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Stable foundations for Energa Group despite difficult conditions in 2019

June 01, 2020

The Energa Group ended 2019 with EBITDA of PLN 2.04 billion, which is an increase by 9% compared to 2018. Over the timespan, renewable energy production also grew by 15 percent, reaching a level of approx. gross 1.4 TWh. Work to develop RES generation assets continued, too. There was also an 18% Y-O-Y growth in revenues, which amounted to PLN 12 billion. In total, Energa Group allocated PLN 1.57 billion for investments in 2019.

In 2019, the Group’s financial foundations remained stable, with high EBITDA and revenue levels. This was achieved despite the difficult market environment, primarily a rise in the prices of CO2 emission allowances by 59% and of Green Certificates by 33%.

The Energa Group’s net result of PLN -1 billion was under pressure from one-off accounting events, including write-downs on the value of shares and interests held in PGG SA and Elektrownia Ostrołęka Sp. z o.o. Net of the write-downs, the Group’s net profit amounted to over PLN 300 million.

A slight improvement is expected in Q1 2020

The Group has also published its estimated figures for Q1 2020. It generated EBITDA of PLN 570 million, which is 3% higher compared to the same period in 2019. Revenues amounted to PLN 3.29 billion, 11 percent more than Q1 2019. The figures were attained despite the impact of the COVID-19 pandemic on the domestic and global economy in the second half of March, adverse hydrological conditions that impacted the volumes of electricity production, distribution and sales, and the lower margin on distribution with network losses. In parallel, the volumes of distribution (5694 GWh) and sales (4922 GWh) of electricity remained at comparable levels year on year. The differences were ca. -2.0 and ca. -0.9 percent respectively compared to Q1 2019.

Change in shareholding as an opportunity for further growth

One key event for Energa Group last year was the announcement by PKN ORLEN in December of a call for the buyout of Energa S.A. shares. The largest such transaction on the Polish energy market was completed in just 4 months. As a result, on 30 April 2020, PKN ORLEN acquired 80.01 percent of Energa Group shares, which translates into 85.20 percent of GM voting rights.

As announced by PKN ORLEN, the takeover of Energa is the next stage of building a strong multi-energy group that can operate more efficiently on the domestic and foreign markets and has the potential to develop significant projects. PKN ORLEN also entered into an agreement with the State Treasury in which it declared that following the takeover, its strategic investments will be continued, once the underlying conditions are reviewed.

Strengthened in this way, the concern also has the potential to become a flywheel both for the Polish economy and the energy transition. PKN ORLEN clearly bases its development strategy on low- and zero-emission power generation sources, which corresponds to Energa’s previous renewable operations and provides a strong basis for powerful business synergies. The thus focused strategy will also allow the Group to operate efficiently on the market, which is under a strong impact of the EU climate policy.

A year of major investment decisions

In February 2020, Energa, together with the second sponsor of the Ostrołęka C power plant construction project, Enea, decided to temporarily suspend the funding of the investment in order to carry out additional analyses, in particular to address the technical, technological, economic, organisational, legal and financial parameters of the project. The analyses were to end on 7 May, but the sponsors decided to extend them for about a month.

In 2019, Energa Operator, an important pillar of Energa’s financial performance, allocated PLN 1.3 billion for electricity network upgrading investments in order to further improve the reliability of electricity supplies, and expand the network by connecting new customers and generators.

This highly improved reliability as measured by the System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI). The former was 127 minutes per customer (improvement by 16%), and the latter 2.02 breaks per customer (improvement by 6%), which was the best result nationwide.

In addition, Energa Operator more than doubled the total length of cable lines running through forested and wooded areas – almost 128 km of such lines were built in 2019 (an increase of 227% year-on-year). This was crucial for improving the security of electricity supply – underground cables are not threatened by severe weather phenomena in contrast to overhead lines, which are exposed to breakage.

Energa invests heavily in the sun and wind

In 2019, the Energa Group also continued to invest in renewable energy generation assets. Work was underway at the Przykona Wind Farm (installed capacity of approx. 31 MW), with test runs completed in Q1 2020. The construction is to be completed formally in Q2 of this year. The wind farm also took part in capacity market auctioning, contracting a volume of approximately 1.2 TWh for 2020-2035. In addition, Energa OZE obtained a building permit and the grid connection terms for its next generation asset planned in Przykona, a photovoltaic PV Gryf solar farm with an installed capacity of 19.8 MW.

In 2019, the Generation Business Line recorded a 15% increase in RES production (Y-O-Y), which was mainly attributable to high increases in wind and biomass generation. A slight decrease in hydropower generation resulted from the adverse hydrological conditions over the past year. Owing to the 19 percent decline in coal energy production, the share of RES generation in total energy production grew from 31 to 38 percent.

The volume of electricity sold in 2019 evidences a stable customer base and demand, which amounted to 19.7 TWh, a figure comparable to the previous year (with a difference of only 0.1 TWh).

The Energa Group is also intensively developing electromobility. By the end of 2019, it had installed a total of 40 recharging stations, including 12 fast recharging stations. Currently, the Group’s infrastructure comprises 43 recharging stations. Most of them are concentrated in Pomerania (Pomorskie and Zachodniopomorskie Provinces), but Energa also has facilities in Kujawy, Warmia and Mazury, and in eastern Wielkopolska, among other regions.