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Energa Group’s High 9-month 2019 Sales Performance Strengthens Its EBITDA

November 15, 2019

Nine months into 2019, Energa Group’s EBITDA reached PLN 1.74bn. This exceeds the last year’s corresponding figure by 10 percent. Also the Group’s sales revenue, at PLN 9.065bn, saw a 19-percent growth vs. the previous year.

 

For Energa Group, the three quarters of 2019 were a period of development of new technologies and generation capacities in the area of renewable energy. The Group has been consistently implementing assembly works at its new Przykona Wind Farm, with an installed capacity of 31 MW and an estimated average annual electricity production of 75 GWh. Nine wind turbines and the necessary infrastructure are now being built on a 250ha reclaimed brown-coal mine site. In turn, Poland’s largest electricity storage facility, with a target output of 6 MW and the ability to store 27 MWh, is being built next to Bystra Wind Farm near Pruszcz Gdański.

In the power generation sector, renovation and upgrade works have been conducted on the operating hydropower plants. Through the upgrade measures, effective use of these assets is ensured in the years to come, and a high share of green energy in Energa’s generation mix is strengthened. The Group is preparing Poland’s first implementation of an innovative technology optimizing solar energy production based on floating photovoltaic panels. The success of the Group’s pilot project, completed on an artificial lake near the hydropower plant in Łapino, opens up its possibilities for application of this technology on a larger scale.

“Energa Group invests in its future and is committed to exceeding the expectations of energy consumers. Environmental compatibility and modern technology are our answer to the challenges faced by the present-day energy sector. By obtaining funds from various attractive sources, both domestic and foreign ones, we are able to expand our investment activities without at the same time limiting the sustainable development of the Group as a whole. As the country’s leader in this area, we are building a smart grid under a dedicated program. This is a technology which will effectively improve the continuity of electricity supplies to customers, but at the same time it will also ensure the most efficient grid management and reasonable energy use. Unlike other state-owned energy companies, we have no large generation units, which means that our strengths on the increasingly competitive market lie in the development of renewable assets, innovative storage systems, diverse and tailored offering for our customers, and effective distribution management,” says Grzegorz Ksepko, the acting President of Energy Group.

Consistency and Effectiveness

In Q3 of this year, Energa Group conducted appropriate settlements of its customer accounts as required under the Act of 28 December 2018 which stabilized the electricity prices for end customers. The price difference was re-calculated and the revenue for the first six months of 2019 was adjusted, and the financial compensation due for Q3 was taken into account. No negative impact of the legislation on the Sales Business Line’s performance in the 9-month period or in Q3 2019 was shown by this settlement.

“The 9-month performance is a solid ground for us to assess the year and the progress of our investment measures. The latter are proceeding as planned in all our areas of activity. The joint performance figures of the Sales Business Line for the three quarters show that our price policy has been properly adjusted to the applicable regulations. At the same time, expenditure is being optimized across the organization by allocating funds to goals which build the Group’s value. With use of our competence and experience and by successfully engaging our external business partners, we implement innovative projects, especially in the Distribution Business Line, which will strengthen our market competitiveness,” emphasizes Jacek Kościelniak, ENERGA S.A. Vice-President of the Management Board for Finance.

Over the first 9 months of 2019, Energa Group completed investment measures worth PLN 1.1bn, 6 percent above the corresponding figure for 2018, of which close to PLN 945m was generated by the Distribution Business Line. Under the projects planned by the Distribution, funds were allocated to upgrades of the power grid in order to further improve the reliability of electricity supply, and to the expansion of the grid in order to enable connecting new customers and producers. During the first 9 months of this year, 44,800 new customers were connected, 3,107 km of high-, medium-, and low-voltage lines were constructed or upgraded, and new renewable energy sources of 133 MW in total were connected to the grid as a result of these investment measures.

Performance of the Business Lines

This year’s 9-month EBITDA of the Distribution Business Line totalled PLN 1,303m vs. PLN 1,364m in the previous year. This performance was influenced, among other factors, by a lower margin, due to higher prices of energy purchased to offset grid losses year on year, and by the postponed introduction of the new tariff for 2019. Higher OPEX also had an impact on the Line’s final performance. From the point of view of energy consumption, the weather conditions were also less favourable, both on a year-on-year basis (a warmer winter and a colder summer, which translated into a lower power demand for, respectively, heating and air-conditioning), and in comparison with other DSOs.

After three quarters of this year, the Generation Business Line had an EBITDA of PLN 226m vs. PLN 234m in the previous year. The performance was influenced by an increase in the revenue from electricity sales (a higher sale price at the Ostrołęka power plant and hydropower plants, and a higher CHP and wind production volume), and a higher revenue from sales of green property rights. On the other hand, the performance was also influenced by the cost of fuel, cost of purchase of emission allowances, and permanent costs, such as a medium-term repair of unit No. 2 at the Ostrołęka power plant.

The EBITDA of the Sales Business Line for the 9 months of 2019 totalled PLN 258m, up by PLN 208m vs. the corresponding period of 2018. The increase in EBITDA was due to a low base value of the previous year, reduced costs of redemption of property rights and excise duty, as well as a partial reversal of the 2018 provisions for onerous contracts with regard to the tariff G freeze under the Act of 29 December 2018 which stabilized the electricity prices. The implementation of this legislation had no negative impact on the Business Line’s financial performance in the period concerned.

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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 network consists of power lines with a total length of 188,000 km and a coverage of approximately 75,000 sq km, close to 24 percent of the country’s total area.