ZEW Kogeneracja - Financial forecasts & Macro assumptions - Warsaw Stock Exchange

Financial forecasts & Macro assumptions
1. Macro assumption
Financial forecasts

In our last report, we assumed that Polish government will implement the price caps proposed earlier by EC of EUR 180/MWh. But it decide to implement price caps that are equal to (cost of fuel + cost of CO2) + 3% margin of power price (80%TGeBase+20%TGePeak) + PLN 50/MWh. In our view, such construction of price cap, will allow only to cover cost of fuels and CO2 and will allow to generate margin to generate margin sufficient to cover fixed cost. Therefore, assuming that CHP will not generate any profit or losses on other activities (trading, green certificates, etc.), results of Kogeneracja S.A. and EC Zielona Góra will be equal to the results generated on heat sales and CRM revenues.

Such solution is especially negative for EC Zielona Góra which was expected to heavily benefit from its long-term contract with PGNIG for gas deliveries with the price indexed by inflation. Assuming the price cap at EUR 180/MWh and the gas price EUR 17.5/MWh (plus inflation factor) in 2023e company was expected to deliver extraordinary high result on power sales, however, now this result will be much lower. We believe that it will be close to result on heat sales and revenues from the CRM.

Financial forecasts & Macro assumptions

Macro assumption

We do not change our long term macro assumptions. Compared to our previous report, we changed the price of gas in 2023/24e to EUR 53/38/MWh (vs. EUR 108/42/MWh assumed in our last report) and price of coal to PLN 40/33/GJ (vs. PLN 50/45/GJ in our last report). As a result, we change our estimates of electricity to PLN 1068/686/MWh in 2022/23e (vs. PLN 1115/1016/MWh in our last report).

Financial forecasts

Kogeneracja S.A. (parent company). Coal CHPs will also suffer due to implementation of price cap, however for these capacities, due to expected high prices of coal, the price cap will be set much higher than in the case of EC Zielona Góra. Nevertheless, as in the case of EC Zielona Góra, we believe that price cap will be set in a way to cover all variable and fixed cost of power generation and company’s result will be close to the result on heat generation and CRM revenues. On the other hand, we underline that the price of heat in tariff approved by ERO jumped in 2023 to PLN 70/GJ (vs. PLN 42/GJ in 2022) which is above our expectations from our last report also the cost of coal should be much lower than our earlier expectations. In total, we forecast EBITDA of PLN -2/130mn (vs. PLN 62/150mn assumed earlier).
EC Zielona Góra. In our last report, we highlighted that company will be benefiting in 2023/24e from its long-term contract for gas deliveries which has been signed in 2004 for the period of 20 years, where the price is indexed by inflation formula. It was expected that this CHP, in the light of sharp growth of electricity prices and relatively stable cost base will realize extraordinary high margins on the sales of electricity even if European price cap (EUR180/MWh) were to be implemented. However, solutions approved by Polish government will allow only for the price cap which in our view will allow only to cover variable and fixed costs of power generation. Therefore, we believe that the results should be close to the result on heat generation and CRM revenues. Hence, we forecast the EBITDA in of PLN 136/121mn (vs. PLN 216/145mn assumed earlier).
Czechnica. We do not change our key assumption for Czechnica gas CHP and we assume that it will be launched by the end of 2024e and we assume EBITDA in 2025/26e of PLN 199/301mn.

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Analyst: Marcin Gornik

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marcin.gornik@pekao.com.pl

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