Hello everyone. My name is Valentina Dinu, and I would like to welcome you to the presentation of the financial statements for the first quarter of 2022. Before going to the section of questions and answers, I would kindly ask my colleague, Dan Culai, CFO of the company, to deliver the presentation. Dan, the floor is yours. Thank you.
Hello, everybody. Thank you for joining. I'm going to be presenting the financial statements for the first quarter 2022. As you probably have seen, we have a very good quarter. It's one of the best in the history of the company. It's mainly driven by the market prices, but we are also proud of our competence in the operational area. If I have to go through the presentation. The first slide summary of what you're going to see in the next hour, at least. Then a brief presentation of the income statement with comparison with the 2021 first quarter and the budget. We're talking about huge increase in revenue, RON 1.8 billion, which is higher than anticipated in our budget.
With operating expenses overall higher than anticipated, but the main driver of the increase in the value of the operating expenses is the windfall tax on electricity. The actual amount of the windfall tax is almost equal to the value of or even higher than the value of the standard operating expenses. EBITDA, very good increase even when compared to first quarter 2021 and compared to the budget. Overall speaking, we are discussing about a net profit of RON 818 million, which is a 23.6% increase over the budget. The next slide presents the negative effect and the positive effects starting from the 2021 figures to the 2022 figures.
You've seen that the biggest positive effect is generated by the increase in the price of electricity, and the largest negative effect is this windfall tax, which was very difficult to budget. Right. Next slide. Balance sheet position. Nothing substantial to report here. Leverage is decreasing fast. We have a little bit of an increase in trade receivables, but this is mainly driven by increase in the average selling price. We have an increase in accounts payable, but this is mainly driven by the increase in the current tax liability because of the windfall tax. Other than that, as mentioned, a decrease in long-term borrowing, which will lead to, in the end of 2022, the existing borrowings will reach zero maturity. Okay.
In terms of sales structure analysis, you've seen here that we managed to sell very well on the spot market with a very good average price. We also sold very well on the competitive market, which at the end drove you know the highest revenue for the first quarters. In terms of OpEx, you've seen here the big items. Windfall tax, you probably know that initially at the beginning of November, a windfall tax has been enacted with a certain formula, which basically taxed average sales price over 450 lei with 80%. In March, we got the clarification over the methodology for the taxation of excessive revenues.
Instead of having basically a comparison between average selling price and RON 450/MWh, we have now a comparison between the average ad hoc profit computation. The formula includes the deduction of certain expenses. In any case, as a result of this clarification in the methodology, we had to do a small retroactive adjustment to the overall computation of the windfall tax. Overall, the increase was driven by higher than anticipated revenues.
In terms of personnel expenses, we have almost 10% increase in the number of employees, which together with some increases in the salary, generated 20.8% in the personnel expenses. In terms of uranium fuel, there is a marginal increase of 12.2% generated by various factors which are presented in the slide. Capital expenditure, we managed to fulfill our obligations better than anticipated. We have a 14.2% completion degree as opposed to 10% in the first quarter of last year. In terms of real amounts, we're talking about almost RON 100 million over a total investment program of RON 700 million. In terms of CapEx, the main projects, you probably know of them.
The first and one of the most important is the refurbishment of Unit One, which is going as planned. You have all the information here in the presentation. In February, a very important decision has been taken to move to the second phase of the project. Now we will proceed with the project on an accelerated pace. In terms of Unit Three and Unit Four, we are proceeding as planned. We have all the details of the various governmental decisions and strategic decisions within the company are presented in the bottom of the page. The capacity factor, it's very good as planned. We have the accumulated capacity factor for Unit Two and Unit One.
It's at accumulated three months, 99.7%, which is very good. We are very pleased with the result. In a nutshell, that was the presentation of financial results. The next event will be on the third of August when we are going to present the first half year report for 2022. Thank you. That is all. I'm looking forward to respond to any questions, if any.
Hi. This is Iuliana Cepraga. I have a couple of questions. First, on the windfall tax, can you explain a bit what you meant? I mean, I'm not sure I understand how the windfall tax is actually computed. You're referring to the ordinance referring to some changes to the windfall tax. Are you referring to the ordinance that would apply from April to March 2023? I mean, are those provisions applied retroactively as well? Were they applying the first quarter of 2022?
Okay. I will try to explain. The first windfall tax was enacted in accordance with Law 259/2021, and it was supposed to cover the period from November to March 2022. The formula for computation of the windfall tax was very clear and simple. As mentioned before, it was a comparison between the average selling price and RON 450. The difference was taxed at 80%, which resulted in a certain amount. On the basis of this law, we have computed our budget and our estimation of amounts. In the first November December months, our average selling price has not exceeded RON 450, so therefore, the actual windfall tax was zero.
In January, February, March, we exceeded the threshold of RON 450. For January and February, we have applied Law 259/2021, which was, at that moment, very much applicable. However, in March, roughly at 18 March 2022, the government enacted GEO 27/2022, which changed the methodology for the computation of the windfall tax. Now the formula is much more complex, takes into account certain but not all the expenses. Therefore, instead of comparing two sales prices, basically the average sell price and the arbitrary threshold, RON 450, now we're looking at some sort of an ad hoc profit which exceeds RON 450.
Even what I wanted to mention, maybe I was not very clear. Even if this formula changed, the main driver for the increase in the windfall tax as compared to the budgeted tax, was the fact that we managed to sell higher amounts on the spot markets at a higher average rate, which drove the revenue much higher than anticipated, as budgeted. I hope I clarified the matter. Thank you.
It's still I mean, when you're saying ad hoc, it's still an average monthly price, right?
It's a complex formula. I would urge you to read the ordinance. We're starting from an indicator. I don't know. If we have time, we can go through the formula, but we're looking at the average price for electricity in a certain month, and then you deduct RON 450, and you multiply with the quantity. I think it will take five minutes to explain. It's an ad hoc computation of the profit. The government looked very carefully at the cost drivers and the revenue drivers and created an ad hoc formula, which is not a profit as per the income statement computation.
It's a windfall profit and the tax on this windfall profit, which exceeds RON 450.
Still on average. We're still talking about averages, right?
Let's say for cost, of course, in terms of revenue.
Because I mean, in my understanding, the new version of the tax allows you to deduct some costs. While the previous version of the tax did not allow any deduction of costs. I mean, for example, during the maintenance when you're going to have to buy power from the market, you are allowed now to deduct those costs. While in the previous version, you weren't allowed. That's why I mean.
Yes. It's true. In the first quarter, the difference between those two methodologies was marginal.
Yeah. Okay. Thank you so much. You're mentioning. I mean, in the previous discussion, if I remember correctly, you said that you sold 70 or 75% of this year's production at 470 RON per MWh. This was the forward price at the end of December, most likely. Actually the average forward price in the first quarter was way above this figure. I think it was 500 and something, if I remember correctly. What has driven this difference? What is driving basically this difference?
Well, we are in a lucky situation in which we can try to improve our revenues through negotiation.
You renegotiated the existing forward contracts, is that what you meant?
No. Not what I said. I said that when we're discussing about the forward-looking at the crystal ball, it was an average amount, and now we're looking at actual sales.
Oh, okay. I understand what you mean. Okay. It was an estimated kind of. You're talking about an estimate. 470, that 470 was an estimate, not the actual forward price achieved by you versus the contract.
No. We are. It's probably normal. We are not allowed to discuss about this because we don't have the influences. It's always an average and an estimation. An estimation of the average.
Would it be correct to use the average forward price of the first quarter, this RON 563, going forward in the following quarters? What do
I don't really know what to say. I'm confident that in this quarter, the next quarter will look as good as this one. For the following two quarters, I have no visibility. The market is in turmoil.
Okay. Because I would have assumed that you already sold forward the bulk of the volumes in the following quarters as well. That's why I was asking if we could use that price. Regarding the split, can you comment anything on the split between spot and forward? I mean, is what happened in the first quarter indicative of what could be happening in the following quarters as well? A larger percentage forward.
Not necessarily, because the margin of our spot, the quantities that we can sell on the spot market are slowly decreasing because of the fact that we are selling our entire capacity on the competitive market. It, the spot market, will have a lesser impact on the overall revenue.
Okay. Thank you so much.
Welcome.
Any other questions, please?
Yes. Dimitar Prokopovich from Tech Capital Partners. Congratulations on good results. I would like to ask about how much electricity is estimated to be bought from the market during plant outage, plant shutdown that is taking place right now.
I don't have the information, and I'm not really sure if I can share this information at this moment. Sorry.
Okay, regarding the sales structures, what do you expect the sales structure to be in the second quarter? Should we expect more or less than 10% of electricity to be sold on the day-ahead market?
It might be similar, but as mentioned before, it will decrease.
Okay. Regarding future, how many contracts for 2023 were already signed? When do you anticipate to sell more of forward contracts for 2023?
I have this information I don't have readily available. If you send me an email, I will try to answer this, but it may be a confidential information or commercially sensitive.
Okay. The last one regarding the uranium, how much reserves were bought from Cernavodă, and when the company will use them, these reserves?
I don't know this information. Please send me an email and I will try to the best of my knowledge to respond without infringing on confidential or strategic information.
Okay. Right now you're buying uranium from international markets, not using some uranium from Cernavodă. Yes?
Our current commercial policy is the one that you mentioned, yes.
Okay. We shall expect some increases as the prices of uranium increase on the international markets going forward.
There's a lot of turbulence on the market. I cannot really comment. The overall price of materials on the overall markets are increasing, so this might be the case. I don't know the net impact.
Okay. Okay. Thank you.
In the presentation I see here regarding the uranium fuel, you're writing here that you consumed some of the existing stock. So automatically that means that if you're going forward, if you're forced to buy from the market, then the price might increase. Is that correct?
Sure. If we have the average cost computation, weighted average cost. When the existing stock will decrease in quantity and we'll have to take into consideration the price of the new stock.
Mm-hmm.
Cristian Petre from NN. Just a follow-up on Iuliana. So you sold this quarter around 75 was sold on the competitive market and rest on the spot? Just to make sure I understood.
81%.
81%.
81. Okay. Thank you. This, as you said, may decrease the spot market as competitive will grow, right?
Right.
Okay, thank you.
Can you also tell us how long would the planned outage last? How many days?
About one month.
Regarding Units Three and four, are there any updates? Because in the presentation you've included something, but it's nothing very recent that's happening. Can you give us some details what is happening right now with this project?
Well, we are working with our partners to advance the engineering virtual project, and we are actively looking for financing for the project.
You're already looking into financing for Unit Three and Four?
You probably know that these projects are of very high value, and you have to prepare well in advance in order to have the financial closing when is needed.
Any idea when we would get an update on this?
As soon as any relevant information is available, it will be published on our website.
Will it be, I mean, do you expect anything happening in the short term, this year, next year?
In the short term, there is nothing to report.
Okay.
Other than what is included in the presentation, of course.
Would you be working with the new NuScale on the reactor 3 and 4? No, that's not the plan? Only NuScale is only for SMRs?
NuScale is only for SMRs. The current strategy of the company is to deploy CANDU-type technology on Unit Three and Unit Four.
Do you have any more questions?
Hi, Laura Tinu from Raiffeisen Bank. Just two more questions. Regarding the Feldioara production line, when do you estimate it will be operational? Second, if I remember one of the previous meetings, you mentioned that,
The lag between any movement in market price for the uranium and your cost is about 2 quarters, if you can confirm that. Thank you.
Feldioara is in process of becoming operational. It's a complex takeover arrangement. In terms of uranium, can't remember what I said that, but if I said, yeah, it must be probably good what I said. Anyway, no, it really depends on the supply chain. Supply chains are strengthened. Our inventory of uranium. It may be one quarter, two quarters.
For this year, do you expect to complete the Feldioara production line or the next year?
I would certainly hope so, but there are a lot of elements to be considered and followed up in order to achieve this result.
Okay. Thank you.
In principle, it's expected to happen before the end of the year. What would be the impact, when Feldioara becomes operational? What should we expect after that?
I don't think the impact will be material.
Okay, everyone. If you don't have any more questions, thank you all for joining in. I will send you the presentation and the audio file. You can also find those on our website on the investor relations page. Furthermore, if you have any questions, you can send us an email and we will get back to you. Thank you and have a good afternoon.
Thank you.
Thank you. Bye-bye.
Thank you. Thank you, everybody. Bye-bye.