WOOD Flash – Polish utilities: another confusing quarter, with prelims revisions likely ahead
All four Polish utilities under our coverage (PGE, Enea, Energa and Tauron) are due to release their preliminary numbers in the coming weeks, before publishing their full 2Q19 financials later in August and September. We expect Enea to post the strongest results, Energa somewhere in the middle, and Tauron and PGE’s results likely disappointing the market. On a segmental basis, as in 1Q19, the supply segment is likely to remain under pressure, due to higher power prices and the power sellers’ inability to pass higher costs onto customers. Moreover, given the as yet unknown impact of the soon-to-be-released framework on which the compensation will be based, it is possible that the utilities will revise their preliminary numbers once more information is known on the subject (in the second part of August, we estimate). Tauron has already decided to postpone its full 2Q19 release date until 16 September – the company expects the computation of the compensation to take quite some time, but plans to reflect the impact of the compensation in 2Q19E. Depending on the timing of the regulation (the Ministry of Energy) and the parameters (regulator) announcements, PGE, Enea or Energa might decide to postpone their full numbers as well, in our view. We also note that there is still no working regulation for the heat segment and the companies do not receive support for cogeneration – this is likely to boost the 3Q19E EBITDA, with the heating tariff in place. The distribution tariff was approved in April – a 4% decline yoy for the sector, which might not be enough to compensate the utilities for the higher costs, mainly those connected with grid losses, in our view.ENEA is engaged in production of electricity and heat; trade in electricity; and distribution of electricity.
Energa SA is a Poland-based company engaged in the electric power sector. It produces and distributes the electric power and participates in the electric power market in Northern and Central Poland. It divides its business into seven segments: Electricity Distribution consists of electricity distribution conducted by subsidiaries; Renewable Energy invests in renewable energy sources and produces electricity through hydro, wind and bio-energy plans; Baseload Power Plant consists of manufacturing and investment activities in the area of conventional power plants, service and repair activities related to the generation of electricity; Combined Heat and Power (CHP) includes manufacturing activity of power plants and the heat distribution; Sales is engaged in lighting services, trading of electrical energy and customer service; Services provides accounting, human resources (HR) and payroll services, among others; Other includes hotel and training centers, and transportation services.
PGE Polska Grupa Energetyczna is an electricity company based in Poland. Co. is engaged in the generation and selling of electricity. Co. is a predominant power producer and supplier in Poland and a major heat and power sector company in Central and Eastern Europe. Co. supplies over 5 million households, businesses and institutions through a combination of its own fuel resources (lignite), power generation and final distribution networks. Co.'s activities focus on the following areas: Conventional Power Generation, Renewable Power Generation, Nuclear Power Generation, Wholesale, Distribution and Retail. Co. has 12.2 GW of installed generation capacity.
Tauron Polska Energia is engaged in the generation, transmission, distribution, and sale of electricity and heat in Poland. Co. generates electricity from various conventional and renewable energy sources, including hard coal, lignite, natural gas, biomass, wind, solar, and hydro power. It is also involved in quarrying, crushing, and breaking of limestone; quarrying of stone for the construction industry; mining of hard coal; trading in electricity; and production of technical gases. In addition, Co. engages in the repair and maintenance of machinery and electrical equipment; electrical installations; and construction of power lines.
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