Ladies and gentlemen, thank you for standing by. The Electrica teleconference is starting now. Thank you.
Hi, this is Raluca, Head of Investor Relations, and together with the entire Electrica management team, we'd like to thank you for joining us for the first teleconference of this year, to present and discuss the full year financial results. Those of you who are connected only by phone, please download the presentation in PDF format available on our website on the Results and Presentations section. The participants connected online can address recent questions on the live webcast or can intervene live on the Q&A session. They can also send us emails at ir@electrica.ro. Kindly note that since the entire conference is being recorded, all participants will be in a listen-only mode, so the attendees' voices will be disabled. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone.
The recorded presentation will be available on our website starting latest tomorrow, and the transcript, as well as, as soon as possible, both in Romanian and English. We kindly ask you to see the disclaimer on page three of the presentation, and we'll begin the presentation of the financial results. At the end, we'll have a question-and-answer session. I'd like to turn the conference over to our CEO, Mr. Chiriță.
Thank you, Raluca. Dear ladies and gentlemen, on behalf of the Electrica team and myself, allow me to warmly welcome you to our first teleconference of this year. As always, it is a great pleasure to have you with us. The 2024 financial results confirm our capacity to deliver performance beyond the set objectives, especially given the complexities of the economic and regulatory environment in which we operate. Electrica Group has successfully navigated this challenging context, achieving financial results significantly above the budgeted expectation. The 2024 IFRS consolidated net profit is RON 389.6 million, 34.6% above our estimation in the budget last year, and we managed to make more investments than we targeted. I believe this shows the effectiveness of our strategy and our team's determination to strengthen the company's position in the energy sector.
We remain cautiously optimistic and prudent, particularly as we continue to navigate a transitional period toward market re-liberalization, a process we believe will present both challenges and significant opportunities for growth. EBITDA on IFRS for the year stood at RON 1.36 billion, a 3.5% increase over initial projections, underscoring our continuous focus on operational optimization. Operational revenues reached RON 10.68 billion, increasing by 1.5% compared to our initial budget, reflecting effective management and strategic market positioning. Furthermore, we intensified our investment efforts with the commissioned investments in the distribution segment, reaching RON 808 million, 112.5% of our planned investments, reflecting our commitment to modernizing and digitizing our infrastructure for the benefit of our nearly 4 million customers. Operationally, our distribution segment recorded a notable performance with a 6.8% increase in revenues, driven by higher distribution tariffs and increased distributed volumes, up to 4.2% compared to 2023.
However, in our supply segment, revenues decreased by 13.1%, impacted primarily by lower volume supplied and regulatory adjustments. Despite these challenges, we effectively managed operational costs, significantly mitigating the financial impacts. Our sustained efforts to strengthen the financial position were appreciated by the Fitch Ratings Agency, who on Thursday improved the outlook of our rating from negative to stable, one notch above the sovereign rating, a decision that supports our strategic plans, including the green bonds issuance approved at the end of 2024 and planned for this year. Electrica continues to prioritize investments in renewable energy projects, having approximately 300 MW capacity in various stages of development. We are still aiming for 1 GW production and 900 MW storage by 2030. We also remain actively involved in securing non-reimbursable funds to support our strategic objectives and enhance the sustainability of our growth.
As you know, last year, our shareholders approved investments for building two photovoltaic parks, Satu Mare 3 and Bihor 1, with a total capacity of 136 MW, for which we are at this time evaluating the EPC contract offers and already have submitted requests for funding through the Modernization Fund. The investment's value for the two projects is EUR 87.5 million. In February this year, our shareholders additionally approved an investment of EUR 253 million for Crucea Wind Park of 121 MW capacity, and we are working on the EPC tender. We'd like to remind you that this project has been designated among the winners of the first round of the auction for the state aid scheme in the form of Contracts for Difference. Satu Mare 2 Photovoltaic Park of 27 MG is in the final stages of construction and should be operational in the second semester of this year.
The first park that we built ourselves, Vulturu, has passed all tests, and it is in the process of getting the operating license while finished is operational. In regard to our new venture in smart grid technologies, we are working tirelessly with our partners to start building what we promised. Looking ahead, we hold a positive outlook for 2025 and are committed to exceeding expectations with regards to our investment objectives. Investments in network infrastructure, production capacities, and improvement of our internal processes remain our highest priority. We firmly believe that strategic decision direction will transform how Electrica Group delivers on its promises to shareholders, investors, and partners, paving the way for sustainable and robust long-term growth. Short mention about the qualified opinion formulated by the financial auditor, Deloitte Audit SRL, on the consolidated financial statements as end for the financial year ended December 31st of 2024.
Information we'll publish, we published on Saturday, and you probably noticed it. The reservation expressed by the auditor refers to the impossibility of testing until the date of publication of the financial statements, an amount of RON 979.5 million, representing commercial receivables still unvoiced related to the electricity supply segment. This amount corresponds to approximately 430 GW of electricity delivered to end customers and was mapped 97% on consumption points, being in an advanced validation process and to be invoiced by April 30th, 2025 at the latest. Last but not least, I wish to address the auditor's report, which has been published. The auditor's qualified opinion exclusively concerned the financial, the financials of our subsidiary EFSA, respectively the amount, above mentioned.
The situation mainly results from factors beyond our control, like the application of Emergency Ordinance number 312 from 2024, associated with contract tariff, which required the complex updates to the billing system, recalculations, and reissues of invoices. The cyber attack on December 9th, 2024, which, although it did not affect the main infrastructure nor the clients, required significantly additional security measures and resource allocation, and also the succession of very frequent legislative changes in the price cap and compensation framework starting from 2021, which repeatedly impacted our regular invoicing processes. In these conditions, Electrica Furnizare prioritized the correct implementation of the legal provision and the issuance of compliant invoices to customers, which unfortunately caused delays in billing. We emphasize that over half of the total unbilled energy recorded at year-end had already been invoiced by the time of financial statement publication, with no significant issues regarding collections or bad debt.
Furthermore, Electrica Furnizare has successfully secured for 2021 subsidies, totaling RON 5.7 billion out of RON 6.8 billion requests from authorities, significantly supporting our receivables recovery and maintaining our sustainable financial position. Electrica Group assures all its investors, financiers, and partners that it carries out with priority all necessary actions for the completion as soon as possible of the invoicing processes, the recovery of receivables, and the complete testing of the related amount. In this regard, we are fully confident that the situation reported at this time by the auditor will no longer be applicable at the time of the issuance of the letter of representation by Deloitte, included in the documentation related to future Eurobond issue of the Electrica Group, million euro. I will now pass the presentation to our CFO, Ștefan, who will provide detailed insights into our financial performance.
At the end of the presentation, we invite you to actively participate and address any questions you may have. Your insights and perspectives are highly valued. Thank you, Ștefan.
Thank you, Alexandru. Just to make a small joke, my work is very easy now because Alexandru covered also a lot of the financial numbers, so it puts me in a simplified position, but I will still go through the consolidated financials, and I will try to point out the main changes in numbers and what are the causes. In this slide 13, you can see basically the evolution of the revenues, of the consolidated revenues, which is in line with the evolution of the price in energy market. A few comments about the profitability.
You can say that, compared with 2020, the EBITDA and the net result is in decreasing, but you should bear in mind that 2023, it was a very specific year with very, very good results. Basically, in 2024, as we'll explain in more detail later, we're mainly affected on the supply segment by the volatility of the evolution of the prices, in the balancing market. We'll explain the context and the differences at the respective slides.
In terms of net debt, net cash, we have at the end of the year, consolidated position of RON 4.4 billion, which is related to both the fact that we continue to support the support scheme, but we also are having expenses which are relating to the evolution of the portfolio of production for which we are advancing with the commissioning, with the parks, and we have plans for all of them to be commissioned in the next couple of years.
The point is, as you know, the support scheme will be finalized for the energy part at mid-year 2025, and basically, we expect for this part of the year that this peak of indebtedness to decrease, and along with the decrease of the indebtedness which is caught by the financing of the support scheme, yeah, as long as this is released, we will be able to gradually increase and put it at work for the development of the production. If we can go to the next slide, here is the evolution of the consolidated EBITDA and net result evolution, compared with the previous year.
As mentioned, there is an energy market margin overall variation of minus RON 77 million, which is composed of a significant positive effect from the distribution segment, along with the increased tariffs and also with the increase of the volumes of distributed electricity. There is a negative effect cumulated from the supply segment where we have the fact that we had the decrease in the purchase cost, but this manifested also not only in the cost but also in the decrease of revenues from the sale of electricity. As you might know, according to the Government Ordinance 27, we have this cost-plus method, which is basically having the contract price and the final price calculated to the consumer, established under the formula purchase cost realized plus the supply component.
We were quite affected on this part by the evolution of the balancing market expenses with a significant number of prosumers entering the market, being connected in the networks, and this put a pressure on the evolution of the results on the supply because basically, I'm obliged to take that energy and buy the, pay the average purchase price to them, but then on the, on some base, we simply cannot reposition and use that energy, and we are giving it in the balancing market with negative prices. In combination with that, we also had the effect of the changing of the way of recognizing the subsidies cost.
Basically, we had a cap of the subsidies cost to be recognized under the support scheme, and there was a change, by the regulations of the ANRE in terms of recognizing this cost, which was effective, in fact, applied retroactively from 1st of January. In OpEx, we have a negative variation of RON 236 million, which is mainly resulting from the negative effect of the expenses with salaries, most of them from the distribution segment and also apart from the other segments. Of course, in this context, with the evolution of the inflation in the last year and so on, we also had some pressures to increase in some situations of the salary costs in order to keep our best people and to keep them motivated and to keep them with the company.
As an end result, an end result is, variation is of minus RON 383 million, mainly negative evolution of EBITDA, and then we have a positive evolution of the financial result of RON 70 million and increase of amortization and depreciation along with the newly commissioned assets of minus RON 72 million. Of course, there is also the effect of the profit tax expense plus RON 27 million. As mentioned, please bear in mind the previous year was an exceptional year in terms of, of the result. Coming to the next slide, we have here the details about the distribution segment.
As you see, evolution of EBITDA was positively influenced by energy revenues and also by the part related to other revenues, while the other elements were the evolution of the net losses cost, which increased with RON 60 million as expenses, and the part related to the employees' benefits. Otherwise, you can see that distribution performed quite well and has an EBITDA which is higher than in the previous year. Moving to the next slide, you have here the details about the main aspects for the distribution segment. I will not stay too much on it. Going next slide, you have the usual analysis for the distribution segment. Here you go from the regulated asset-based rentability and then going to calculate, including the regulated profit, RON 900 million. To add to this, we add the net losses capitalized cost of RON 191 million.
We go to the gross result. On the next slide, you have the further down, you know, that going from total net revenue, we also have here the regulated result of RON 900. Here we go down the line operating result, and then also having the net results under RON 1,802 and then also RON 2,844. IFRS-EU, you can see also the various adjustments from this point of view, mostly the adjustments from RON 2,844, the localized IFRS, and to the IFRS-EU are represented by the impact related to the capitalization of net losses expenses, which are present in RON 2,844, and are not posted under IFRS-EU. Going to the next slide, you have the details about the performance of our distribution company on the regions. I will go directly to 2023 because here we have the three 2023.
In 2023, you have the details about the evolution of the net losses cost. In terms of net with income, the cost of electricity per increased by RON 90 million, minus RON 60 million is the evolution of the expenses compared with previous year. There was an impact on the distribution because in the previous year, we had the MACEE, which supplied the MACEE mechanism, which supplied a lot of energy for the distributors. Now, as this was changed, starting with 1st April 2024, and MACEE became voluntary, basically the quantities which were provided via MACEE decreased significantly. Also, the distributor, our distributor, like the others, bought more and more of the from the energy at market prices. In terms of investments, also the General Manager mentioned this degree of achievement, yeah, compared with the ANRE plan. We have 115% of the commissioning plan value.
Of course, this includes also the additional works of connections that we are getting as requests from the customers, but I think this is showing our strong commitment in, you know, achieving the investment plan, improving our networks, and also increasing our regulated asset base, which is to be remunerated by the regulator. Going then to next slide, we have 24, we have the details about the Electrica Furnizare unit, the supply segment. As mentioned here, the result was, the negative one. In fact, as you might know, the supplies were affected across the industry, so it's not only a situation with Electrica Furnizare unit but the evolution of the energy prices in the balancing market, especially in the summer.
We saw this situation, which was quite abnormal compared with the rest of the E.U., in which a lot of market prices were negative and with significant negative results. Now, there was a measure taken by the authorities. As you know, in the summer, they took position. They discussed about the matter. Also, ANRE promoted the order 60, which could have capped the prices for a temporary moment in the balancing market. This was not the case to be put in place, and we had an evolution of the price towards the rest of the year, which was calmer, let's say, but still, yeah, not compared with previous year.
As an idea, the cost with balancing was more than six times per megawatt delivered to the customer, higher than in the previous year, with this effect that we mentioned, and of the prosumers in the market. In terms of net debt, you can see that the supply segment is relatively stable. We expected that during this year, with the end of the support scheme and as the amounts which are requested under the support scheme will start to be also further paid, this will further decrease. Overall, we have since the beginning of the scheme in November 2021, we got paid by the Romanian state RON 5.7 billion out of the total of RON 6.8 billion of requests which were submitted to the regulator.
Yeah, you can see that as a percentage, there is a significant amount paid, and even if there are some delays in some moments, the amounts are recuperated. Going to the next slide, you have the position of Electrica in the market share. As you can see, it's not necessarily that we're number one anymore, but we are still on the top. We are second on the competitive on the total market share, share, including the supplier of last resort, and on the competitive market, we are third, but this is not a focus for us, necessarily in market quota. We have a stable portfolio of customers. It's also a matter about, you know, optimization of the functioning, taking, paying attention to the expenses and, you know, having a profitable activity.
Slide, next slide, it summarizes the, I think, yeah, 26 is the details about the segments of the supply. You have 27, the summary of the financial impact, including the change of legislation. Bear in mind that this is based on the individual numbers of Electrica Furnizare , which are as per Romanian accounting standards, as the statutory Order of Ministry of Finance 100-a(2), but it explains a little bit about, you know, the changes in the legislation. Slide 28, I think it puts details about evolution of the weighted average price evolution on the head market, but also on the balancing market.
Here you can see in orange the situation of 2024 compared with 2023, which was 2024, both on the head market and on the balancing market. It was far more volatile, you know, and including the negative prices, February, March, and then April, May in the balancing market. Slide number 29 is the summary related to the evolution of the receivables. In terms of comparable numbers, there is a slight increase of the receivables. This is related to the fact that we had during the year the migration to SAP IS-U, which meant on one side the change of the delay, in fact, in invoicing, which then pushed the process of invoicing with the, let's say, roughly one, one month, one month and a half further.
There is also some decisions regarding the way this is calculated and this is invoiced. The process of invoice generates this delay. This is to be also correlated with the fact that we did not have the resumption of disconnection, issuing disconnection notices and doing disconnection until mid-year. However, we do not feel that there is a problem of collecting receivables from the customers. Bad allowances are in an amount below RON 200 million for the entire portfolio, and this is mainly related to all the cases. Most of them or significant part of them is older insolvency and other procedures. Next slide. Next slide is about our energy services subsidiary.
Here we had an impact related to the fact that, as the market became more and more competitive, it was more challenging for Electrica itself to get contract on these new markets related to installation of photovoltaic panels and compensators for active energy. We will still focus to change this in the future and to improve, but, since the revenue decreased, basically by half, this affected the EBITDA and the profitability. Next slide, it's about the production. We have here a positive evolution because in terms of the net result of the production, we registered a more than doubling net result than previous year. We are continuing to evolve with the five projects that we have, with the projects that we have in our production segment.
Vulturu was completed, connected, and finalized the trial period, then the photovoltaic part of Satu Mare 2, Sunwind Energy also, is in advanced phases of being implemented and starting to produce energy. All these projects are now with a clear path to being commissioned with the authorization of construction and all the details in place. I think this is quite important, and this was also well appreciated by the market that, after some long gestation, in case of some of, we are now in line with all of them to generate a production capacity, cumulated from all these projects of some 300 MW. Going to the next slide, we have the liquidity position.
Of course, it's decreasing from compared with 30th of September, because it's also in relation with the fact that, towards the end of the year, we didn't have any more payments from the subsidies from the support scheme. I think it's important to be compared with the result in 31st of December 2023. The overall liquidity available is more than double. What is also more important, I think, is that we managed to put a lot of the debt, a higher percentage of the debt on longer term, especially on the distribution segment, to match with the recuperation of net losses. This was also, as you saw, appreciated by the Fitch Ratings Agency, which provides us with the change of the perspective from negative to stable. The other slides related to the evolution of the dividends.
As an axis, you have all the, yeah, you saw we are basically distributing a dividend, which might seem small, but I think it's a 50% increase of the previous distributed in terms of percentage compared with the profit, distributed profit. You see that we are basically distributing almost everything compared with the distributed profit and standalone net profit. Yeah, I think this would like to show that we are going to, also in terms of gross dividend per share, there is an increase compared with the previous two years. This would like to signal the fact that after the support scheme is done and with the production starting to be commissioned, we would like to move to a more consistent dividend of the dividend distribution.
Now, if you do have questions, we are welcoming your questions, and we'll try to answer them together in the team as detailed as possible. Thank you.
Ladies and gentlemen, please note that those who are participating via the webcast kindly follow the instructions indicated and either type your question via the box or dial into the audio conference. At this time, we will begin the audio question and answer session. Anyone who wishes to ask a question may press star followed by one on their telephone. If you wish to remove yourself from the question queue, then you may press star and two. For those participating in the question and answer session, please use your handset when asking your question for better quality. Anyone who has a question may press star and one at this time. One moment for the first question, please.
The first question comes from the line of Andrei Ioana with Alpha Bank Romania. Please go ahead.
Good afternoon, and thank you for taking my questions. Can you hear me?
Yes, we can hear you just fine.
Okay. Oh, great. I will start now with my first question, and it's regarding the fourth quarter result. Can you please detail what happened in the distribution segment that triggered the decrease in bottom line? I've seen the increase in net losses, but this doesn't seem enough to justify the, the rope result. Second, I have several questions regarding the fifth regulatory period, and I will start with the corrections for the fourth regulatory period. If you could please tell us some values here for the total corrections set for the fourth regulatory period, the corrections for the efficiency gains, and maybe even the correction for the inflation adjustment.
I don't know if you can, but if you can, please disclose what is the value of the controllable OpEx set at the beginning of the period and maybe the efficiency factor, because I know that there is a study for that. One more here on the regulatory period. I was wondering what is the price for network losses projected at the beginning of the regulatory period? Is it a price, inflation adjusted or a prognosis? If you can, please tell, or I'm curious what is the initial projection of ANRE, not the recognized level ex post. One more, if I may, I'm trying to understand the difference in revenues, again, in the distribution segment between the reported value as presented in the financial statements and the net regulated income. There is a difference up to RON 900 million for 2024.
Can you please tell us what generates these revenues that seem not to be regulated revenues on the distribution side? That is all. Thank you.
Thank you for the questions. I will ask my colleague Gianina to take over, and we will go with them, I think, one by one, not to miss any, try to be as explicit as possible.
Hello. Regarding the network losses target, if I understand correctly, your question is regarding the realized target, yes, for the total year. The realized target is 8.38%, and we are aligned with the regulated target. In fact, they are very, very little over target, based on 8.89%. Is this your question?
Not really. I was wondering about the price. The price that ANRE considers for the network losses in its projection, the initial projection for the fifth regulatory period.
What is the price for network losses considered?
For 2024?
For 2025.
For 2025, it's RON 650 per megawatt hour without services. With the services, it's RON 674 per megawatt hour for 2025.
Oh, okay. Thank you. This was, and for further on in the initial projection, this price is a, a price in inflated price, or it's based on assumption? What kind of assumption?
For, for the during the fifth regulatory period, it will be applied to inflation. The methodology provided.
That was my question.
Okay.
Thank you. For the corrections for the fourth regulatory period?
For the fourth regulatory period, the correction, the total correction applied is near zero. There were not significant corrections applied for the fourth regulatory period, but it was the increase of the RAB with around RON 1 billion.
This will be a huge, positive impact in the fifth regulatory period, so not negative or not included in the correction. The total correction for the previous period is around zero.
Okay. Great. Sounds great. Thank you.
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Let's take a question, a written question, and if there are any audio questions, we'll take them after.
Please go ahead.
First question, government has recently published the draft which regulates the new 1% taxation of special building, which will imply a 1% tax on net value of special construction with private firms, 0.5% of the gross value of such assets for the companies which are having assets in concession from the state.
Yes, we have estimated the impact. The impact is estimated to be slightly more than RON 70 million. They are included in the budget proposed to be approved for 2025. It's not included in the regulated revenue in the tariffs for 2025. It is an element which fulfills all the criteria for non-controllable OpEx, and we think, without a problem, that we should recuperate it through the tariffs in 2027, the latest, if the methodology will not change. Initially, the fourth preliminary results were published only in accordance with the OMFP, Order of Ministry of Finance. I assume it's the 2844 order, while the first three quarters of full year 2024, we had the IFRS EU numbers. From now onwards, the idea will be the following.
For the quarters, we'll publish the IFRS, which is in line with the changes promoted by, also by the regulator for the stability, the financial supervisory authority for comparability purposes. For the full year, yeah, the fourth year, the fourth quarter result, we'll publish both. We'll publish the IFRS numbers, and we'll also publish the order of Ministry of Finance 2844 per 2016, which is also, yeah, it's the localized IFRS, let's say it. It has the flavor of IFRS, but it has some changes. It impacts also us and other companies with some changes compared with the overall IFRS. In our case, it's especially the part related to the capitalization of network losses. Then, we had a question, some questions. The question,
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If you wish to submit a written question, please do so now.
In terms of corrections, at this moment, we estimate corrections of the year 2024 for the tariffs in 2026 of more than RON 300 million. I think it is RON 340 million, if I remember correctly. It is also in the administrator's report. They are mainly generated by the correction for the distributed energy.
Should you have any more questions, either register for audio or please write. Give me a second.
What was wrong in distribution in Q4? It is mostly the net losses, as you pointed out. I mean, this is mainly the impact. There were also some effects related to some expenses with the staff, but mostly it was the part related to the net losses because we have this cyclicity, this evolution of the activity during the year.
It was the fact that we had some, with November and December, we had some, also some colder time affected also the price. Basically, till October, we had no capitalization of the net losses prices, of the difference of the net loss prices compared with ex-ante price. November and December brought some capitalization and some impact.
[Foreign language]. The investment plan for the next regulatory period are already published in ANRE order number 97. The investment plan are published, the value of investment plan.
You find, you can find it in slide 54 on the presentation.
Are there any more questions, please?
Also, just to mention also in terms of distribution segment, we had also some adjustments in quarter four related to the change of the margin for this fixed wealth according to the evolution of the margin for RON 60 million out of that.
Let's wait one minute to see if there are any. As always, we are here. You can contact us anytime to give you more details or we are full on full disclosure of transparency at any time at your disposal. Raluca, you can take the floor.
If you have any questions, we're always here. Please email us at ir@electrica.ro or the phone contact that you have on our website. We are gonna see you in May. Thank you.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone.
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