Financial and operating results of the Enea Group in H1 2022 – steady transformation of the Group in a challenging environment
In H1 2022, the Enea Group generated PLN 14.7 billion in revenue from sales and PLN 861 million in net profit – all that in a rapidly changing and tough environment caused by Russia’s aggression against Ukraine and Europe’s unstable energy market. The Group’s EBITDA improved in year-over-year terms and reached PLN 1.8 billion. The Group focuses on ensuring an uninterrupted energy security and the pursuit of the objectives of the Development Strategy. The recapitalization process was finalized with an additional PLN 750 million raised for capital expenditures in the distribution area. The Group also put into operation the first photovoltaic farm and signed letters of intent on the development of small modular nuclear reactors and the sale of LW Bogdanka to the State Treasury, in accordance with the strategic objectives providing for the disposal of coal assets owned by the Group and across the Polish power sector.
- Compared to the same period of last year, the Group’s EBITDA rose by more than 10%, while revenue from sales and other income improved by 49%.
- The Group generated 13.3 TWh of electricity, up more than 10% y/y.
- Energy generation from renewable sources remained at a similar level in year-over-year terms and stood at 1.2 TWh.
- In June, Enea and the Ministry of State Assets signed a letter of intent on the sale of an equity stake in LW Bogdanka to the State Treasury.
- Also in June, the Group put into operation a new photovoltaic farm in Jastrowie (Wielkopolskie Voivodship) as first of a number PV projects currently in progress.
In H1 2022, the Enea Group generated an EBITDA of PLN 1.8 billion (up more than PLN 176 million, or 10.6%, y/y). Revenue from sales climbed 49% versus the corresponding period of last year to PLN 14.7 billion. Net profit in the reporting period grew 15.7% to nearly PLN 861 million. The Group spent PLN 1.08 million on investments from January to June 2022, chiefly in the distribution area.
The highest EBITDA of PLN 673 million was earned in the generation area. The area posted a year-over-year improvement by PLN 17.4 million, or 2.7%. In the System Power Plants segment, EBITDA improved by PLN 26 million y/y, largely driven by a higher margin on generation with the concurrent establishment of provisions for onerous contracts and a lower margin on trading and the Balancing Market). In the RES Segment, EBITDA declined by PLN 40 million y/y, chiefly due to the establishment of a provision for onerous contracts and an increase in the costs of biomass purchases. In the reporting period, the Enea Group generated 13.3 TWh of electricity, up more than 10% y/y. Energy generation from renewable sources remained at a similar level in year-over-year terms and stood at 1.2 TWh. Sales of heat increased only slightly to 3.9 PJ (petajoules).
The EBITDA generated in the distribution segment was at the level of PLN 634 million versus PLN 687 million in H1 2021. The following factors contributed to this year-over-year change: the lower margin on licensed activity, higher operating expenses and the lower result on other operating activities. Enea Operator delivered 10.2 TWh of distribution services to 2.7 million end users. At the end of H1 2022, more than 140 thousand renewable sources were connected to Enea Operator’s distribution grid.
The trading area posted an EBITDA of PLN -33.6 million. The PLN 42.5 million decline y/y is mainly due to lower realized margins on the retail market. The lower margins are a result of a spike in the purchase prices of electricity and gaseous fuel on the wholesale market and an increase in the prices of green property rights, higher costs of provisions for claims of terminated green property rights contracts and movement in provisions related to onerous contracts.
The sales volume of electricity and natural gas in H1 2022 was down y/y by 1.3% to 12 TWh. The slight decrease was caused by a change to the customer portfolio. In the business customer segment, the Group posted a decline in the sales volume of natural gas (384 GWh y/y) and a simultaneous increase in the sales volume of electricity (380 GWh y/y). In the household segment, a slight increase by 1 GWh was observed in the sales volume of gaseous with a concurrent decline in the sales volume of electricity by 153 GWh. In the reporting period, total revenue from sales of electricity and gaseous fuel increased by PLN 2,059 million, or nearly 60%, as compared to the corresponding period of 2021.
The Enea Group focuses on pursuing the objectives of the Development Strategy and responding to the rapidly changing market situation, itself affected predominantly by the energy crisis caused by Russia and spreading across Europe. The successful recapitalization process brought an additional PLN 750 million to be spent on capital expenditures in the distribution area. Enea and the Ministry of State Assets signed a letter of intent on the sale of an equity stake in LW Bogdanka in line with the pursuit of strategic objectives related to the disinvestment in coal assets and the resulting provision of financial resources and opportunities for the energy transition. In accordance with the provisions of the letter of intent, the parties will cooperate in the preparation and execution of the acquisition of shares in Bogdanka. The State Treasury is interested in acquiring a total of 21,962,189 shares from Enea. The letter of intent will remain in force until the end of 2023. In June, a 3 MW photovoltaic farm was put into operation in Jastrowie, Wielkopolskie Voivodship. This event marked the completion of the first among many projects in the Group’s photovoltaic portfolio to be developed in the near future. The Company also established cooperation with an American developer with a view to building small modular reactors (SMRs). In turn, Enea Elkogaz, set up in March to execute a project aimed at restoring the generation capacity of 200 MW units at the Kozienice Power Plant, announced a competitive dialog procedure for the construction of CCGT power units. The new low emission sources will stabilize RES as they develop in the initial phase of the Enea Group’s efforts to achieve climate neutrality and will provide for the security of the electric power system and our customers.
In H1 2022, the consolidated revenue of Lubelski Węgiel Bogdanka was PLN 1,462.6 billion (up by 34.9%), EBITDA was PLN 615.4 million (up by 81%), operating profit stood at PLN 412 million (up by 226%) and net profit at PLN 336 million (up by 237.5%). The achieved financial performance was driven by the higher output and sales, propped up by an increase in the selling price of coal. In H1 2022, Bogdanka mined approx. 18.4 km of corridors. Production of commercial coal was more than 5.6 million tons (in Q2 alone, production reached nearly 2.8 million tons). Sales of coal improved by 14% y/y to 5.2 million tons (2.5 million tons in Q2 alone). The average yield in H1 2022 was 72.3%, compared to 71.6% one year earlier, and in Q2 itself it stood at 72% (vs. 70.8% in Q2 2021).
COMMENTS ON THE ENEA GROUP’S PERFORMANCE IN H1 2022:
Rafał Mucha, Vice-President of the Enea Management Board for Financial Matters:
“In H1 2022, the Enea Group recorded robust financial performance, as evidenced by the more than 10% y/y improvement in EBITDA. The performance of the trading area was affected by the large volatility of prices on the energy market and the movement in provisions for onerous contracts and potential losses on Tariff G due to the increase in the electricity purchase costs. Our net profit generated in the reporting period reached PLN 861 million. Our net debt/EBITDA ratio declined by 1.34 y/y to -0.28. Our current priority is the pursuit of green transition and ensuring the country’s energy security in the long run. The Group is actively looking for projects involving modern zero-carbon electricity generation technologies. In addition to investments in photovoltaic and wind farms, we intend to develop innovative projects related to modular nuclear energy generation”, said Rafał Mucha, Enea’s Vice-President for Financial Matters.
Lech Żak, Enea’s Vice-President for Strategy and Development:
“We are consistently focused on activities aimed at pursuing the objectives of our Development Strategy. In June, we put into operation a photovoltaic farm in Jastrowie, Wielkopolskie Voivodship. This year, we plan to launch additional investment projects that will gradually expand the Enea Group’s photovoltaic generation capacity. At the same time, at the Kozienice Power Plant, we are working on an investment to restore the generation capacity of 200 MW units in combined cycle gas turbine technology. These projects support our endeavors aimed at accomplishing the main objective, which is to achieve climate neutrality by 2050. The signing of a letter of intent on cooperation in the preparation and execution of the transaction to sell an equity stake in LW Bogdanka to the State Treasury is the next stage in the process of the Group’s responsible green transition, which will enable us to focus entirely on the development of renewable energy sources and the execution of innovative energy projects. Our recapitalization and share issue process completed in Q2 will enable us to execute our capital expenditure program in the distribution area,” said Lech Żak, Enea’s Vice President for Strategy and Development.