At the end of August, Enea announced its preliminary results for the second quarter. The net profit was supposed to be PLN 260 million. Two weeks later, the company publishes its financial statements and shows this There are 346 million Polish zlotys, but… subtracting. This is a radical change of PLN 607 million. a reason?
It turns out that LW Bogdanka’s shares had to be written down in value on the financial books. According to PAP, the value of fixed assets in the mining sector, i.e. Bogdanka shares, was previously 3.38 billion PLN, and now the valuation has been reduced to 2.63 billion PLN. Meanwhile, Bogdanka’s entire value is on the stock exchange, not just 64.57%. Share Ina It reaches PLN 1.16 billion on Thursday With a book value of PLN 3.83 billion Bogdanka.
Enea’s board clearly thinks so The potential transfer of Bogdanka to the planned state-owned company NABE should take place at a price slightly exceeding the book value of Bogdanka, and not at market value.. Moreover, Jacek Sassen’s main project was supposed to be voted on in September, and due to the election campaign, Marshal Vitek no longer planned to hold meetings in September.
However, the ministry headed by Jacek Sassen proposed much less, and more precisely The amount is PLN 988 million, i.e. PLN 45 per share. on Thursday, after a 2.3% rise. Bogdanka is priced at PLN 34.20, so the offer seems reasonable. The government wants to pay above market value. But Enea’s information means that the board wants to negotiate with the ministry, otherwise the write-off would be much higher.
The stock exchange accepts all this information quite calmly, because it values Bogdanka on Enya’s books at market value, not book value.
Let’s bargain
“The net asset value of CGU Wydobycie (LWB) resulting from the quote obtained is less than the carrying value and less than the fair value of CGU Wydobycie estimated by the Board and, therefore, Unsatisfactory and not accepted“- the board of directors writes in the financial report.
According to the Board of Directors, the use of the current stock market value is not justified to determine the valuation of Bogdanka. The recoverable amount was estimated at the “fair value less costs of disposal” level.
“Taking into account the analyzes performed and the report obtained estimating the market value of LWB shares (prepared by Pekao Investment Banking on September 11, 2023), The Board of Directors considers a valuation of at least PLN 72.28 per share to be a reasonable amount As part of the negotiations, you will strive to sell the shares at a level that takes this valuation into account. The valuation of PLN 72.28 per share is the basis for estimating the amount of write-offs on CGU Wydobycie assets and resulted in an impairment loss of PLN 748,815 thousand. PLN,” we read in Enea’s semi-annual report.
In other words, Enea wants 61% for Bogdanka. More than what the Ministry suggests.
Nearly a billion losses due to currency speculation
Write-off Bogdanka amount and possible greater write-off if you have to accept the MAP offer. However, this does not exhaust the bad news contained in the Enea Group report. Negotiations with the Ministry of State Assets overshadowed the loss incurred by the company due to currency speculation. Why do we write about speculation? The Company used derivatives outside the scope of “hedge accounting,” that is, outside the specific needs resulting from its operating activities. I lost a lot because of that.
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“Change in the outcome of currency derivatives Unused hedge accounting in the amount of PLN 550.1 million resulting from changes in the valuation of currency contracts and realized exchange rate differences related to these contracts,” we read in the financial statements.
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What’s more, During the entire half-year, these losses amounted to PLN 800.3 million. In other words, the company bet that the zloty would weaken, but it strengthened far beyond securing real positions in its operations. If it has maintained its position in derivatives so far, after the Monetary Policy Board’s decision last week, it is likely that it is now counting hundreds of millions of zlotys in profits or rather offsetting losses. But the fact is that the company is supposed to produce and supply electricity, and is engaged in speculation in the currency market, even though it operates in the country.
Carbon dioxide costs money
It is also worth paying attention to CO2 emissions in the financial statements. The group’s emissions were 8.94 million tons of carbon dioxide compared to 11.42 million tons in the previous year. A decrease of 21.7%, especially at the Polanek power plant (emissions decreased by 30% and emissions per MWh by 6.3%) and the Pella Heat and Power Plant (emissions -62% year-on-year per MWh). By 2030, Enea plans to reduce CO2 production to 254 kg per megawatt hour, and by 2040 to 201 kg.
It seems that such results should provide benefits. However, we can talk about “smaller losses”, not benefits. The cost of purchasing allowances rose to PLN 3.77 billion in the first half of 2023 from PLN 2.75 billion in the same period last year, i.e. by 37%, although the price of allowances rose by only 2%. This means that a year ago the company had more allowances “in reserve”.
Profits on clients almost double
What the company loses in Bogdanka’s valuation, currency speculation and CO2 emissions, it partly makes up for in operational activities. In the second quarter, EBITDA (result of operating activities plus depreciation) amounted to PLN 1.27 billion compared to PLN 743.3 million in the previous year, an increase of 71%. RDR.
Revenue from the sale of electricity (trading and generation) in the second quarter increased year-on-year by PLN 2.95 billion to PLN 11.5 billion, despite a decrease in sales volume. Prices have simply gone up. Earnings before interest, taxes, depreciation and amortization (EBITDA) on electricity sales It amounted to PLN 648 million in the second quarter PLN 578 million higher year on year.
Distribution profits rose to PLN 433 million from PLN 323 million in the previous year. The group also earned PLN 234 million from coal mining, but less than a year ago (PLN 332 million).
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