Yahoo Finance Polska Grupa Energetyczna SA (PGPKY) Full Year 2023 Earnings Call Transcript Highlights: ...
EBITDA: Increased by 3.6 billion PLN, with generation contributing 2.5 billion PLN due to energy crisis and high prices.
Net Loss: 5 billion PLN, primarily due to noncash impairment write-offs.
Debt: Increased significantly, financial debt exceeded projections by 13 billion PLN.
Electricity Generation: Decrease in lignite-based generation by over 25% year-on-year, coal down by 8%, gas up by more than 50%.
Heat Sales: Decreased due to warmer temperatures, with a negative trend in electricity generation.
CapEx: Close to 10 billion PLN, with 2.5 billion PLN in distribution network and significant investments in gas power units.
Renewable Energy: EBITDA stable at 1.1 billion PLN, despite expected decrease in spot market prices.
Distribution: Driving force with nearly 4 billion PLN last year, expected to increase due to approved tariff and asset regulatory value growth.
Release Date: April 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: What is the current status of PGE's strategy update or revision? A: (Dariusz Marzec - President) The strategy update or revision is connected to the discussion about the change of the group's asset structure. An updated vision of PGE's strategy should be based on concrete starting points, such as an agreement with the government on specific solutions that allow for a change in the structure of the assets. The direction of decarbonization, development of renewable sources, and investment in distribution are clear, but a hard revision of the strategy is best done once there's a concrete starting point regarding asset structure changes.
Q: How does PGE view the potential for the President of the Regulatory Office to request a reduction in household electricity tariffs? A: (Dariusz Marzec - President) Speculating on potential requests from the President of the Regulatory Office is difficult. Any price reduction would increase challenges for PGE. If faced with such a request, PGE would adjust its plans and financial strategies accordingly.
Q: Is PGE committed to the nuclear project? A: (Dariusz Marzec - President) PGE is currently at a stage of a feasibility study for the nuclear project and is considering technology suppliers. The company is committed to continuing this work, but it's at a very preliminary stage. The involvement of PGE in the project will be clearer after discussions at the governmental level and the results of the study.
Q: What is the plan for outsourcing coal assets, and what changes are expected in the transaction structure? A: (Dariusz Marzec - President) PGE is working on updating the financial model for the coal assets, considering the volatile market. The company aims to propose a solution to the government that is financially viable, socially responsible, and acceptable. The timing for this is as soon as possible, and the approach will be based on the updated model and market data.
Q: What is the financial outlook for PGE given the current market situation and the challenges with coal assets? A: (Dariusz Marzec - President) PGE does not face short-term financial difficulties, but there are midterm challenges. The company is working on solutions to restructure its assets, which is crucial for its development. The timing for implementing these changes is critical, and PGE is looking to propose viable solutions soon.
Q: How does PGE plan to handle the strategic cooperation with mines to secure coal deliveries? A: (Dariusz Marzec - President) PGE aims to align coal production with the requirements of power plants, producing only as much coal as needed rather than the maximum output. This coordination is at an initial discussion stage and aims to prevent overproduction and storage issues.
Q: Will PGE Fuels sign more agreements for imported coal delivery? A: (Dariusz Marzec - President) Import and sales of coal are not PGE's core business, and the company does not plan to develop this line of operations. PGE Fuels operates independently, and while PGE cannot make declarations on its behalf, it is open to offers for selling this asset.
Q: What are the expected CapEx outlays for offshore wind projects, and will they increase significantly this year? A: (Dariusz Marzec - President) Expenditures for major development projects, including offshore wind, will grow each year. The exact increase will depend on the necessary expenses and the development potential of the group.
Q: How does PGE view the nearly 12% WACC for distribution, and what are the arguments for such a generous return on equity? A: (Unidentified_3) The question was raised about the regulator's decision to grant a high WACC for distribution, questioning the need for such a high return on equity.
Q: Why should the government agree to take over PGE's coal assets instead of leaving the company to handle the problem on its own? A: (Dariusz Marzec - President) PGE argues that with the current asset structure, it won't be able to fund the licenses for offshore wind projects on the Baltic Sea. The company needs to restructure its assets to unlock full development capacity and meet the stability requirements of the electrical energy system.
This article first appeared on GuruFocus.
