Results of the Energa SA Group’s Distribution Business Line (PLN m)
Download: Results of the Distribution Business Line
The Distribution Business Line has generated 80% of EBITDA of the ENERGA Group in 2017 (nearly 85% in 2016).
Revenues from the sale of Distribution Business Line in 2017 were higher than in the same period of the previous year by 6%. It resulted mainly from:
increase in the average distribution rate (by nearly 5%);
higher volume of distributed electricity (by 2%).
Net profit in 2017 was PLN 29 m lower than the year before. It is attributable mainly to higher amortization and depreciation resulting from high capital expenditures.
Capital expenditures of the Distribution Business Line amounted to PLN 1,247 m, that is PLN 16 m less than the year before.
EBITDA Bridge of the Distribution Business Line (PLN m)
EBITDA remained at a similar level y / y. A significant impact on the operating result at the level of PLN 959 million was:
increase in distribution margin (including net losses of PLN 83 million), which was mainly due to the favorable sales structure of the distribution service;
real estate tax higher by PLN 11 million;
higher OPEX (increased by PLN 51 million), mainly due to higher costs of employee benefits compared to a low base in 2016;
increase in the costs of operation and repairs of the distribution network, which resulted from greater involvement of the engineering and assembly staff in operational works;
positive effect of dissolving some of the write-downs on disputable receivables in connection with the analysis of the provisions of IFRS 9.
Results of the Energa SA Group’s Generation Business Line (PLN m)
Download: Results of the Generation Business Line
The share of the Generation Business Line in the total EBITDA of the Group amounted to 18% in 2017 (16% in the same period last year). The EBITDA increase amounted to PLN 83 million and this was mainly due to:
increase in revenues from the sale of electricity. It resulted from the increase in electricity production in the owned water sources (by 26%) and wind (by 27%) and the Group's heat and power plants (by 13%) and higher electricity sales prices in the Generation Area of the Power Plant in Ostrołęka;
increase in revenues from property rights;
increase in revenues from regulatory system services;
the above revenue increases were offset, among others higher cost of fuel consumption.
At the same time, the cost of purchasing CO2 emission allowances increased y / y (by PLN 5 million) due to the allocation of a smaller pool of free production allowances for 2017 for the Line.
EBITDA Bridge of the Generation Business Line (PLN m)
In addition to the above-presented factors shaping the gross results of the Business Line, the recognition (in the third quarter) and reversal (fourth quarter) in 2017 of impairment allowances for the non-financial fixed assets of the Business Line with a total value of PLN (+) 53 million. result:
in the third quarter of 2017, from recognizing write-downs updating the value of existing wind farms for a total amount of PLN 71 million and planned wind farms for the value of PLN 4 million and goodwill worth PLN 11 million;
in the fourth quarter of 2017 due to changes in the legislative environment, in particular the President of Poland signing the Power Market Act (which guarantees support for generating units and the resulting price path forecast), from reversing impairment losses on assets the total amount of PLN 138 million, including PLN 69 million for wind assets and PLN 69 million for Ostrołęka B.
Download: Results of the Generation Business Line broken down into Generation Areas
Results of the Energa SA Group’s Sales Business Line (PLN m)
Download: Results of the Business Line Sale
In 2017, Business Line Sales generated PLN 85 million EBITDA, i.e. 4% EBITDA of the Energa Group, compared to PLN 40 million EBITDA in 2016, when the Business Line's share in the Group's EBITDA was 2%.
Revenues of the Business Line Sales in 2017 amounted to PLN 5 316 million, which means that their level decreased by PLN 310 million (by 6%) in comparison with 2016. The most important impact on the revenues of this Business Line is invariably generated by electricity sales. In 2017, they were lower by 5% y / y (i.e. by PLN 247 million). This change is due to:
lower revenues from the sale of electricity on the wholesale market. They were lower by 319 million zlotys (41%) in y / y terms, which was attributable to: a 36% decrease in volume and an 8% average sales price.
higher revenues from the sale of electricity on the retail market. In 2017, they were higher by PLN 72 million (by 2%) compared to 2016 - this is a resultant of 5% higher volume and 3% lower average sales price.
lower revenues from gas sales. In the analyzed period, they were lower by PLN 71 million in y / y terms, mainly due to a drop in volume.
a drop in the margin on the sale of electricity. In y / y terms, the margin fell by PLN 30 million.
Download: The determinants of shaping the margin on the sale of electricity
EBITDA Bridge of the Sales Business Line (PLN m)
The following factors also had an impact on the EBITDA level of the Business Line:
dissolution of revaluation write-offs for disputable receivables for the amount of PLN 44 million - as a result of the analysis of the provisions of IFRS 9, introducing changes to the approach to creating revaluation write-offs for disputable receivables, write-offs previously created were partially released;
resolving part of the provisions for administrative and court proceedings established in December 2016 with a total value of PLN 22 million - as a result, the EBITDA change as a result of this event amounted to PLN +66 million y / y.
activities related to gas trading - the margin on sales of this fuel decreased by PLN 16 million y / y. This is the effect of a drop in sales volume and lower unit margins. Compared with previous years, profitability on this market deteriorated due to greater activity of the main gas seller in Poland, i.e. PGNiG, and introduction of less-favorable trading rules on the gas wholesale market (the need to pay for fuel storage in the case of imports);
increase in costs (included in the "Other" element on the above EBITDA Bridge) - this is a consequence of running an active sales policy.
In September 2017, Energa Obrót SA decided that long-term contracts for the purchase of green certificates will be void due to the way they were concluded (without a tender), including contracts generating huge losses for the Company (settlements based on substitute fee, not market prices ). This decision has no significant impact on the results of the Business Line Sales in 2017 due to redemption of the vast majority of 2017 certificates before this decision. Positive impact on the results should be expected in subsequent years, however its occurrence and scale will depend on court decisions. The decision resulted in the improvement of cash flows of the Business Line in the fourth quarter of 2017 due to the cessation of purchase of certificates under long-term contracts.