Current Report No. 5/2020

Date: 4 February 2020

Subject: Estimated results of Energa Group for Q4 2019 and for 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 fourth quarter of 2019 and for 2019.

Financial and operational results achieved in Q4 2019:

EBITDA of the Group: PLN 300 million (vs. PLN 290 million in Q4 2018), including:

EBITDA of the Distribution Business Line: PLN 341 million (vs. PLN 340 million in Q4 2018),

EBITDA of the Generation Business Line: PLN 41 million (vs. PLN 95 million in Q4 2018),

EBITDA of the Sales Business Line: PLN -76 million (vs. PLN -135 million in Q4 2018).

Distribution of electricity: 5,597 GWh (vs. 5,615 GWh in Q4 2018),

Gross production of electricity: 802 GWh (vs. 1,045 GWh in Q4 2018),

Retail sales of electricity: 5,013 GWh (vs. 5,027 GWh in Q4 2018).

Financial and operational results achieved in 2019:

EBITDA of the Group: PLN 2,042 million (vs. PLN 1,877 in 2018), including:

EBITDA of the Distribution Business Line: PLN 1,644 million (vs. PLN 1,704 million in 2018),

EBITDA of the Generation Business Line: PLN 267 million (vs. PLN 329 million in 2018),

EBITDA of the Sales Business Line: PLN 182 million (vs. PLN -85 million in 2018).

Distribution of electricity: 22,155 GWh (vs. 22,542 GWh in 2018),

Gross production of electricity: 3,578 GWh (vs. 3,896 GWh in 2018),

Retail sales of electricity: 19,681 GWh (vs. 19,777 GWh in 2018).

In Q4 2019, Energa Group generated EBITDA of PLN 300 million, a 3% increase compared to the same period last year. This result was mainly due to the following factors:

a) EBITDA generated at PLN 341 million by the Distribution Business Line. The key negative driver contributing to the result of this Line was an increased cost of grid losses, driven by higher energy prices. On the other hand, the application of IFRS 16 to a subsequent category of contracts and the resulting decline in taxes and fees had a positive impact on EBITDA.

b) EBITDA generated at PLN 41 million by the Generation Business Line. The result of the Line was subdued mainly by factors such as decreased revenues from the sales of electricity and from the sales of system services, both affecting mainly the Ostrołęka Power Plant. On the other hand, some factors, including lower costs of purchase of emission allowances due to the lower production of the Ostrołęka Power Plant and lower fixed costs of the entire Line drove EBITDA up.

c) EBITDA generated at PLN -76 million by the Sales Business Line. Compared to the same period last year, the result in Q4 2019 was significantly influenced by one-off events. In Q4 2018, a provision for onerous contracts related to G tariff in connection with the Act on electricity prices in 2019 was created (PLN -136 million) – a part of this provision corresponding to this period (PLN +26 million) was released in Q4 2019. Furthermore, a provision was created in Q4 2019 for onerous contracts related to G tariff in connection with the approval of a tariff for this customer group for 2020 by the President of the Energy Regulatory Office (PLN -125 million).

In 2019, Energa Group generated EBITDA of PLN 2,042 million, a 9% increase compared to the same period last year. The Group’s EBITDA level was mainly due to:

a) the Distribution Business Line’s EBITDA at PLN 1,644 million. This was primarily due to a lower margin on distribution with grid losses, caused i.a. by high prices of the energy needed to cover grid losses, the delayed implementation of the 2019 tariff (from April) and a one-off event from 2018 involving a change in the method of estimating unbilled sales, which inflated the estimates of unbilled sales and reduced the estimate of grid losses in the comparative period. A positive boost came from higher revenues from connections.

b) the Generation Business Line’s EBITDA of PLN 267 million. The decrease in the result compared to the 2018 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 sales of property rights.

c) the Sales Business Line’s EBITDA of PLN 182 million. The year-on-year improvement of this result was driven by an increase in the electricity sales margin (low previous year base combined with lower costs of redemption of property rights and lower excise duties) and a one-off event consisting in the reversal of the 2018 provision for onerous contracts related to G tariff in connection with the Act on electricity prices in 2019 in the amount of PLN 136 million. In parallel, the 2019 result included the creation of a provision for onerous contracts related to G tariff in connection with the approval of a tariff for this customer group for 2020 by the President of the Energy Regulatory Office (PLN -125 million) and of a provision for potential penalties under CPA contracts (PLN -28 million).

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