Energa sums up 2023. A year of intensive investment in green energy

Three years after equity acquisition by ORLEN SA, Energa Group has once again posted solid financial results. 12 months of the previous year have just been summarized. Consolidated sales revenues increased year-on-year by 28% to PLN 26.09 billion, while the Group EBITDA amounted to PLN 2.89 billion, improving the 2022 result by 12%. The Group's net profit in 2023 was PLN 0.6 billion, compared to PLN 1 billion a year earlier.

Energa Group increased capital expenditures to PLN 4.33 billion (PLN 3.26 billion in 2022). According to the Group's strategic documents, which were updated last December, investments totalling nearly PLN 48 billion are planned over a seven-year horizon, including about PLN 14.3 billion for investments in renewable energy sources.

Energa is actively meeting the challenges of the country's energy transition. Sales of electricity from renewable sources increased in 2023, with nearly 50% of the energy sold to customers coming from wind and solar, among other sources (+9 pp. y/y). RES, in turn, accounted for 46% of its own production. As at the end of 2023, the Group had 0.6 GW of renewable capacity, with a gross electricity output totalling 1.6 TWh throughout the entire 2023.

Good operating and financial results were achieved despite market challenges faced by Energa Group companies. This includes the war in Ukraine, which affects the domestic and international economy all the time, carrying with it risks such as changing commodity prices and currency fluctuations.

Consolidated EBITDA in 2023 was PLN 2.89 billion, compared to PLN 2.57 billion in 2022 (+12% y/y). The Distribution Business Line accounted for the largest share of the Group's result: 68%.

Over the 12 months, Energa Group produced 3.4 TWh and supplied 22.4 TWh of electricity. The volume of retail sales was 17.1 TWh. RES accounted for 46% in own generation.

Energa invests more

Capital expenditures in Energa Group amounted to PLN 4.33 billion, most of which were investments in the Distribution Business Line (PLN 2.26 billion). In the Generation Business Line, expenditures on investments amounted to PLN 367 million, a significant portion of which was spent on the development of new renewable energy capacities (mainly PV) and the development and maintenance of heating assets. The greatest amounts in the Sales Business Line were spent on lighting assets. Expenditures on the construction of CCGT units in Ostrołęka and Grudziądz, reported in the Other Business Line, amounted to more than PLN 1.6 billion.

In December 2023, Energa updated the assumptions of its Long-Term Strategic Investment Plan (WPIS) and Strategic Development Plan (SPR). According to the update, total expenditures on the Group’s investments planned for the years 2024-2030 will amount to approx. PLN 47.9 billion, of which approx. PLN 23.4 billion accounts for the Distribution Business Line, approx. PLN 22.8 billion for the Generation Business Line (of which approx. PLN 14.3 billion for RES-related investments and approx. PLN 3.2 billion for construction and maintenance of CCGT units in Grudziądz and Ostrołęka), approx. PLN 1.6 billion for the Sales Business Line and other services.

Distribution

EBITDA of the Distribution Business Line in 2023 was PLN 1.96 billion, compared to PLN 2.12 billion in 2022 (-8% y/y).

Negative impact on the Line’s EBITDA was exerted by a more than four-fold increase in the purchase price of electricity to cover network losses and by OPEX, which was PLN 359 million higher y/y, which was caused inter alia by inflation and an increase in the minimum pay and the resulting wage pressure. On the balance, the Distribution Business Line benefited from an increase in the average rate of the distribution service year on year and a growth in revenues from connections.

In terms of investments, activities of the Distribution Business Line in 2023 included primarily the grid expansion with a view to connecting new customers and producers as well as upgrades aimed at improving the reliability of electricity supply. Energa Operator allocated PLN 2.1 bn for the purpose in 2023. This is the highest figure in the company's history.

Consistent investments in grid maintenance, expansion and upgrade are reflected in the latest SAIDI and SAIFI indices. In 2023, SAIDI was at 189.2 minutes per customer, compared to 410.5 in 2022. The same is true for the SAIFI index (disruption per customer over the period), which dropped from 3.2 in 2022 to 2.1.

At the end of 2023, 268,891 micro-installations with a total capacity of 2,334 MW were connected to the Energa Operator's grid. 40,396 new micro-installations were connected over the year, of which nearly 95% were photovoltaic installations.

Expenditure was also incurred on innovative technologies and grid solutions, such as a smart grid conversion project.

Energa Operator remains the leader in installing remote readable meters. Currently, more than 2.5 million such devices have already been installed with customers supported by the company.

In 2023, Energa Operator recorded a 2% increase in the number of customers compared to the end of the previous year.

Generation

The Generation Business Line ended 2023 with EBITDA of PLN 488 million, compared to PLN 843 million in 2022 (-42% y/y). The main factors affecting the EBITDA of the Generation Business Line on a year-on-year basis included lower production from the Ostrołęka Power Plant.

In 2023, Energa Wytwarzanie was actively expanding its RES potential. The construction of the Wielbark PV farm cluster in the Warmińsko-Mazurskie Province with a total capacity of nearly 70 MW was completed, and the Gryf PV farm in the Wielkopolskie Province was repowered to approximately 25 MW. A contract was also signed with the prime contractor for the Mitra PV farm, with a total installed capacity of about 65 MW.

Energa Wytwarzanie is also in the process of acquiring more renewables. Last June, the company signed an agreement with the Portuguese group Greenvolt for the purchase of a wind farm and four photovoltaic farms with a total capacity of about 59 MW. Last October, Energa Wytwarzanie signed a preliminary agreement with Lewandopol Holding for the purchase of an SPV developing new hybrid renewable sources - the Kleczew Solar & Wind project. The project is located in the municipality of Kleczew in the Wielkopolskie Province and will have a total capacity of up to 334 MW.

The total installed capacity of Energa Group's renewable sources at the end of 2023 was 624 MW.

Energy generation in the Baltic Sea

In addition to the development of photovoltaic projects, Energa Group was also focused on an offshore wind farm project in 2023. The special-purpose vehicles established to implement successfully applied for a permit to erect and use artificial islands, structures and equipment for offshore wind farms in two locations.

Last year, Energa Wytwarzanie, a subsidiary of Energa SA, and Northland Power, established the Baltic Offshore Service Solution. This will be the first consortium in Poland to offer a comprehensive management service for offshore wind farms. The entity will also be responsible for the operation of ORLEN Group's planned 24/7 Offshore Wind Farm Management Centre. The business unit will control, monitor and coordinate the activities of offshore assets.

Sales

In the Sales Business Line, EBITDA increased by PLN 883 million, from PLN -317 million in 2022 to PLN 566 million in 2023.

The key underlying factor was the change in the level of provisioning for financially onerous contracts, which followed from regulations on electricity prices for some final consumers in 2023 and 2024, as well as from the level of tariffs set by the President of the Energy Regulatory Office for electricity for G tariff consumers.

At the end of 2023, the number of final consumers of electricity (Points of Consumption) of the Sales Business Line was 3.3 million, which denotes an increase by approximately 53,000 customers y/y. The G tariff group (households) is mainly responsible for the increase in the customer base.

Energa Obrót, the parent company of the Sales Business Line, prioritizes the sale of green energy. It is therefore worth noting that the volume of energy sold from renewable sources increased by more than 9 percentage points compared to 2022. Already 49.52 percent of the electricity sold to customers is generated from wind, solar, hydro, biomass and biogas sources.

The Energa Obrót Transition Program was launched in 2023. Its launch resulted from the transition in ORLEN Group, with the main goal of aligning Energa Obrót with the goals set in the ORLEN Group Strategy to 2030.

The contemplated changes are expected to allow the organization to actively participate in the development of a multi-energy group in the retail segment, and to develop new products and services strengthening the brand. The program is intended to adapt Energa Obrót to operation in the "digital age”. The transition will enhance the company's capacity to quickly adapt and take advantage of opportunities arising from, among others: the energy transition and decarbonization process, the development of renewable energy sources, the liberalization and decentralization of the energy market, regulatory policies, and increasing competition and changes in the retail market.

Investments in low-carbon sources on schedule

Energa Group is currently developing two gas-fired power plant projects: CCGT Ostrołęka and CCGT Grudziądz. Both projects are designed to implement decarbonization goals for Poland, as well as ORLEN Group's strategy to reduce carbon dioxide emissions by 40% for every MWh by 2030 and to achieve carbon neutrality by 2050. The development of the low-emission generation units will also increase the country's energy security and secure the stability of the country's energy supply.

2023 will see intensive work on both projects. The progress of work in Grudziądz is currently 75%, and more than 65% in Ostrołęka. The work is on schedule.

Award for CCGT Ostrołęka financing

The deal to raise financing for the Ostrołęka CCGT project received an award from IJ Global Awards magazine. The transaction involved raising more than PLN 2.6 billion in debt from a consortium of Polish and foreign banks in the project finance formula to develop a 745 MWe net gas-fired power plant (CCGT) project in Ostrołęka and to fund the operations of a special purpose vehicle operating the project.

The IJ Global Awards is a prestigious award in the financial and investment industry. The competition recognizes the achievements of companies, financial institutions, investment teams and projects in areas such as project finance, infrastructure, renewable energy, transport, real estate and the public sector. The project was awarded in the Power Deal of the Year 2023 in Europe category.

ESG - activities in the area of sustainable development

2023 in the ESG area saw Energa focusing on sustainability tasks. They revolved around the fulfilment of EU directives and recommendations. Measures and actions were put in place to meet the requirements of the European Non-Financial Reporting Standards ("ESRS"). In 2023, Energa participated in the ORLEN Group’s work aimed at adapting to the new reporting requirements.

It independently assessed gaps and compliance with the EU’s standards and undertook alignment work in such areas as sustainable development strategy, value chain, biodiversity, etc. 

Currently, Energa’s sustainability reporting complies with the new Global Reporting Initiative (GRI)guidelines, which are recognized worldwide as a standard for non-financial reporting. Additionally, as part of the EU Taxonomy reporting, Energa Group identified activities that significantly contribute to mitigating climate change, thus contributing to environmental protection and counteracting climate change.

Energa Group uses sustainable financing. Energa is currently actively working with two rating agencies - Moody's ESG Solutions and Sustainable Fitch - to obtain its ESG rating. The primary rating comes from Moody's ESG Solutions, and the company’s score for 2022 was 43. In 2024, 45 points were awarded to Energa for actions taken in 2023. Improvements were noted in all areas subject to the assessment.