The Enea Group generated sound financial and operating results in Q1 2024 in a demanding market environment

The Enea Group’s results in the first three months of 2024 confirm Enea’s stable market position despite the extensive volatility and changes transpiring in the environment. The Group improved its EBITDA result y/y in three of four key business segments. The Group posted incremental growth in its EBITDA and net profit and improved its net debt/EBITDA ratio. In the subsequent months of 2024 Enea will focus on pursuing its ambitious CAPEX plan spanning distribution, generation, mining and sales to run the Group through the green transition process responsibly and effectively.

• The Enea Group generated a higher EBITDA y/y of PLN 1.88 billion. Revenue from sales and other income totaled PLN 8.38 billion and was down y/y by 33%.
• The production of electricity from conventional sources was 4.4 TWh and 558 GWh from renewable energy sources.
• Capital expenditures totaled PLN 441 million, with PLN 257 million of that figure representing investments in distribution, which is consistently gaining the potential to connect new sources.
• The Group finalized transactions to secure funding for growth projects in distribution and investments in renewable sources of energy.
• Enea’s Supervisory Board rendered a positive opinion on the Management Board’s proposal to cover last year’s net loss (more than PLN 1.6 billion) from future earnings and its recommendation not to pay a dividend for 2023 to buttress its capital for key investments.

The ratings awarded to the company by Fitch Ratings affirm the company’s sound financial position during its transition and of the overall power sector with long-term foreign and domestic currency issuer default ratings of BBB. Strengthening credibility on the market and among investors is crucial in the context of pursuing the Group’s transition and ensuring secure funding for its investment plans in all of the key business segments.

In Q1 2024 Enea sourced PLN 2 billion to fund investments in distribution and renewable energy sources

In early 2024 Enea signed two credit facility agreements to source external funding to develop its investment plans. The Company entered into a credit facility agreement of PLN 1 billion with Bank Polska Kasa Opieki S.A. and Powszechna Kasa Oszczędności Bank Polski S.A. The funds will be wholly earmarked for investments in generation units utilizing renewable energy sources. The Group also signed a second credit facility agreement in the short term with the European Investment Bank (EIB). The PLN 2 billion sourced in two phases (December 2023 and January 2024) will be wholly earmarked for investments in distribution to be carried out by 2025. The investments underwritten in this way will underpin the Group’s transition towards zero emissions.

The investment tasks in progress support Enea’s green change

The Enea Group spent PLN 441 million on investments from January to March 2024. The largest capital expenditures were incurred in distribution: PLN 257 million, with PLN 150 million being for connecting new offtakers and PLN 25 million for connecting new sources. At the end of Q1 2024 the total number of renewable energy sources connected to Enea Operator’s grid consisted of nearly 180 thousand installations with a total capacity of over 6.1 GW.

The Bejsce wind farm (Świętokrzyskie Voivodship) with a capacity of 20 MW acquired in 2023 is in the process of construction. Work completion is planned for 2025 while the connection of 10 MW is supposed to be conducted this year. Work has begun in the Group on the construction of the Dygowo I PV farm (Zachodniopomorskie Voivodship) and the Jastrowie II PV farm (Wielkopolskie Voivodship) is just about to be started. A new hybrid RES installation has already started to work on the Group’s land where the Darżyno wind farm (Pomerania Voivodship) is located. It consists of a 2 MW PV installation and a 6 MW wind farm. By utilizing cable pooling, namely combining two sources of renewable energy as part of a single grid connection, they are utilized more effectively and indicate the direction for the optimum usage of the grid’s connection capabilities.

The Enea Group’s development is taking place on the basis of sound financial and operational foundations

In Q1 2024, the Enea Group generated an EBITDA of PLN 1.88 billion, up by nearly PLN 833 million y/y. Revenue from sales and other income fell y/y to PLN 8.38 billion (versus PLN 12.53 billion last year). The net profit for the reporting period was PLN 1.04 billion. The net debt/EBITDA ratio was 0.85 compared to 2.83 in the corresponding period of 2023 and affirms the Group’s capacity to source external funding for the further development of renewable energy sources and of the grid.

The highest EBITDA of PLN 930 million was earned in the generation area. This represents growth y/y of PLN 440 million. The major drivers were the increase in EBITDA in the System Power Plants Segment in which an increase in the margin in sales was posted and the increase in revenue on the Capacity Market. The RES Segment saw a decrease in EBITDA due among other factors to the realization of a lower margin on the Green Unit (mainly as a result of lower electricity prices, coupled with a simultaneous decrease in the unit cost of biomass). In addition, in generation, the base effect from the corresponding period of the previous year relating to the costs incurred for the charge for the Price Difference Fund is significant.

W Q1 2024 r. the Group generated nearly 4.4 TWh of electricity from conventional sources. Generation from renewable sources was 558 GWh with a small decline y/y of 3%. The sales of heat in the Generation Area totaled 2.3 PJ (petajoules), signifying a result down y/y by roughly 4%. 

The Distribution Area posted EBITDA of PLN 613 million (up by PLN 187 million y/y). This is a consequence of the higher margin realized on the concession business and higher result on other operating business coupled with the simultaneous increase in operating expenses. In Q1 2024 Enea Operator delivered 5.2 TWh of distribution services to nearly 2.8 million end users.

The EBITDA result in the Trading Area was PLN 80 million, which is primarily the effect of higher margins on the retail market coupled with the simultaneous decline in revenue on compensation payments and the decline in the usage of provisions related to onerous contracts. In the period under discussion the sales volume of electricity was down 13% y/y to 6.5 TWh. The increase was caused by shifts in the customer portfolio. In the business customer segment the Group posted an increase in the volume of sales of electricity y/y of 14% (643 GWh), while the household segment saw an increase of 8% (103 GWh). In Q1 2024 the Enea Group practically discontinued the sales of gaseous fuel, which is reflected by the sales volume of this fuel, which fell by 99.6% y/y.

The Group’s total revenue from sales of electricity and gaseous fuel to retail customers fell from Q1 2023 by PLN 675 million, or by more than 15%, reflecting the decline in electricity prices on the wholesale market.

In the Mining Area: LW Bogdanka’s sales revenue was PLN 815.9, EBITDA was PLN 162.5 million while EBIT was PLN 48.3 million. The production of commercial coal in the period under discussion was 1.88 million tons with sales of 1.76 million tons.

 COMMENTS ON THE ENEA GROUP’S PERFORMANCE IN Q1 2024:

 Grzegorz Kinelski, CEO of Enea: 

“The new Management Board’s priority is to manage the Enea Group rationally and effectively in the direction of adapting the organization to the rapidly changing environment and preparing it to face the challenges related to transition.  We want to be poised to implement innovative management solutions and new technology and to build a modern RES generation fleet that will underpin sustainable development and respond to future needs. We continue to analyze the possible directions for the Group’s development in terms of the strategy update.

The capital expenditures planned for 2024 will contribute to growing RES generation capabilities, connecting new offtakers and new RES sources. They will also support the development of a smart power grid and the modernization of distribution grids. This year the Group plans to allocate more than PLN 161 million to projects in new RES capacities, mostly PV installations. At the same time, we are working on many projects in the preliminary phase of development and we anticipate intensive acceleration in terms of the RES capacities we have starting in 2025. Nearly half of the capital expenditures planned for 2024 will be allocated to distribution”, said Grzegorz Kinelski, CEO of Enea.

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

“The Company’s final financial results for Q1 2024 may be regarded positively despite the challenges the coal sales market places on the Company. In Q1 the Company ramped up the production and sales of commercial coal compared to the corresponding period of the previous year. The lower coal sales price and the diminished demand for steam coal on the domestic and international market made a major contribution to the posted financial results. The Company maintains its capacity to respond on an ongoing basis to the evolving market situation thanks to previous and current preparatory work, which allows us to ramp up production if needed”, said Artur Wasilewski, Vice-President of the LW Bogdanka Management Board for Economic and Financial Matters.