Energa: H1 performance up across the board
In H1 Energa posted 34% growth in net earnings, as well as higher revenues and EBITDA. Traditionally, the Distribution Segment drove the Energa Group’s growth. The Sales Segment sold the highest volume of energy in the last five years with the number of energy customers exceeding the 3 million watermark for the first time in its history. In turn, the Generation Segment ramped up production by 14% as nearly its entire asset fleet performed better.
In H1 Energa generated PLN 5.2 billion in revenues, up 5% from a year ago and net earnings of PLN 488 million, up 34% from last year’s result, net of impairment losses. EBITDA rose PLN 53 million to PLN 1,143 million. Energa booked higher operating results in Sales (7% more energy sold) and Generation (14% uptick in production). The Group produced 2.1 TWh of electricity (up 0.3 TWh), while the total volume of electricity sold was 10.1 TWh (up 0.7 TWh). The volume of distributed energy remained steady at a level close to last year’s, i.e. 11 TWh.
“H1 should be considered to be a very successful period. The Group is growing at the right pace in line with our strategy. Despite the challenging external environment we have substantially better performance than one year ago. We perceive energy security and an opportunity to enhance our top line not only in new conventional sources but also in a better balance in RES generation. That is why we are the leaders in energy storage and DSR (Demand Side Response) services. We kicked off H2 with a solid financial buffer also because we are effectively following our own growth path in the regulatory and administrative environment that exerts a strong influence on us”, says Daniel Obajtek, President of the Energa SA Management Board.
Segments perform better in an unfavorable environment
The Distribution Segment generated an EBITDA of PLN 930 million (up PLN 10 million over last year) despite the adverse impact exerted by the lower distribution tariff in 2017 and higher operating expenses. The higher margin on distribution as the outcome of a favorable sales split also made a positive contribution to the Segment’s result, especially in Q2 of this year. Distribution continues to be the unwavering driver of the overall Group’s growth: in H1 it accounted for 81% of the Group’s EBITDA.
The Generation Segment reported higher performance on persistently low prices for property rights, higher fuel costs and the increase in the property tax on wind farms. In H1 it generated an EBITDA of PLN 177 million, up PLN 9 million since last year. The 5% EBITDA growth was driven mainly by higher sales revenues: on electricity and regulatory system services. In H1 this segment produced more than 14% more energy than last year. The completion of the modernization of power generation unit number 1 in Elektrownia Ostrołęka B contributed to this outcome, which translates into higher efficiency in electricity generation. All its generation assets (apart from photovoltaic assets) produced more energy.
The Sales Segment steadily developed new products and in H1 it onboarded nearly 40 thousand new customers, nearly four times more than it lost to other sellers. Thanks to that, the number of customers at Energa Obrót surpassed 3 million for the first time in its history. PKP Intercity was one of the largest business partners it acquired. In Q2 the Segment clearly enhanced its performance despite the fixed costs it carried under the long-term contracts to purchase green certificates and it closed the first six months of the year with an EBITDA of PLN 11 million. In Q1 factors such as the decline in the electricity sales margin, the upswing in the costs of acting as the Offtaker of Last Resort and the unfavorable price for “green certificates” contributed to the Segment’s negative result (EBITDA of -PLN 10 million). However, Q2 brought about a very marked rebound and noticeable improvement stemming among others from the margin expansion on the sales of electricity to the tune of PLN 25 million and the 10% uptick in the sales volume.
The modern face of energy security
In June of this year Energa adopted its Innovation Strategy for 2017-2020 with an outlook to 2025+. Apart from developing smart grids and energy storage units, it posits greater flexibility in energy generation and developing new services for grid operators. To innovation alone, the Group will allocate roughly PLN 40 million per annum. The major vehicle for running these projects is the M. Faraday Memorial Research and Development Center established in June. The Group is also constantly expanding its competences in Demand Side Response, i.e. managing energy consumption. In June, its company Enspirion offered the largest volume of energy in a tender for a service to reduce capacity organized by the Polish Power Grid (PSE). In addition, in tests it conducted Enspirion retracted a record-breaking quantum of energy from the system, having regard for the conditions in Poland. In turn, the power plant in Ostrołęka launched the construction of an innovative weir on the Narew River to safeguard the level of water required to cool the power generation units while intervening in the river’s ecosystem to a minimum extent. Apart from that, Energa introduced a new application, in Ostrołęka, too, to provide heat consumers data access from any venue.
Energy storage and smart grids
The Distribution and Generation Segments that cooperate with one another constantly strengthen Energy in its leadership position in energy storage, local balancing and smart distribution grid management. Among other things, the Group has at its disposal Poland’s first virtual power plant outfitted with an energy storage unit (installation in the vicinity of Puck), and in the first half of the year it launched construction, jointly with Hitachi and PSE, of Poland’s largest hybrid battery energy storage unit on the premises of the Bystra wind farm belonging to Energa in the vicinity of Gdańsk. The implementation of a prototype system to enhance the operational security of electrical power grids will accompany it. In parallel, Energa Operator is testing smart grid management in Gdynia in the UPGRID project. The company has installed 55 prototypes among others to monitor and control the grids through which electricity is supplied to the residences of 14,700 customers.
New products and electromobility
In H1 Energa Obrót rapidly onboarded new customers and developed products expanded to include new services; roughly 80% of the newly-connected customers elected to sign up for these offers. The “Energy Professionals” service enjoyed particularly extensive popularity. Nearly 23 thousand customers enrolled in this service to protect them from various household mishaps. Energa is also constantly running electromobility projects to build its leadership position to enable it to capture a premium when the market enters into a rapid growth phase. Among other things, the Group launched Poland’s first electric car sharing service, it built its own network of seven charging terminals in the Tri-City and it is cultivating its collaboration with local governments interested in developing low emission transportation.
Investments and enhancing the reliability of energy supply
In H1 2017, Energa executed investment projects worth nearly PLN 528 million, including PLN 434 million in the Distribution Segment. This work consisted of grid modernization and expansion to connect new customers and generators. In H1 Energa:
- connected nearly 25 thousand new customers
- built and modernized 1,865 km of power lines of all voltages
- connected new renewable energy sources to the grid totaling nearly 12 MW.
The high level of capital expenditures in the Distribution Segment contribute to constant improvement in the reliability of electricity supply, which has placed Energa among the top players in Poland in recent years. In H1 2017, Energa-Operator improved its SAIDI and SAIFI indices by 23% and 8%, respectively, translating into 73.9 minutes per customer and 1.1 interruptions, respectively. One year ago these figures were 95.7 minutes per customer and 1.2 interruptions, respectively.