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The Enea Group and its Bogdanka Coal Mine released their financial results for the first quarter of 2017. According to the company the construction of the new 1075 MW unit no. 11 in Kozienice has been completed at about 99%. Enea’s Bogdanka mine located near Lublin presented data on coal production in Poland and its 1H 2017 results. The situation on the international market will facilitate a drop in coal prices.
“The Group’s development is balanced and the data shows that the company is growing, even when the results are adjusted to not take into consideration the takeover of the Połaniec power plant. Without the power plant the results would also improve, which shows that we are developing in a sustainable way,” Enea’s CEO Mirosław Kowalik said. He added coal production was increasing and so were energy sales, which made Kowalik happy.
On the first of September the Połaniec power plant for the first time released power into the national grid as part of the synchronization works of the new unit, which is – according to Kowalik – one of the most state-of-the-art installations in Europe and in the world. The CEO also said the company was diversifying by investing in the Polish Mining Group (PGG) and Polimex.
Numbers
Enea’s consolidated net profit in the first half of 2017 was PLN 623.8 m, which is a 32.4% increase in comparison to the same period last year.
Enea’s EBITDA profit was PLN 1.358 bn, in 1H 2016 it was PLN 1.206 bn. The company earned PLN 623.8 m net in comparison to the PLN 471.2 m in the same period last year. In the previous six months the Group’s operational profit was PLN 781.6 m in comparison to 1H 2016’s PLN 610.6 m.
Investments
The company is hoping this year its investment expenditure will amount to PLN 4 bn. This is the price of taking over Połaniec and adjusting to the BAT and BREF requirements. The cost to adapt the Kozienice power plant is PLN 150 m and the adjustment of the Połaniec power plant is PLN 350 m.
“The regulations will be implemented in 2022. We want to complete the works so that there is no drop in electricity production,” Kowalik said.
Rafał Szymański the acting Vice-President of the Management Board for Corporate Issues stressed the works to adapt the machinery to the BAT and BREF conclusions were ongoing.
“We are working on improving the automation of the quality of the network’s operation. Enea Operator opened a central power distribution, which will facilitate the delivery of energy in central and northern Poland,” Szymański said.
The Enea Group estimated that the price of adjusting its generation assets to the BAT requirements will cost about PLN 500 m. At the same time Enea Wytwarzanie says its costs of adapting to the BAT conclusions will be about PLN 150 m. This is about the 200 MW units at the Kozienice power plant. The estimated costs at Enea Połaniec will be about PLN 350 m.
Repairing the damage after storms
According to Piotr Adamczak the Vice-President for Trade the extent of damage caused by the storms in August was the biggest in history of the impacted area where Enea operates. The CEO stressed all grid elements have been secured, the repair units have already left the area, but in some places works were still taking place to provide energy to individual clients.
The storms left 250 thousand consumers without electricity, destroyed 85 high voltage pillars and about 2.5 thousand medium- and low- voltage pillars, while 7200 transformer stations were left without power.
Połaniec power plant enhances Enea’s results
A significant increase in EBITDA at PLN 96 m was reported in the generation sector. The EBITDA was PLN 427 m, while a year earlier it was PLN 331 m. This was caused by the takeover of the Połaniec power plant, which upped the company’s generation capacity. Let us remind that in March 2017 Enea purchased the Połaniec power plant for PLN 1.26 bn.
EBITDA for trade grew by PLN 54 m and reached PLN 105 m, while EBITDA for extraction was about PLN 321 m in 1H 2017 and higher by 13.6% than in the first six months of 2016.
Growing profit
During the first six months of 2017 Enea spent PLN 2.455 bn on investments, out of which PLN 1.608 bn was capital investments, PLN 329 m was spent in the generation sector, PLN 344 in the distribution sector and PLN 139 in extraction. During the same period last year the Group’s investments amounted to PLN 1.171 bn.
Currently the Group’s generation capacity is 5.2 GW, it has 121 distribution lines with connections and its three mining fields have the potential to yield 277 million tons,
Renewable energy sources (RES) and emission permits
According to Piotr Adamczak, Vice-President for Trade, supply dominates demand on the property rights market. A new draft amendment to the Renewable Energy Act appeared in the middle of the year, but it did not cause a significant drop in the oversupply on that market. “A significantly bigger impact was made by the increased RES requirement for the coming years, but that took place in the third quarter,” Adamczak said. He also added that the emissions permits market was experiencing a downward trend, but in the last few days it actually noted a significant increase.
Production and sales up
In 2017’s first half, the Group generated 9 337 GWh of power, which is a 37.2% increase. As much as 8 484 GWh was produced in conventional power plants, which is a 29.9% increase.
Between January and June 2017 Enea sold 8 979 GWh to retail consumers. Last year it was 8 302 GWh. Enea also sold 530 GWh of gas. In the first quater of 2016 it was -704 GWh.
Bogdanka’s efficiency is improving
Enea also released the results of the Bogdanka Coal Mine it owns. The mine’s net profit was at PLN 43.9 m in the second quarter. “The production increased by about 6% while extraction costs dropped, which shows we are becoming more efficient,” Krzysztof Szlaga, Bogdanka’s CEO said. When it comes to selling coal to the commercial power generation sector, the mine’s position is also strong at 26.2%.
Coal production is growing
In the first half of the current year the production of commercial coal was 4.6 bn tons, last year it was 4.3 bn. During the discussed period the Group sold almost 4.7 tons of coal in comparison to 4.4 m tons in the first half of 2016.
“This year we want to prepare 30 km of new longwalls, so far we have completed 15 km. We are getting ready for a situation when coal demand will increase,” Szlaga said. The company’s goal is to produce 9.2 – 9.3 m tons.
Market conditions
According to Krzysztof Szlaga, in the first half of the year the second quarter in a row when coal prices dropped was recorded. The coal price in the middle of the year was at USD 77 per ton in the ARA ports. In July and August it went up to about USD 85 and currently is at USD 88. “In China production increased by 5%. In the first half of the year it amounted to 1.7 bn tons. China is closing the most unprofitable mines, but also opening new ones whose potential is 350 tons annually. The Chinese are also increasing the number of extraction days from 276 to the previous 330 days a year,” Bogdanka’s CEO said.
He also added that in the first half of the year the production in the US increased by 16% and consumption by 5%, which was caused by the change in policy made by President Donald Trump. In the first five months of the year increased export at 40 m tons was also recorded. “It is a 60% increase year on year and this coal is shipped mostly to Europe,” Szlaga said.
Russia is another country that has an impact on coal’s prices across the world. In the first six months of the year 200 m tons was extracted there and the country’s export increased to 10%.
The CEO of Bogdanka also said that considering the growing supply, in the long-term, coal prices will drop below USD 90. In his opinion the optimal price is about USD 65-70.
In Poland coal prices in the second quarter increased in comparison to the first, while production dropped by about 5%. In 2018 it is expected that prices will increase for Bogdanka. Szlaga stressed that 90% of the company’s contracts were long-term.
According to the data included in the Bogdanka Coal Mine’s report, in the first half of 2017 coal production in Poland was 25.1 m tons, whereas last year it was 27 m. The reserves of steam coal dropped to 23.9 m tons from 24.2 m in 1H 2016.
At the same time coal exports are dropping, while imports are going up. Coal import increased this year from 2.9 m tons to 3.2 m. Coal export dropped from 3.2 m tons to 2 m. This data was released by the Industrial Development Agency.
Kozienice almost finished
Enea also reported that the construction of the 1075 MW unit no. 11 at the Kozienice power plant has been almost completed at 99%. At the beginning of September the synchronization of the new unit with the national transmission system has been successfully completed and the unit has released power into the grid for the first time.
According to Rafał Szymański the acting Vice-President of the Management Board for Corporate Issues, the modernization of units 3 and 8 at Kozienice had been completed. The modernization started in July. Unit no. 8 was equipped with an SCR flue gas denitrification installation. “The Group is consistently adapting its machinery to the requirements of BAT and BREF,” Szymański stressed.
The construction of unit no. 11 at the Kozienice power plant has been completed at 99%. The deadline for completing the works is 19 December this year. “Previously we were working on commencing all installations of the project. On 1 September we conducted the first synchronization with the national transmission system, which was successful,” Szymański stressed.
The company is following its plan and working on regulations and optimizing the unit’s operation. In November this year the unit will have a trial run where it will be in operation for 720 hours incessantly.
