German energy turnaround making progress
Mannheim energy company MVV paints a positive picture and intends to become climate-neutral itself by 2050 at the latest
MVV CEO Dr. Georg Müller calls for more speed and more courage and for a “reliable roadmap for further expanding renewables” – Forecast met: Operating earnings almost at previous year’s level.
The Mannheim-based energy company MVV Energie AG (WKN: A0H52F, ISIN: DE000A0H52F5) has painted a positive picture of the energy turnaround, and that despite “all due criticism of it”. As stressed by MVV’s CEO, Dr. Georg Müller, at this year’s annual results press conference held by the company in Frankfurt on Tuesday: “The German energy turnaround is making progress. The energy industry will be the only sector in Germany to meet the climate protection targets for 2020”. At the same time, Dr. Müller called for a reliable roadmap for further expanding renewable energies to enable their share of generation in Germany to be raised, as agreed, to 65 percent by 2030. To achieve this, it would in particular be necessary to overcome the block on onshore wind power and create a reliable basis for the newly resolved exit from coal. Commented Dr. Müller: “Lip service is not enough, neither is merely competing for targets. We need more speed and more courage.” MVV’s CEO announced that his own company, with its consistent strategic focus on sustainability and economic efficiency, would be climate-neutral by 2050 at the latest.
MVV met its own economic targets in the past 2019 financial year (1 October 2018 – 30 September 2019). “Having begun on quite a weak note in the 1st quarter and finished with the best 4th quarter in a long time”, as Dr. Müller put it, the operating earnings of Euro 225 million reported by the group of companies almost matched the previous year’s figure of Euro 228 million. “And that despite several months of downtime at our biomass power plant at Ridham Dock and positive one-off effects in the previous year that naturally could not be repeated in 2019.” This earnings performance was driven above all by an improved performance in the renewable energies project development business and by consistent cost management across all business fields. Dr. Müller: “All in all, 2019 was a good year for MVV.”
Sales decreased from Euro 3.9 billion to Euro 3.7 billion. In line with expectations, this slight reduction was chiefly due to an amendment in the company’s accounting under International Financial Reporting Standards (IFRS 15) rather than to operating factors. This amendment requires market premiums to be recognised on a net rather than gross basis. As a result, companies throughout the sector have been required to net items between sales and cost of materials for the renewable energies they market. This did not have any impact on earnings. According to MVV’s CEO, that meant that “we did not lose any good, i.e. earnings-producing sales”.
Pre-tax earnings (adjusted EBT) fell largely in line with EBIT to Euro 168 million. Due to lower taxes on income, the company nevertheless managed to increase its adjusted annual net income after minority interests by Euro 4 million to Euro 98 million. Adjusted earnings per share therefore came to Euro 1.49, as against Euro 1.43 in the previous year.
MVV is growing with New Energies
The fact that renewable energies are playing an ever more significant role in MVV’s business performance is clearly reflected in the figures for individual reporting segments. Based on roughly unchanged sales, the group of companies increased its earnings in its “New Energies” reporting segment, for example, by 21 percent to Euro 109 million in the past 2019 financial year. “Our renewable energies project development business has regained its momentum, particularly in the international arena”, stressed Dr. Müller. To illustrate this, he referred to two projects at the Juwi subsidiary, namely a 123 MW solar park in the US state of Colorado and a solar project of more than 200 MW in Greece.
Even though the expansion in onshore wind power in Germany had virtually come to a halt, Juwi and MVV’s second project developer Windwärts had at the same time successfully extended their project pipelines. “All in all, we were able to connect renewable energies plants with total capacity of 460 MW to the grid in 2019”, added Dr. Müller. The environmental energy business was also still acting as a key growth driver. Thanks to pleasing developments in prices, this business field, involving the generation of energy from waste and biomass, had managed to offset the effects of turbine damage at Ridham and of planned inspection work in the past financial year. As a result of these developments, MVV expected to see further earnings growth in the “New Energies” reporting segment in the current financial year.
Positive outlook, high payout ratio
Given stable developments in its sales activities, as well as in its combined heat and power generation and grid activities, MVV expected both its operating earnings and its sales to show slight year-on-year growth overall in 2020. Dr. Müller: “That is once again an ambitious target. But every department at every company across our Group is making every effort to turn this forecast into reality, and the first weeks have been quite encouraging.”
For its dividend, the company intends to uphold the continuity it provides to its shareholders. For 2019, the Executive and Supervisory Boards will be proposing an unchanged dividend of 90 cents per share for approval by the Annual General Meeting due to be held in Mannheim on 13 March 2020. This would correspond once again to a high payout ratio of 61 percent.
Roadmap requested for further expansion in renewable energies
Given the discussions currently surrounding energy and climate policy, MVV’s CEO called for politicians to act with “more speed and more courage”, as well as for a reliable roadmap for further expanding renewable energies. In particular, if the ambitious climate target of raising the renewable share of the electricity supply to 65 percent was to be met by 2030, it would be necessary to revive the expansion in onshore wind power, an area which had currently stalled. Dr. Müller thus spoke out against the rules currently under discussion for minimum distances between homes and wind turbines and in favour of accelerating and simplifying approval processes in Germany: “We cannot afford to do without onshore wind power in Germany.”
According to MVV’s CEO, stepping up the renewable energies expansion was also a basic prerequisite for the coal exit now resolved, and which MVV explicitly welcomed. Now it was about finding consensus around a solution that involved gradually exiting from coal. Dr. Müller basically supported the market-based tender processes provided for in the coal exit legislation, but warned against dividing Germany into north and south in energy terms, a development that would discriminate against power plants located south of the River Main. At the same time, he rejected the decommissioning of power plants without compensation from 2027 onwards as a severe infringement of existing property rights. “As an export-driven nation, we should steer clear of such measures.”
MVV’s CEO referred to the resolutions on the future level of CO2 prices as still unsatisfactory. It was certainly right to include the transport and building sectors in pricing mechanisms and thus create uniform climate policy standards, but the CO2 price specifically envisaged would not yet have any impact on developments. In parallel to this, it would also be necessary to ease the strain placed on electricity prices by taxes and duties, so that electricity customers did not end up footing the bill on their own. Dr. Müller: “We need to get the right balance between costs and incentives. The energy turnaround is a balancing act in social terms as well.”
Climate neutrality by 2050 – at the latest
The group of companies aims to become climate-neutral itself by 2050 at the latest. Expanding renewable energies and reducing proprietary CO2 emissions are at the forefront of MVV’s efforts here. “Climate protection is not just one of the core tasks facing our generation”, underlined CEO Dr. Müller. “It is also hard work and has to be implemented step by step.” In this respect, reaching climate neutrality could be compared to running a marathon.
As milestones along the way, Dr. Müller referred to the sustainability targets which the group of companies had set itself for the next ten years in 2016 already. Consistent with these targets, MVV intends to double its proprietary electricity generation using renewable energies to more than 800 MW. It currently stands at 474 MW. In its project development business, MVV intends to connect renewable energies totalling 10,000 MW to the grid by 2026. To date, it has achieved 1,882 MW. At the same time, the company intends to raise its annual CO2 savings to one million tonnes. To date, it has achieved a reduction of 486,000 tonnes of CO2 a year.
Investments form basis for future earnings
To this end, MVV will be maintaining a high pace of investment in the years ahead as well. In 2016, the company announced investments of three billion euros for the following ten years. In the past 2019 financial year, it invested Euro 310 million of this total, after Euro 290 million in the previous year. According to its CEO, the company will step up its investments even further in the current financial year. Alongside the new gas-powered CHP plant in Kiel which, at Euro 290 million, represented the largest single project in the company’s history, key focuses of investment in the past year also included building the new energy from waste plant in Dundee in Scotland and the forward-looking development of the energy location at Friesenheimer Insel in the North of Mannheim. Here, MVV is investing around Euro 100 million. Among other objectives, this will enable the heating energy generated when waste is incinerated to be used for district heating and fed into the heating energy grid. Dr. Müller: “That is a first major milestone as we head for a green heating supply in Mannheim and the region.”
The complete Annual Report 2019 is available on the internet at www.mvv.de/investoren . Here, you will also find our new MVV Magazine 2019, in which we show how, with our inno-vative and forward-looking products and services, we are shaping the energy system of the future together with our customers.
MVV in Figures
|FY 2019||FY 2018||% change|
|Financial key figures|
|Sales excluding energy taxes (Euro million)||3,683||3,903||- 6|
|Adjusted EBITDA1 (Euro million)||409||443||- 8|
|Adjusted EBIT1 (Euro million)||225||228||- 1|
|Adjusted annual net income1 (Euro million)||115||111||+ 4|
|Adjusted annual net income after minority interests1 (Euro million)||98||94||+ 4|
|Adjusted earnings per share1 (Euro)||1.49||1.43||+ 4|
|Dividend proposal/dividend per share (Euro)||0.90||0.90||0|
|Cash flow from operating activities (Euro million)||238||331||- 28|
|Cash flow from operating activities per share (Euro)||3.60||5.03||- 28|
|Adjusted total assets at 30 September2 (Euro million)||4,472||4,152||+ 8|
|Adjusted equity at 30 September2 (Euro million)||1,544||1,550||0|
|Adjusted equity ratio at 30 September2 (%)||34.5||37.3||- 8|
|Net financial debt at 30 September (Euro million)||1,345||1,075||+ 25|
|ROCE (%)||7.9||8.5||- 7|
|Value Spread (%)||1.6||2.2||- 27|
|Capital employed (Euro million)||2,847||2,674||+ 6|
|Investments (Euro million)||310||290||+ 7|
|Non-financial key figures|
|Direct CO2 emissions (Scope 1) (tonnes 000s)||1,545||1,547||0|
|Net CO2 savings (tonnes 000s)||486||485||0|
|Installed renewable energies capacities (MW)||474||467||+ 1|
|Share of renewable energies in own electricity generation (%)||63||63||0|
|Concluded development of new renewable energies plants (MW)||460||1,011||- 55|
|Number of employees at 30 September||6,113||5,978||+ 2|
|of which women||1,756||1,701||+ 3|
|of which men||4,357||4,277||+ 2|
|Share of female managers at 30 September (%)||15||14||+ 7|
1 Excluding non-operating measurement item for financial derivatives, excluding structural adjustment for part-time early retirement, excluding restructuring result and including interest income from finance leases
2 Excluding non-operating measurement item for financial derivatives