Enea CG's financial results in 2015 and Q4 2015

Consolidated Profit and Loss Statement – 2015

2015:

Change factors of EBITDA of Enea CG:

(-) lower revenue from sales of electricity by PLN 490 mln:

(-) lower volumes of electricity sold in wholesale trading (4,206 GWh) despite a growth in the average selling price (5%) affects a drop in revenue by PLN 585 mln

(+) growth in the average selling price in retail trade (6.9%) affects the growth in revenue by PLN 88 mln

(+) revenue from sale of natural gas - extension of operations in the segment of Trade in Q4 2014

(+) higher sales of distribution services by PLN 104 mln stem from:

(+) greater volume (1.8%) of sales of distribution services to end-users and growth in rates in the tariff for 2015 (PLN 123 mln)

(-) lower revenue from sale to the Balancing Market (PLN 26 mln)

(+) higher revenue from grid connection fees (PLN 4 mln)

(+) growth in revenue from the sale of heat energy stems from the growth in prices by 4.75%

(+) growth in revenue from the sale of the other services (PLN 30 mln) e.g. lighting assets servicing

(-) lower revenue from the sale of goods and materials by PLN 18 mln results from a consistent exclusion of “non-core” operations in Enea Group

(+) sales of coal as a result of LW Bogdanka’s takeover

(-) lower average price of proprietary interests (RES 32.2%) and lower volumes (43.9%) results in lowering of revenue from proprietary interest trading

(-) higher costs of employee benefits as a result of LW Bogdanka’s takeover

(-) higher costs of transmission services by PLN 59 mln stem from higher transitory charge and quality charge

(-) higher costs of outsourced services as a result of LW Bogdanka’s takeover and in connection with the investments realised on grid assets

(-) higher taxes and charges mainly as a result of the investment realisation in the area of grid assets ad as a result of LW Bogdanka’s and MPEC Białystok’s takeover

(+) lower costs of purchases of electricity and gas by PLN 553 mln as a result of:

(+) lower volumes of electricity (4,976 GWh), despite higher average purchase price of electricity by 2.8%

(-) higher costs of ecological and cogeneration obligations by PLN 63 mln (e.g. entry into force of yellow and red obligations from 30 April 2014)

(-) lower results on the other operating activities by PLN 184 mln:

(-) settlement of the tie existing before LW Bogdanka’s takeover totalling to PLN 94 mln (one-off)

(-) higher provision for claims for damages and litigation PLN 22 mln

(-) recognition in 2014 of a provision discount for transmission corridors in the amount of PLN 26 mln (one–off)

(-) higher provision for transmission corridors by PLN 8 mln - higher rates

(-) overview and verification of the balance of receivables PLN 13 mln

(-) settlement in 2014 of an agreement in respect of State Forests in the amount of PLN 8 mln (one-off)

Settlement of non-financial fixed assets impairment write-down (impact on net result):

(-) tangible assets impairment write-down (PLN -1,502 mln)

(-) write-off of goodwill (PLN -201 mln)

(+) deferred tax (PLN 285 mln)

Consolidated Profit and Loss Statement - Q4 2015

Q4 2015:

Change factors of EBITDA of Enea CG: 

(-) lower revenue from sales of electricity by PLN 203 mln:

(-) lower volumes of electricity sold in wholesale trading (1,112 GWh) despite a growth in the average selling price (2.3%) affects a drop in revenue by PLN 172 mln

(-) lower volumes of electricity sold in retail trading despite a growth in the average selling price (3.4%) affects a drop in revenue by PLN 20 mln

(+) revenue from sales of natural gas - extension of operations in the segment of Trade in Q4 2014 - higher sales volume by 376 GWh with a concurrent drop in price by 8.4%

(+) higher revenue from sales of distribution services by PLN 46 mln stem from:

(+) greater volume of sales of distribution services (1.2%) to end-users and growth in rates in the tariff for 2015 (PLN 25 mln)

(+) higher revenue from grid connection fees (PLN 18 mln)

(-) lower revenue from the sale of goods and materials by PLN 19 mln results from a consistent exclusion of “non-core” operations in Enea Group

(+)higher value of sales from the other services as a result of LW Bogdanka’s takeover

(-) lower revenue from sales of certificates of origin resulting from lower price of RES Proprietary Interests by 27.5%

(+) sales of coal as a result of LW Bogdanka’s takeover

(-) higher costs of employee benefits by PLN 36 mln resulting from LW Bogdanka’s takeover

(-) higher costs of transmission services by PLN 19 mln stem from higher transitory charge and quality charge

(-) higher costs of outsourced services by PLN 88 mln resulting from LW Bogdanka’s takeover

(+) lower costs of purchases of electricity and gas by 183 mln - lower volumes of electricity (1,424 GWh) with a concurrent growth in the average purchase price of electricity by 1%

(-) lower result on the other operating activity by PLN 86 mln stemming from:

(-) settlement of the tie existing before LW Bogdanka’s takeover totalling to PLN 94 mln (one-off)

(-) establishment of the provision for claims for damages and other provisions PLN 11 mln

(+) overview and verification of the balance of receivables PLN 5 mln

(+) result of the assets stocktaking PLN 4 mln

(+) higher revenue from damages and contractual penalties by PLN 3 mln

Settlement of non-financial fixed assets impairment write-down (impact on net result):

(-) tangible assets impairment write-down (PLN -1,502 mln)

(-) write-off of goodwill (PLN -201 mln)

(+) deferred tax (PLN 285 mln)

Results on particular segments of operations of Enea Capital Group

Enea CG 2015:

The highest EBITDA in the segment of Distribution

The highest growth in EBITDA in the segment of Generation by PLN 121 mln (after exclusion of one-off LTPPA in Q2 2014 and Q3 2015)

Enea CG Q4 2015:

The highest EBITDA in the segment of Distribution

The highest growth in EBITDA in the segment of Distribution (PLN 38 mln)

Segment of Trade

Enea SA deals with retail sales of electricity

Wholesale is realised by Enea Trading sp. z o.o.

2015 Change factors of EBITDA:

First contribution margin

(+) higher average selling price by 5.9%

(-) higher costs of ecological obligations by 14.3%

(-) higher average purchase price of energy by 5.0%

(-) drop of the volume of energy sales by 0.9%

(+) result on the trade in gaseous fuel PLN 4 mln

Internal costs

(-) higher costs of commercial marketing by PLN 5 mln

(-) higher costs of commissions for business partners by PLN 6 mln

(+) lower costs of customer service and debt collection by PLN 8 mln

Other factors

(-) provisions for litigation and potential claims PLN 17 mln

(-) written off debts PLN 17 mln

Q4 2015 Change factors of EBITDA:

First contribution margin

(+) higher average selling price by 4.6%

(+) lower costs of ecological obligations by 1.6%

(-) higher average purchase price of energy by 2.9%

(-) drop of the volume of energy sales by 4.4%

(+) result on the trade in gaseous fuel PLN 1 mln

Internal costs

(-) higher costs of customer service and debt collection by PLN 3 mln

Other factors

(-) written-off debts PLN 3 mln

(-) provisions for litigation and potential claims PLN 7 mln

(+) lower impairment of receivables by PLN 6 mln       

Segment of Distribution

Enea Operator sp. z o.o. is responsible for electricity distribution to 2.49 mln Customers in the western and north-western Poland on the area of 58,192 km².

The basic task of Enea Operator is a continuous and reliable supply of energy maintaining appropriate quality parameters.

In the Segment of Distribution the financial data of the following companies is presented:

• Enea Operator sp. z o.o.
• Enea Serwis sp. z o.o.
• Enea Pomiary sp. z o.o. and
• Annacond Enterprises sp. z o. o.

 

2015 Change factors of EBITDA:

Margin on the licensed operations

(+) higher revenue from the sale of distribution services to end users by PLN 127 mln

(-) higher costs of purchase of transmission services by PLN 62 mln

(-) higher costs of purchasing energy for coverage of book-tax difference by PLN 12 mln

(-) recognition in 2014 of the final settlement of electricity purchases for coverage of book-tax difference for 2013 PLN 33 mln (one-off)

(+) higher revenue from grid connection fees by PLN 4 mln

Non-licensed operations

(+) higher volume of realised services, optimisation of fixed costs PLN 33 mln (Enea Serwis, Enea Pomiary)

(-) lower revenue from services related to the shift of competences to Enea Centrum by PLN 21 mln

(-) lower revenue in relation to the partial resignation from rendering the street lighting maintenance services by PLN 13 mln

Operating expenses

(+) optimisation of materials and costs, outsourced services and costs of employee benefits PLN 18 mln

(-) higher costs of asset exploitation by PLN 7 mln (greater material scope of work realisation)

(-) higher costs of taxes and charges by PLN 11 mln (greater value of grid assets as a result of completion of investment tasks)

Other operating activity

(-) recognition in 2014 of a provision discount for transmission corridors in the amount of PLN 26 mln (one–off)

(-) higher provision for transmission corridors by PLN 8 mln

(-) higher costs of removing fortuitous events by PLN 11 mln

(-) settlement in 2014 of an agreement in respect of State Forests in the amount of PLN 8 mln (one-off)

Q4 2015 Change factors of EBITDA:

Margin on the licensed operations

(+) higher revenue from the sale of distribution services to end users by PLN 26 mln

(-) higher costs of purchase of transmission services by PLN 15 mln

(-) higher costs of purchasing energy for coverage of book-tax difference by PLN 13 mln

(+) higher revenue from grid connection fees by PLN 19 mln

Non-licensed operations

(+) higher volume of realised services, optimisation of fixed costs PLN 9 mln (Enea Serwis, Enea Pomiary)

(-) lower revenue in relation to the partial resignation from rendering the street lighting maintenance services by PLN 4 mln

Operating expenses

(+) lower actuarial reserves by PLN 20 mln (transfer of employees to Enea Centrum one-off)

(-) higher costs of exploitation services by PLN 14 mln (greater material scope of work realisation)

(-) higher costs of taxes and charges by PLN 1 mln (greater value of grid assets in connection with the completion of investment tasks)

Other operating activity

(+)lower provisions for potential claims by PLN 8 mln

(+) stocktaking result PLN 4 mln

Segment of Generation

The segment of Generation presents financial data of Enea Wytwarzanie sp. z o.o. and it subsidiaries.

Enea Wytwarzanie holds e.g. 10 highly-efficient and modernised power units in the Segment of System Power Plants. Annual generation capacity amounts to ca. 16 TWh electricity in this segment.

Tests for the fixed assets impairment:

• impact on EBIT PLN -1,502 mln (Y2015 and Q4 2015)

2015 Change factors of EBITDA:

Segment of System Power Plants:

(+) higher margin on generation by PLN 59 mln

(+) higher revenue from LTPPA PLN 36 mln

(+) lower fixed costs by PLN 16 mln

(+) higher margin on trade and the Balancing Market by PLN 11 mln

(+) higher revenue from Regulatory System Services by PLN 8 mln

Segment of Heat:

(+) EBITDA MPEC (takeover of the Company on 16 September 2014) and PEC Zachód (incorporation of the Company on 27 June 2015): PLN +32 mln

In the other areas of the Segment:

(+) higher revenue from sales of heat by PLN 19 mln

(+) higher result on the other activity by PLN 5 mln

(+) higher revenue from electricity by PLN 4 mln

(-) lower revenue from certificates of origin by PLN 6 mln

(-) higher costs of fuel consumption by PLN 12 mln

Segment of RES:

(+) Area of Biogas (PLN -10 mln): in 2015 establishment of provisions for future liabilities in the amount of PLN 6 mln (one–off)

(-) Area of Wind (PLN -16 mln): in 2014 redemption of liabilities in the amount of PLN 10 mln (one-off), drop in revenue from certificates of origin by PLN 9 mln, lower fixed costs by PLN 3 mln

(-) Area of Water (PLN -2 mln): drop in revenue from certificates of origin and revenue from electricity by PLN 8 mln, reduction in fixed costs by PLN 4 mln, higher result on the other operating activity by PLN 2 mln

Segment of Generation

Q4 2015 Change factors of EBITDA:

Segment of System Power Plants:

(-) lower margin on trade and the Balancing Market by PLN 24 mln

(+) lower fixed costs by PLN 8 mln

(+) higher margin on generation by PLN 3 mln

Segment of Heat:

(-) EBITDA PEC Zachód Q4 2015: PLN -6 mln (incorporation of the Company on 27 June 2015)

In the other areas of the Segment:

(-) lower revenue from sales of electricity and heat by PLN 4 mln

(+) lower costs of remuneration by PLN 14 mln (result of the transfer of employees to PEC Zachód)

(+) lower costs of outsourced services by PLN 2 mln

(+) lower costs of fuel consumption by PLN 7 mln

(+) higher result on other operating activity

Segment of RES:

(+) Area of Biogas (PLN -6 mln): in 2015 establishment of provisions for future liabilities in the amount of PLN 6 mln (one–off)

(-) Area of Water (PLN -3 mln): drop in revenue from certificates of origin and revenue from electricity by PLN 2 mln, higher fixed costs by PLN 1 mln

Segment of Mining

LW Bogdanka

Financial data for two months of 2015 (November - December)

Mining realised on three fields: Bogdanka, Nadrybie, Stefanów

Production assortment: fine coal (ca. 98%), pea coal, nut coal

Key recipients: commercial power industry and industrial power industry

2015 Factors of generated EBITDA:

(+) EBITDA profitability 43.1% and EBIT profitability 31.9%,

(+) profitability of the reporting period (November and December) higher than annual profitability (average sales revenue for coal higher by over 14% than the average monthly level in 2015)

(+) average quantitative sales of coal in the reporting period higher by over 17% than the average monthly level from 2015

(-) signing of two annexes to coal sales agreements introducing lower prices and recalculation of previous supplies to the current price (impact of the recalculation PLN -7,0 mln)

(-) establishment of provisions for growth in remuneration budget

Segment of Other activity

In the segment of Other Activity companies are presented from three areas:

• support for the other Capital Group companies:
• Enea Centrum sp. z o.o. - being the Shared Service Centre in the Group within accounting, staff, teleinformation, customer service
• Enea Logistyka sp. z o.o. - the company specialising in the logistics, warehousing, supply operations
• supplementary operations:
• Enea Oświetlenie sp. z o.o. - the company specialising in lighting the interior and exterior of buildings; designs, constructs street lighting, illumination of urban areas, lighting monumental buildings and public utility objects, and also rendering construction services and comprehensive servicing of photovoltaic power plants
• other operations:
• The Group conducts restructuring activities whose objective is keeping in the structure only those companies from the basic value chain and companies supporting and supplementing them. This group of companies includes: Energo-Tour, Szpital Uzdrowiskowy ENERGETYK

Assets - structure of assets and liabilities of Enea Capital Group

Change factors of fixed assets (growth by PLN 3,859 mln):

higher tangible fixed assets by PLN 3,457 mln stems mainly from:

(+) higher expenditures (PLN 1,903 mln) in the segment of Generation (construction of the power unit No. 11 in Kozienice)

(+) higher expenditures on the grid assets in the segment of Distribution (PLN 905 mln)

(+) takeover of LW Bogdanka

(-) fixed assets impairment write-down (PLN -1,484 mln)

lower value of intangible assets by PLN 118 mln stems mainly from:

(-) fixed assets impairment write-down (PLN -207 mln)

(+) development of the software for the Capital Group being the support in the companies’ operating activities (e.g. ERP systems) and expenditures on the extension of Customer Comprehensice Service System

higher deferred tax assets (by PLN 450 mln) relate to: fixed assets impairment write-down (PLN 285 mln), valuation of the assets of LW Bogdanka and provisions for redemption of proprietary interests

higher cash and cash equivalents stems from the funds gathered in LW Bogdanka within the Mine Liquidation Fund

Change factors of current assets (growth by PLN 1,022 mln):

• higher allowances for emissions of CO₂ by PLN 99 mln stem from a higher purchase by PLN 30 mln and lower sales by PLN 45 mln
• higher inventory by PLN 141 mln stem from a growth in coal stock levels
• changes in the financial instruments portfolio structure result from withdrawal of financial assets kept to maturity (expiry of deposits maturing over 3 months) and lower financial assets valued at fair value through financial result stem from the withdrawal of some funds allocated in securities with high liquidity
• higher cash and cash equivalents by PLN 1,135 mln stem from the demonstration in the statements of LW Bogdanka SA’s cash (PLN 258 mln), inflow at the end of December of the funds from the final settlement of LTPPA and activities aiming achieving an optimum level of return on cash and cash equivalents held by Enea CG (decrease in the portfolio of funds in Asset Management for the account of bank deposits)

Assets - structure of assets and liabilities of Enea Capital Group

Change factors of non-current liabilities (growth by PLN 4,268 mln):

• bond issue within the programme agreements concluded by Enea and releasing subsequent tranches of a loan from EIB (a total of PLN 3,056 mln);
• Demonstration within Enea CG of non-current liabilities of LW Bogdanka SA PLN 1,234 mln, including PLN 700 mln of issued bonds

Change factors of current liabilities (growth by PLN 555 mln):

• PLN 94 mln higher liabilities for purchase of tangible and intangible assets
• PLN 171 mln higher liabilities for salaries
• PLN 264 mln higher provisions:
• PLN 87 mln higher provisions for purchase of C0₂ emission allowances
• PLN 81 mln higher provisions resulting from LW Bogdanka’s acquisition
• PLN 85 mln higher provisions for certificates of origin

Cash situation of Enea Capital Group

1) Acquisition of tangible fixed assets and intangible assets and acquisition of a subsidiary of Enea CG 2015

Acquisition of tangible fixed assets and intangible assets and acquisition of a subsidiary of Enea CG 2015

Ratio analysis ¹⁾