Wrap-up of 2023 by the Enea Group – accelerated development of RES projects supports the Group’s transition

The Enea Group is an active participant in the transition of the Polish power sector, consistently pursuing projects aimed at achieving zero emissions and climate neutrality. Capital expenditure projects completed in 2023 stepped up the Group’s generation potential from renewable energy sources. The Group is pursuing a long-term strategy to improve the efficiency and reliability of the grid by earmarking an increasing amount of capital expenditures to be spent on distribution. The financial and operating performance in 2023 reflected the dynamics of changes and challenges in the market and regulatory environments.

• In 2023, the Enea Group’s EBITDA improved in year-on-year terms to PLN 6.3 billion. Revenue from sales and other income reached PLN 48.2 billion.
• The Group recorded an increase in energy output from renewable sources (up 17% y/y), which totaled nearly 2.3 TWh, with a simultaneous decrease in energy output from conventional sources (down more than 21% y/y).
• As at the end of last year, the Enea Group’s installed RES capacity already exceeded 500 MW. In 2023, the Group boosted its renewable generation potential by 53 MW.
• Capital expenditures surpassed PLN 3.7 billion, of which PLN 1.86 billion were spent in the Distribution Area.
• The Group focuses on securing financing for development projects from external sources.

In 2023, the Enea Group generated an EBITDA of PLN 6.3 billion, or upwards of PLN 4 billion more than the year before. Revenue from sales and other income climbed 60% versus the corresponding period of last year to PLN 48.2 billion. In parallel, the Group recorded a net loss of PLN -443 million, largely caused by the company’s impairment losses on generation assets of Enea Wytwarzanie, Enea Elektrownia Połaniec and Enea Ciepło as well as the value of the mining segment from the Group’s standpoint. In 2023, the net debt/EBITDA ratio stood at a level of 0.85 compared to 1.73 in the same period in 2022. Last year, the Group spent more than PLN 3.7 billion on investments. It was a record-high year in terms of distribution expenditures. The investment budget in this area was PLN 1.86 billion.

Good financial and operating performance in the Group’s key business areas

The highest EBITDA of PLN 3.6 billion was earned in the Generation Area (up by PLN 3.3 million y/y). This was affected by the increase in EBITDA in the System Power Plants Segment and the RES Segment. There was an increase in margins from generation concessions (among other things, the effect of the year-ago base for forward power supply contracts, for which the costs required to fulfill the contracts exceeded the expected benefits), an increase in revenues from the Capacity Market, an increase in revenues from Regulatory System Services, and an increase in Green Unit margins (mainly the effect of higher electricity prices, with an increase in the unit cost of biomass). The Heat Segment saw a decline in EBITDA, which was influenced by, among other things, a decline in the unit margin on heat. In addition, there was an increase in costs due to the write-off for the Price Difference Fund and fixed costs across the Generation Area. In the reporting period, the Group generated 21.3 TWh of electricity. Energy generation from renewable sources was higher year-on-year by 17% and stood at 2.3 TWh. Sales of heat in the Generation Area dwindled by 7% y/y to 6.6 PJ (petajoules).

The Distribution Area posted an EBITDA of PLN 1.8 billion (up by PLN 493.2 million y/y). This was driven by the higher margin realized on the concession business, with a simultaneous increase in operating expenses and a decrease in the result on other operating activities. In 2023, Enea Operator provided nearly 20 TWh of distribution services to end users. Over 24 thousand renewable sources (along with micro-installations) were connected to the company’s grid. The total number of micro-installations connected to the grid surpassed 174 thousand with a total capacity of over 1.5 GW at the end of 2023.

The Trading Area posted an EBITDA of PLN -29.9 million. The year-on-year increase of PLN 46.1 million (lower loss) was largely caused by the utilization of provisions related to onerous contracts and the higher revaluation of CO₂ contracts. At the same time, despite the operation of the compensation system, margins in the retail market declined. 

In 2023, the sales volume of electricity and gaseous fuel was down by 3.5% y/y to 22.8 TWh. The decrease was caused by shifts in the customer portfolio. In the business customer segment, the Group posted a decline in the sales volume of electricity (by 642 GWh y/y) In the household segment, the sales volume of electricity increased slightly by 34 GWh. In the period in question, total revenue from sales of electricity and gaseous fuel increased in by nearly PLN 3.8 billion (or 31.7%) as compared to the corresponding period in 2022, reflecting the rapid electricity price increases on the wholesale market. This increase affected for the most part revenues in the business customer segment.

Enea deployed the Enea Trade 24 system for managing electricity purchases based on prices shaped by commodity exchange indices. This online platform enables business customers to optimize their energy purchase expenses and independently pursue the adopted purchasing strategy. The platform may be used by Enea’s existing and new business customers from any location in Poland.

Bogdanka’s record-high profits

In 2023, LW Bogdanka generated the highest revenues and profits in its entire history.  The LW Bogdanka Group’s revenue totaled PLN 3,939.3 million, EBITDA reached PLN 1,345.2 million and sales profit stood at PLN 896.5 million. In turn, net profit reached PLN 687.1 million, a 291% year-on-year increase. Commercial coal output in 2023 was 7.1 million tons with sales of 6.7 million tons.

Green Change rolled out by the Group

Capital expenditure projects completed in 2023 stepped up the Group’s generation potential from renewable energy sources by 53 MW. As at the end of 2023, the Enea Group’s installed RES capacity already exceeded 500 MW, with significant growth potential based on projects currently in the pipeline. The Group’s generation assets were expanded with the 35 MW Genowefa PV farm (in Wielkopolskie Voivodship) and smaller facilities in Tarnów (in Dolnośląskie Voivodship) and Tykocin (in Podlaskie Voivodship). The Group acquired a 19.8 MW wind farm under construction in Bejsce (Świetokrzyskie Voivodship), scheduled to kick off operation in early 2025. Work has also been launched on the Dygowo I photovoltaic farm, while the Jastrowie II PV farm is nearing completion.

PLN 1.86 billion earmarked for investments in distribution

Of key significance for the sustenance of the rapid growth of RES and prosumer energy projects is the construction and development of new power grids and the modernization and expansion of existing ones. The ENEA Group is pursuing a long-term strategy to improve the efficiency and reliability of the grid by consistently earmarking an increasing amount of capital expenditures to be spent on distribution. In 2023, these reached at a record high value of PLN 1.86 billion. It is also a priority to increase the power grid’s potential to connect additional renewable energy sources, while ensuring security and reliability of electricity supply. In 2023, Enea Operator commissioned new main supply points (GPZs) in Suchy Las (Wielkopolskie Voivodship), in the Poznań city center and in Szczecin, and modernized substations in Wronki and Chodzież (Wielkopolskie Voivodship), Recław and Gryfice (Zachodniopomorskie Voivodship) and Szczecin’s Gumieńce district. These investments upgrade the distribution network and also constitute an element of the Enea Group’s development strategy: building a smart grid.   

Transition with financial security  

Accelerating the progress of scheduled capital expenditure projects is made possible by securing financing, which is indispensable for the development of clean energy generation potential and for strengthening the distribution area that bolsters the expansion of new RES projects. At the beginning of 2023, Enea signed a facility agreement with a syndicate of five banks for a total amount of PLN 2.5 billion, of which PLN 1.5 billion will be earmarked for investments in the distribution area and the execution of renewable energy projects. The Group also signed an investment loan agreement with the European Investment Bank (EIB). The PLN 2 billion raised thereunder will be allocated in full to investments in the distribution area to be carried out from 2023 to 2025.

COMMENTS ON THE ENEA GROUP’S PERFORMANCE IN 2023:

Grzegorz Kinelski, CEO of Enea: 

The past year in the power sector clearly demonstrated that a number of growth aspects still require special endeavors to accelerate the transition. In parallel, the increase in the installed capacity of renewable energy sources in the Polish Power System and the rapid growth of energy output from renewable energy sources is a strong indicator of our involvement in the sector’s expected shift. The Enea Group is actively and consciously participating in the sector’s transition process, supporting the diversification of generation sources, the expansion of its own RES generation park and the upgrades and development of power grids to be ready to face the challenges of the future. 

The Group’s financial and operating performance reflected the dynamics of changes and challenges in the market and regulatory environments. Regardless of the system regulations that are preordained to shape the structure and organizational solutions to be adopted by the sector of conventional power generators, the Enea Group is committed to taking steps aimed at achieving the goal of full neutrality and ensuring a responsible participation in the transition of the Polish power sector. Our mission is the pursuit of sustainability in line with the expectations of the market, our shareholders and customers. In 2024, we will continue to strive for the achievement of our Group’s transition objectives by continuing to invest in renewable energy sources and the distribution network. There is only one direction, and that is Enea’s Green Change,” said Grzegorz Kinelski, CEO of Enea.

Artur Wasilewski, Vice-President of the LW Bogdanka Management Board for Economic and Financial Matters:

“The achievement of the record-high financial performance in Bogdanka’s history confirms our role as a leading supplier of hard coal to the power sector and our status as one of the most efficient companies in the Polish mining industry. Today, Bogdanka is in a very good financial standing. These achievements were driven by the outstanding dedication and determination of our staff, cooperation with the Enea Group and efficient management of the mine, including the pursuit of an effective cost policy. The cash flow generated by the company now provides stable financing for operating and investment endeavors. Our 2023 performance is particularly satisfying, given that it was generated during a complicated and challenging period for our mine and Poland’s entire mining industry,” said Artur Wasilewski, Vice-President of the LW Bogdanka Management Board for Economic and Financial Matters.