Financial results

EBITDA after three quartersamounted to PLN 6.1 billion and were higher by 18 percent than a year ago. The result was mainly an outcome of a positive balance of one-off events, i.e. mainly the allocation of free allowances for CO2 emissions valued at about PLN 1.4 billion. The result of the 3rd quarter itself (an increase of EBITDA by 16%) was positively affected by an increase of the obtained energy price by PLN 68 per MWh compared to the previous year. Net profit for the shareholders, after three quarters, amounted to PLN 2.2 billion, i.e. 28 percent more than a year earlier.

After 9 months of 2019, the Conventional Generation segment had the biggest share in the reported EBITDA of the PGE Group, which amounted to more than PLN 2 765 million, and the Distribution segment with a result of PLN 1 810 million. The District Heating segment ended the reporting period with a result of PLN 865 million. At the same time, the Supply segment generated PLN 532 million and the Renewable Energy sector, PLN 411 million.

We maintain the trend of robust financial results which are amplified by one-off events. We end another reporting period with satisfying operational performance and an increase in the production from renewable energy sources. We produced 23 percent more energy from the wind alone than in the comparative period of the last year and the increased volumes of uncontrolled sources once again resulted in an increased demand for the operation of pumped storage plants, which improved by 67 percent.– says Henryk Baranowski, president of the Management board of PGE Polska Grupa Energetyczna (Polish Energy Group).

Operating results

Operating results after three quarters of 2019 were mainly affected by the lower demand on the part of the operator for the energy generated in conventional units, which was associated with an increased volume of production from wind (+1.9 TWh) and an increased volume of imported energy (+2.7 TWh) in the case of the domestic energy consumption lower by 0.8 TWh.

In 9 months of 2019, the PGE Group produced 43.44 TWh of electricity, 24.82 TWh of which (16 percent less than in the previous year) came from lignite. The decrease resulted from a reduced workload of the Bełchatów and Turów Power Plants and upgrade work in progress in both power plants.

The production of electricity from hard coal was 13.54 TWh, which means a decrease by 12 percent in comparison to the base period. It is an effect of a less load and an overhaul in the Opole Power Plant and of the stand-by of Dolna Odra and Rybnik Power Plants.

The volume of production from gas increased by 9 percent, which after three quarters of 2019 amounted to 3.12 TWh. The increase resulted from the greater production of electricity in cogeneration in the Lublin Wrotków Power Plant.

Owing to favourable weather conditions, the PGE Group recorded an increase in the wind energy production by 23% in the reporting period. PGE achieved higher volumes of production also in the case of production from biomass, where an increase of 39 was recorded. The increased production from uncontrolled sources resulted in a 67 percent increase of production in pumped storage plants which act as an emergency backup in the system.

The volume of the distribution of electricity in the reporting period amounted to 27.1 TWh, which means being maintained at the same level compared to the same period in the previous year, despite a national decline in energy consumption.

We are the leader of Poland’s energy transition, the evidence of which are the investment projects implemented by us. There is a massive work continuing in connection with the choice of the partner for the implementation of a programme of wind farms in the Baltic Sea and we are also starting cooperation with the largest owners of land in Poland, such as PKP and KGHM Polska Miedź, when implementing our ambitious programme of photovoltaic farms. In the near future an agreement will be signed between PGE Energia Odnawialna and PGE GiEK on the installation of photovoltaic panels on land used so far as landfill for furnace waste generated in the Bełchatów Power Plant. The capacity of the farm may reach even 60 MW.  We consistently enhance our leadership in the renewable energy sector – says Henryk Baranowski.

Our investment project portfolio includes also low-carbon gas, including the flagship project based on this fuel, i.e. two combined cycle gas and steam units with a total capacity of 1400 MW in the Dolna Odra Power Plant. After the completion of the project, i.e. around 2024, Nowa Dolna Odra will be one of the most modern and environmentally friendly system power plants in Europe. We also consistently focus on the development of electromobility, which we treat as complementary. We focus on system solutions – from the charging infrastructure for electric cars, through zero-emission public transport, to consistently complementing our own specialised car fleet with electric vehicles. At the same time – wherever possible – we focus on the effect of synergy, taking cooperation with industry partners – added Henryk Baranowski.

Capital expenditures

After three quarters of 2019, capital expenditures in the PGE Group amounted to PLN 4.5 billion and was about 19 percent higher than in the corresponding period of the last year. On 30 September, the one of the most important investment projects of PGE has been completed in accordance with the adopted schedule – the construction of generating units No. 5 and 6 in the Opole Power Plant. Owing to the use of state-of-arts technology, the efficiency of electricity production in the new units reaches a level of approximately 46 percent, which results in a significant reduction of the environmental impact of the power plant. The new generating units are low-carbon and meet the stringent environmental standards of the European Union with a margin. From two to four times less sulphur and nitrogen oxides will be produced per each kilowatt hour of the electricity produced in Opole units, and the specific emission of carbon dioxide will be less by about 25 percent. Thanks to the project worth near PLN 11.6 billion, the Opole Power Plant is currently in the world lead of the cutting edge power plants and meets 8 percent of the domestic demand for electricity. Energy produced in the new units is able to supply as many as 4 million households.

Also the construction of a 490 MW generating unit in the Turów Power Plant is successively progressing, where construction and assembly work continues. In September 2019, the supply of power from a 110 kV line has started and in the nearest future the stage of commissioning of individual devices will commence. In the 1st quarter of 2020 it is planned to fire the boiler up with oil. The advancement of the work covered by the contract at the end of the third quarter was approx. 93 percent. The new unit will meet the stringent environmental standards imposed by the European Union with a margin and the electricity produced in the unit will be sufficient to cover the needs of approx. 1 million households. In accordance with the existing schedule, the new unit No. 7 will be put into service by 30 October 2020.

Combined cycle gas and steam units

The Group invests in assets fuelled with gas, thus diversifying the generating fleet with regard to fuel sources. PGE Górnictwo i Energetyka Konwencjonalna, a company of the PGE Capital Group, is at the stage of selection of the General Contractor for the construction of two combined cycle gas and steam units with a combined capacity of approx. 1400 MW in the Dolna Odra Power Plant. The deadline for the submission of tenders expired on 31 October 2019.  A tender has been submitted by the consortium of Polimex Mostostal and General Electric and the tender is currently under the process of formal and legal evaluation. The signing of the agreement with the General Contractor is subject to the results of a capacity market auction that will take place on 6 December 2019. The project will apply for a 17-year capacity agreement. The project would allow to recreate the production capacity of the Dolna Odra Power Plant and eventually to replace all existing carbon units in that location. It would also result in the reduction of emissions of the entire generating fleet of PGE, thereby reducing the exposure to the risk of the increasing prices of CO2. New combined cycle gas and steam are also a response to the growing demand for flexible capacity in the National Power System, particularly in the northern part of the country where many onshore wind farms are located and eventually also offshore wind farms will be constructed in the Baltic Sea.

Onshore and offshore wind farms

The PGE Group continues the search for a strategic partner for the preparation, construction and operation of wind farms in the Baltic Sea, with a total capacity up to 2545 MW, constituting the first stage of the Group's offshore programme. The implementation of the project would allow to avoid emissions at a level of around 7 million tonnes of CO2 per year. On 22 October, the Group announced that it has invited Ørsted, the world leader in the offshore technology, to the next stage, i.e. the negotiations of the transaction documents of the share purchase agreement and an investment agreement. Eventually PGE intends to sell 50 percent of the shares in its two special purpose vehicles i.e. Baltica 2 and Baltica 3, under which the offshore wind farm projects are being prepared and then, together with the partner, implement them in the form of a joint venture. At the same time, work continues in the area of technical projects of Baltica 2 and Baltica 3, such as: wind measurements, planning work, obtaining environmental consent decisions and geophysical data collection. Also a tender procedure for the selection of the contractor for the seabed survey was announced.

Concurrently, a letter of intent was signed with PKN Orlen for the cooperation in the development of offshore wind energy engineering. Polish champions intend to jointly support the development of the offshore projects, in view of the positive impact of the development of this technology on Poland’s economy, including maximising the participation of Polish suppliers and contractors.

PGE also invests in wind farms also on land. Work is in progress at the construction of a project titled Klaster, consisting of three wind farms (Starza, Rybice and Karnice II) with a total installed capacity of 97.17 MW and an annual production of around 277 GWh, which corresponds to the annual demand for electricity of 130 thousand households. The erection of all 10 turbines at the Karnice II farm has already been completed. The current work is related to the installation of internal equipment. In accordance with the schedule, the turbines will undergo tests this December. At two other farms, Rybice and Starza, the supply and assemlby of another turbines take place.

The implementation of the Cluster project will allow to avoid emissions at a level of around 215 thousand tonnes of CO2 per year. The work is carried out in accordance with the schedule and obtaining a Use Permit (PnU - Pozwolenie na Użytkowanie) for all farms is planned for the end of the first quarter of 2020. The implementation of the project will allow to increase the installed capacity of the wind farms of the PGE Group by 18 percent to nearly 650 MW.

Photovoltaics development programme

The Group consistently fulfils its plans for the development of photovoltaics. PGE has already signed letters of intent with Grupa Azoty and Zakłady Chemiczne Siarki "Siarkopol", PKP Polskie Koleje Państwowe and KGHM Polska Miedź, assuming the use of land of these companies for further investment projects involving photovoltaic panels. Also signing of an agreement between two companies of the Group, PGE Energia Odnawialna and PGE GiEK, on the installation of photovoltaic panels on land used so far as landfill for furnace waste generated in the Bełchatów Power Plant is planned for the next weeks. The capacity of the planned photovoltaic farm may reach up to 60 MW. The aim of PGE is achieving the installed capacity of 2.5 GW in this technology in 2030.

Next steps toward electromobility

PGE is gradually developing also in the area of electromobility. PGE Nowa Energia, a company responsible for this area in the PGE Group is active on the electric car charging market in mid-size cities and health resort regions. In the 3rd quarter, the PGE Group has signed a letter of intent with the Social Security Office (ZUS - Zakład Ubezpieczeń Społecznych) for the construction of new charging stations at ZUS branch offices. These are supposed to be public access stations and PGE Nowa Energia is to be the investor and operator of the resulting infrastructure. At the same time PGE Nowa Energia is the first operator of electrical car charging stations in Poland who ensures a fully eco-friendly power supply for its customers. This is guaranteed by a contract signed with PGE Energia Odnawialna under which electricity in the stations belonging to the PGE Capital Group comes entirely from renewable energy sources.

Also another two agreements signed in October contribute to the broadly defined electromobility development programme. The first one, concluded between the PGE Group, through the FIZAN Eko-Inwestycje fund, and the Industrial Development Agency concerns a project under which contracts for the supply, lease or long-term rental of electric buses will be obtained. The partners are planning to jointly coordinate the production process conducted by Polish companies from the industry, including Autosan. The cooperation started is an important step toward the replacement of the fleet of local government units intended e.g. for the transport of pupils to schools. The second agreement related to the production of a fleet of special vehicles for the energy sector was concluded with Polska Grupa Zbrojeniowa (the Polish Armaments Group), Autosan as well as Tauron and Enea. The cooperation potential has been estimated at 1500 of specialised vehicles in the four coming years.

Investment in startups

PGE Ventures, a CVC fund of the PGE Group once again has invested in yet another, the seventh startup. This time it is ConnectPoint who supplied its customers with e.g. management systems for wind farms, combined heat and power plants, municipal distribution and power plants throughout Europe. The solutions of ConnectPoint increase the effectiveness of the systems of production and distribution of energy. In consequence, it enables to reduce operating costs and reduce CO2 emissions by large power companies. The solutions proposed by the startup may allow companies from the PGE Group to collect and standardize production data in one place, which might reduce the costs of the integration of new systems.