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After nine months of 2018 Energa Group’s EBITDA exceeded 1.5bn

November 08, 2018

After three quarters of 2018 the Energa Group recorded EBITDA exceeding PLN 1.5bn and net profits at PLN 680m. Revenues between January and September exceeded PLN 7.6bn. In nine months the Distribution Business Line traditionally continued to have the largest share in the growth of the Energa Group with EBITDA exceeding PLN 1.36bn.

After the nine months of 2018 the Energa Group generated a net profit of PLN 680 million. It is 22 per cent and PLN 121m higher than the result achieved in the same period of last year. After three quarters of 2018 the Group’s EBITDA totaled PLN 1,587m and was comparable to the same period of last year. The Group’s EBITDA for the nine months of 2018 was positively affected primarily by the Distribution Business Line (yoy EBITDA growth by PLN 19m) and the Sales Business Line (yoy EBITDA growth by PLN 26m).

 In the 3rd quarter of 2018 the Energa Group completed a number of important renewable energy and environment protection investment projects. At Ostrołęka B Power Plant the modernization of the last power unit was completed which, among other things, was equipped with denitrogenation and dust removal systems. In that way at the end of September all power plant units became fully operational. Moreover an agreement was signed for the construction of another exhaust gas cleaning system at the facility. The Żydowo pumped-storage facility’s overhaul and modernization works were completed as well. Larger hydroelectric plants of the Energa Group, including the Włocławek plant, were certified for main auctions in the power market. In total 31 applications were submitted for FIT/FIP agreements for Energa hydroelectric plants. The third quarter of 2018 was also marked by intense organizational and legal activities related to the Ostrołęka C investment project, i.e. the construction of a new, highly efficient power unit with the capacity of 1,000 MW. In October SPV Ostrołęka Power Plant was certified for a main auction to be held on 21 December.

“The Energa Group’s EBITDA is solid and clearly exceeds PLN 1.5bn. More importantly, the Group has generated net profits at PLN 680m to-date, an increase by 20% vis-a-vis the figure recorded after three quarters of 2017. Our results show that the Group has been performing well even in particularly difficult market environment. We are capable of improving the attractiveness and competitiveness of our products and services and such approach helps us win new customers on a regular basis. Addressing their needs we have been constantly investing in the Distribution Business Line developing competence and range of activities of our professionals to make them ready to market new, innovative solutions. At the same time within the entire Energa Group we have been carrying out projects as planned aimed at improving efficient operations and cost optimization,” says Alicja Barbara Klimiuk, acting President of the Management Board of Energa SA.        

Within the nine months of 2018 the Energa Group completed investment projects totaling PLN 1,042m, including almost PLN 860m worth of investments in the Distribution Business Line whose share in the Group’s EBITDA result has invariably exceeded 80%. Thanks to the company’s development investments, between January and September 2018, 40,839 new customers were connected, 3,145.1 km of high, medium and low voltage lines were built and upgraded and 33.5 MW of new RES sources were connected to the grid.

“The Group has been consistently implementing tasks planned for 2018. Our results have been stable and good despite clearly felt, record-breaking prices of CO2 emission allowances and electricity. It must be emphasized that after nine months we have a solid financial buffer that helps us secure the implementation of our strategy. It is crucial for the stability of the Group’s finances as during the nine of months of 2018 we spent over PLN 1bn on investments. I would also like to point out that the Group does not have the same potential of generation assets as other vertically integrated energy groups and as a consequence we are forced to buy a certain portion of electricity on the market. Given current very high prices of electricity, the above also impacts the performance of the Sales Business Line. However, thanks to a continuous market analysis and proactive steps, the adverse effect on our performance has been limited to the maximum. Those measures have been appreciated by shareholders and investors who have maintained positive recommendations for the company,” stresses Jacek Kościelniak, Vice-President of the Management Board for Finance, Energa SA.

 Results of the Business Lines after the nine months of 2018

Having the largest share in the growth of the Energa Group, in the nine months of 2018 the Distribution Business Line generated an EBITDA result totaling PLN 1,364m, being PLN 19m higher compared to the previous year. In the third quarter of 2018 EBITDA amounted to PLN 374m and accounted for 88% of the Group's quarterly EBITDA. Such high result achieved by the Distribution Business Line in the nine months of 2018 can be owed to a higher margin on distribution (by nearly PLN 107m), and a distribution service volume sold which was 3% higher as well as lower grid losses. Clearly higher OPEX costs in the 3rd Q of 2018 (mainly in the area of third party services and employee benefits) had an adverse effect on the result.

Within the nine months of 2018 the Generation Business Line’s EBITDA reached PLN 234m vis-a-vis PLN 267m in the corresponding period in 2017. Lower EBITDA was chiefly attributable to higher costs of purchasing CO2 emission allowances (by PLN 75m) resulting from higher market prices, and lower revenues from system services (by PLN 12m, due to a lower volume of the Operating Reserve) and from heat generation (by PLN 8m, due to lower generation volumes). Higher (by PLN 42m) revenues from sales of electricity resulting from higher selling prices at Ostrołęka Power Plant despite lower generation volumes and higher (by PLN 24m) revenues from sale of green property rights, had a positive effect on the result.

The Sales Business Line’s EBIDTA in the period between January and September 2018 totaled PLN 50m, up by PLN 26m on the corresponding period of 2017. The improved performance is driven by a higher margin on the sales of electricity (by PLN 55m yoy) on the back of reduced legal and contractual obligations (among others, a limited function of the Offtaker of Last Resort). In the 2nd and 3rd Q of 2018 the Group’s result was adversely affected by the effects of high energy prices in the market as well as by arbitration decisions and settlements with operators of wind farms.

 Energy production, sale and distribution

Generation assets of the Energa Group in the nine months of 2018 produced 2,851 GWh of electricity, namely 9% less than in the corresponding period of the previous year. This was due to factors such as: lower compulsory power generation at Ostrołęka Power Plant for the Transmission System Operator in Poland, overhaul of one of the units at this plant in the second and third quarter and a slight decrease in power generation in hydro and wind assets due to weather conditions in the second and third quarter of this year.

On the other hand, the total volume of electricity sold increased during the nine months of this year by 2%. It amounted to 17,564 GWh, which means an increase by 347 GWh in comparison to 2017.

Also the volume of electricity distributed between January and September 2018 was 3% higher compared to the corresponding period last year. It amounted to 16,927 GWh (16,465 GWh vis-a-vis the corresponding period of 2017).  

The SAIDI and SAIFI rates of Energa Operator in the nine months of 2018 stood at 124.6 min/cust. and 1.7 disr./cust., respectively (in 2017 those rates were 239.5 min/cust. and 2.2 disr./cust., respectively). The improved rates vis-a-vis those recorded in the corresponding period of last year can be attributed, among other things, to investments in the area of distribution and more favorable weather conditions compared to the previous year.

Over the first three quarters of 2018, the Energa Group made investments of PLN 1,042.2m, of which the majority amounting to PLN 860.1m was taken up by the Distribution Business Line, mainly for investments involving grid modernization in order to improve reliability of energy supply or to connect new users.