Ladies and gentlemen, thank you for standing by. The Electrica teleconference is starting now. Thank you.
Hello, everyone. I'm Raluca Casap, Head of Investor Relations, and together with the entire Electrica management team, I would like to thank you for joining our conference call and live webcast to present and discuss the Q3 2023 financial results, drafted according to the order of the Ministry of Finance, 2844/2016. 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 at the end. 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 latest tomorrow, and the transcript as well, as soon as possible. We kindly ask you to see the disclaimer on slide three of the presentation. Now, we will begin the presentation of the financial results, which will be followed by a questions and answers session. At this time, I would like to turn the conference over to Mr. Chiriță, Electrica CEO, to begin the presentation. Thank you.
Good afternoon, ladies and gentlemen. It is a privilege to welcome you all today. Your engagement with Electrica, especially during these fluctuating times, is deeply appreciated and vital to our journey forward. Despite the ongoing volatility in both economic and legislative spheres, Electrica is on a steadfast path towards recovery and growth. We've been diligently aligning our strategies to address the challenges of a rapidly changing energy market, and I am pleased to report that our efforts are aligning with the expectations of our long-standing investors. A special note of gratitude goes to our entire Electrica team, whose dedication and innovation approach are pivotal in steering us towards a greener and more sustainable energy future. Reflecting on our recent financial trajectory, there is a mix of challenges and achievements.
Our EBITDA saw a significant increase of 13.5%, reaching RON 148.8 million in the first nine months of 2023, compared to the same period in 2022. This growth, however, has been offset by a notable decrease in net profits, primarily influenced by increased financial costs. These figures are a testament to our resilient financial management and strategic adaptability in an unpredictable energy sector. Electrica remains committed to the strategic course we have set with our investors. Key highlights in this journey include: Our merger process through the absorption of the production subsidiaries is on track, reflecting a significant stride in Electrica's transformation. Following the final shareholder approval in December 20th, we will be entering a decisive phase starting January 1st, 2024.
As for progress we made so far in the production segment, for the Vulturul project, 10 MW, we have finished the acquisition of the EPC contractor and will begin building it very soon. For Satu Mare project, 27 MW, as we recently announced, we attracted non-reimbursable funds through PNRR, and the auction for contracting the EPC, as per the rules of PNRR, is on track. We are rapidly approaching the ready-to-build stage for several projects, with an expected launch in Q1 2024. We'd like to announce that we have secured the land plot in Fântânele, Mureș County, in collaboration with Electrocentrale Grup. Our goal here is to build a cutting-edge combined-cycle gas power plant, integrating hydrogen component and storage capabilities with a maximum installed capacity of 500 MW. At this time, we kickstarted the market research for the feasibility study.
As soon as we have it, we will start the procedures for obtaining all the necessary corporate approvals. Furthermore, we are exploring other renewable energy projects with a capacity of about 200 MW. All these projects are crucial to achieving our ambitious target of 1 GW by 2030. As always, we will keep you posted and share more concrete details as soon as we can. On the DSO segment, a significant focus has been our engagement with the Modernization Fund. We have actively submitted 17 projects, representing a substantial portion of funds available resources. This initiative underscores our commitment to enhancing both our core businesses and renewable energy production capabilities. Regarding the detailed financial analysis, our EBITDA performance for the nine months... For the first nine months of 2023, has been in line with our estimation, reaching RON 152 million.
This growth is an indicator of our operational efficiency and strategic financial management. Operational revenues, however, experienced a slight downturn of 3.2%. This is primarily attributed to the complex interplay of increased tariffs and our rigorous cost control measures. The net profit saw a decline, mainly due to the component, due to the compounded impact of increased financial costs, which arose from delayed subsidy collections and other market dynamics. Our CFO, Ștefan, will shortly delve deeper into the financial aspects, offering a granular view of our performance and outlooks. As we near the close of 2023, our focus remains unwavering on strengthening Electrica's market position and fulfilling investor expectation. The upcoming presentation of our medium and long-term strategy will encapsulate our resilience, adaptability, and unwavering commitment to sustainability and growth.
I extend my heartfelt thanks to all our stakeholders for your continued support and trust in Electrica. Together, we are we are poised to not only navigate, but thrive in this dynamic energy landscape. I now hand over to Ștefan, our CFO, to provide you with a detailed breakdown of our financial results and strategic insights.
Thank you so much, Alex. Going to the numbers, I will ask my colleagues to go to the summary, first summary slide related to the summary of consolidated financials. And I would like to first mention that even in the context of the rapid changes in the energy sector, with the volatility of the energy prices, our positive financial performance for nine months during 2023 is highlighted by the increase in AU compared to the previous comparative period. Which is the result of our ability to implement the effective strategies to increase profitability and optimize operations, translating into a sustainable evolution of our group.
So this result, in terms of positive evolution of EBITDA, is due to the reduction of operating expenses, especially from the purchase of energy for the net losses for the own technological consumption, for distribution segment, due to the implementation of MACEE, but also efforts to maintain other OpEx costs under control. When comparing the EBITDA with the periods of 2022, we should mention that in 2022, we had the income from the capitalization of net losses costs, which were revenues of non-cash nature. It's about the revenues, which will be recoverable in monetary terms through billings and subsequent receipts, starting from first of April 2023, and which will extend for the period of five years, and which we started to collect from first April 2022.
If you exclude this part related to the capitalization of net losses, you would see the positive trend of EBITDA compared between nine months 2022 and nine months 2023. Also, No, let's stay on the slide. Sorry. Go back. One slide back, the one with the, it's perfect. If you look at the result, net result margin, you would see the part related to negative, let's say, trend in terms of net result margin in comparison with the positive trend in terms of EBITDA margin. This is related a lot to the increase of the financing cost. So basically, we continue to pre-finance them. In terms of net losses, the amount which was financed last year, we only gradually started to recuperate through tariffs.
This is basically the explanation related to the fact that we have a slightly lower net result margin, while we still have a higher EBITDA margin. In terms of net debt, net cash, you would see an increase of RON 800 million compared with the end of the year. This is related to facilities, which are also related to refinancing the support scheme. Mainly, this is the explanation related to the difference, and also there is an explanation related to position of net cash. Going to the next slide, please. Looking at the analysis of the consolidated EBITDA net result.
The consolidated EBITDA is higher in nine months 2023, with RON 149 million, compared with nine months 2022, being the cumulative effect of several factors, which I will I will list in terms of the most important ones. It's about the positive variation of the energy margin with RON 932 million, and also the impact of the net capitalization, RON 713 million. It's about the capitalization that we registered last year.
In terms of the variation of the energy margin, this is to be explained mostly by the positive impact from the distribution segment, where we have a RON 1 billion effect of positive variation of the energy margin, out of which RON 349 million is the increase in energy distribution and revenues, being the net impact of the increase of the distribution tariffs. Basically, we are starting to recuperate the difference from net losses from previous year, starting first of April. And then we have a positive impact of RON 750 million, which is related to decrease of the cost for covering net losses.
We are benefiting here by the implementation of the match mechanism, according to which the producers can sell 80% of the energy needed for the distribution at a regulated price. So this is basically covering the energy needed for net losses. More than that, we also benefited from the very good activities of purchasing energy for the DSOs in our distribution subsidiaries. Plus, we took advantage of the market trends with the decrease of the price of energy, and we are in the situation in which basically we are below budgeted average price for purchasing the energy for 2023.
We are in the situation in which, basically, we only capitalized RON 66 million as difference of net losses during this year, so less than we initially budgeted. Net losses capitalization of RON 730 million is the difference between the net cost of the purchase of energy and the cost of own technological consumption. The variation is generated by the fact that at nine months 2022, we registered RON 780 million as this capitalization, and nine months 2023, the capitalization is only RON 66 million. There are also some variations about the OpEx, but I don't think they are material considering the big pictures. You have the details in the presentation, and I will just move to the net result variation.
Where I will mention that, the net result is RON 150 million less, coming from the... Which has a positive effect related to the positive evolution of EBITDA, but it's compensated in a negative way by the increase of financial cost, as I mentioned. Last year, we took some credit lines during the year. Now, this year, we continue to have these exposures, and with the evolution also of the interest rates in the market, we have this impact, which is starting to be more important. And, of course, also we have an impact of the amortization and depreciation of assets, which includes also the depreciation for the net losses capitalized. Moving to the next slide.
We have the summary of the data regarding market quote. I will move over that. Go to the next one. In the distribution segment, here you have also, in more detail, the elements that I have already mentioned about evolution of the result. You also have a split of the net debt increase for the distribution segment. Basically, you could see that, in the distribution segment, in terms of net debt, this is relatively stable. We took some additional financing, but we also are reimbursing, according to the repayment schedules, the loans that we have from the past. Moving to the next two slides. These are the next slides. This is the slide related to some summary of other details about distribution. I will not say too much on that.
Going also further, next slide, it's next two slides, slide nine and 10, it's the analysis in terms of the budget, starting from the RAB and going to the net results, budgeted. You know, these slides from our previous meetings. And then the next slide, slide 12, I will move here a little bit. Next slide, please. No, I think you skipped to that. Here we have the evolution for nine months, starting from the total net revenue, yeah, and going to the net result. What you could see here is, basically, that we have the elements that I've mentioned before related to the financial results, which has a negative impact, RON 145.
Also, in part, in the first part, after the regulated result, the net loss is capitalization, which is, of, of RON 66 million, what we capitalize. And then you can see also going down the, the waterfall, the details also going from the statutory financials with the adjustments to the, to the results according to the local IFRS, so OMFP 2844. Moving to the next slide, please. Yeah, these are the usual slides related to the operational performance of our subsidiaries. I will not say too much on this as well. On the slide 15, I would just mention that, part of the investments is, which is mentioned at the lower part of the, of the slide.
At the nine months of 2023, we commissioned 42.5% of the planned CapEx for 2023, which included also the part that we needed to recuperate for 2022. We are confident that we'll still be able to make a good job on that and recuperate the targets. We still can recuperate until the end of six months of 2024. Basically, the situation in 2022 for us and for other operators was that, due to the fact that we needed to pre-finance RON 1 billion for the net losses, we needed somehow to prioritize in terms of, you know, financing, getting the financing and utilizing the financing related to the loans.
But we do have the loan with the EIB, which is aimed for these investments, and we are confident that we'll be able to recuperate this in the future. Plus, we should also mention that there are additional works in this investment plan, resulting from the legislative changes related to the connections. Now, moving to the next slide related to the electric assets, to the energy related services.
Here we have a positive result, in the sense that for nine months we have a slight positive net result with the negative EBITDA, because SERV has a positive result in terms of financial revenues, because for some reasons coming from the past, they do have some liquidities which are placed in the cash flow system and are used for financing the other subsidiaries. Basically, SERV is benefiting of the increase of the demand in respect of the solar projects, you know, EV and we are also part in this and trying to get as much contract as possible and get to execute this and have a part of this increasing activity. Now, moving to the next slide.
It's about the supply, in the supply segment. In the supply segment, we have EBITDA, which decreased with RON 100 million compared with nine months, 2022, and which is mainly due to several factors. First of all, there is a factor related to the decrease in revenues from the supply of electricity and natural gas,RON 609 million , which is a mixed effect of increasing selling price on the retail market and decrease of volume of energy supplied by 10%. It's...
Then another element to be mentioned, that we have other operating revenues increased by RON 449.79 million, representing the subsidies which we, we are posting, and we are, collecting from the state as a result of the application of the capping of energy prices, as approved, initially by Government Ordinance 118 from 2021, and then with the subsequent changes. We, we have a increase of purchased energy costs by RON 60 million. We should mention one thing, that according to the market, the priority for the energy- acquisition of energy through market is given to the TSO and DSO, and only the remaining part goes to the supply. So basically from the supply, for the supply from mar- we had a limited energy came from March, coming from March.
We have, we had an amount at the initial allocation, yearly allocation, and then with each month at the, periodic monthly allocation, we still had the initial quantities coming, and we are still under—we are also under budget with the price of acquisition of energy, also for the supply segment. In terms of the net profit, there is a decrease of RON 160 million, mainly coming from this negative evolution of EBITDA, and then, a negative evolution of the financial result of, RON 87 million. In terms of net debt, we have an increase of the net debt. It's basically, about the financings that we continued to secure in order to pre-finance the support scheme. We could give also some details about this at the, the, at the collection of receivable details. There are,...
We should mention that during September, we collected significant amounts from the state budget, from the total, from the Ministry of Energy and the agency and the Ministry of Labor in terms of amounts due under the subsidies. Moving to the next slide, please. Here we have the most recent report in terms of market share, July for the supply market. You see the split, depending on the various markets. Also, we should mention that there is not a significant change in the number of places of consumption. Going to the next one, please. Here you have also market allocation and some details about split of the electricity revenues, and also a key operation indicator in the last three years. It's a summary of performance of our supply subsidiary.
Going to the next one, here you have the usual details about analysis of the gross margin, not only the energy margin, but overall the gross margin in the supply segment, and also all the details regarding the changes in the legislation, with measures coming from 2022, but also the measures coming from 2023. On the bottom, you have the graphs related to the electricity weighted average price evolution on the Day-Ahead market on the left, and then on the balancing market, equilibrium market on the right. You could see that prices are at a level which is significantly lower than in the previous year, and we see the market calming down and stabilizing. Then the next slide has the details about the receivables analysis.
We did see an important decrease in the outstanding receivables at the end of September, compared with the end of December 2022. We have an improvement of the recovery rate for the interval 160 days overdue. As previously mentioned in previous presentations, we don't see an issue necessarily about collecting from the, from the customer. As you see, the outstanding receivables are decreasing both in nominal terms, but also in terms of outstanding receivables, adjusted with the turnover. Basically, the bad debt allowances are mostly referring to the things which are older, some older than five years. The recently invoiced receivables don't present an issue. We consider that this is an element which is under control. Going to the next slide. It's a slide about production.
As you know, as also our general manager mentioned, the development of the production activity is one of our priorities. I will not state too much on this slide. There is one solar park which is already operating, and then there are the other parks which are under various stages of operationalization. You heard the details from our general manager. Right now, in terms of results, we do have a positive result, which is coming from the activity of the existing park. It is a decrease related to the fact that the prices of energy on the Day-Ahead Market are starting to go down towards the second part of this year.
We're basically having this energy from this park delivered under under under they had market contract. Moving to the next one. In terms of group liquidity, we started to include this, you know, after the toward the end of the of 2021, when this this all this volatility crisis on the energy market started to to occur. What you can see is that we are basically at the second--we're at the highest position of liquidity and limits available starting starting 20 September 2021. This is a result both of our optimization measures, but it's also benefiting of the fact that, as I mentioned in September, the state did repay did pay some significant amounts on the subsidies. We cashed in almost RON 800 million then.
Moving to the next one. There is this detail about the dividends that you know from the previous presentation. Then it's the graph structure, and you have the annexes that are available for any details. I will not state much onto that. I will just invite you to ask us your question so that we could clarify as much as possible and as better as possible, in terms of explaining our results and how do we see our performance. Thank you.
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 your star 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 Iuliana Ciopraga with WOOD & Company. Please go ahead.
Hi, good afternoon, and thank you for the presentation. I have a number of questions, but first, regarding the CCGT, did I understand correctly that you're considering to invest in a CCGT plant? And I was wondering, where can we find more details? And actually, it doesn't seem to be fully in line with your strategy, with what you've published so far. So that's why I'm actually trying to find out if I understood correctly. And there is more on the distribution and tariff side. So, regarding grid losses, how much was actually covered via margin in the first nine months? And what's the price reflected in tariffs right now for grid losses? My third question would be, what should we expect regarding 2024 tariffs for distribution?
If you can comment a bit on corrections for 2024, and if you have any visibility regarding 2025 as well. The last one, regarding receivables, when should we expect a normalization, and what would be a normalized level of receivables, and where do you see net debt when that happens? Thank you.
Thank you for your questions. I hope everybody can hear me well.
We do.
Regarding your first question, it is in line with the strategy as the investment in the green energy sector needs to have balance. We cannot invest solely on green energy. We need to find, figure out a way in which we can balance the energy outputs, because solar and wind have different periods of time that are more feasible, and we need to ensure a bandwidth, a megawatt, in order to secure the balances.
... Given that we are currently in the process of acquiring the feasibility study, we are unable to disclose additional information at this stage. However, as soon as this process is completed, we will provide a public presentation, the study, and the study will be subjected to all necessary corporate approvals. Hope this answers the question.
But what, I mean, can you at least tell us the size of the CCGT plant, and will it be owned fully by you, or how would that work out?
The size is estimated, yes, the size of this investment project will be of maximum 500 MW. It will have a hydrogen component, and it will also have battery storage.
Okay. Thank you.
Thank you. If so, we can proceed to question number two. Ștefan?
5Yes, thank you. Thank you, Alex. So in terms of how much of the grid losses were covered. Basically, for 2023, 80%, yeah, of the quantity needed for the forecast of the net losses were covered by MACEE . And the price, which is reflected in the tariffs, it's RON 533 per megawatt. Combining March with the good performance of acquiring energy, we are at a level which is very close to what we have in tariffs, and this is reflected in the fact that we capitalize very little, only RON 66 million capitalized.
The RON 530, that's an average, right? Because first quarter was different.
Yeah, yeah.
Or is it just from April?
First quarter was not the effect of the tariffs. The tariff started from first of April. First of all-
Okay. So under the current tariff, it's RON 530.
Yeah. Then we also saw that the prices in the market started to decrease. So also for the remaining part of 20%, we were able to have a good performance in terms of the pricing. What should we expect regarding 2024 tariffs? Can you comment on expected corrections for 2024, and if you have details affected 2025? For the 2024, we basically expect that the tariffs will increase in the limit of the yearly ceiling of 77%, which is stipulated in the ANRE regulation. For 2025, we believe it's premature to make any comments. As you know, 2024 was established as transition year towards the next regulatory period.
Specifically to allow, you know, for both the regulator and also the operators to have the discussion and the negotiations and, you know, settle and clarify things for the next period of regulation, the fifth period of regulation. As soon as we will have details that we'll be able to share with you in terms of the next regulation period, we will get back to you, and we'll communicate be the current report or, you know, we could have, like, workshop with the investors and so on. What is our outlook on receivables? When should we expect a normalization, and at what level, where do you see net debt when this is achieved? I'll be honest, I see that next year we'll start to see a normalization of the receivables.
Because, and I'm combining this from two, from two ideas. one idea is that with the, with the evolution of the... Now, there are two things here, you know. one is receivables from the customers, and the other is the receivables under the support scheme, if you would like to get into, into more details. As mentioned before, in the receivables from the customers, we don't see an issue. We had some delays in the past in the receivables from the customers simply because we are invoicing with delay, because we needed to stop the system in the supply subsidiary to just implement changes of algorithm and so on, and, you know, stopping for 1 month or 1 month and a half, not invoicing, and this was pushing the receivables further.
But we don't see an issue from this point of view, now or in the future. We see that there is a fluctuation in the sense that whenever we are just, you know, we have the instrument of the notification to disconnect, you know, and when we are seeing these warnings, we are seeing that we are, we are regulating the collection from the customers. For the part related to what we receive from the state budget under the support scheme, we see that this will, should normalize next year, in line with two things.
First of all, that we expect that the amounts would be much lower, the amounts that we will request under the support scheme, considering that the pricings, price, prices of energy are going down, and all expectations and all the signals, including for contracts that we are concluding already for next year, are showing that the market is going down in terms of pricing. And the other element is that in the discussions with the authorities, they give all the support and all the signals that for the next year budget, they will include and stipulate the amounts that will be able to, you know, clear the amounts that we still, for which we have some, let's say, overdue collection this year.
So, my, my feeling would be this, that next year this will start to, to normalize. And it's quite important also for us because we are very keen on maintaining the indebtedness level, at a level which is okay with the international financing institutions, but also with Fitch. And, you know, if we would like to develop further the production, the generation, yeah, any financing for that should come in the moment in which we are reducing the amounts which are now committed for pre-financing the support scheme. Also, in terms of the indebtedness at the level of the group, we will continue to see the increased tariffs under the CPT component, net or loss risk component on the distribution. I hope this is answering your question.
But, if I were to look at a percentage of revenues, for example, where would be a normal level? I mean, I understand that compensation will be going down. That makes a lot of sense, but what should—what is normal right now? 'Cause that's a bit, you know-
Could we please put the second slide, the one with the summary? Basically, you see the receivables at the end of 2021 and the receivables at the end of 2022. Yeah.
Yes.
2021 was the normal level. Okay, we already started to have some parts of the support scheme, but very little, not significant amounts. Yeah, basically, we took RON 2 billion additional, which was related to pre-financing the support scheme and financing the difference of price for net losses for the distribution, yeah?
Mm-hmm.
So this is the difference. Okay, we realize that we will not go down to that 2021 position all at once, but it will be gradual. It gives you an indication about, you know, the needed indebtedness level related to normal flow of business.
Thank you.
Miss Ciopraga, are you done with your questions?
Yes. Thank you.
Thank you. As a reminder, if you would like to ask an audio question, please press star and one on your telephone. For written webcast questions, please type your question in the box or dial into the audio.
Until we see that we have any more questions, I want to make a comment. Regarding the CC, the combined cycle gas solution, at the present, we are working with four different scenarios, which is how our market research is structured. The maximum install capacity will be determined based on the project's internal rate of return, and the capacity factor for the various scenarios under consideration. So we will come later with a feasibility study that will show exactly what the solution will be.
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
As an ending comment, I want to thank you for being with us today. I'll give the floor to Raluca to close the meeting. Thank you.
Please know that we're here, and if you have any kind of questions, even if it's not today, then please write us at ir@electrica.ro, and we will get back to you. Same, we answer our phones, so whichever questions you may have about the results or otherwise. Also, I wanted to remind our shareholders that we have a GMS on the day after tomorrow, and also another one on the twentieth of December. Thank you very much for joining us, and see you next year.
Ladies and gentlemen, the conference is now concluded, and you may disconnect. Thank you for calling, and have a good afternoon.