Energa Group summarized the very successful year 2017. EBITDA amounted to PLN 2.2 billion, and revenues reached PLN 10.5 billion
Higher production, distribution and sale of electricity. Higher revenues, net profit and EBITDA. In 2017, Energa achieved better results in all Business Lines under conditions of very strong competition.
In 2017, Energa actively pursued the tasks included in the development strategy. The Group's EBITDA increased to PLN 2.160 billion - a result 133 million higher than in 2016. Revenues increased by PLN 353 million to PLN 10.534 billion. However, the net result amounted to PLN 789 million, up by PLN 642 million compared to 2016.
Capital expenditures amounted to PLN 1.402 billion in the previous year, of which the most, i.e. PLN 1.247 billion, was spent by Energa in the Distribution Business Line. Owing to this, the Group, among others, connected nearly 52,000 new customers (their number has exceeded 3 million), built and modernised 3,718 km of high, medium, and low voltage lines and connected to the grid 32 MW of new RES. In addition, Energa acquired EUR 250 million from the European Investment Bank for the modernization of distribution networks on favourable terms. As previously planned, the company prepared itself for the construction of a new Ostrołęka C unit which is to commence in 2018. The new unit will expand domestic generation potential in the future and strengthen the security of the Polish power system. The program of management optimization and costs reduction resulted in increased efficiency and optimized the allocation of funds to the goals that enhance the value of the entire organization.
- Such good results achieved in 2017 confirm that we have properly planned and carried out the tasks scheduled for the last 12 months. Although we faced strong competition and had to deal with regulatory restrictions, we were able to improve results in all our business lines. Taking care of the constant development of our services and enriching the offer with innovative solutions has enabled us to exceed the number of 3 million customers. Our credibility and operational efficiency gave us the opportunity to obtain additional external financing on attractive terms. These funds will be used to further modernize the distribution network, to improve the reliability and continuity of energy supply - emphasized Alicja Barbara-Klimiuk, acting President of the Management Board. - The improvement of our results from quarter to quarter and the higher capitalization of the company in 2017 were very positively perceived by investors. Energa received positive recommendations from analysts, confirming that it is a responsibly managed and stable entity - added Jacek Kościelniak, CFO.
In 2017, the Distribution Business Line traditionally maintained the most important position in the creation of the Group's result. It was responsible for almost 80 percent of Energa’s profit. Line's EBITDA amounted to PLN 1.723 billion (PLN 1.720 billion a year earlier). Revenues in 2017 were 6% higher than in the corresponding period of the previous year. The increase in revenues was a result of an increase in the average distribution rate (by nearly 5%) and a higher electricity volume distributed (by 2%). The Distribution result was also positively influenced by the increase in the distribution margin and the beneficial structure of sales of services. The Line's result was encumbered by, among others, higher costs of the real property tax and OPEX costs. The level of SAIDI index was higher than in the previous year by 55 percent, and the SAIFI index was higher by 7 percent. The deterioration of the indices was the result of disastrous consequences of the storms that took place in August 2017 and the hurricanes Ksawery and Grzegorz. Following the August disaster, nearly 180,000 customers had no access to electricity in the area served by Energa. Approximately one thousand transformer stations (MV/LV) required repair or partial reconstruction. 150 teams were involved in repairing the damage and restoring energy supplies, and losses were effectively and quickly eliminated. Energa Operator's distribution network was insured, therefore some of the losses were offset by the indemnity payouts.
The share of the Production Business Line in the Group's EBITDA in 2017 was 18%. Production EBITDA amounted to PLN 398 million, more than a quarter more than a year earlier. Its increase was mainly due to higher revenues from the sale of property rights and regulatory system services. Electricity production in water assets was higher by 26% and in wind assets by 27%. Good results were also achieved thanks to the increase in electricity sales prices by the Ostrołęka Power Plant. In 2017, the Group's generation assets produced approximately 335 GWh of electricity, or nearly 8 percent, more than a year earlier.
In 2017, the Sales Business Line generated EBIDTA of PLN 85 million, or 4 percent of the result of the entire Group. A year earlier, the share of Sales in EBITDA was 2%. The results were higher by PLN 45 million, despite the drop in the margin on the sale of electricity and gas. The decrease in the profitability of the core business was related to the growing burdens resulting from the performance of long-term contracts for the purchase of RES certificates. However, the result of the Business Line was improved by the dissolution of the revaluation write-offs for disputable receivables and the dissolution of the provisions for administrative and court proceedings established in December 2016.
In 2017, Energa Group took important decisions regarding contracts in the area of renewable energy. After carrying out in-depth legal analyzes, Energa concluded that a great number of existing long-term framework contracts for the sale of property rights arising from the certificates of origin (the so-called RES certificates) were invalid. As a consequence, Energa Obrót SA ceased to perform them and initiated 22 legal actions to have the invalidity of those contracts confirmed. Stopping the performance of these commitments, considered unjustified by the Energa Group, is to ultimately bring PLN 2.1 billion in savings over the coming years.
In accordance with the assumptions of the strategy in 2017, Energa actively sought solutions allowing it to modernize energy infrastructure and offer new services. Energa Operator obtained over PLN 166 million from the Operational Program Infrastructure and Environment for the years 2014-2020 for investments related to the implementation of a smart power grid. The plans are to adapt the network to the Smart Grid standards by further installing smart metering and automation, as well as building modern energy storage systems. Enspirion, a subsidiary of Energa, maintains its leading position in the area of DSR, i.e. management of the demand for electricity. The service has become one of the important instruments to improve the security of the National Power System. Enspirion is responsible for 1/3 of the transferable power in the tender resolved by Polskie Sieci Elektroenergetyczne in the middle of last year. In 2018, the Company is also preparing for the next PSE tender and for participating in the auction already being prepared within the power market.
Implementing the strategy aimed at the transition from being an electricity supplier to becoming a utilities and integrated solutions supplier, Energa consistently strengthened its co-operation with local governments by carrying out, among others, street lighting modernisation and using lighting infrastructure to improve road safety. Using its own experience in the field of electromobility, the Group also offers municipalities assistance in the implementation of low-emission transport.
In 2017, Energa conducted the process of optimisation of the Group’s structure and management. Companies whose tasks overlapped have been merged or liquidated. Energa has centralised logistics processes and IT support. In the past year, the number of companies decreased from 44 to 34, and by the end of 2018 will fall to around 20. In addition to reducing operating costs, these activities increase the decision-making capabilities and flexibility of the company in a changing market environment.