Electrica Regs Regulatory News (ELSA)

Executive summary - 3M 2023

§ At consolidated level, EBITDA is positive in the first quarter of 2023 in amount of RON 170 million as compared to the negative EBITDA in amount of RON 51 million recorded in the previous period

§ Electrica Group recorded revenues and other operating income in the amount of RON 3.512 million in the first quarter of 2023, compared to RON 3.258 million in the same period of 2022, which represents an increase of approx. RON 254 million, or 7.8%

§ At consolidated level, the net profit of Electrica Group, in the first quarter of 2023, recorded a loss in the amount of 66.6 million RON, respectively a significant reduction compared to a loss of 157.8 million RON in the first quarter

§ The net profit on the supply segment, in Q1 2023, is 24 million RON and positive EBITDA in the amount of 70 million RON

In the first quarter of 2023, EBITDA at the level of the Electrica Group registered an increase of RON 220 million, reaching a positive value of RON 170 million, compared to the negative value of RON 51 million achieved in Q1 2022. The impact was generated mainly, by the operational performance of the distribution segment, due to the implementation of the centralized purchase mechanism MACEE, which determined a significant decrease in the costs incurred with the purchase of electricity for own technological consumption.

According to the Emergency Ordinance no. 153/2022, between 01 January 2023 and 31 March 2025, the mechanism for the centralized purchase of electricity is established, with OPCOM being designated as the sole purchaser. The distribution operators buy from OPCOM, through an annual/monthly mechanism, 75% of the quantity forecasted and validated by ANRE at the price of 450 lei/MWh, and the producers will sell to OPCOM, through an annual/monthly mechanism, 80% of the quantity forecasted and validated by ANRE and Transelectrica at the price of 450 lei/MWh.

Considering that the increased tariffs approved by ANRE for the distribution segment, enter into force on 01 April 2023, they are not reflected in the performance of the distribution segment in Q1 2023. The tariffs will be increased by approximately 20% (26.1% North Muntenia area, 21.5% North Transylvania area and 10.9% South Transylvania area) as a result of GEO 28/2023 and will have an impact between 01 April 2023 and 31 March 2024. We mention that 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 and began to be amortized from the fourth quarter of 2022 and the second capitalized asset was registered on 31.12.2022 for the period October-December 2022 and began to be amortized from the first quarter of 2023, while the recovery through increased tariffs of the electricity price difference for NL only started on 01 April 2023, which impacts the net result on the distribution segment.

Statement of Alexandru Chirita, CEO of Electrica S.A.: "The financial performance of Electrica Group in the first quarter of this year attests to our corporate robustness and our commitment to operational optimization and strategic adaptation in the context of fluctuating economic and legislative landscapes. This upward trajectory, achieved in an energy market still under the sign of unpredictability, underlines the commitment we have at team level to the sustainable evolution of the Group.

As we shape our future plans, our strategy will continue to be underpinned by this agile approach, which will help us adapt our operations to market conditions. At the same time, we will focus on promoting the sustainable growth of each business entity, our objective being to strengthen financial stability and increase operational efficiency in all business divisions, thus strengthening the existing portfolio and ensuring stable prospects for the Electrica Group".

*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

Supply segment:

Ø Revenues from the supply of electricity and natural gas decreased by RON 169 million, or 7.6%, to RON 2,039 million, from RON 2,208 million in the first quarter of 2022, being mainly generated by the net effect of increasing retail prices on the retail market by 3% and reducing the amount of energy supplied to the retail market by 9.4%.

Ø The revenues from subsidies amount to RON 987 million in Q1 2023, increase by RON 355 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.

Ø The cost of purchased electricity (including transmission system services) increased by RON 286 million, or 13.1%, to RON 2,465 million in Q1 2023, from RON 2,179 million recorded in Q1 2022.

Ø The net profit on the supply segment in Q1 2023 is RON 24 million (compared to RON 151 million in Q1 2022) and positive EBITDA of RON 70 million (compared to RON 187 million in Q1 2022).

Distribution segment:

Ø During the three months period ended 31 March 2023, revenues from the electricity distribution segment increased by RON 97 million, or 12.8%, to RON 857 million, from RON 760 million in the same period of the previous year, as a result of the following factors:

o  favorable impact of approx. RON 32 million, mainly from the rise in the distribution tariffs by an average of 4%[1] (see above the mention of tariffs increase starting with April 1, 2023 by aprox. 20%), compared to the first three months of 2022, positive effect reduced by the decrease in the volumes of electricity distributed by approx. 9%;

o  favorable impact from the evolution of revenues recognized in accordance with IFRIC 12 - the revenues from electricity distribution segment are influenced by the recognition of investments into the network under concession agreements, these revenues increasing in Q1 2023 by RON 65 million, compared to the same period last year. The impact was generated by the increase in CAPEX achieved in Q1 2023 vs Q1 2022.

Ø The revenues from the capitalization of own technological consumption amounted to RON 21 million, representing the additional NL 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 - 31 March 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 their own technological consumption, compared to the costs recognized in the regulated tariffs are capitalized quarterly and remunerated with 50% of the regulated rate of return (RRR) approved by ANRE.

Ø The cost of electricity purchased to cover losses in the network decreased by RON 316 million, or 46%, to RON 377 million, from RON 693 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 subsided by the increase of the electricity volumes necessary to cover the losses in the network.

Ø The net result in the distribution segment reached in Q1 2023 represents a net loss of RON 93 million and positive EBITDA of RON 112 million (vs RON 221 million negative EBITDA in Q1 2022). The net result will improve significantly with the entry into force of the increased distribution tariffs, starting with 01 April 2023.

OTHER IMPORTANT INFORMATION

Ø The Electrica Group distributed, in Q1 2023, approximately 4.26 TWh (down 9% compared to the same period in 2022) to a number of approximately 3.9 million users;

Ø In Q1 2023, the Electrica Group supplied to the retail market approximately 2.09 TWh to a number of approximately 3.5 million places of consumption;

Ø According to the latest ANRE report from December 2022, Electrica Furnizare was the market leader with a share of 17.96%. At the same time, the company was also a leader on the SoLR (suppliers of last resort) market, with a share of 31.21%, on the competitive market with a share of 12.79%;

Ø Electrica Group continues to pursue the expansion of its portfolio in the field of electricity production, especially from renewable sources.

The results presented in this release are based on the condensed consolidated interim financial statements prepared in accordance with the Order of the Minister of Public Finance no. 2844/2016 for the approval of the Accounting Regulations compliant with the International Financial Reporting Standards.

For more information about the financial results of the Electrica Group in 2022, please see the following link: https://www.electrica.ro/en/investors/results-and-reports/financial-results/financial-statements-for-q1-2023/

Contact details:

Electrica Investor Relations

E-mail: ir@electrica.ro 

Chief Executive Officer

Alexandru-Aurelian Chirita

Disclaimer

This report does not represent a recommendation/ offer/ invitation to contract or buy shares. This report contains information regarding preliminary key-operational indicators of Electrica Group's companies, so this forward-looking information is neither guarantees for future performance nor a forecast for the real data or otherwise, being risky or uncertain. The real results could differ significantly from the data in this report.

Therefore, Electrica undertakes no responsibility/liability for any damages that may occur from using this forward-looking information. The data in this report are selective and may requires updates, revisions and changes in the certain circumstances. Electrica assumes no obligation or commitment to publish any update, revision or modification of any information contained in this report, unless required by the applicable law.