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Energa Group’s EBITDA and revenue up in the first quarter of 2020

June 10, 2020

Energa Group generated EBITDA of PLN 0.57 billion in the first quarter of 2020, a 3% increase year on year. During that period, the Group’ revenue rose 11 per cent, up to PLN 3.29 billion. In the period covered by the report, approx. 57% of the energy generated within the Group’s assets originated from RES.

Energa Group delivered sound financial performance despite the fact that the COVID-19 pandemic in Poland impacted its first quarter’s results. Over a short period of time, the pandemic led, among other things, to a decline in demand for electricity and disturbances in the operation of supply chains. The Group estimates that its EBITDA in Q1 2020 shrank by approx. PLN 27 million in connection with the impact of the coronavirus on the Group’s business.

“Energa Group closed the first quarter of 2020 with good results, both financially and operationally. We reported a change in EBITDA, improved our results measured by key reliability indices and further expanded the share of RES in generation of energy in the Group. This was possible owing to consistent implementation of an investment strategy aimed at modernizing our distribution network and strengthening our position in the sector of zero- and low-emission sources. In the initial months of the year, we also adjusted the Group’s operations to the new major changes in the regulatory and market environment, as evidenced, among other things, by a number of key but necessary decisions involving the Ostrołęka C project. The optimization measures will be continued also in connection with the pending integration with ORLEN Group, which will contribute to the consolidation of some of Energa’s directions of development,” says Jacek Goliński, President of the Management Board of Energa SA.

Decision on Ostrołęka C project

One of the key events in Q1 2020 was the agreement between the sponsors of Ostrołęka C investment project, Energa and Enea, made public on 13 February 2020, relating to the suspension of the project financing and commencement of in-depth analyses as to its future. At the start of June 2020, completion of analyses was reported and the decision was made to continue construction of a generation unit in Ostrołęka while changing the electricity generation technology to natural gas combustion. That decision was prompted primarily by both regulatory changes at the European Union level associated with the climate policy and the energy industry, including the introduction of the so-called Green Deal, and the lending policy of financial institutions that significantly limited the availability of financing for coal-based projects or, as in the case of the European Investment Bank, effectively discontinued funding such ventures. Another material factor favoring the project’s conversion was higher profitability of the natural gas-fueled unit attributable, among other things, to its greater flexibility in terms of RES balancing and average emission levels twice lower than those of coal-based units. In parallel, Enea, Energa and PKN Orlen signed a tripartite agreement defining the principles of further cooperation on the project.

In pursuing its strategy aimed at expanding RES assets, Energa Group finalized in Q1 2020 the investment in the Przykona Wind Farm with an installed capacity of 31 MW and estimated annual generation capacity of approx. 83 GWh. In March, start-up tests involving all nine turbines were started and successfully completed. Przykona Wind Farm secured electricity selling prices in the years 2020-2035 for approx. 1.2 TWh with a winning bid at the RES auction.

Energa met the challenges of the pandemic

Following announcement of the state of epidemiological threat and, subsequently, that of epidemic, Energa Group introduced appropriate organizational changes. Their objective was to adjust the operations to the sanitary requirements while ensuring continuity of energy generation and distribution processes critical to the country’s energy security.

“Energa Group successfully met the coronavirus-related challenges. Informed decisions and responsible actions were taken under trying circumstances. At the time of the peak demand, continuity of the Group’s core operations critical to Poland’s energy security did not come under threat,” emphasized Dominik Wadecki, Vice-President of Energa SA Management Board for Operations.

Performance impacted by external factors

The performance of individual Business Lines was also influenced by other factors, including, but not limited to, the lower distribution margin due to the increased costs of grid losses, hydrological conditions less favorable than in Q1 2019 translating into lower generation of electricity in hydro power plants and the lower demand for heat attributable to high temperatures during the winter season. That performance was also affected by lower production at the Ostrołęka B power plant due to e.g. must-run operation carried out for the benefit of the Transmission System Operator in Poland.

 “Energa boasts high generation capacity and financial stability that offer high chances of mitigating the negative consequences of COVID-19 throughout 2020. Optimization of business processes or implementation of investment programs concurrent with the pending energy transformation constitute some of available options,” says Marek Kasicki, Vice-President of Energa SA Management Board for Finance.

More RES energy and improved interruption response statistics

In Q1 2020, approx. 57% of energy generated in the Group’s assets originated from RES, compared to approx. 44% in the corresponding period of the preceding year.

Both the System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI) improved. The former was 30 minutes per customer net of mass outages (34 minutes in the corresponding period of 2019 – an improvement by approx. 12%), and the latter equaled 0.5 of outage per customer (0.6 of outage in Q1 2019 – an improvement by approx. 17%).

In the first three months of 2020, 14,600 new customers were connected to the distribution grid, a change by 2,200 customers year on year or an 18% increase, and new renewable energy sources of the combined capacity of 115 MW compared to 24 MW in the corresponding period of 2019, a 421% increase. That number included nearly 7,000 new micro-installation of the combined capacity of almost 47 MW, representing a change by, respectively, 265% and 283% compared to Q1 2019. Thus, the combined number of micro-installations connected to Energa Operator grid at the end of Q1 2020 reached 35,000, their capacity totaling 245 MW.