Ladies and gentlemen, thank you for standing by. The Electrica teleconference is starting now. Thank you.
Hello, everyone. I'm Raluca Kasap, Head of Investor Relations, and together with the entire management team of Electrica, I would like to thank you for joining the Electrica conference call and live webcast to present and discuss the third quarter 2022 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 of the Investors section. The participants connected online or through phone can address written questions on the live webcast or can intervene live on the Q&A session at the end of the presentation. 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 0 on your telephone.
Now, we will begin the presentation of the financial results, followed by a questions and answers session at the end. At this time, I would like to turn the conference over to Mr. Alexandru Chiriță, Electrica CEO.
Thank you. Good afternoon, ladies and gentlemen. The financial results at the end of nine months of 2022 demonstrate the Group's above-average performance in ongoing challenging conditions in the energy market, results that encourage us to continue our strategic efforts to maintain a top position in the energy sector. We have proven to be a responsible company towards our employees, customers, shareholders, and partners. In addition to ensuring solid prospects for the continuous development of the Group, we have been able to quickly respond and adapt to the challenges that kept arising. As a result of the efforts made by the whole Electrica team, at the end of the third quarter of the year, the values of the most important financial indicators of the Electrica Group are above those of similar period last year.
The value of the consolidated net profit exceeded the one recorded at the end of September 2021 by RON 462 million, reaching RON 534 million. EBITDA increased by RON 629 million, reaching RON 1,104 million. The operating revenues increased by RON 5,061 million to the value of RON 10,221 million. Distribution segment recorded in the first nine months of 2022, a recorded net profit of RON 314 million and an EBITDA of RON 811 million.
The most significant positive impact being the result of the capitalization of additional costs with the purchase of electricity to cover the network losses in the form of revenues from the production of intangible assets worth RON 780 million for the ninth-month period in 2022, as per the regulations in force. There was also a positive impact from the distribution tariffs, which increased starting with the beginning of the year by an average of 8.6% compared to 2021, followed by an additional average increase by 20.3% starting on first of April 2022 compared to the first quarter of 2022. Talking about the previously mentioned capitalization, I'd like to highlight the positive impact of over RON 740 million on the 2022 consolidated budget approved by the GMS in April.
You can find more details in the announcement published by Electrica on the 15th of November. Our distribution subsidiary continues the ambitious pro-investment program carried out since the beginning of the previous regulatory period, aimed to modernize the network infrastructure and accelerate the expansion of smart metering on a large scale, leading to reduction of network losses in line with regulated targets. In the first nine months, the actual network losses is below the regulated annual target for all three areas. The supply segment recorded again a good performance in this first nine months of the year, way above what we have always consider sustainable, 2.5%, achieving a 5.5% EBITDA margin.
The numbers, a net profit of RON 239 million and a positive EBITDA of RON 327 million, come mainly from the increase in electricity sales prices, combined with the internal efforts of our colleagues to mitigate the risks regarding the purchase of electricity needed for resale, to control operational costs, to digitalize, and to increase customer satisfaction. In the green production, we currently have an operational photovoltaic park since 2020 and interest in five projects, photovoltaic and wind, total installed capacity of 296 MW, with attached electricity storage capacity of 60 MW, which are in different stages of being put in operation.
Our strategic aim is to develop a portfolio of electricity generation capacities from renewable resources, wind and photovoltaic, with a total capacity of 400 MW in parallel with electricity storage capacity, with an installed capacity up to 100 MW by 2024. It is our intention, and we are working towards a goal of total installed capacity of 1 GW by 2026. These results, as well as the strong team that we have, make us confident in the business strategy we have adopted at the group level and in the decisions taken, and we will continue to pursue the sustainable development objective of all our business segments, in parallel with maintaining a high degree of resilience in the face of future challenges. I would like to turn the presentations over to Ștefan to present the financial results in detail.
Thank you, Alexandru. Going into more deep dive the results and explaining the drivers of the various evolutions of the financial indicators, I will first ask my colleagues to go to slide 3 of our presentation, where you see basically the evolution in the revenues, which is driven by the evolution of the prices in the energy market. You should note that these are excluding the part related to revenues from the support scheme. Yeah, from the subsidies related to the support scheme. In terms of EBITDA, we have a result which is significantly impacted by the capitalization of the costs with the difference of price for the energy, for the network losses.
Even without this part of RON 780 million, we would still have an EBITDA which is positive, and I think it's consistent in this current complex market context. One more comment I'll post here related to this slide on the position of debt and net cash. Basically, we needed to, during this year to pre-finance the support scheme for the supply segment and also to finance the difference of price for the energy cost network losses. This is why there is this position in terms of net debt compared with the previous periods. Now, to go into more detail, I will switch to slide number 4. Slide number 4 consists of an analysis of EBITDA and then net results at consolidated level.
Basically, the consolidated EBITDA at nine months 2022 is RON 1.1 billion. It's RON 629 million higher than in the similar period of last year, and this is due to the following main factors. On the distribution segment, there is a positive factor related to the increase in the revenues from energy distribution, which is resulting from the increase of the tariffs at the beginning of the year with 8.6%. Starting with first of April, following the Ordinance 27, based on which we were getting the increase in tariffs to recuperate the difference from net losses from the previous year. We had a transfer increase in tariffs of 20.3%.
Basically, this generated a positive effect in terms of revenues from the tariffs of distribution, widely reduced or netted by the decrease in the volumes of electricity distributed on average 3.2% for the nine months following a decrease of the consumption. On the other side, on the distribution segment, we have the negative effect related to the increase of expense with purchased energy, cover network losses. As a result of the increased energy price, RON 962 million. As you know, the ex-ante price is RON 450, which was not completely recognized in tariffs at the beginning of the year due to the limitations of methodology. You know, the actual prices in the market were around RON 970 per MW.
On the supply segment, we have also a positive effect of RON 424 million, which comes from two directions. One direction is related to the increase of the energy and natural gas revenues in relation with the increase of the price in the market. Another positive effect is related to the operating revenues from subsidies, which was not existing in the previous year. We have a negative effect of RON 3.5 billion, which is related to the increase in the cost of energy purchased for supply.
On net result, we have overall in terms of upper P&L of the supply subsidiary, we have a positive effect, which is the proof of our effort to mitigate the risk in terms of sourcing of energy for the contracts from long-term contracts and forward contracts. Now the other element to be mentioned is the element of other revenues, which I also briefly mentioned in the previous slide. There is a net effect of RON 757 million. This is mainly due to this capitalization of the additional cost with the purchase of energy for the distribution subsidiary. The amount is around RON 780 million, which is calculated based on the estimation according to the order of the regulator.
The actual value was RON 823 million, but the capitalization was constituted based on the order of the regulator, based on some estimations which took into consideration the seasonality from the previous year. The idea is, since the difference from the net losses price for this year is to be recuperated based on Ordinance 27 and then Ordinance 119 on a five years period, this capitalization is basically also putting the expense on these five years. I'm constituting a capitalized asset during this period, so that I'm not recognizing the entire expense on this period. I'm amortizing this during the following five years. Also we have some variation of OpEx. Net impact is -RON 76 million. It's related to some adjustments of trade receivables according to IFRS 9.
It's also related to prior impacting change of provisions. Some reversal of provisions for potential obligations that did not materialize, and an increase in cost in distribution subsidiary, which is related to utility costs, the cost for energy, water, et cetera, in our locations, and also for the uncontrollable costs related to the switch or to three-month meters readings. The net result at the group level is RON 462 million variation compared with the nine months of 2021. Total results at nine months is RON 534 million, and it's mainly due to this effect of the positive evolution of EBITDA. We have a negative evolution from the financial result, RON 86 million, which is impacted by the cost of the financing that we've mentioned previously.
Because all these financings for covering the pre-financing of the support scheme and the network losses difference they do have a cost. This generated an increase in costs with interest and, I mean, negative impact in financial results. Also, we have an impact of the expense of the income tax, which is on the IFRS related to the basically deferred tax credit related to the loss that we registered in the previous year. Now, moving to the segments. In slide number 5, we have a summary of the distribution subsidiary.
In order not to repeat what I've mentioned at the overall view, I would just like to point out the graph at the bottom of the presentation, where basically you can see that in terms of operational expenses, we don't have significant impact in the analysis of evolution of EBITDA. We have the effect of the energy revenues that I've mentioned in relation with the increased tariff. We have the negative effect of the network losses cost, and then we have the other revenues which comprises mainly of the revenues from this capitalization of the difference of price, but with the energy.
Now, also in terms of the distribution subsidiary, I would also mention that there is an increase in net debt compared with the first half of 2021, which comes from increase in credit lines because we needed to finance this difference of price for the net losses. Now moving to the next slides. In the following slide, we have details about the distribution segment. In slide number six, you have some regulatory information related to the current regulatory period. This is something that we included in our presentation following the questions that are coming from analysts. It is also previously discussed. If these matters related to regulation, which are reasonably complex, raise questions, we are welcoming your questions in this subject.
Second, following slide number 7 is a slide related to the analysis of regulated net results. Yeah, going from the total revenues, going through the regulated result and then to the IFRS results so that you can see the various adjustments. We also pointed out the effect of the net losses capitalization with green so that you can see the impact related to that. Slide number 8. The next slide, we have the analysis from EBITDA to the result on the OMFP standards and then to the IFRS results for the whole year. To put in perspective a little bit the element of the various corrections and elements of adjustment for the result.
In the following slides, we have the details about each of the distribution networks. I will go through this and skip directly to the slide number 12, where I will mention I have spoken already about the decrease in distributed energy. The network losses were covered in the previous slide. I would also mention that in terms of investments for the end of third quarter, the commissioning program for the investments for 2022 is achieved at 33%. We should mention that, of course, for a distribution operator, which needs to pre-finance the network losses, which are double than the CapEx amount for this year. There is always a matter about, you know, prioritizing the financings in terms of covering both the network losses differences, but also the CapEx plan.
We do have according to the agreement with the regulators, yeah, with the methodologies, the possibility to recuperate, and we are confident that we'll recuperate the plans of investment in the following six months of next year. In fact, as of today, this is significantly higher than the participants. Going to Electrica Serv, the energy services subsidiary. We have a situation where basically the EBITDA remains at approximately the same level compared with the previous year. We had an increase in income, which is related of approximately RON 11 million, which is related to the fact that the increase of demand for photovoltaic systems is triggering increase of contracts and of works contracted for the subsidiary.
Of course, also this demand is generating an increase in expenses with materials, raw materials, but approximately around RON 10 million. We have a net result of RON 1 million on that. Going to the supply segment. The supply segment is also showing a positive result. EBITDA significantly increased compared to the nine months of 2021 with RON 344 million. The result of EBITDA being RON 327 million for the nine months of 2022. This is mainly a result of, as I mentioned, the positive margin on energy on the upper P&L of the supply, which is reflecting basically the fact that we took good measures in terms of covering the contracts for the end consumers with term contracts for purchasing the energy.
We had this cover after half of the year. We had basically 100% of the need covered from term contracts. This is slightly compensated, but by some favorable effect on the variation of green certificate, RON 24 million, and then another RON 55 million from impairment losses on trade receivables. This is a matter related mostly to the recoverability analysis based on IFRS 9, but you'll see in the slide later related to the receivables that we don't necessarily have a receivables collection matter.
Of course, the net profit increased by RON 262 million, mainly due to the positive evolution of EBITDA, with a negative effect related to the financial results because we have the increased costs for pre-financing the support scheme. With a favorable effect related to the income tax effect, considering the tax credit on IFRS in connection with the negative result last year. Net debt increased by RON 1.1 billion compared with the year-end 2021. Basically, we took credit lines from our partner banks in order to pre-finance the support scheme and the net debt was at the level of RON 1.36 billion at nine months 2022.
As an overview of the supply market, in the next slide, in the slide 15, you can see that in terms of positioning of the market, Electrica is still one of the strongest players. We do have in terms of number of consumption places, the first place, and in terms of market quota by volume, we are on the second place on the market. Both Enel comprising under the same umbrella, Enel Energie Muntenia and Enel Energie, they have a higher quantity of energy distributed, which is also related to the fact that they distribute in the Bucharest area, where of course the consumption is higher. If we go in the next slides, I will go to the slide 17 and just brief you up with some details.
Uh, you have also the graph of the evolution of the price evolution on the day ahead market and on the balancing market, and some details related to the changes in legislation in terms of the support scheme, which, uh, were, uh, were, uh, influencing our activities. Uh, basically, we had Government Ordinance one nineteen last year, uh, which was then approved through Law 269 of 2021 . And then, uh, we had prolongation of the support scheme through Government Ordinance three from 2022 , which basically prolonged the application of the support scheme for February and March and, uh, increasing ceilings of the price and including non-household customers in the capping. And then we had governance, uh, Governance Ordinance 27 of 2022, uh, in, uh, which continued the scheme for the period after 2022 and March 2023.
Also in September, Government Ordinance 119, and now recently we had the Government Ordinance 153 from 2022 regarding a certain form of regulated market for next year. As main factors which affected the evolution of results for the supply part, we should mention that we had a higher selling price versus the budget which generated positive impact. It was higher price with RON 70 per megawatt. The purchase price was lower by RON 78 per megawatt than you liked versus budget. We had the revenue from capping higher by RON 265 million versus budget, which is generated by the increase in the difference between the average purchase cost and the purchase component to be recovered from the final consumer.
Basically, it's related to the fact that we took some consumers and some quantities in the supplier of last resort segment. For this part, we sourced from the day-ahead market for the energy needs for that. This was increasing the component which is to be recuperated from the budget. Going to the next slide. About receivables in Furnizare, I mentioned that we don't necessarily have an issue with the receivables. You can see the details about aging of receivables. The receivables might seem that they increased, but when you adjust to the turnover and the inflation, the increase of the price of energy, then you see that basically they are lower than at the end of last year.
Also apparently we might have in certain periods some delays in terms of collecting those receivables, but these are related in fact to the delay in invoicing. Because for example, every time when a new ordinance is coming and this is changing the algorithm for calculating the capping scheme, et cetera, or it's changing the ceiling and so on, we need to make some changes in our IT system and make some developments. For some time, this means a couple of weeks of not invoicing. Some invoices related to a certain amount of consumption might seem that they are collected later. This is mainly related to the kind of delays in order to implement and accommodate the changes from the support scheme.
In terms of group liquidity, you see that the situation have slightly improved from mid-June. In terms of cash, we have pretty much the same position, but we have additional credit lines from the banks. We should mention that we got during this entire period the support of our partner banks, which granted us the needed financings in order to prefinance the support scheme and the difference of price for the network losses. Of course, we appreciate all these efforts from their side. Next slide are related to the dividend distribution. As you know, we paid a dividend also this year, even if the results for last year at the level of the group were a loss.
We wanted to send a signal that the group, as an energy and utility group, would like to pay dividends to their shareholders and as a sign of the confidence that, you know, we can turn around the situation in a positive way. I think this is shown by the results in this year. Also there are some mentions about the strategic group objectives as a group and the sustainability values. These are also reflected in the sustainability report that you can find on the site. The main corporate governance events are summarized also here, so that it's easier for you to get a grip on them without going necessarily to the administrator report.
I will end here my presentation and I'll pass through to my colleague, the Head of IR, Raluca Kasap, to welcome your questions.
I just wanted to mention that in the appendices to the presentation, you can find more information about the group structure, the market share in the distribution and supply, as well as the corporate governance bodies, the shareholder structure, and also the evolution of the shares on the Bucharest Stock Exchange and on the London Stock Exchange. In the last many slides, you can find more details about the regulatory aspects affecting our distribution and supply businesses. Should you have any questions, now we will begin the Q&A session. You can address questions through the website, through the Q&A section on the website for those of you connected online. For those of you connected only through the phone, please use star followed by 1.
We will take a five-minute break to receive questions, and then we will get back to you with the answers. 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 in to the audio conference. At this time, as management said, we will begin the audio question-and-answer session. Anyone who wishes to ask a question may press star followed by 1 on their telephone. If you wish to remove yourself from the question queue, then you may press star and 2. 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 1 at this time. One moment for the first question, please.
The first question is from the line of Ioana Andrei with Alpha Bank Romania. Please go ahead.
Hello. Thank you for the presentation. Can you hear me?
Yes, we can hear you.
Okay. Uh, first of all, I would like to know, uh, if you can, uh, tell us if the revenues from the capitalized losses can be distributable to shareholders or they are a non-cash item, what's their, uh, condition? And, uh, as a follow-up question on this side, um, can we see some dividends, some distribution of dividends in 2022 , maybe from, uh, other results?
Yes, thank you for your question. The revenues from the capitalization of the difference of the cost related to the difference of price, of energy price for the network losses are for sure a non-cash revenue. They are a fiscal revenue, if you want to say. Of course, they are taxable, and I mean, they can be distributed as dividends. The issue is that, you know, the expiration of these revenues will follow in 5 years. Basically, this is just an accounting measure in which since the expiration of the difference of price in network losses for this year is to be recovered in 5 years from increase in future tariffs, as stipulated by Ordinance 27.
Also the expense related to this difference is also to be amortized on these five years. What I would like to mention is that making a move to the question about the dividends, I think that the fact that we paid dividends also during this year, even if the results at the level of the group were a loss at the end of last year, are showing that we have the commitment, and we have also the details in our dividend policy to provide the dividends also during next year. Of course, this is subject to the proposal that the executive directors will make to the board, and the board will then further propose to the GMS meeting.
The capabilities to pay dividends would also need to be related to the cash availability at the level of the Group, considering how the support scheme will evolve, how the prices in the energy market will evolve and all these kind of elements. Also considering that the Group has quite important targets in terms of further investing in developing the fourth pillar of the green energy production, and also in further investing in the distribution network.
If you take a look at what is stipulated in the Fit for 55 and in Europe and all these initiatives, which basically mean a transformation of the energy segment, energy sector in Europe, these are built a lot on, you know, improving capabilities of digitization and of flexibility of all the distributors here, operators in Europe. The distributors will need to further invest for the period, probably until 2030, at significant levels similar with the ones from the previous years. I hope this is answering your question.
Thank you. Can I have another question, please?
Yes, of course.
I would like to know when will be the next adjustment in tariff? It is going to be in April or later on in September 2023? Because it's mentioned there that you have a fourth and fifth intangible asset recognition from April to August. Why?
Because this is what is stipulated in the Ordinance 119. In the Ordinance 119, which was approved in September, this was covering also the support scheme on the supply side, but on the distribution side, this was also related to giving the proper details in order to have this capitalization further regulated, further put into law by the order of the Ministry of Finance and order of the regulator. In that ordinance, this is stipulated that the capitalization will not only function for this year, but will function also for next year until August. It's stipulated that the capitalization will be done on a quarterly basis. You start with the first one at the end of September this year, and then quarterly you are having this.
At the end, you know, we have only two months for the July and August. It's not a full quarter, but this is how it was regulated in Ordinance 119. This is how it was also reflected in the order of the Ministry of Finance. I think it was the 3,900 from this year and also from the ANRE order.
I'm sorry, maybe it's my connection too poor. I'm not sure I understood your answer. Basically the first adjustment in tariffs we'll see in April, starting with April?
Yes, the capitalization of the expenses starts this year with the first one now at 30 of September. Yes, in this too, the first increase in tariff, it will be starting with April. It's not a perfect match, but this is how it turned out from the legislation. It's not a perfect world in which we are living. There is a slight mismatch between the separation from the revenues. Sorry.
Yes, and you'll have an adjustment there, uh, that will be recognized over a five-year period and will go beyond the seven percent limitation, right?
Yes, that is correct. It's stipulated in the Ordinance 119 and also in the subsequent regulations by the ANRE. Basically, it's a separate component. It does not add up to the corrections which are subject to the 7% cap.
Okay, thank you. I have one more question regarding the subsidies. Just to be clear, you've registered RON 2 billion subsidies and around RON 1 billion remains to be received from the Ministry of Energy. This is correct?
From where you draw this conclusion? The subsidies which you see in the P&L is related to the entire period, revenues from subsidies.
Okay.
Yeah. If you look.
Ioana Andrei, are you finished with your questions?
Yes, thank you.
Okay, thank you.
Yeah, yeah, right. If you're correct, if you look at the balance sheet at the end of September, you will have RON 1 billion there. Starting from there, this was also further repaid. You know, we started to collect also from that part. This is rotating, but there are some peaks, and this September shows a peak. It's correct.
Okay, thank you.
The next question is from the line of Iuliana Ciopraga with WOOD & Company. Please go ahead.
Hi, good afternoon.
Hello.
Hello. Couple of questions for you.
Hello, Ciopraga.
First, what volumes have you hedged already for 2023 in supply and also in distribution?
Now, I would not necessarily go and give too much details in terms of numbers for this because it's also some, like, not public information and like, you know, commercial sensitive information also, especially in relation to the supply segment. I'll put a little bit of context into that. The idea is that there were not so many quantities of energy available for purchasing for next year in the market because also the producers were waiting to see how the changes in legislation will unfold for the period to follow. You know, there was a legislation which stipulated a long-term strategy of sale of energy for the producers, which was stipulated by Ordinance 119.
There was also some method related to the expectations in respect of where the market prices will evolve. This is the reason for which I don't know how relevant is for this year to see at which are the percentages, you know, of coverage. On the distribution, I would mention that there are additional factors for which basically we were not in the position to hurry to purchase energy. Because there are all these discussions about single buyer, these discussions about having a basket of purchasing energy for the distributors.
There was this element about, you know, taxation, which was hoping to favor the sale of energy to the distributors at RON 450 per megawatt, which is the ex-ante cost. You saw recently the Ordinance 153, which of course will be further probably discussed when will be put to the parliament. At the first glance, it should secure a significant part of the energy for the distributors at RON 450. This is why on the distribution it was not really a pressure to go on that.
We are confident that we have a quite important part of energy purchase for next year. What we have as information from the market and the transactions in the market, we do believe we are at a higher percentage than our peers. Anticipate your further question. It is the cost, an average cost, which is significantly lower than the RON 1,300 BRP cap, which is in Ordinance 119.
Thank you so much. Basically we should conclude that for distribution you probably didn't hedge much, but you did hedge something, but below the threshold that was included in the ordinance. You hedged something for supply, but below the threshold. Okay. Should I understand that the tariffs to be set in April, excluding the amortization of these additional grid losses costs, will be subject to that limitation, inflation plus 7%?
Sorry, I don't know.
It's not clear yet.
I don't know if I heard you. I'm not sure I heard you right, well.
I was just wondering if the increase in tariffs from April, excluding the amortization of the additional grid losses costs, will it be subject to the cap inflation plus 7%? The increases in place, including that.
Ac-ac-accordi... Yes, yes, it's correct. According to the methodology, it's correct.
At what price? I mean how do you think that the regulator will look at grid losses cost for next year?
I think that the regulator will analyze the market price at that moment versus the ex-ante price that they will consider.
How much is your minimum exposure on spot market? Is it like 10%-20%?
The methodology does provide this adjustment of price.
Mm-hmm.
ANRE could take this decision based on the methodology. The methodology provides the mechanism.
I see. What will be the minimum exposure on spot? Because via the centralized market, your most of the grid losses are covered, but I guess you would remain exposed on the spot market. What would be the minimum exposure on the spot market, basically? Around 20%?
You are referring to this one, Ordinance 153. I'm sorry I'm hearing you quite badly. Maybe it's me or the connection, but I don't necessarily understand your question. I think you are pointing out to the Ordinance 153.
Actually, yes. Via 153, you will be able to buy power at RON 450. You'll still be exposed to the spot market, so you still need to buy some volumes from the spot market. What would be the minimum to be acquired from the spot market?
If you look at the Ordinance 153, the way in which it's set up now, but again, this might be further adjusted when it goes to the Parliament. For the distributors, we are speaking about, you know, 75% of the need for next year. Okay. Less what they have already purchased, of course. If you look lower, the priority for allocation is for the DSO. At least 25% would be exposure not necessarily to the spot market, because we can also purchase on term contract, but would be exposure to the market. Maximum 25%.
I see. Thank you so much. A final question from me. This year you're recovering RON 360 million from 2021. Next year, in principle, we should no longer see this adjustment, but we do see its impact right now on the profitability. Should we expect a lower profit on distribution because of that?
No, no.
In the-
Of course not. The idea is, listen, I think it's good to pass through this to my colleague Jan Mintal, which is heading the distribution regulation part. Yeah. The idea is the tariffs for 2023 will reflect the correction from 2021, you know. Basically, we always said, you know, this year we had RON 360 million, which was the difference for network losses for last year. In the next year, I will have, starting from next year, for five years, I will have correction from the distribution for this year. Yeah
That's why. What you recover from April will no longer be reflected in the P&L because you'll have the amortization as well. It's zero impact on P&L from the amortization from what you will be included in tariffs. That's actually why I'm asking this because we see an impact right now in profit because everything is basically included in the balance sheet. The difference will be easing to decline now in the balance sheet. We still have an impact on profit from the RON 360.
Hello, Ileana. For 2023, at first April, ANRE will do the correction for 2021, and for this RON 363 million already received in first April 2022, they will not do an entire correction in order to track this value from our revenue. They will do a correction.
Because the price for Q1 or for first quarter of 2023 will be impacted by this RON 300 million received already the 1st April 2022. Yes, there will be a correction, but not the entire correction of RON 363 million. It's okay for you? It's clear?
Maybe in a perfect world, the estimation of ex-ante from ANRE should be closer to the real effective price of purchasing the energy for network losses. The difference would not be that high. The situation is that the previous years and this year are showing a very high difference in that. Of course, probably there are also some precautions related to the increases of tariffs. Basically the RON 363 that I got in this year is just to compensate me for the difference from last year. Okay, I will not have it starting from next year, but on five years I will have the difference, you know, for compensating, for recuperating the difference in network losses price from this year.
Indeed.
Catch-up game.
On cash flow. It's a catch-up game, but then it moves in the cash flow, but no longer in the P&L. I was just wondering about the P&L effect. Indeed, in cash flow should be reasonable cash flow next year compared with this year. Actually we won't be seeing that in the P&L, and I was more wondering about the profit from the P&L. What will be reflected in the P&L from that? Because indeed, I mean, I see what you mean, but on the other hand, you are losing the RON 360 million which are right now in the profit.
Your question is, Iuliana, the right answer for your question is that this amount will not disappear from the 2020 profitability. This is the right answer.
Okay.
If you want to discuss more detail, I think that we can discuss after.
Sure. Thank you so much.
Okay. Okay.
As a reminder, if you would like to ask a question, please press star and one on your telephone. The next question is from the line of Alexandru Stroilă with BT Capital Partners. Please go ahead.
Hello, can you hear me?
Yes, we can hear you.
First of all, congrats on your results. I have a couple of questions. First, regarding the subsidy collection. For the third quarter, how much subsidies did you actually collected from the government? Also if you can provide some insight in terms of the collection process. Has it been much better now with the fact that the legislation became more clear, let's say, in terms of collection?
There were some evolutions of the, let's say there was a certain, let's say, seasonality. I don't know, a certain evolution of the collection in the sense that when a new ordinance was coming and a new mechanism was established, there was a delay in order to have all the details clarified in terms of the metrics for reporting and all sorts of things, especially if the algorithm was significantly changed. There were some delays in the past. I would just say that in the current form of the algorithm, I cannot file in for the refinance request sooner than 1 month and a half to 2 months from the month of consumption. Why?
Because I need to wait for the results from the equilibrium market, because this needs to be fit in and included in the calculations there. Basically, if I'm speaking about the month of September, yeah, it's only now, you know, starting from now that I'm able to file in the report because I have the whole information. I have the information from the equilibrium market. You know, also there is a learning process also with us and also with the regulator and the ministry. Once the algorithm is changing for the first month, it's more complex, you know, to prepare the reports, to think of all the details, et cetera.
Once the algorithm is the same from one month to the other, things are also starting to oil up and, you know, the process runs smoother, you know. Basically considering this, what I've told you know, I would say that right now the collection is where it should be considering these limitations of the algorithm. Yeah. We filed in for August. We got most of the amounts for August. September, we can only file in now.
Okay. You don't have the number for the third quarter exactly, right? Of how much you cashed in in terms of subsidies?
Altogether for what?
No. Only for the third quarter. From August to October.
From the third quarter, from the quota total, I think. It's coming from my mind, it's an estimation. We can get into the more, let's say, clear details with you. I think we collected something like RON 350 million for the third quarter.
Okay. Okay. I have another question. If you could please provide us some insight regarding the current situation of bank overdraft. I saw that at the 6 months period ended, you had something like RON 2.3 million in banks overdraft at the group level. At the 9M results, the situation hasn't changed very much. You do not need to pre-finance anymore or what happened there? Because I was expecting overdraft to increase.
Of course, we would like to also be cautious about, you know, managing our indebtedness level because we do know that also banks and analysts and everybody is taking a look at the ratios of indebtedness. I would not necessarily look to get indebted to the sky levels. You know, the other element is that we got quite early in this process of securing the financing, and we were probably the first to talk with the banks about the need for financing for this year.
You saw that we had two GMS meetings where we approved some quite large ceilings which we believe and it was proved that we're large enough to ensure for us to go through that and pre-finance the support scheme and finance the difference of prices for the network losses. Basically, we are in the situations in which we secured in the first part of the year the main lines. I think after half of the year, we just signed one major other line in addition. I mean, you can also see from the graph with the liquidity.
Now there is a discussion with the banks where they are looking to structure a product of factoring, where basically for the request of refinancing from the state, they would structure that as some form of factoring, which should not be with recourse on my balance sheet. It would be with risk on the state. This is something that also, of course, all the industry is looking at because it might help me to, you know, reduce the indebtedness on my balance sheet and have the liquidity insured in a way which is more optimal for my balance sheet.
Thanks. Two more questions. I think they were touched upon, but if you have any guidance regarding the revenue from capitalization for the fourth quarter, and this is somehow related to what cost of RON per megawatt you expect for the network losses for the fourth quarter?
We see the price in the market are going down, both in the prices of the market for the day-ahead market, which you can also check on the home, but also in the price of transactions for the term contract. What I can say is that there are transactions in the market which are included for December at prices which are in the range of the RON 1,300 per MW cap. Let me check if I can just brief you with some estimation of capitalization in Q4. The estimation for capitalization for quarter four is RON 300 million, roughly. Probably the price, average price, something like ballpark figure, yeah, RON 1,000 per MW. 1,000, yeah.
Okay, thank you very much. I have no further questions.
Thank you.
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Ladies and gentlemen, thank you for holding. We are to resume our conference.
There is one more question coming from you. There is a question related to do you maintain your budgeted figure of RON 166 million adjusted upwards with the additional income from capitalized losses from Q3 and Q4?
Yes, we do maintain this in terms of budgeted figures. Please note that, yeah, that, of course, in terms of the evolution of the prices until end of the year, especially in relation with the network losses, there might be also some adjustments downwards in terms of effective acquisition price of the network losses. With the mechanism of capitalization, yeah, these are to be not put on this result, the result of this year, but amortized on five years.
We are confident that at least the result in the budget we will achieve by the end of the year. There is one more question. Can you please explain how the centralized market 153 would work for the supply market? Okay. The ordinance 153 would work for the supply market. Basically, the mechanism as we read it from the ordinance, which is not necessarily a very straightforward text, is the following. There are some needs which are to be covered on the estimation. The needs are calculated as 75% of the need for the network losses for the distribution, minus what they have already purchased already for next year. There is another part related to 80% of the supply segment. Yeah.
The need for the customers in the portfolio of the supply segment, minus what it was already purchased for next year. If you look at the producers which are object of the ordinance, sub-subject of this mechanism of centralized market, yeah, they will not cover all this estimation, both for the distribution and TSO and for all the suppliers. There is this rule which is stipulating the priority for the distributors. We see that the distributors would get probably most of the need for the energy, for the network losses covered through this centralized market at RON 450. For the suppliers, it will remain something which would be not so significant. I cannot really announce any percentage now because we are still running our calculations and our estimations of impact.
We will also would like to see the end of the debate and of the discussions and how the legislation will unfold in a final form. When we'll have something more certain, we'll get back to you with the estimation and communication. Yeah. The full value for the assets included in the RAB, yeah, this is also mentioned in the notes to the financials, and I will give you also the number now. The value is roughly RON 5.5 billion at the end of December 2021, and it's included in the note in the financials with the details about the concession agreements. If there are no further questions, I would end up this conference now.
I would like to mention two things. Any questions you do have, we are always here with our team of Investor Relations. You can contact my colleagues headed by Raluca Kasap. We are here in terms of the finance team for Electrica and for the subsidiaries. We'll be able to provide everything, all the information that you ask to be as transparent as possible. I would also like to say something. All these results and the fact that we've proven resilient in this year and we have proven that we are able to post a positive result is something for which I would like to thank to all my colleagues.
All my colleagues here in the headquarters of Electrica, but also all my colleagues in our subsidiaries, which are making efforts every day and which are doing all their best to adapt to the market conditions and to post these results, being paying attention to the control of the costs, operational costs, paying attention to the mitigating the risk in terms of purchasing energy for the network losses and for the portfolio supply. We are all together a team, where we do have also the support of our board members, the board members in the subsidiaries.
I really did feel this year that we worked as a team and we were able to prove our resilience and prove our capability that in this context of complex market conditions, we pulled through with some strong results. Thank you. Thank you all.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.