Ladies and gentlemen, thank you for standing by. The Electrica teleconference is starting now. Thank you. Hello, ladies and gentlemen. I'm Raluca, Head of Investor Relations, and together with the entire Electrica management team, I'd like to thank you for joining our conference call and live webcast to present and discuss the Q1 of 2024 financial results, which are prepared according to IFRS-EU, in anticipation of the upcoming capital market legislation changes. Those of you who are connected only by phone, please download the presentation in PDF format, available on our website on the Results and Presentation section. The participants connected online can address written questions on the live webcast or can intervene live on the Q&A session. You can also email us at ir@electrica.ro if you have questions at this time.
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. I remind you that the recorded presentation will be available on our website, starting latest tomorrow, but most probably... the transcript as well, as soon as possible. We kindly ask you to see the disclaimer on slide, slide three of the presentation. Now, we'll begin the presentation, followed by a questions and answer session. At this time, I'd like to turn over the conference to Mr. Chiriță, Electrica CEO, to begin the presentation.
Thank you, Raluca. Good afternoon, ladies and gentlemen. As always, I'm happy to welcome you all today. Today marks two years since I became the CEO of Electrica, and I am once again happy to welcome everybody. Certainly, you saw Electrica latest financial report released on Wednesday for Q1 2024. At consolidated level, we have an increase of both net profit and the EBITDA, up to around RON 127.7 million, and also by to RON 400.8 million. Marking a decade since the double listing on Bucharest Stock Exchange and London Stock Exchange, we celebrate with significant achievements and major transformations. The current performance give us confidence that we are on the right path to continue the positive trend in the future.
The EBITDA and net result growth was mainly driven by the operational performance of the distribution segment, on the back of the increase in electricity distribution revenues, generated mainly by the increased distribution tariffs, as well as the decreased electricity cost to cover the network losses. Electrica's financial performance demonstrates our team's ability to adapt and progress in a still very dynamic economic environment. The EBITDA increase of 170% and the net profit notable improvement of RON 170.7 million, highlighted our operational and strategic efficiency, consolidating our market position and underscoring our commitment to generating added value for shareholders. Investment continue to be a priority across the entire group, with a strong focus on the distribution area, reflected in a 40% increase in the value of works commissioned in Q1 compared to Q1 last year.
The average degree of execution of CapEx investments in the Q1 of 2024 is 144% of the planned value at three months, estimated to RON 216 million of the planned 150, respectively, 25% of the planned annual value. These investments are essential for both the modernization and development of the infrastructure we manage, for providing high-quality services for our customers, as well as for supporting the transition to increasingly sustainable energy sources. The group continues to pursue the expansion of its portfolio of electricity production from renewable sources. At this time, we have projects in different phases of execution with a capacity of approximately 300 MW.
Referring to the Vulturu Project, the first part built by us, the commissioning test will start in approximately two months, and with respect to the Satu Mare Project, the construction works have begun. We are evaluating other projects, and as always, we'll share details as soon as we can. On the supply, according to the latest and only ANRE reports available for this year, January and February 2024, our supply subsidiary is the largest supplier of electricity in Romania, again, with a total market share of 16.36%, and of course, Electrica Furnizare is still the largest supplier by number of consumption places, 3.5 million. Another success story this quarter is the entry of Electrica shares in the FTSE Russell Indices series, starting 18th of March, which is a confirmation of the improvement of liquidity on the Bucharest Stock Exchange.
Also, the appreciation of Electrica shares this year is notable. After the share price almost doubled by the end of last year from two years ago, when I took the helm of the company, our shares have increased this year by about 20%, more than the increase of almost 15% of BET-TR this year to date. In fact, as we speak, the share price reached 14 RON. It hasn't reached since 2017, with a few exceptions of a couple of days. As for the next strategic steps, for this year, we are waiting for the final methodology for the fifth regulatory period for our distribution to be finalized.
It should be approved by ANRE in early Q3 of this year, and we will revise our strategy for the next seven years, as we said, we launched it in December last year. Last but not least, you probably saw our announcement last evening. We have signed an MOU yesterday with Esyasoft, a very large provider of network grid modernization and automation solutions globally, with the purpose of finding the latest technologies and innovative for our grid modernization and automation. We are confident that our new partners, together with the continued efforts of our entire Electrica Group team, will bring added value to our distribution and production operations, which shall translate into better serving our customers and into adding value for our investors.
I will hand over to Ştefan now, our CFO, to provide you with a detailed breakdown of our financial results.
Thank you, Alex. Going to the numbers, I'll propose that we go directly to the, we skip the slides related to the presentation, and for efficiency purposes, we go to the point two group financial results to the slide number 13. And I will make some comments related to this slide. First of all, the decrease in revenue is both in terms of year-on-year and quarter-on-quarter is mainly due to the decrease of the prices of energy in the energy market. As you will see in the slides to follow, we managed to keep our margin, energy margin, stable in supply and to improve our energy margin in the distribution.
I would also mention the evolution of the net result and net result margin, which is benefiting in 2024 by the elements related to focus on operational cost reduction, but also on the fact that we benefit on the distribution side of the increase of tariffs related to expiration of GPTE from the past, from year 2022. In terms of EBITDA growth and margin performance, we are back to margin of EBITDA, close to 18%, which we believe it's more close to the normalized performance of our businesses before 2021, and the situation with the volatility in the market that we faced since then.
In terms of net debt or net cash position, we have a temporary increase of RON 4.7 billion, which is related to the fact that we drew RON 1 billion from EIB, which is money to be used for financing the CapEx plan in the distribution subsidiaries for this year, but also with a view to the following regulatory period. What we forecast is that, following the reimbursements of the subsidies that we expect during the year, this level will fall down to a similar value with the one at the end of 2023, by the end of the year. So it's a context related to the fact that we wanted to secure this funding at a very good rate.
Now, if we go to the next slide, and the analysis of consolidated EBITDA, and net result evolution, I would mention that, the variation of EBITDA, compared with the Q1 of previous year, is of RON 252 million, and this is mainly due to the positive variation. Okay, sorry. Now is better? Technical point of view, correction. Okay. So, the positive variation of the energy margin is of RON 285 million, out of which, as I mentioned, in the supply segment-
Line.
Sorry? Sorry.
Technical difficulty. Hello?
Hello, the management can proceed. Thank you.
Okay. I hope you can hear us now. Apologies for the technical difficulties.
Yeah. Okay, so the evolution margin in terms of the supply segment, we managed to have a roughly stable margin of the energy. As you see, it's a RON +9 million difference. Basically, the benefit from the decrease of the cost of electricity purchase for supply of +1.1 billion RON is compensated by the decrease in the subsidies, yeah, revenues from subsidies and the revenue from electricity and natural gas sold to the customer. So we managed to keep the margin fixed. In terms of distribution segment, we have RON 276 million positive effect on the distribution segment, on the energy margin, which is mainly coming from the fact that we have basically two consecutive increases that we benefit in Q1 .
Basically, last year in Q1 , we didn't benefit of the increase of tariffs for recuperating the network losses coming from 2022. It only started from first of April, while now we have the second increase applied to the tariff after the first of January. Also, there is the positive effect related to the benefit of MACE mechanism for the acquisition of the energy. And then there is also an effect related to the increase in the volumes of electricity distributed of approximately 3.4%, which is mostly in the low voltage. In the low voltage, we have the households.
So we see that with the prices going down and with the more confidence of the population in relation to that, we see that consumption energy distributed and consumption to the population is slightly increasing. In terms of other elements impacting the results, we have the RON 90 million positive results from other revenues, which is composed of some smaller elements. For example, the margin on the study of the availability for a fix twelve from 3% to 4.35%, and we have some increase in the revenues, some penalties for late payments from customers, and these are composing this impact.
And then in the negative variation of OpEx, so overall, there is a -RON 451 million effect, which is coming from two components: the negative impact of RON 20 million from valuation of salaries in the distribution segment, and then RON 21 million from operational expenses from supply segment due to some contractor penalties cost increase. As we go to the net profit, the variation is RON 171 million, which is positive variation, mainly due from the positive evolution of EBITDA of around RON 265.2 million mentioned above. And this effect is slightly alleviated by the negative impact of the financial result, increasing with RON 50 million from Q1 last year.
Basically, we need to continue to finance the subsidies and the support scheme, and the banks are having costs which are increasing with the capital allocation and the requirements of capital allocations with this financing. And then we have an increase of the amortization and depreciation of assets of RON 34 million, minus RON 34 million. This is coming from the revaluation of assets that we have done at the end of the year. And then there are also the new entries in the asset base from the investments of the distribution subsidiaries. And on the other side, we have negative impact in profit tax of minus RON 42 million. It's the reduction of the benefit with profit tax, following the decrease in the previous fiscal year loss, for which the benefit is of deferred tax, what we registered.
Basically, distribution segment registered fiscal loss in Q1 , 2023. Going to distribution segment, next one, slide 15. I will mention, just to keep focused on the elements which were not discussed already. I'll mention the fact that in terms of operating expenses, we have a favorable impact of approximately RON 60 million, mainly as a result of the decrease in utility expenses. And then I will also mention in terms of evolution of net results, RON 485 million. This is mainly from the positive evolution of EBITDA. And then in terms of unfavorable effect, we have million impact in the financial results. So the financial result in terms of interest cost has slightly increased, and then increase in expenses with amortization and depreciation of assets of RON 10-30 million, as mentioned before.
The profit tax, which is also in line with the explanation before. Important to mention here is that the favorable impact for the distribution segment results from this decrease in net losses cost by RON 40 million. From RON 315 million net value in Q1 2023 to RON 328 million net value in Q1 2024. This being generated by the decrease of the prices of energy purchased for the net losses. Most importantly, due to the legislative changes related to the introduction of MACE mechanism, but we also see the prices in the market going down, significantly in terms of also purchasing on forward contracts outside MACE.
In terms of net debt, we have an increased net debt of RON 571 million, compared with the end of 2023, and this comes from the increase of the bank borrowings, where the most important is the RON 1 billion borrowed from EIB. It's competitive on the other side with the decrease in the overdraft, and there is minor decrease in the financial debt. In the next slide, we have the operating performance of the distribution segment detailed. I will just go through this, then with slide 17, the usual analysis that we are doing.
Slide 17 and 18, going from the regulated RAB calculated for 2024, and then going through the various corrections to the total regulated profit variation, and then regulated from regulated profit to the net result under the statutory, RON 109 million, and under IFRS, RON 238 million. Then the next slide, we have the analysis starting from net revenue and going to the IFRS result for Q1 . And here, you can see the elements that we mentioned. What is very important is that net loss capitalization, it's only RON 26 million.
So as you see, we have a very low difference between the ex-ante price that we get in the tariffs for the net losses and what the effective price for acquisition, due the MACE and the positive evolution of the prices of energy. Then you have the situation on the three regions with the details. I would also mention, on the slide 23, that, making a detail compared with what is mentioned, also in the summary of results. In CapEx, we achieved CapEx value of RON 70 million, which is some 2.2% more than the planned in 2020 for the Q1 , but it's almost 40%, approximately 40%, more than the CapEx in Q1 , 2023.
It's also related to the fact that during 2023, we had some delays in CapEx related to the challenges of liquidity in respect of refinancing the difference in price net losses. If we look at the supply segment, slide 24. We have slightly the same EBITDA like previous year. It's a minor difference of 9 million in EBITDA compared with Q1 , 2023, which is mainly due to the factors related to changes in the energy margin. As I've mentioned, decrease in the revenue from the supply of electricity of natural gas, due to the decrease of price of energy, corroborated with the other operating income decrease in the subsidies. Income from subsidies were compensated by the positive effect related to decrease of purchased energy cost.
Net profit decreased by RON 80 million, mainly from the negative evolution of EBITDA, but also with the impact from financial results increasing with RON 11 million, which is the effect, which is diminished by the decrease of income tax by RON 3 million. Net debt increased by RON 166 million. The variation of the loans of the overdraft, depending on the collection of the amounts from customers and from the subsidies. We have decrease of cash and cash equivalent of RON 136 million and increase in our draft, RON 30 million. Going further, you have the data about market quota for electricity distribution, and you can see there that basically for the first month of 2024, we have the largest market quota on the supply market.
Then slide 20, 26, you have the evolution of the key operational results in the previous 3 years. Operational results for 3 months, 6 months, 9 months, and annually, and the evolution of the volume of electricity supplied on the retail market. What we can see is that if we compare with 7.8 terawatt hour supplied in 2023, total years, we do have 2 terawatts supplied in Q1 , 2024. So, we could say that we are, at least we could say that we are pretty much stable in terms of quantity supplied in the market.
On the next slide, slide 27, you have the details related to how are these volumes split on the types of market, universal service, supplier of last resort, and competitive market. And then also the split in terms of volumes and number of consumption places on household and non-household. You can see that basically, it's close to 50/50 in terms of volumes split between household and also non-household, although in terms of numbers, out of 3.5 million customers, 3.3 are household. The next slide, 28, it has the details about the gross margin on energy, and also some details about the evolution of the legislation, changes of legislation in terms of a support scheme.
On slide 29, you have the evolution of the impact of the energy prices. You can see evolution for 2024, going down and also compared to previous year. I would like to mention here one very important element. You see that the evolution of the prices in the market will also help us in terms of reducing the amount that we are requesting under the support scheme. So basically, out of the RON 2.2 billion, which are in the balance sheet as subsidies, 1.9 are requests which are already placed with the authorities, and the difference. It's basically representing Q1 . So we're having, like, RON 300 million for Q1 . Full quarter. In the past, we're having RON 300 million per one month in one request for reimbursement.
So this makes us confident in terms of, preparation, of the subsidies in the future. Electrica, the energy services supply, we have a result of RON 4 million, Q1 . We continue to push them to advantage of this context in the market, where a lot of the companies and a lot of them projects in the energies, especially in the solar field, are being developed and to get them involved in this kind of project, for either sourced from the customers of the group or also directly sourced. Slide 20, 21, we have a highlight on the production segment. Mentioning the situation of the companies of the respective SPVs.
Of course, since this is a project in development, basically we are in the startup phase at various moments of development for the project. The result is a negative result, but it's minus RON 1 million. We should mention that for a total of almost 40 MW, we have construction phase and ongoing. In terms of group liquidity, slide 32, you see, with the impact of the liquidity that we utilized from EIB, we have the best position since 2022, because basically we were able to the financing, which is very in very good terms, enabled us to repay some of the overdraft. And now we have a significant amount of liquidity available.
I would end the presentation now and wait for your questions, planning to answer them. Thank you.
Ladies and gentlemen-
So we-
I'm sorry.
Yeah, please.
Ladies and gentlemen, please note that for those 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 the presentation. I have a question regarding the budget proposal. Your estimate is around RON 200 million net profit for the full year, based mostly on the strong decline in the distribution bottom line. Now, considering that most, more than half of the distribution side budgeted profit has already been achieved, and you've seen a strong recovery of this segment, but also considering changes starting with April first, please give us more color on what to expect for the rest of the year. Is the budget still reasonable, and therefore you expect a strong deterioration of profitability in the next quarters, or you consider an upward revision of the budget? Thank you.
Thank you. The idea is the following. When we made this budget for this year, we pointed out that it's a more conservative approach for this year, considering that at that moment, we didn't have a lot of information about, you know, the evolution of the prices of energy. But there was a discussion about how the legislation will change in terms of market, et cetera. So from this point of view, let's say we will have been more cautious. What you are saying is that at least it looks like we have done all the profits in Q1 or something like that. Okay, it's not almost all that profit.
We do consider that in terms of profitability, we are confident that we'll be able to keep up with this Q1 result and continue the good performance. However, I will not... I'll have more visibility, and I will be more realistic to have this kind of flavor that you are asking, provided more at the end of the half year, you know. It will be the moment in which it will be more clear where we stand in terms of that. We are also doing some optimizations in the business, and we will need to see how this unfolds.
... I'm sorry, I'm not sure I've understood correctly. So basically, what your guidance is that, you can continue with the, the same?
Right now, right now, we are one, right now, I say, right now I say that we'll, we'll stick on the budget, which is published, the results is, is published, and after half of the year, we'll see the results of the half of the year, we'll be able to have a, a more clear, like a more clear position whether we will exceed the budget this year or not. In the context, in the context in which there are some changes in the market still potential to happen, we prefer to be more, cautious.
Okay, thank you.
As a reminder, if you would like to ask a question, please press star and one on your telephone.
So, Christian, an expectation of a regulated rate of return in the new regulatory period. You might also know the regulator published a regulatory rate of return proposed of 6.75% for a public consultation. The distribution operator requested more with some arguments we are discussing on the component of the calculation of the WACC formula. There is a period of consultation until the approval of the final value of RRR. We are relatively rather confident that we will see an improved value compared with the initial proposal. We will see how this unfolds. Is the revaluation of the regulated asset base... is the valuation of the regulated asset base inflation finished? Is there any other to follow?
No, we have done the full revaluation of the assets in all the business at the end of 2023. So none. This is done, this is to follow. There is none, there is none to follow. I mean, the values are there. The revaluation of regulated asset base should allow us to receive the difference from inflation at the end of the regulatory period, and the discussions are showing that there is an openness to have this planted. Capitalized with losses, how much is the revaluation with inflation? So you are asking about... So the regulated asset base of RON 7.4 billion does not include the capitalization of grid losses. That's a virtual asset.
It's true that we are getting remunerated, with half of RRR on that, but it's not included on the definition of a regulated asset base. Now, regarding of how much is the evaluation with inflation, the IFRS value is RON 6.3 billion, and 7.4 is the RAB with the inflation. Sorry, just a second. We're back. Yeah. Sorry. Next question, please provide some details on receivables from state due to capital of supply prices. I have also touched this during the presentation, but I'll be happy to, to, give more detail. So, what we are seeing now is that on the balance sheet, we have RON 2.2 billion RON supply subsidies at the end of Q1 , 2024. Out of these, 1 billion represent amounts which are already requested.
We have files requested for to the authorities for being recuperated. This is basically up to December last year. Yeah. So the difference of, from 2.2 to 1.9 is RON 300 million, which is our estimation for Q1 , 2023. So this is decreasing with the prices going down. Basically, the support team is only actioning for the levels of price of 0.68 and 0.8. We are in the situation in which we are offering the customers contract for prices which are below the other two prices in the support team, benefiting from the evolution of the energy prices down. In the past last year, we were requesting RON 300 million for one month, and now it's RON 300 million in Q1 .
We are optimistic that after mid-year, we will see the same thing that we saw also last year. That is, the amount that the state will collect from the overtaxation from oil and gas will be directed to the transition fund and will be used to clear the existing balances under the support team. So we expect a significant cash in from this point of view, the middle of the year. And with the decreasing value of the request that we're filing, this pressure related to the receivable from subsidies should diminish significantly until end of the year. In terms of investment, what the outlook and levels of medium term, we continue to have a CapEx plan, strong CapEx plan in the two directions.
One is related, of course, to the distribution subsidiary, where, yeah, in order to refurbish the line and to fulfill the requirements which are needed from the DSO, considering the changes in the energy structure or the, the structure of the energy system are related to 655 REPowerEU. The fact that we will need to accommodate consumers, we will need to accommodate energy distribution sub-distributive systems of energy, all the new projects of energy connected directly in the distribution network. We will continue with similar level of investments like the ones we have now, yearly in the distribution toward the horizon of 2030. Another area is the area related to production. There may be also my colleague that here will, she is able to provide some light of that.
We are focusing on, you know, we have more than 400 MW, which we are under operationalization, we are focusing to try to finalize as soon as possible, and then is the target of 1,000 MW that we still keep as well.
Thank you, Ștefan. So we, according to our strategy, the scope is to reach one gigawatt by 2030. Currently, we're developing the 2 parts that I've mentioned, the Vulturu and the Satu Mare 2 projects, and we're close to finishing the next two in Bihor and Satu Mare two. We are still working on everything, so we keep up with the investments according to plan. We say that at this point, we are on track with everything.
Ladies and gentlemen, are there any other questions?
The next question comes from the line of Caius Răpanu with BCR. Please go ahead.
Hi, thank you for the presentation. Congrats for the results. Well, a couple of my questions have been answered already, but I was just wondering, in the renewable segment, if you could give us an indication about what type of IRR you are looking when you are entering this project? Second, would be, do you see any pressure on your market share in terms of supply? We have seen that there have been some new entrants from smaller or bigger on the market, and how do you see this in different in households and non-household business?
And, third one is about this recent agreement that you have announced yesterday, in terms of this international cooperation for implementing smart grid. I mean, what do you expect to get from that, and what would be the impact on the economics of the business? And that's it. Thank you so much.
Thank you, Caius. So I'll answer the first two questions, and then for the related memorandum, I'll invite my, my colleague, Alex, to, to give you the details. He was very much close to the project. We don't see necessarily a pressure from the, on the supply market. I mean... You saw the numbers. We are market leaders after two, two months in 2024. Yeah, last year, we provided 7.8 TWh, and this year we have 2 TWh in the Q1 . Yeah, 2x. Yeah, you can make the calculations. We are confident that we are pretty much stable in that, from this point of view.
We mentioned also in the past, we benefit of the fact that, in where we have a lot of our customers in the supply segment in Transylvania, households are very stable in keeping their suppliers. And from this point of view, they are less, less prone to, you know, switching from a supplier to another. The other question was, in terms of IRR, I will not necessarily be able to give a figure publicly. What I will say is this: Let's wait and see how the regulatory rate of return will end for the distribution. And then, of course, the generation of energy is slightly riskier, so we can add up to that a little bit and get to a percentage which is, which is, which is the one that we are using.
Nevertheless, I would mention that in terms of electricity projects, we are not judging only on the IRR. Because of course, IRR is an important element, but for us, in terms of—I mean, I think that the result at the end of 2021 showed that on the long run, supply without generation is not sustainable. And even if I will not be able necessarily to have production covering the 8 TWh that I'm having in my supply business, if I have part of the, this production at the level of the group, I'll be able to mitigate the result at the level of the end of 2021. Should I have had 500 MW of production, the result would have been in the black. In terms of the memorandum signed yesterday, last part, I call colleague Alex to give the details.
... So yesterday, we made it public that we signed the memorandum. Our vision is that strategic partnerships in the energy sector for Electrica crucial for enhancing network reliability. We want to expand our grid capacity, and we want to integrate renewable energy sources in the group. By leveraging each other's expertise, the companies can develop advanced grid technologies, optimize resources, and share infrastructure investments. The scope of the alliances is to facilitate the improvement of operational efficiency and enhance, on the other hand, the grid security. It's very important for us to be on the edge of new technologies, and we are searching for partners that can leverage this into our advantage. We see a lot of changes in the market. We see a lot of changes in technologies.
We see the ever-growing evolution of intelligence, of artificial intelligence in the energy sector, and we want to be at the forefront of these implementations. We are keen to respect all the regulations in place, and we want to overachieve them in the next years to come.
Thank you so much.
Ladies and gentlemen, as a final reminder, to register for a question, please press star and one on your telephone. Ladies and gentlemen, there are no further audio questions at this time. I will now pass the floor to Electrica management. Thank you.
I see that we have another written question.
The level. What is... The question is: What is the level of capitalized grid losses at Q1?
RON 36 million is the level of capitalized losses, so it's very little difference between ex-ante and effective price.
Okay. Thank you very much. It seems that there are no other questions. You can always email us, and we'll answer as soon as possible or call us anytime. In the meantime, thank you everyone for joining, and I'll give the floor to Aurelian to wrap up.
Thank you so much for being with us today. I want to take the opportunity to thank all the members of the team within the Electrica Group. It's an effort that has to be maintained, and I'm sure we will overcome expectations by the end of the year. Thank you.