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Distribution Drives Value at Energa Group in Q1 2019

May 30, 2019

 

In a challenging market environment, the Energa Group delivered PLN 554 m in EBITDA and PLN 2.97 bn in revenue in the first quarter.

The Distribution Business Line continues to be the driving force behind the performance of the Energa Group. Its EBITDA at PLN 548 m accounts for 99% of the Group’s total figure. An improvement relative to the first quarter was recorded by the Generation Business Line, with PLN 118 m in EBITDA fuelled by high market prices for electricity and all-time high wind energy output. On the other hand, Sales Business Line’s EBITDA was negative at PLN -95 m.

A quarter marked by investments

In the first quarter, the Energa Group consistently invested in new generation capacities and new energy technologies. The goal is to drive the value of the Energa Group, defend the strong leading position on the domestic market in terms of the share of renewable energy sources in the overall generation mix, and strengthen the energy security of Poland. The Group started the construction of the new Przykona Wind Farm with an installed capacity of 30 MW and average annual energy output of around 75 GWh. Its nine wind turbines and the necessary accompanying infrastructure will be located on 250 hectares of reclaimed soils of a former lignite mining site. It is an exemplary socially responsible model for the implementation of onshore wind energy projects in Poland. Also in Q1 this year, the Energa Group began the construction of Poland’s largest electricity storage system with target rated power of 6 MW and energy storage capacity of 27 MWh. The hybrid warehouse is located in the vicinity of the Bystra Wind Farm near Pruszcz Gdański.

“The first quarter of 2019 proved very successful for our Group in terms of carrying out our distribution and generation activities according to plan. Our business determination and investment activity, especially in the field renewable energy, work to our benefit. Owing to the consistent expansion of our renewable energy fleet, we took advantage of good weather conditions in the first three months of the year, improving our wind energy output by almost 50% year on year. We spent nearly PLN 370 m on investments in the first three months of the year”, stressed Jacek Kościelniak, Vice President, Finance at Energa SA.

Performance of Business Lines

In Q1 2019, the Distribution EBITDA accounted for as much as 99% of the Group’s EBITDA (vs. 81% in the corresponding period). Both EBITDA and EBIT increased by 8% year on year to PLN 548 m and PLN 346 m, respectively. A PLN 54 m increase in the distribution margin and lower grid losses had a considerable impact on the result. The net profit in Q1 2019 was PLN 252 million, marking an increase by PLN 23 m year on year.

The Generation Business Line had a 21% share on in the total EBITDA of the Group. The Generation EBITDA increased by PLN 15 m year on year, driven mostly by higher revenue from the sale of energy and green certificates. The positive impact of higher prices on performance was reinforced by the record-breaking (considering the recent years) wind farm output and the relaunch of a biomass-fired unit in Elbląg which had undergone optimisation measures. EBITDA in the Generation Business Line increased despite a higher cost of purchase of CO2 emission allowances resulting and a smaller pool of free generation allowances granted for 2019.

In Q1 2019, the Sales Business Line’s EBITDA was negative at PLN -95 m. In accordance with the Act of 28 December 2018, in 2019 the Sales Business Line continued to bill its customers at the rates from 30 June 2018. In parallel, the cost of energy purchase was higher, due to prevailing market conditions. The adoption of an implementing regulation to the act will improve performance in view of the possibility of receiving a compensation.

In the first three months of 2019, the capital expenditure of the Energa Group amounted to PLN 369 million, of which the most capital intensive investments were made in the Distribution Business Line, totalling PLN 334 m. These included power grid upgrades to further improve the reliability of electricity supply and expansion of the grid to connect new customers and producers. Money was also spent on innovative technologies and grid solutions. In the Generation Business Line, efforts made to align assets with sustainability requirements and upgrading investments at Ostrołęka Power Plant B had a significant share in the spending.

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Energa Group is one of the four largest groups of energy companies in Poland and the Polish market leader in terms of the share of renewable energy in own production. The Group’s core activities include the distribution and generation of and trading in electricity. The Group supplies and sells electricity to more than 3 million customers, both households and the business sector.

Energa Group is the third largest integrated distribution system operator (DSO) in Poland in terms of the volume of energy supplied. Its distribution grid consists of 185,000 km of power lines and covers almost 75,000 sq. km, i.e. ca. 24% of the total area of Poland.