approx. PLN 1.6 billion, of which PLN 225 million was spent on investments related to environmental protection endeavors, including commercial connection of wind farms to Enea Operator’s grid and subsequent modernizations and projects to adapt the Group’s power plants to the BAT conclusions.

Enea Group’s Generation Area – completion of unit modernizations in Połaniec

The highest EBITDA of PLN 1.2 billion was earned in the Generation Area (up by PLN 58 million y/y). During the three quarters of the year, the Group produced nearly 17 TWh of electricity. In this period, unit 11 at the Kozienice Power Plant was in operation for nearly 5,300 hours, generating approx. 3.7 TWh of electricity. Energy generation from renewable sources increased in the Group by 9% y/y and the Group generated nearly 1.8 TWh of RES electricity in the period. Sales of heat in the generation segment were 3,989 TJ.

The Połaniec Power Plant completed the Feniks modernization project implemented since 2013. It served the purpose of boosting the economics and reliability of the power plant’s operations by carrying out a through modernization of conventional power units, extension of their life span and modification of the power plant’s emission parameters to the current, more strict standards. The last unit, whose modernization ended in recent quarters, was unit 5. The maximum capacity of the whole power plant increased to 1,899 MW.

Distribution Area with a dynamic increase of RES connections

The EBITDA generated in the distribution area reached PLN 994 million, increasing by PLN 189 million (23%) y/y. This result was driven by higher margins on licensed activities and a higher result on other operating activities, driven mainly by changes in the provisions for grid assets. During the three quarters of 2020, Enea Operator provided nearly 14.3 TWh of distribution services to end users. This signified a decrease in the total volume of sales of distribution services by approx. 450 GWh (3% y/y), with a concurrent increase in the number of buyers and higher sales to households. During the three quarters of 2020, nearly 27 thousand renewable energy sources (including micro-installations) with a total capacity of 376 MW were connected to Enea Operator’s distribution grid. For the sake of comparison, 19.5 thous. RES sources with a total capacity of 1.5 GW were connected during the entire year 2019. Only in the third quarter of the year, the distribution company connected 12 thousand new RES sources to the grid.

Increase in the volume of sales of electricity and gaseous fuel in the Trading Area

In the three quarters of 2020, the volume of sales of electricity and gaseous fuel to retail customers was 15.6 TWh, up 510 GWh, or 3.4% compared to the corresponding period of 2019. An increase in electricity sales (by 314 GWh) was recorded in both the business customer segment and the household segment. The sales volume of gaseous fuel also increased, by 196 GWh, i.e. 26.3% y/y.

The total revenue from sales of electricity and gaseous fuel increased in the period by PLN 434 million y/y, or 10.5%. This increase affected revenues in both the business customer segment and in the household segment. The Trading Area posted an EBITDA of PLN 59 million, which marked a drop of PLN 1 million y/y. This result of this area was favorably affected by an increase in the average sales price of energy and a revaluation of CO₂ contracts, partially offset by a negative effect of an increase in the cost of energy purchases and the costs of environmental obligations.

Results of the Mining Area in a difficult market environment

After three quarters of 2020, the consolidated revenue of Lubelski Węgiel Bogdanka was PLN 1,353.5 million (down by 16.8%), EBITDA was PLN 317.6 million (down by 48%), operating profit was at PLN 50.7 million (down 84.1%) and net profit at PLN 34.8 million (down by 86.8%).

After the three quarters of 2020, Bogdanka executed 19.7 km of corridors, of which 6.6 km in Q3 of the year. Production of commercial coal after 9 months was more than 5.5 million tons, which marks a decline of 22.3% y/y (in the Q3 itself, production reached 1.8 million tons). After the three quarters of 2020, sales of coal amounted to 5.7 million tons. The average yield at the end of September 2020 was 64.5%, compared to 65% one year earlier, and in Q3 itself it was 60.2% (vs. 64.6% in Q3 2019).

In the period in question, Bogdanka maintained its market position, achieving a high, 27.4% share in sales of coal to commercial energy sector. The overall share in total steam coal sales was at 20.8%. Approx. 85% of sales in the last 3 quarters were to Enea Group companies: Enea Wytwarzanie and Enea Elektrownia Połaniec.

COMMENTS ON THE ENEA GROUP’S PERFORMANCE FOR 3 QUARTERS OF 2020:

Paweł Szczeszek, President of the Enea Management Board:

“In the first three quarters of 2020, we generated stable financial results, posting an increase in the Group’s revenue from sales and EBITDA. The Enea Group’s net profit was affected by impairments, which were non-cash events and thus did not affect EBITDA. The net debt/EBITDA ratio decreased to 1.37 from 1.64 in the corresponding period of last year. Financial results build up our Group’s stability; its safe financial position allows us to implement the Group’s development and transformation plan in a responsible manner. We want to support the national energy and climate policies. Renewable energy sources will play an increasing role in our generation mix. We have been consistently improving our RES production ratio already; during the 3 quarters of 2020, we generated nearly 1.8 TWh from renewable sources. We are also looking at the market and seeking new investment opportunities in terms of RES projects, including offshore wind farms. We remain ready to cooperate with potential partners in joint investment projects. The Enea Group is also working on our Development Strategy update, which will adapt it to the new external conditions and enable an effective transformation process. Our activities, projects and investments will build the energy sector for the future, while supporting Poland’s economy through job creation and providing businesses struggling with the economic effects of the pandemic with the needed growth impulses.

The Enea Group has continued to provide stable electricity supply to its customers. I would like to express my gratitude to everyone, who has extended daily care for the safety of our customers and contractors, showing commitment and engagement in these difficult times, by making sure that our energy supply remains secure – said Paweł Szczeszek, President of the Enea Management Board.

Artur Wasil, President of the Lubelski Węgiel Bogdanka Management Board

– Our financial performance in Q3 2020 was driven by lower levels of sales due to the COVID epidemic and technical and geological issues. After a period of slower economic processes during the first half of the year, demand for steam coal normalized and we were able to restore our sales levels to the levels from previous years. Since we had to reduce the continuity of work on longwalls, we encountered the problem of deformation pressures building up, which in September led to a temporary hindrance in the functionality of gate roads and consequently also the progress of the longwall.  However, events like this are normal for mining operations and are only temporary – said Artur Wasil, President of the LW Bogdanka Management Board