Energa 2022 summary The Group kept its solid standing in the sector
The Energa Group, a member of the ORLEN Group, produced 4.5 TWh of electricity in 2022, and its renewable energy sources, such as wind farms, photovoltaic farms and hydropower plants, accounted for 30% of that figure. PLN 3.3 billion in total was spent on investments, an uptick by 55% (y/y). Distribution Business Line was the primary driver of the Group’s 2022 EBITDA, at PLN 2.6 billion, accounting for 82% of that figure, while Sales had a negative bearing on the consolidated result. That resulted primarily from regulations introduced to protect consumers, for which the Energa Group earmarked PLN 1.1 billion.
The Energa Group’s key financial results grew in a stable manner, including EBITDA, showing an increase by 5% y/y, and net profit by 8% y/y (to PLN 1 billion). Distribution Business Line EBITDA for the whole year reached PLN 2.1 billion (+3% y/y), which corresponds to 82% of the whole Energa Group’s EBITDA. In turn, Generation Business Line reached EBITDA at PLN 0.8 billion (an over seven-fold increase y/y), which corresponds to 33% of the consolidated result. Sales Business Line and Other Business Line negatively affected the Group EBITDA.
– A demanding year is behind us, but it ended successfully, regardless of the challenges. The Energa Group maintained its stable standing in the Polish energy sector, being part of the ORLEN Group. We consolidate the RES segment and develop low-emission sources required for the balancing of the National Electric Power System in the transition period. Our solid financial performance in 2022 gives us confidence that strategic investments we have undertaken will be delivered as planned – says Zofia Paryła, President of the Management Board of Energa SA.
Positive Ratings
In 2022, Fitch Ratings raised Energa’s rating to BBB+ with a stable outlook, which emphasizes the significance of the Energa Group as a key item in the implementation of the ORLEN2030 energy transition strategy. Moody’s, in turn, confirmed Energa’s long term rating in domestic currency at “Baa2”.
Yet again, Energa reached a record ESG rating. A very high score for the environment aspect was the primary driver of that. The rating is prepared by Moody’s ESG Solutions.
Impact of extraordinary energy market regulations on the Energa Group’s performance
2022 saw a significant increase in electricity prices under SPOT and future contracts, primarily triggered by conventional fuel price rises following Russia’s attack on Ukraine. Under the circumstances, the market regulator decided to implement acts of law intended to protect consumers. Energa-Obrót, Energa’s subsidiary, assessed the impact of those regulations and the 2023 electricity tariff approved by the President of URE for tariff group G (households) on its operations. The assessment identified a potential loss from contracts with tariff group G customers in 2023, equal to around PLN 1.1 billion. That required the establishment of a provision for Sales Business Line, which translated into the EBITDA reduction for the entire line by that amount, and in effect the reduction in the consolidated 2022 EBITDA for the entire Energa Group.
Photovoltaics growing stronger
Generation assets of the Energa Group produced 4.5 TWH of electricity in 2022, of which 1.3 TWh came from RES. Investment in new generation capacities and favorable weather over the year resulted in an increase in wind farm production by 5% y/y. Wind power accounted for 36% of the energy produced by the Group’s renewable sources, whereas 56% came from hydropower plants. A clear production growth in intensely developed photovoltaics sector was observed, as the PV farms, producing some 5 GWh of energy in 2021, generated as much as around 26 GWh in 2022.
Growing pace of investment
The annual capital expenditures for the Energa Group totaled PLN 3.3 billion (+55% y/y) in 2022. As in prior years, the largest share of that figure, that is around 51%, was spent on the Distribution Business Line investments. In effect, some 2.8 thousand kms of distribution networks were developed and upgraded over the year, with the networks reaching a total of 195 thousand km in length at the year’s end. 72 thousand new customers and renewable sources with an output of ca. 1.2 GW were connected during the year.
Another 33% share of capital expenditures was spent on the development of a combined-cycle power plant in Ostrołęka (some 750 MW in output), and 14% on other generation assets, such as for example the development of a CCGT unit in Grudziądz (ca. 560 MW in output), new PV farms or the upgrade program for CHP plants.
Development of new generation assets
In addition, the Energy Group kept a robust pace of investment in other areas, too. Both zero-emission and low-emission source projects were developed. Last year saw the finalization of work on two major photovoltaic farms, PV Gryf and PV Wielbark, launched in full capacity already in 2023. The PV Mitra farm project reached a milestone, being the grant of the building permit.
Energa Green Development, a subsidiary of Energa SA, and member of the Orlen Group responsible for the development of onshore renewable energy sources, is consistently expanding its project portfolio with new installations. Currently, these are projects with a combined output of ca. 550 MW, at various completion stages.
Further, low-emission combined-cycle power plant projects proceeded in Grudziądz and Ostrołęka. In the case of the former, May 2022 saw the signing of the construction contract, and so the start of the construction work. In March last year, the notice to proceed (NTP) was issued for the Ostrołęka project. The initial design work, supply of materials and plant as well as construction work commenced for both projects.
The Energa Group’s low-emission sources, with total installed capacity in excess of 1 GW, are of paramount importance for domestic energy security. As the share of renewable sources with uncontrolled production profile increases in the National Electric Power System, the balancing role of the CCGT units, such as those in development at Grudziądz and Ostrołęka, will continue to grow. Gas-fired power plants have a much smaller environmental impact than their coal-fired counterparts. That results for instance from a lower emissions level and their smaller demand for water. For all those reasons, the combined cycle power plant projects will contribute to the achievement of decarbonization targets for Poland and the Energa Group alike.
Last year, the Energa Group successfully addressed the last remaining issues in connection with the coal-fired unit project in Ostrołęka. At the main auction in the capacity market for the 2026 supply year, completed in 2021, two planned gas-fired units of the Energa Group, that is CCGT units in Ostrołęka and Grudziądz, contracted a total of 1,214 MW of the capacity obligation under 17-year contracts. That allowed for the termination, in 2022, of the capacity contract for the coal-fired unit project without penalties being charged. In the context of the capacity market, the auction for the supply year of 2027 was also successfully completed, with the energy storage facility at WF Bystra signing a 7-year capacity contract for 3.79 MW.