Energy Supply South East Europe
The Energy Supply South East Europe Segment is responsible for the operation of electricity networks and the sale of electricity to end customers in Bulgaria and Macedonia, the generation and sale of heat in Bulgaria, the production of electricity in Macedonia, the sale of natural gas to end customers in Croatia and energy trading throughout the region.
Highlights 2015/16
- Water flows in Macedonia above long-term average, but below previous year
- Lower revenue due to mild winter and ongoing liberalisation
- Decline in energy procurement costs and operating expenses
- Improvement in EBITDA
- EBIT and result before tax negatively influenced by impairment loss in Bulgarian heating business
| Key indicators – Energy Supply South East Europe | 2015/16 | 2014/15 | +/-
nominal% | 2013/14 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Key energy business indicators | GWh | ||||||||||
| Electricity generation volumes | 450 | 495 | –45 | –9.1 | 400 | ||||||
| thereof renewable energy | 175 | 209 | –34 | –16.4 | 127 | ||||||
| thereof thermal power plants | 276 | 286 | –11 | –3.7 | 273 | ||||||
| Network distribution volumes | 13,403 | 13,563 | –160 | –1.2 | 13,034 | ||||||
| Sales volumes to end customers | 12,066 | 12,670 | –604 | –4.8 | 12,717 | ||||||
| thereof electricity | 11,882 | 12,459 | –577 | –4.6 | 12,531 | ||||||
| thereof heat | 184 | 211 | –27 | –12.8 | 185 | ||||||
| Key financial indicators | EURm | ||||||||||
| External revenue | 949.4 | 1,037.9 | –88.5 | –8.5 | 900.4 | ||||||
| Internal revenue | 0.3 | 0.2 | 0.1 | 45.0 | 0.4 | ||||||
| Total revenue | 949.7 | 1,038.1 | –88.4 | –8.5 | 900.8 | ||||||
| Operating expenses | –820.2 | –917.4 | 97.2 | 10.6 | –880.6 | ||||||
| Share of results from equity accounted investees with operational nature | – | – | – | – | – | ||||||
| EBITDA | 129.5 | 120.7 | 8.8 | 7.2 | 20.2 | ||||||
| Depreciation and amortisation including effects from impairment tests | –94.1 | –62.9 | –31.2 | –49.5 | –252.9 | ||||||
| Results from operating activities (EBIT) | 35.4 | 57.8 | –22.4 | –38.8 | –232.8 | ||||||
| Financial results | –23.3 | –26.1 | 2.8 | 10.7 | –29.2 | ||||||
| Result before income tax | 12.1 | 31.7 | –19.6 | –61.8 | –262.0 | ||||||
| Total assets | 1,184.1 | 1,276.0 | –91.9 | –7.2 | 1,251.8 | ||||||
| Total liabilities | 1,006.3 | 1,119.4 | –113.1 | –10.1 | 1,137.8 | ||||||
| Investments1) | 93.5 | 78.5 | 14.9 | 19.0 | 77.5 | ||||||
| 1) In intangible assets and property, plant and equipment | |||||||||||
Regulatory framework
The regulatory commission in Bulgaria raised the end customer prices for electricity by an average of 0.83% in EVN’s supply area as of 1 July 2016. However, the tariffs more relevant for the reporting year were still based on the 0.4% reduction implemented on 1 August 2015. The end customer prices for heat in 2015/16 were reduced step-by-step by 1.9% as compared to the level on 1 July 2015. EVN is continuing to actively pursue the arbitration proceedings started in June 2013 at the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID). A tariff decision in Macedonia on 1 July 2016 led, as in the previous year, to an average reduction of 0.3% in the end customer prices for electricity.
Energy sector development
EVN’s companies in South Eastern Europe generated 450 GWh of electricity in 2015/16, which represents a year-on-year decrease of 45 GWh or 9.1%. Water flows in Macedonia were higher than the long-term average, but failed to reach the record prior year level. The result was a decline of 34 GWh, or 16.4%, in renewable production to 175 GWh. Thermal electricity generation was also lower due to the very mild temperatures, which led to a reduction in the use of the co-generation plant in Plovdiv, and fell by 11 GWh, or 3.7%, to 276 GWh.
Electricity network sales volumes totalled 13,403 GWh and were 160 GWh, or 1.2%, lower than the previous year, above all due to the mild winter. The higher temperatures combined with liberalisation steps taken during the reporting year were also responsible for a decline of 577 GWh, or 4.6%, in electricity sales volumes to 11,882 GWh. In addition, heat sales to end customers in Bulgaria declined by 27 GWh, or 12.8%, to 184 GWh.
Revenue development
The 2015 tariff decisions in Bulgaria and Macedonia and the liberalisation steps taken in both countries as well as the lower temperatures led to a decline of EUR 88.4m, or 8.5%, in revenue for the Energy Supply South East Europe Segment to EUR 949.7m in 2015/16.
Operating expenses and operating results
Operating expenses declined in line with revenue and fell by EUR 97.2m, or 10.6%, to EUR 820.2m. Apart from a price- and volume-related decrease in energy procurement costs, energy purchases from third parties declined primarily due to the further reduction of network losses. Positive effects were provided by continuous improvements in the collection of customer receivables and further internal cost savings. EBITDA improved by EUR 8.8m, or 7.2%, to EUR 129.5m. Depreciation and amortisation, including the effects of impairment testing, rose by EUR 31.2m, or 49.5%, to EUR 94.1m. This increase resulted chiefly from an impairment loss of EUR 31.3m recognised by the Bulgarian heating company TEZ Plovdiv to reflect the continued adverse rulings by the regulatory authority in the heating sector. The results from operating activities (EBIT) fell by EUR 22.4m, or 38.8%, year-on-year to EUR 35.4m.
Financial results and result before income tax
Financial results improved by EUR 2.8m, or 10.7%, to EUR –23.3m in 2015/16. This increase was supported by the scheduled repayment of bank loans and a further decline in interest rates. The result before income tax equalled EUR 12.1m and was EUR 19.6m, or 61.8%, lower than the previous year.
Investments
Investments in the Energy Supply South East Europe Segment rose by EUR 14.9m, or 19.0%, to EUR 93.5m during the reporting year. Projects focused on the replacement of metres in Bulgaria and on efficiency improvements to the networks through the expansion of infrastructure and measures to reduce network losses.
Outlook
EVN sees itself well positioned for the increasing competition brought about by the continued liberalisation of the South Eastern European energy markets. This market deregulation is, however, expected to have an impact on segment earnings in 2016/17. Overall, results should be stable with a positive trend due to the absence of the one-off effect from the impairment loss recognised in 2015/16. Changes in the regulatory environment and the initiated proceedings in Bulgaria could, however, have a significant influence on segment earnings.
