Dear Stakeholders,
We are publishing the 2019 results in unique circumstances: for several months now, the economy has been operating in the epidemic environment, which poses challenges facing Poland and other countries all over the world. By taking swift action, we have secured stable and uninterrupted operation of the ENEA Group, by maintaining continuity of operation of all our companies and ensuring uninterrupted supply of electricity to our clients. When the state of epidemic threat was announced in Poland, the Enea Group adopted a modified work organization framework and special safety procedures in conforming to the recommendations issued by the Minister of Health and the Chief Sanitary Inspectorate. During this special time, our employees have been performing their assigned tasks with responsibility and commitment. I would like to extend my sincere gratitude to all our employees, clients, partners and other stakeholders for this immense effort.
At this time, we should also emphasize our considerable involvement in supporting governmental and civic initiatives combating the coronavirus epidemic. The ENEA Foundation and Group companies joined in to support hospitals from the area of the Group’s operation. Through the Foundation, we donated PLN 3.5 million among others for specialist medical equipment and the necessary hygiene and protection measures. On top of that, Lubelski Węgiel Bogdanka donated PLN 740 thousand to support medical centers in the lubelskie voivodship.
Recently, some of the regulations related to the state of epidemic in Poland and affecting the operation of companies and the economy, have been mitigated. It is becoming important to return as soon as possible to the implementation of the accepted business plans and objectives. The Enea Group will continue to actively support Poland’s economic growth, in particular sustainable development and transformation of the fuel and energy sector, among others by carrying out responsible investments, undertaking additional initiatives, which improve its operating efficiency and by optimizing the Group’s business model.
In December 2019, in response to the sector’s changing operating conditions and the clear trends supported by regulations at the European and local level, we updated the ENEA Group Development Strategy, setting clear targets for 2030 with an outlook to 2035 The commitment to implement the accepted development directions and objectives is very important, especially now, as we observe economic slowdown caused by the state of epidemic. I am certain that we, as the Enea Group, have the necessary potential to achieve our ambitions as detailed in our plans.
Stable and robust financial and operating results
2019 was a challenging year for the power sector, with the higher pace of changes in the market environment and increasing pressure to accelerate transformation of operations in the fuel and energy sector. In Poland and Europe alike, we observed how the trends from previous years continued, driving the changes in the business and regulatory environment. Their impact on the whole sector offers a chance to grow and transform towards the low-emission energy industry. The changes in the EU climate policy framework, the pressure to develop renewable energy sources faster, including photovoltaic sources and offshore wind farms, or development of prosumer energy production – those are some of the issues that set the course for the industry and had a significant impact on power generation and trading segments.
We generated robust financial results in 2019. ENEA Group increased its EBITDA of PLN 3,410 million, up by nearly 45% from the previous year. Revenues reached of PLN 16,401 million, increasing more than 29% compared to 2018. During that period, we produced roughly 26 TWh of electricity. The volume of sales of electricity and gaseous fuel to retail customers was 20.3 TWh. Total revenue from sales of electricity and gaseous fuel increased in 2019 (without compensation) by PLN 2,879 million as compared to 2018.
The planned capital expenditures were executed as previously assumed. Out of the executed amount of PLN 2,181 million, some PLN 238 million was spent directly on pro-environmental projects.
The Group steadily increases its renewable generation capacity (by 12.5 p.p. y/y), with the largest increases in energy production in the wind farms area (42%). According to the updated Development Strategy for the ENEA Group, in 2030 we will have increased the share of RES in total energy production more than fourfold.
Responsibility for the environment
The ENEA Group is an active participant in the transformation of the Polish energy sector. Our goal is to achieve sustainable development in the entire value chain by using cutting-edge environmentally-friendly technologies. The planned responsible transformation of our generation assets will increase efficiency of energy production and reduce unit CO2 emissions levels significantly. In 2019, we started important modernization works at the Połaniec Power Plant. The project is part of the plant’s program of adaptation to strict European environmental standards, including BAT conclusions. By the end of this year, electrostatic precipitators will be upgraded in six power units. The work will be conducted during the scheduled overhauls of the individual units and therefore will not affect the ongoing operation of the plant. These activities also entail an upgrade of the desulfurization installation, which is to be completed in early 2021. The Kozienice Power Plant is also upgrading its generating units to comply with the BAT conclusions. The work on two units was completed in 2019 and on three additional ones will be performed during the planned shutdowns in 2020.
Modern distribution network
The largest capital expenditures in 2019 were made in distribution. The power grid modernization program cost PLN 1.0 billion. ENEA Operator completed the largest grid project in its history – a thorough redevelopment of the 110 kV Morzyczyn-Drawski Młyn line. After the redevelopment, the line (240 km in length) significantly improves energy security in north-western Poland. The distribution company improved tis energy supply reliability indicators, where the average time of unscheduled interruptions for clients from the North-Western part of Poland was reduced from 152 to less than 124 minutes. The result achieved in 2019 is nearly half an hour better than it was before.
Our capital expenditure projects support and implement the assumptions of the national plan to increase the share of RES in the energy mix. The upgrades of our power infrastructure raise the capacity of the grid to accept energy from dispersed renewable energy sources connected to the DSO grid. In 2019 alone, ENEA Operator connected 12.7 thousand micro-installations with the combined capacity of nearly 90 MW. The increases in the connection capacity goes hand in hand with the change in the network management philosophy, according to which a system must increasingly be able to handle two-way flows.
The Group’s development plan also includes projects associated with electromobility and related infrastructure. We are joining the initiatives to build an electric vehicle charging network in cooperation with, among others, Polish Post, Kolejowe Zakłady Łączności and the West Pomeranian University of Technology.
Stable fuel source for power plants
Lubelski Węgiel Bogdanka is the main supplier of fuel to ENEA Group’s two power plants. Last year, the Company recorded nearly 9.5 million tons of production, up by nearly 5%. In the same period, sales of coal increased by 4.7%. The LWB Group posted revenue from sales of PLN 2,158 million and EBITDA of PLN 771 million
Socially responsible employer, development of human capital
The key elements of the ENEA Group’s social responsibility and sustainable development policy include: investments in human resources, protection of the environment, commitment to relations with local communities and support for the areas that are not directly related to the company’s operations. Our goal is to maintain good relations with local communities and an open and constructive dialog with our social stakeholders. For years, we have been accompanying our employees and their communities in projects supporting, among others, education, sports, health prevention, protection of the environment, people in need and seniors. In 2019, we put special emphasis on development of the endorsed schools and dual studies project Our “Current is not so terrible” campaign, in which we are teaching the youngest how to be safe with electricity, was recognized in the Ranking of the Responsible Business Forum as the most valuable program for the public in the last 30 years.
As a responsible employer, we are investing in employee development, fostering the improvement of leadership and merit-based competence related to the areas of our activity. We invite employees to take an active part in development activities, customized to match the needs of the participants and our organization. We subsidize learning under lifelong learning programs, we create opportunities to improve language competences in our units and at positions that require it. We educate employees and develop their competences by offering e-learning courses, webinars and information brochures on how to build a friendly working environment based on the values of the ENEA Group.
Update of the development strategy in response to changes in the sector's environment
We are actively participating in the transformation of the Polish energy sector. Our updated Development Strategy of the ENEA Group assumes an increase in the share of zero- and low-emission generation sources in total electricity production. In 2030, it will reach 41% of production and 60% by 2035. A sustainable and responsible transformation of our generation assets will reduce unit CO2 emissions levels significantly. The other important pillar of the transformation process will be offering new integrated products and services diversifying the Group’s current activity using advanced digital and IT technologies (Internet of Things, Blockchain, etc.), which will create added value for the company as well as its shareholders and customers.
Please read the summary of activity of the ENEA Group in 2019. On behalf of the ENEA the Management Board, thank you to all the members of the Supervisory Board, management boards of companies and all of the Group’s employees for professional and effective activity, through which we can build and strengthen the value of the ENEA Group together.
Sincerely,
Mirosław Kowalik
President of the Management Board of ENEA S.A