12. December 2017| MVV Energie

MVV pressing ahead with sustainable investments

Positive 2017 financial year at Mannheim energy company - Operating earnings grow 5 percent to Euro 224 million - New environmental energy projects in UK and 100 million euro investment in Mannheim - Slight sales and earnings growth expected for current 2018 financial year

The Mannheim-based energy company MVV Energie AG (WKN: A0H52F, ISIN: DE000A0H52F5) will be pressing ahead with expanding renewable energies, boosting energy efficiency with environmentally-friendly district heating and developing new business models in the years ahead as well. "These are investments in the future of our group of companies and mark our contribution to successfully implementing the energy turnaround”, stressed MVV’s CEO, Dr. Georg Müller, at the company’s press conference for the 2017 financial year (1 October 2016 – 30 September 2017) held in Frankfurt on Tuesday.

At its Mannheim energy location on Friesenheimer Insel alone, MVV plans to invest Euro 100 million to connect its combined heat and power (CHP) plant to the district heating grid in Mannheim and the region and extend its activities with innovative phosphorous recycling technology. Not only that, having successfully launched operations at its power plants in Plymouth and Ridham the company has now been awarded a third project in the UK. At the end of November, MVV took over a waste incineration plant in the Scottish city of Dundee and will invest Euro 135 million in total to build a new CHP plant and operate this for 25 years.

The Mannheim energy player has invested nearly three billion euros in growth and in modernising its grids and plants in recent years. It is now reaping the rewards of having acted early to align its business to the energy system of the future. In the past 2017 financial year, MVV generated further operating earnings growth of 5 percent to Euro 224 million. At more than Euro 4 billion, the company’s sales also reached the previous year’s record level.

"We asserted our position well in what is a challenging market”, commented Dr. Müller. “We increased our earnings for the third consecutive year and thus met the guidance we released during the year. That shows that we are on a good course and are managing to implement our strategy with sustainable success.”

Driven by a substantial improvement in the financial result, pre-tax earnings (adjusted EBIT) rose by 22 percent to Euro 169 million. Adjusted annual net income after minority interests came to Euro 93 million. The cash flow from operating activities grew from Euro 274 million to Euro 474 million.

The company’s results were positively influenced above all by the strong performance of the environmental energy business and by cooler weather last winter compared with the previous year. On the other hand, as expected and already announced a year ago, in the 2017 financial year the project development business was unable to match the record sales and earnings posted for 2016. Not only that, lower wind volumes meant that the company’s proprietary wind turbines produced less electricity.

Positive outlook, high distribution ratio

Looking to the years ahead, Dr. Müller expects the underlying framework to present further challenges for energy industry players. He underlined his confidence looking forward: "Our corporate strategy, with its focus on robust growth, means we have laid a foundation enabling us to play an active role in this dynamic transformation process in future as well”. Based on its operations and assuming normal weather conditions, MVV expects to generate further slight growth in sales and adjusted EBIT in the current 2018 financial year.

With regard to its dividend, MVV is upholding its policy of continuity for its shareholders. For 2017, the Executive and Supervisory Boards will propose an unchanged dividend of 90 cents per share for approval at the Annual General Meeting in Mannheim on 9 March 2018. This corresponds to a dividend yield of around 4 percent and a distribution ratio of 64 percent.

Ongoing high pace of investment

According to its CEO, MVV will be maintaining a high pace of investment. In the years ahead, the company intends to invest a further three billion euros in the energy system of the future – of which Euro 300 million in the current 2018 financial year alone. Here, the Mannheim-based company will start on its own doorstep. Connecting the CHP plant on the island location of Friesenheimer Insel to Mannheim’s district heating grid, which also provides heating to the towns of Heidelberg, Schwetzingen and Speyer, will make the environmentally-friendly district heating supply more renewable. “This way, we will reduce the primary energy factor (PEF) by a third, a measure also relevant for real estate owners, construction clients and investors”, stressed Dr. Müller. In technical terms, MVV will combine this link-up to the district heating grid with a significant expansion in the volume of steam supplied to the Roche Group’s neighbouring Mannheim plant. This will involve building a new culvert underneath the Old Rhine.

In parallel, MVV intends to integrate an innovative phosphorous recycling technology into its Mannheim CHP plant. This move will facilitate the recovery of this valuable resource and also reduce imports. “Our new plant, which is currently in the approval process, will offer a sustainable solution in this field.”

New CHP plant in Dundee/Scotland

At the same time, the Mannheim-based energy company has clinched what is already its third power plant investment in the UK. MVV has taken over the existing energy from waste plant in the Scottish city of Dundee and will be building a state-of-the-art and highly efficient new CHP plant in the direct vicinity. With total investments of around Euro 135 million, the new plant should commence operations in 2020. The new power plant is designed for annual throughput of 110,000 tonnes of waste. The predominant share of this will come directly from local authority partners. Together with commercial waste, MVV will then achieve full capacity utilisation.

This new power plant will also be operated with combined heat and power (CHP) generation. With an overall efficiency rate of nearly 55 percent, it will produce electricity and heating energy with capacity of around 10 megawatts each. The heating energy will be supplied as process steam to the neighbouring plant of the tyre manufacturer Michelin. “Drawing on decades of experience and our broad-based expertise, in recent years we have developed energy from waste into a paradigm of sustainability and of local and regional climate protection”, underlined MVV’s CEO, Dr. Müller.

Wind tenders now only for approved projects

With a view to the energy policy challenges facing the new Federal Government, MVV’s CEO called for the expansion in renewable energies to be stepped up and for the heating energy sector to be developed along sustainable lines. From his perspective, onshore wind power is and will remain the key technology for the energy turnaround. “If climate protection targets are to be met, wind power will have to be expanded nationwide.” For this, Dr. Müller added that “the errors made in onshore wind tenders will have to be remedied fast”. The delay in forming a new government should not lead to the deferral of decisions that are urgently required and supported by all political groupings. One measure requiring immediate implementation was the provision that only approved wind projects should be permitted to participate in tenders. Not only that, Dr. Müller called for additional tendering of a one-off volume of 1.5 gigawatts for 2018 to offset the undesirable effects of the first tender rounds. Added Dr. Müller: “Changing to competitive, technology-specific tenders was the right move and has been successful. It has significantly reduced costs. It would make no sense to halt this expansion process precisely when the efforts made to enhance efficiency in recent years are starting to take effect.”

Alongside this, MVV’s CEO also sees the heating energy supply as a key factor in reaching climate protection targets. Heating energy generation accounted for around one third of Germany’s CO2 emissions. Germany would have to retain various heating energy options, as built-up areas required different solutions to rural areas. District heating would continue to play an indispensable role in future as well. Particularly in large built-up areas, district heating grids represented sustainable infrastructure and acted as key energy hubs and should therefore not be devalued. The foundation for environmentally-friendly district heating was provided by highly efficient CHP generation. That is why the CHP legislation and the coal-switch bonus should be extended beyond 2022. In parallel, renewable energies and industrial waste heat solutions should be integrated. Dr. Müller: “Politicians should formulate climate-based targets for the heating energy supply, but they should not prescribe specific technologies.” Given the diverse range of heating energy applications, gas would continue to play a significant role. In terms of infrastructure, heating energy grids were the prerequisite, both now and in future, for making the supply of district and local heating greener and for the ever more advanced range of power-to-heat applications.

The complete financial report ist available at www.mvv-investor.de

MVV in Figures
       
Euro million FY 2017 FY 2016 % change
       
       
Sales excluding energy taxes 4,010 4,066 - 1
Adjusted EBITDA1 407 425 - 4
Adjusted EBIT1 224 213 + 5
       
Adjusted annual net income 1 107 98 + 9
Adjusted annual net income after minority interests1 93 95 - 2
Adjusted earnings per share 1 (Euro) 1.41 1.45 - 3
Dividend proposal/dividend per share (Euro) 0.90 0.90 0
       
Cash flow from operating activities 474 274 + 73
Cash flow from operating activities per share (Euro) 7.19 4.16 + 73
       
Adjusted total assets (at 30 September)2 4,248 4,401 - 3
Adjusted equity (at 30 September)2 1,490 1,452 + 3
Adjusted equity ratio (at 30 September)2 35.1% 33.0% + 6
Net financial debt (at 30 September) 1,077 1,283 - 16
       
ROCE 8.2% 7.6% + 8
WACC 6,1% 6,4% - 5
Value Spread 2.1% 1.2% + 75
Capital employed 2,734 2,806 - 3
       
Investments 194 236 - 18
of which growth investments 64 121 - 47
of which investments in existing business 130 115 + 13
       
Employees (at 30 September) 6,062 6,174 - 2
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

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