Current Report No. 29/2019

Current Report No. 29/2019

Date: 18 October 2019

Subject: Estimated results of Energa Group for Q3 and 9 months of 2019

Legal basis: Article 17 (1) of MAR - inside information 

The Management Board of Energa SA hereby reports preliminary estimates of selected Energa Group’s financial and operating data for the third quarter and 9 months of 2019.

Financial and operational results achieved in Q3 2019:

EBITDA of the Group: PLN 484 million (vs. PLN 426 million in Q3 2018), including:

EBITDA of the Distribution Business Line: PLN 327 million (vs. PLN 374 million in Q3 2018),

EBITDA of the Generation Business Line: PLN 54 million (vs. PLN 66 million in Q3 2018),

EBITDA of the Sales Business Line: PLN 119 million (vs. PLN -7 million in Q3 2018).

Distribution of electricity: 5,396 GWh (vs. 5,487 GWh in Q3 2018),

Gross production of electricity: 827 GWh (vs. 963 GWh in Q3 2018),

Retail sales of electricity: 4,863 GWh (vs. 4,752 GWh in Q3 2018).

Financial and operational results achieved in 9 months of 2019:

EBITDA of the Group: PLN 1,742 million (vs. PLN 1,587 in 9M 2018), including:

EBITDA of the Distribution Business Line: PLN 1,303 million (vs. PLN 1,364 million in 9M 2018),

EBITDA of the Generation Business Line: PLN 226 million (vs. PLN 234 million in 9M 2018),

EBITDA of the Sales Business Line: PLN 259 million (vs. PLN 50 million in 9M 2018).

Distribution of electricity: 16,558 GWh (vs. 16,927 GWh in 9M 2018),

Gross production of electricity: 2,776 GWh (vs. 2,851 GWh in 9M 2018),

Retail sales of electricity: 14,667 GWh (vs. 14,751 GWh in 9M 2018).

In Q3 2019, the Energa Group generated EBITDA of PLN 484 million, a 14% increase compared to the same period last year. This result was the product of mainly the following factors:

a) EBITDA generated at PLN 327 million by the Distribution Business Line. The main factor contributing to the lower result of this Line was the lower distribution margin, mainly due to the increase in the cost of grid losses as a consequence of higher energy prices.

b) EBITDA generated at PLN 54 million by the Generation Business Line. To a large extent, factors such as decreased revenues from electricity sales, as well as an increase in fixed costs were responsible for the Line’s lower result. EBITDA in this area was positively influenced e.g. by higher revenues from green property rights and system services.

c) EBITDA generated at PLN 119 million by the Sales Business Line. The Q3 2019 result, compared to the same period of the previous year, was significantly influenced by the following factors:

- low base effect, as Q3 2018 was characterized by low results due to unexpected and dynamic growth of energy prices on the market at that time,

- lower costs of property rights redemption (termination of the support system for cogeneration in the form of property rights from the beginning of 2019) and excise duties (statutory rate change since 2019),

- reversal of the PLN 24 million provision for contracts generating Tariff G charges, recognized in 2018 (one-off event).

In Q3, the Act of 13 June 2019 amending the Act on amending the Act on Excise Duty and Certain Other Acts, the Act on Energy Efficiency and the Act on Biocomponents and Liquid Biofuels (hereinafter the “Act”) began to be implemented with regard to its provisions applicable to the second half of the year (different scope of subjects from the first half of this year), as a result of which Energa-Obrót S.A. recognized a revenue of PLN 67 million from financial compensation for Q3 2019 in exchange for maintaining the 2018 prices for selected customer groups (mainly households, local government entities, hospitals). In addition, the compensation (amount of the price difference) was recalculated and revenues for the first half of this year were adjusted, which, however, did not have a major impact on the relative neutrality of the Act on the Business Line performance either for nine months or Q3 of 2019.

During the first nine months, the Energa Group generated EBITDA of PLN 1,742 million, a 10% increase on the same period of last year. The Group's EBITDA level resulted mainly from:

a) Distribution Business Line’s EBITDA of PLN 1,303 million. This was primarily due to the lower margin on distribution with grid losses, including due to high energy prices to cover grid losses, the delayed implementation of the 2019 tariff (from April this year) and last year’s one-off event, i.e. a change in the method of estimating uninvoiced sales, which caused a higher measurement of uninvoiced sales estimates and lower grid losses estimates in the comparative period. In addition, the Line recorded higher OPEX, mainly in the area of employee benefits. A positive boost came from the higher revenues from connections.

b) Generation Business Line’s EBITDA of PLN 226 million. The slight decrease in performance compared to the same period of last year was mainly due to higher costs of fuel consumption for production, purchase of emission allowances and fixed costs. The above were partly offset by higher revenues from sale of electricity and property rights.

c) Sales Business Line’s EBITDA of PLN 259 million. The y/y growth of this component was possible due to an increase in the electricity sales margin (low base of the previous year and lower costs of redemption of property rights and excise duties) and a one-off event consisting of partial reversal of PLN 111 million of the 2018 provision for contracts generating Tariff G charges, with simultaneous recognition of a provision for any penalties related to CPAs (PLN -31 million).

The figures presented are estimates and may be subject to change.