Current Report No.: 37/2023

Current Report No.: 37/2023

Date of Preparation: 29 August 2023

Issuer's Abbreviated Name: ENEA S.A.

Subject: Information on preliminary financial and operating results for H1 2023

Legal Basis: Article 17(1) of the Market Abuse Regulation - inside information

Body of the report:

In connection with the adoption, on 29 August 2023, by the Management Board of ENEA S.A. ("Company", "Issuer"), of information on preliminary financial and operating results of the ENEA Group for the first half of 2023, the Company hereby publishes the said preliminary results.

Consolidated financial results of the ENEA Group for H1 2023:

- Revenue from sales and other income: PLN 24,022 million,

- EBITDA: PLN 2,316 million,

- Profit before tax: PLN 625 million,

- Net profit for the reporting period: PLN 552 million,

- Net profit attributable to shareholders of the parent company: PLN 462 million,

- Capital expenditures on property, plant and equipment and intangible assets: PLN 1,202 million,

- Net debt / EBITDA ratio: 1.71.

EBITDA in the distinct operating areas:

- Mining: PLN 523 million,

- Generation: PLN 1,067 million,

- Distribution: PLN 859 million,

- Trading: PLN 71 million.

Selected operating highlights:

- Net coal production: 3.3 million tons,

- Total net electricity generation: 10.5 TWh, of which 1.1 TWh from RES,

- Sales of distribution services to end users: 10.1 TWh,

- Sales of electricity and gaseous fuel to retail customers: 11.6 TWh.

On account of settlements with eligible buyers pursuant to the Act of 7 October 2022 on special solutions to protect electricity buyers in 2023 in connection with the situation on the electricity market and on account of the application of the maximum price in accordance with the Act of 27 October 2022 on emergency measures to reduce electricity prices and support certain consumers in 2023, the ENEA Group recognized in H1 2023 compensation revenues in the total amount of PLN 2,115 million and in Q2 2023 in the total amount of PLN 894 million.

ENEA Group companies are obliged to transfer charges to the Price Difference Fund pursuant to Article 21 of the Act of 27 October 2022 on emergency measures to reduce electricity prices and support certain consumers in 2023 - as electricity producers and as energy companies engaged in electricity trading business. The ENEA Group recognized the cost of charges to the Price Difference Fund in the amount of PLN 1,582 million for H1 2023 and in the amount of PLN 647 million for Q2 2023.

The EBITDA result generated by the ENEA Group in H1 2023 was driven largely by the following factors (compared to H1 2022):

In the Mining Area, the decrease in EBITDA was caused primarily by a decline in the coal sales volume and an increase in operating expenses (an increase in the unit mining cost). Despite the decline in the production and sales volumes, higher revenue from sales of coal was recorded due to the higher realized sales price.

The Generation Area increased its EBITDA in the RES Segment (mainly due to the lower base in the corresponding period of the previous year (as a result of the provision for onerous contracts recognized in H1 2022)) and higher electricity prices; at the same time the cost of biomass increased and costs of a charge for the Price Difference Fund were recognized), and in the System Power Plants Segment (mainly due to the lower base in the corresponding period of the previous year (as a result of the provision for onerous contracts recognized in H1 2022) and an increase in the unit generation margin, the repurchase and Balancing Market margin, while a new cost item was also added, i.e. costs of the charge for the Price Difference Fund. At the same time, there was an decrease in EBITDA in the Heat Segment (mainly an increase in fixed costs and addition of costs of the charge for the Price Difference Fund).

In the Distribution Area, the higher EBITDA is mainly due to the higher margin realized from the concession business, with simultaneous increase in operating expenses.

In the Trading Area, the higher EBITDA result is mainly due to the use of provisions related to onerous contracts and lower provisions for expected losses and potential claims. At the same time, despite the recognition of compensation revenues, there was a decline in margins in the retail market.

Consolidated financial results of the ENEA Group for Q2 2023:

- Revenue from sales and other income: PLN 11,491 million,

- EBITDA: PLN 1,272 million,

- Profit before tax: PLN 262 million,

- Net profit for the reporting period: PLN 301 million,

- Net profit attributable to shareholders of the parent company: PLN 260 million,

- Capital expenditures on property, plant and equipment and intangible assets: PLN 650 million,

- Net debt / EBITDA ratio: 1.71.

EBITDA in the distinct operating areas:

- Mining: PLN 234 million,

- Generation: PLN 577 million,

- Distribution: PLN 433 million,

- Trading: PLN 71 million.

Selected operating highlights:

- Net coal production: 1.6 million tons,

- Total net electricity generation: 5.2 TWh, of which 0.5 TWh from RES,

- Sales of distribution services to end users: 4.9 TWh,

- Sales of electricity and gaseous fuel to retail customers: 5.5 TWh.

On 29 August 2023, the Management Board of the Company identified the need to reverse the impairment allowance for the value of shares in ENEA Wytwarzanie Sp. z o.o. in the amount of PLN 519 million and to recognize the impairment allowance for the value of shares ENEA Elektrownia Połaniec S.A. in the amount of PLN 636 million.

These events will affect the standalone financial statements of ENEA S.A. by reducing the Company's pre-tax profit and net profit for the reporting period by approx. PLN 117 million.

The events have no effect on the consolidated financial statements of the ENEA Group. They are non-cash items and therefore have no impact on either the consolidated or standalone EBITDA for the reporting period.

Standalone financial results of ENEA S.A. for H1 2023:

- Revenue from sales and other income: PLN 10,202 million,

- EBITDA: PLN -78 million,

- Profit before tax: PLN 422 million,

- Net profit for the reporting period: PLN 418 million.

The Company reports that the foregoing figures are estimates and as such are subject to change, and that their final amounts will be presented in the periodic report of the ENEA Group for H1 2023, which is expected to be published on 13 September 2023.

The Company clarifies that the term EBITDA is defined as the value of operating profit (loss) + depreciation and amortization + impairment losses on non-financial non-current assets (values for the reporting period). The Net debt / EBITDA ratio is equal to (loans, borrowings and non-current and current debt securities + non-current and current finance lease liabilities + non-current and current financial liabilities measured at fair value - cash and cash equivalents - non-current and current financial assets measured at fair value - non-current and current debt financial assets measured at amortized cost - other short-term investments) / EBITDA LTM. EBITDA LTM means EBITDA for the last 12 months.

The above definitions and calculation methodologies are the same as those used to calculate these ratios in the Issuer's periodic reports. The definitions of these terms are also included in the glossary of terms and abbreviations available on the Company's website (https://ir.enea.pl/slownik).