Societatea Energetica Electrica S A : Financial results – H1 2022

PRESS RELEASE

Financial results - H1 2022

In H1 2022, Electrica Group's operating income recorded a value of RON 5,933 mn., an increase of RON

2,595 mn. compared to the same quarter of the previous year, of which:

• the revenues from the supply of electricity and natural gas on the supply segment increased by RON 1,185 mn. mainly by the net effect of the increasing of the retail prices on the retail market by 53% and reducing the amount of energy supplied on the retail market by 10%;
• RON 1,211 mn. represents the subsidies recoverable from the State by the supply subsidiary, as a result of applying the mechanism of capping the prices for electricity and natural gas approved by GEO no. 118/2021 with subsequent amendments and GEO no. 27/2022;
• increase by RON 277.5 mn. of revenues from the distribution segment, net impact as a result of the increase in distribution tariffs of 2022 by an average of 8.6%, compared to 2021, and starting with 01 April the average distribution tariffs increased compared with Q1 2022 by 20.3% - positive effect reduced by the decrease in the volumes of electricity distributed by approx. 2.3%;

In 2022 Q1, the Group recorded a good performance on the supply segment with a net profit of RON 213 mn. and a positive EBITDA of RON 287 mn. (30.06.2021: net profit of RON 18 mn. and positive EBITDA of RON 27 mn.), mainly due to the increase in electricity sales prices (e.g.: on the retail market there was an increase of the selling price by 53%).

The operating income and other income registered an increase of 77.7% in H1 2022, compared to H1 2021, reaching RON 6 bn. from RON 3.3 bn., mainly from revenues from the supply of electricity and gas to final consumers and from other operating income related to the subsidies to be received (values to be recovered), as a result of the application of the mechanism of capping the prices for electricity and natural gas approved by GEO no. 118/2021 with subsequent amendments and GEO no. 27/2022.

On the distribution segment, the result recorded in the first semester is a net loss of RON 393 mn., a significant negative impact being from the average purchase price of electricity for Network Losses (NL) higher with 115% than the value set by ANRE ex-ante in tariffs generating additional costs of RON 574 mn., costs that will be recovered in future tariffs in a period of up to 5 years after 31 March 2023 based on GEO 27/2022. Considering these aspects, the recovery of the price from the NL in the amount of RON 574 mn. also puts the performance of the distribution segment in a favorable perspective, thus loss is balanced by the income recognized later.

The electricity distribution operators were directly affected by this significant price increase of the electricity for NL, they being obliged, according to the ANRE GEO no. 73/2014, to purchase the electricity necessary to cover their network losses (NL), in GEO to comply with the general conditions associated with the distribution license on the wholesale electricity market, in accordance with the Law on electricity and natural gas no. 123/2012 with the amendments and completions subsequent (Art. 45).

Also, starting with 1 April 2022, the distribution segment will benefit from the tariffs increased by GEO 27/2022 to allow the recovery of the amount of RON 363 mn. from the difference in the average price of purchasing electricity necessary for covering NL for 2021. In the first semester the tariffs had an increase compared to the previous similar period of 8.6% and starting with 1 April 2022 they will increase by 20.3% compared with Q1 2022. Also related to the tariffs, we mention that according to GEO 27/2022, the tariffs applicable from 1 April 2022 mentioned above will not be amended until 1 April 2023.

The consolidated EBITDA has a positive value of RON 101 mn., decreasing by RON 256 mn. compared to the value in the first six months of 2021. The reduction of EBITDA is determined by the evolution of the distribution segment, mainly, the negative impact being from the average purchase price of electricity in the first quarter of this year for NL.

Evolution of the main indicators in the first semester of 2022:

• EBITDA - positive in the amount of RON 101 mn., a decrease of RON 256 mn. compared to H1 2021
• Net result - loss of RON 176 mn., down with RON 252 mn. versus H1 2021
• The volume of distributed electricity decreased by 2.3%
• The volume of electricity supplied on the retail market decreased by 10%
• The values are not influenced by the revenues subsequently recognized in future tariffs in a period of up to 5 years after March 31, 2023 under GEO 27/2022

The main results are presented below and are extracted from the consolidated condensed interim financial statements not reviewed nor audited as of and for the period ended 30 June 2022:

	Financial Results*			H1 2022			H1 2021			RON mn.
			(RON mn.)			(RON mn.)
Operating income	5,933		3,339		2,595
Operational expenditure	(6,080)		(3,224)		(2,856)
EBITDA	101		357		(256)
Operating profit	(147)		115		(262)
Net profit/loss of the period	(176)		76		(252)

OTHER IMPORTANT INFORMATION

• The Electrica Group distributed, in H1 2022, approximately 9.0 TWh (decreasing by 2.3% from H1 2021) to approximately 3.85 million users.
• In H1 2022, the Electrica Group supplied approximately 4.2 TWh to the retail market (10% reduction compared to H1 2021) to approximately 3.5 million consumption places.

Statement of Chirita Alexandru-Aurelian, CEO of Electrica S.A.:

• The year 2022 continues to be marked by the series of transformations on the external and internal energy market that started in 2021 and had a significant impact on the operations of all energy players

The financial results of the Electrica Group in H1 2022 show that maintaining the efforts of the companies in the group to implement effective measures specific to each area of activity has led to a financial recovery/a reduction of the previous loss, thus demonstrating that despite the unfavorable market context, it remains a stable player, oriented toward continuous adaptation to the conditions of a market exposed to multiple challenges.

In the supply area, the company has identified the best ways to mitigate the negative effects generated by the market instability, managing, in parallel, the impact of the measures provided by GEO 27/2022 on the capping of electricity and natural gas prices. At the same time, Electrica supply continued the process of accelerating the digitalization process, investing in solutions to increase customer satisfaction, meant to optimize, at the same time, the activity at the company level.

The supply company within the Electrica Group has also acted in the direction of developing the B2B customer portfolio, especially in the photovoltaic projects area, registering a significant growth in this segment. In S1 2022, the company offered consultancy and customized solutions to strategic clients at national level, belonging to several types of industries.

In the distribution area, DEER continues the ambitious investment program carried out since the beginning of the previous regulatory period, aiming to modernize the network infrastructure and accelerate the expansion of smart metering on a large scale, despite the economic and geopolitical challenges that influence the capacity of equipment needed for investment. The investment program also includes five projects totaling approximately 60 million euro, financed from European funds from the large infrastructure Operational Program, with an eligible value of approximately 49 million euro, oriented toward the modernization of transformation stations, digitalization, implementation of smart meters and specialized hungry systems, intended for the management of network assets as well as measurement groups. The projects are carried out as multi-annual investments, their completion being planned for the end of 2023.

In the area of services, Electrica Serv In the service area, Electrica Serv continued the approach to reach the Group's objective of contributing to sustainable development, in the context of the European Green Deal, and implemented a series of projects representing the installation of photovoltaic plants. In H1, 11 photovoltaic power plants with an installed power of almost 3,418 MWp were completed and put into operation, and for the next period we will continue the development of this new business line.

The financial results in H1 2022 demonstrate the Group's above-average performance in difficult market conditions and encourage us to continue our strategic efforts to maintain a top position in the field in which we operate."

CEO

Chirita Alexandru-Aurelian

Starting with 17 August 2022, 18:30 (Romanian time), the condensed consolidated interim financial statements as at and for the six-month period ended 30 June 2022 prepared in accordance with the International Accounting Standard 34 - "Interim Financial Reporting", as adopted by the European Union, and the Board of Directors' consolidated report for Q1 2022 will be available, in Romanian and English, in electronic format, on Electrica's website, at www.electrica.ro, in the "Investors > Results and Reports

• Financial Results" section, at https://www.electrica.ro/en/investors/results-and-reports/financial-results/. The above-mentioned documents could be also available, in hardcopy, at the Company's headquarters in Bucharest, 9 Grigore Alexandrescu Street,
  District 1, which is open from Monday to Thursday between 08:00- 17:00 (Romanian time), and on Fridays between 08:00-14:30 (Romanian time), excepting the legal holidays.

*The amounts are rounded to the nearest million

More information about the financial results of Electrica Group in 2020 can be found at this link:

https://www.electrica.ro/en/investors/results-and-reports/financial-results/financial-statements-for-h1-2022/

17.08.2022

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