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Good first quarter of the Energa Group: EBITDA higher than the year before

May 10, 2018

Energa Group worked out better financial result in Q1 2018 than the year before. EBITDA of the Group increased by 4%, reaching 626 mPLN. EBITDA of the key Distribution Business Line was kept at a good level, higher EBITDA was recorded for the Sales Business Line, whereas Generation Business Line repeated the result from the previous year. The Group recorded increased year-to-year electricity production, distribution, and sales volumes. 

In Q1 2018, particularly high increase in EBITDA (by 63 mPLN, to the level of 53 mPLN) was recorded for the Sales Business Line. A year ago, its result was a negative value (-10 mPLN). Such a good result is primarily the effect of reduced additional legal and contractual burdens due to the decision made in September 2017 deeming the long-term contracts on green certificate purchase void, and much lower burdens related to acting as Offtaker of Last Resort. The result of the Distribution Business Line slightly decreased due to lower revenues from connections and margin on distribution service (absence of favourable single event that improved the result in 2017). The result of the Generation Business Line remained at a stable good level vs. the previous year, also owing to greater energy production.

Net profit of the Energa Group in the period from January to March 2018 totalled 277 mPLN, whereas profit on operations amounted to 388 mPLN, namely by 9% more than the year before. Consolidated revenues, totalling 2.64 bPLN, were comparable to the result for the previous year. 

Investments of the Energa Group were continued, principally including further improvement to the quality of the distribution grid. In Q12018, investment expenditures totalled over a quarter billion PLN. Net debt to EBITDA ratio at the end of Q1 remained at a safe level of 1.9 as compared to the status as at 31 December 2017.

‘Satisfying results of Q1 indicate that we effectively implement our development strategy. Growth in the Group’s EBITDA in the conditions of strong competition on the market, and particularly high increase in the Sales Line, are good indications for the further part of the year. The results achieved form good grounds for projects planned for the year. In distribution, we implement a broad-scale investment programme to assure strong grounds for increase in EBITDA in the following years. We effectively use external conditions to achieve good results in the Generation and Sales Business Lines. With the additional very good financial security acquired on favourable terms, we can safely plan necessary investments related to technological development of our offer and the necessary upgrade of the grid,’ pointed out Alicja Barbara Klimiuk, acting as the President of the Board of Energa S.A.

Results at particular business lines

Distribution Business Line – always a driver for Energa’s development – in Q1 2018 worked out 81%of the Group’s EBITDA, namely 509 mPLN. For comparison, in Q1 2017, Distribution’s share totalled 88%, EBITDA dropped down by 22 mPLN vs. Q1 2017, which is an effect, among others, of lower distribution margin (including grid losses) principally caused by absence of the favourable event occurring in Q1 2017, namely adjustment of PSE transitional fee. Additionally, the result was affected by decrease in revenues from connections and increase in the cost of real estate tax, as well as higher OPEX than in the previous year.

Generation Business Line recorded 16% share in the Group’s EBITDA in Q1 2018 (a year earlier this was 17%). The Line’s EBITDA totalled 103 mPLN (in Q1 2017 this was 104 mPLN). Growth of revenues on electricity sales and certificates was reduced by factors independent of the Company, such as higher purchase cost of CO2 emission allowances, and the cost of consumption of fuels of key importance for energy production.

Sales Business Line worked out 53 mPLN in Q1, namely 8% of the Group’s EBITDA. This is as much as 63 mPLN more as compared to the negative result (-10 mPLN) in Q1 2017. The Line's revenues in Q1 2018 totalled 1,423 mPLN, which means they increased by 73 mPLN (5%) vs. Q1 2017. Electricity sales has the biggest share in the revenues, in Q1 2018 being higher by 7% year-to-year (namely by 90 mPLN). The increase was recorded both on the wholesale and retail markets.

‘The results of particular business lines and continuous monitoring of tasks executed in such lines provide us with hints for possible adjustments so as to use the assets managed in a better way. The rather stable stock exchange quotations benchmarked with the sector confirm that the investors evaluate the Management Board’s decisions as good ones. The Company's communication is transparent to allow the market to understand the objective behind specific measures. Now, we focus on improving the efficiency of funds invested particularly in the Distribution Business Line, as this will guarantee an appropriate stream of revenues in the long term, as necessary to implement the tasks planned in our strategy. Activities related to preparation for the start of the next phase of the Ostrołęka C project proceed according to schedule. While using our cooperation with the academic environment, we are intensifying measures related to implementation of new, innovative solutions to enrich our offer for over three million of our customers,’ says Jacek Kościelniak, Vice-President of the Board in charge of Finance.

Energy Production, Sales, and Distribution

Generation assets at the Energa Group in Q1 2018 produced 1,039 GWh of electricity, namely 2% more than in the analogical period of the previous year. Increase in production principally referred to hydropower plants. Energy production in other sources was slightly poorer, including the Ostrołęka power plant, CHP plants, and wind power plants.

In the first three months of the year, total volume of electricity sold by the Sales Business Line increased by 5% (namely by 0.3 TWh) vs. Q1 2017. This is an effect of increased sales volume both on retail market – by 3% (namely by 0.15 TWh), and on wholesale market – by 15% (namely by 0.1 TWh).

In Q1 2018, the volume of energy distributed increased by 233 GWh, namely by 4% vs. analogical period of 2017, with average rate of distribution service sales lower by 1% year-to-year.

Investments

In Q1 2018, the Energa Group completed investments at the level of 256 mPLN, of which almost 222 mPLN in the Distribution Business Line. These involved grid extension to connect new customers and producers, as well as upgrades aimed at improving reliability of electricity supplies. Investments have also been made on innovative technologies and grid solutions. As a result of the investments, in Q1 2018, almost 12 thousand new customers were connected, 931 km of high-, medium-, and low-voltage lines were constructed and upgraded, and 9 MW of new RES sources were connected to the grid.

In Q1 2018, Energa Operator improved the SAIDI and SAIFI indicators. They totalled 33.2 minutes per customer and 0.4 outage per customer, respectively. The improvement to SAIDI and SAIFI indicators vs. analogical period in the previous year is due to higher failure rate in the power grid in Q1 2017 caused by unfavourable weather conditions (blizzard, rime, and frost, as well as hurricane wind causing trees and branches to fall over the grid).