REG - Soc EnergElectricaSA - Half-year Report

Societatea Energetica Electrica SAAnnouncement

25/08/2023 07:00

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RNS Number : 4530K  Societatea Energetica Electrica SA  25 August 2023

Summary of Consolidated Results for Q2 2023 / H1 2023

The evolution of the main indicators in H1 2023:

§ EBITDA - RON 636 mn., substantially increased, with RON 535 mn. compared to
H1 2022;

§ Net result - profit of RON 106, significant improvement, compared to the
loss of RON 176 mn. in H1 2022;

§ Operating income - RON 6739 mil, increase with 14% compared to RON 5933 mn.
in H1 2022;

§ CAPEX PIF (commissioned) - RON 212.4 mn., solid increase with 93% compared
to RON 110 mn. in H1 2022.

The evolution of the main indicators in Q2 2023:

§ EBITDA - RON 466 mn., substantially increased, with RON 314 mn. compared to
Q2 2022;

§ Profit net -RON 173 mn., substantially increased, with the loss of RON 18
mn. in Q2 2022;

§ Operating income - RON 3206 mn., increased with 20% from RON 2675 mn. in Q2
2022;

§ CAPEX PIF (commissioned) - RON 162.2 mil, with 141% more than RON 67.4 mn.
in Q2 2022.

The main results are presented below and are extracted from the Simplified
Consolidated Interim Financial Statements as at and for the six-month period
ended 30 June 2023 prepared in accordance with Order of Ministry of Public
Finance 2844/2016:

 Operating income, out of which                               6739    5933    806    14%   3206    2675    531    20%
    Income from subsidies                                     1802    1211    591    49%   815     579     236    41%
      Income from the production of intangible assets **      56      0       56     -     35      0       35     -
 Operating expense                                            (6460)  (6080)  (380)  6%    (2921)  (2647)  (273)  9%
 (Loss)/Operating profit                                      279     (147)   426    -     286     28      258    921%
 EBITDA                                                       636     101     535    530%  466     152     314    207%
 Newt profit/(loss)                                           106     (176)   282    -     173     (18)    191    -

*Amounts are rounded to the nearest whole value

**Income from the production of intangible assets representing the
capitalization of additional costs with the purchase

of electricity. The first capitalized asset for the additional costs of
purchasing electricity for the NL coverage was registered on 30.09.2022 for
the period January-September 2022 according to OMFP 3900/2022 so in Q1 2022 we
have no comparative value.

Source: Electrica

 

Declaratie Chirita Alexandru-Aurelian, Director General Electrica S.A.:

" The financial results achieved by Electrica Group in H1, including an
increase in EBITDA to RON 636 million and a net profit of RON 106 million, not
only highlight the company's resilient strategy but also the undeniable
dedication of our team in implementing efficient solutions in a volatile
market environment, with a deep focus on transitioning to green energy.

Our people are at the heart of this transition, serving as the source of
innovation and adaptation. In a fluctuating economic and legislative
environment, we are strengthening our position as a stable and resilient
entity, always ready to adapt to the challenges of an evolving market.

By reinforcing our financial foundation and optimizing operational efficiency
in all our business domains, we aim to strengthen and expand our portfolio
focused on renewable energies. I express my deepest gratitude to each member
of the team, our customers, investors, and partners, whose contributions have
been essential in defining and shaping the direction we are pursuing.".

 

OTHER IMPORTANT OPERATIONAL INFORMATION

§ Distributed electricity volumes - 8,28 TWh, decreased with 7.9% compared to
H1 2022; DEER serves approx. 3.9 mn. users, on an area covering about 40% of
Romania;

§ Volumes of electricity supplied to final customers - 3,88 TWh, reduced with
6,84% compared to S1 2022, due to the general downward trend in electricity
consumption; Electrica Furnizare supplies electricity for approx. 3.5 mn.
consumption places on the competitive market, as well as on the universal
service and last resort supplier market.;

§ Supply market share - Electrica Furnizare is one of the biggest electricity
suppliers, with a total market share of 17,79% and a competitive market share
of 10.43%, as per the latest available ANRE report (April 2023);

§ Electrica Group continues to pursue the expansion of its portfolio in the
field of electricity production, especially from renewable sources, having at
this time projects in different phases of execution with a capacity of 296,5
MW;

§ The estimated Regulated Assets Base (RAB), in nominal terms, with an
inflation of 13.69% for the year 2023, estimated at the end of the first
semester of the year 2023 was RON 6.9 bn., without inflation being RON 6.1 bn.

§ At the end of the first semester of 2023, the operator Distributie Energie
Electrica Romania (DEER) made and put into operation investments (commissioned
CAPEX) amounting to RON 212.4 mn., representing 28% of the value of the
commissioning program planned for 2023 (RON 764 mn., of which RON 628.4 mn.
plan for 2023, and RON 135.6 mn. values related to 2022 plan); RON 82.9 mn.
from 2023, RON 95.2 mn. recoveries related to 2022 and RON 34.3 mn. additional
works compared to the 2023 plan, resulting from legislative changes regarding
the connections.

Analsysis of the consolidated financial indicators

In the first half of 2023, EBITDA at the level of the Electrica Group
registered an increase of RON 535 mn., reaching a value of RON 636 mn.,
compared to a value of RON 101 mn. achieved in H1 2022.

The impact was mainly generated by the operational performance of the
distribution segment, due to: increase in income from energy, generated by the
increase in the distribution tariffs by an average of 20% (26.1% MN area;
21.5% TN area and 10.9% TS area), compared to the first six months of 2022, a
positive effect reduced by the decrease in the volumes of electricity
distributed by approx. 8% (in line with the decrease in national consumption);
decrease in the costs incurred with the purchasing of electricity for covering
network losses, due to the implementation of the  centralized purchase
mechanism  MACEE, as well as the ongoing concern to keep operational costs
under control.

*MACEE = According to the Emergency Ordinance no. 153/2022, during 1 January
2023- 31 March 2025, the centralised electricity purchasing mechanism is
established, with OPCOM as the single buyer. The distribution system operators
will buy from OPCOM through an annual/monthly mechanism a minimum of 75% of
the quantity forecast and validated by ANRE at a price of 450 RON/MWh, and
producers will sell to OPCOM through an annual/monthly mechanism 80% of the
volumes forecast and validated by ANRE and Transelectrica, at a price of 450
RON/MWh.

On the distribution segment, we mention, related to the assets capitalization,
the following: the first capitalized asset for the additional costs of
purchasing electricity for the NL coverage was registered on 30 September 2022
for the period January-September 2022 according to OMFP 3900/2022 and began to
be amortized from the fourth quarter of 2022, the second capitalized asset was
registered on 31 December 2022 for the period October-December 2022 and began
to be amortized from the first quarter of 2023, and the third capitalized
asset was recorded on 30 June 2023 for the period April-June 2023 and will
began to be amortized from 01 July 2023, while the recovery through increased
tariffs of the electricity price difference for covering NL costs only started
on 01 April 2023. Moreover, the capitalized assets for the difference of NL
established in 2023 are worth RON 56 mn., as opposed to those established in
2022 worth RON 989 mn., a favorable effect of the implementation of MACEE on
the distribution segment.

Due to the implementation of MACEE, the estimation for 2023 is that the
capitalized will be significantly lower than those in 2022.

On the supply segment, following the adoption of Ord. no. 30 of 10 August
2023, the Ministry of Finance is authorized to fund the account provided for
in the GEO no. 27/2022 regarding some of the measures applicable to final
customers in on the electricity and natural gas market between 1 April 2022
and 31 March 2023, as well as for amending and supplementing certain normative
acts in the field of energy, approved with amendments and completions by Law
no. 206/2022, with the corresponding amounts of the solidarity contribution
collected in 2023, within 3 working days from the date of entry into force of
the Oordinance.  According to this, the Group expects an increase in the
recovery rate of subsidies.

The balance of subsidies to be received, as of 30 June 2023, is estimated at
RON 2,299.9 mn., of which RON 497.9 mn. is the amount not yet collected for
the year 2022, applications submitted and validated by ANRE, not collected, in
the amount of RON 1,253.4 mn (Ministry of Energy: RON 361.4 mn and ANPIS: RON
891.9 mn.) and RON 548.5 mn. from applications not yet submitted to the state
authorities until 30 June 2023.

Not collecting subsidies on time generated a significant additional borrowing
requirement for the company, which generated exceptional financial costs,
affecting profitability.

Analysis of the financial indicators at segment level

The Distribution Segment:

Ø The operational performance for the distribution segment which
significantly improved in the second quarter of 2023, EBITDA registered in the
first quarter on this segment was RON 112 million and in the second quarter it
reached RON 418 million, representing an increase of approximately RON 306
million in the second quarter of 2023 alone.

Ø During the six months period ended 30 June 2023, revenues from the
electricity distribution segment increased by RON 394 million, or 25.3%, to
RON 1,952 million, from RON 1,558 million in the same period of the previous
year, as a result of the following factors:

o  a favorable impact of approx. RON 193 million, mainly from the increase in
the distribution tariffs by an average of 20% (see above the mention of
tariffs increase starting with April 1, 2023 by aprox. 20%), compared to the
first six months of 2022, a positive effect reduced by the decrease in the
volumes of electricity distributed by approx. 8%;

o  a favorable impact from the evolution of revenues recognized in accordance
with IFRIC 12 - revenues from electricity distribution segment are influenced
by the recognition of network investments with concession agreements, these
revenues increasing in H1 2023 by RON 201 million, compared to the same period
last year. The impact was generated by the increase in CAPEX achieved in H1
2023 vs H1 2022.

Ø The revenues from the capitalization of own technological consumption
amounted to RON 56 million, representing the additional CPT calculated as the
difference between the net cost with the purchase of electricity and the cost
of own technological consumption included in the regulatory tariff, for the
period 01 January - 30 June 2023. Starting with 30 September 2022, Electrica
Group applies the provisions of GEO no. 119/2022, through which the additional
costs with the purchase of electricity, realized between 01 January 2022 and
31 March 2025, in order to cover its own technological consumption, compared
to the costs recognized in the regulated tariffs are capitalized quarterly and
remunerated at 50% of the regulated rate of return (RRR) approved by ANRE;

Ø The cost of electricity purchased to cover grid losses decreased by RON 520
million, or 46.4%, to RON 602 million, from RON 1,122 million, the evolution
being generated by a significant decrease in the electricity acquisition
prices as a result of the implementation of the MACEE centralized acquisition
mechanism, according to which the producers have the obligation to sell 80% of
the available energy at a price of 450 RON/MWh, impact mitigated by the
increase of the electricity volumes necessary to cover grid losses;.

Ø The net result on the distribution segment reached in H1 2023 represents a
net profit of RON 68 million and positive EBITDA of RON 529 million (vs RON
165 million negative EBITDA in H1 2022). The net result improved significantly
with the entry into force of the increased distribution tariffs, starting with
01 April 2023.

The Supply Segment:

Ø Revenues from the supply of electricity and natural gas decreased by RON
138 million, or 3.6%, to RON 3.695 million, from RON 3.833 million in the
first half of 2023, mainly due to the net effect of increasing retail prices
on the retail market by 10% and reducing the amount of energy supplied to the
retail market by 7%;

Ø The revenues from subsidies amount to RON 1.802 million in H1 2023, an
increase by RON 591 million compared to the same period of the previous year,
as a result of the increase in the electricity purchase prices and the
application of the capping mechanism according to GEO 119/2022, with
subsequent additions and amendments;

Ø The cost of purchased electricity (including transmission system services)
increased by RON 525 million, or 13.8%, to RON 4.340 million in H1 2023, from
RON 3.816 million recorded in H1 2022;

Ø The net profit in the supply segment in H1 2023 is RON 31 million (compared
to RON 213 million in H1 2022) and positive EBITDA of RON 132 million
(compared to RON 287 million in H1 2022), being significantly affected by
interest on loans contracted to support payments, during the period when the
proceeds of subsidies are not made in time.

Ø The reduction of the profit has, in essence, two main reasons, namely,
increasing the financial costs and decreasing sales volumes, which reduced the
trade net margin and implicitly, EBIDTA

The documents related to the H1 2023 results are available on Electrica's
website at the following link:
https://www.electrica.ro/investitori/rezultate-si-raportari/rezultate-financiare/situatiile-financiare-pentru-s1-2023/
(https://www.electrica.ro/investitori/rezultate-si-raportari/rezultate-financiare/situatiile-financiare-pentru-s1-2023/)
.

We remind you that Electrica's management is organising on 30 August 2023,
16:00 (Romanian time), a web conference for analysts and investors:
Presentation of Electrica Group H1 2023 Financial Results. The web conference
can be accessed online under the following link:
https://87399.themediaframe.eu/links/electrica230830.html
(https://87399.themediaframe.eu/links/electrica230830.html) .

 

Contact Details:

Electrica Investor Relations

E-mail: ir@electrica.ro (mailto:ir@electrica.ro)   ; +40731796111

 

CEO

Alexandru-Aurelian Chirita

 

CFO

Stefan Frangulea

 

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