11. December 2018| MVV Energie

MVV remains on course

Mannheim energy company posts fourth consecutive year of earnings growth – Operating earnings rise two percent to Euro 228 million

Investments totalling Euro 290 million – MVV calls for reliable roadmap for coal exit and faster expansion in renewables – CEO Dr. Georg Müller: “Climate protection is the only option.”

The Mannheim-based energy company MVV Energie AG (WKN: A0H52F, ISIN: DE000A0H52F5) increased its annual earnings for the fourth year in succession in its past 2018 financial year (1 October 2017 – 30 September 2018). According to Dr. Georg Müller, CEO, the company’s consistent focus on successfully implementing the energy turnaround was bearing fruit. The group of companies would continue to invest in the years ahead in further expanding renewable energies, enhancing energy efficiency with environmentally-friendly district heating and developing new business models, stressed Dr. Müller at this year’s Annual Results Press Conference in Frankfurt on Tuesday: “The tasks that lie ahead of us in the energy turnaround are challenging and the climate in which we operate will remain dynamic. We are convinced that we have the right strategy to seize this transformation as an opportunity and generate long-term growth with the energy turnaround.”

In the past 2018 financial year, the company once again met the targets it set itself at the beginning of the year. Operating earnings (adjusted EBIT) for the 2018 financial year were slightly ahead of the previous year’s figure, rising two percent to Euro 228 million. Sales, at more than Euro 3.9 billion, again nearly matched the high levels seen in recent years. Overall, the company increased its adjusted annual net income after minority interests year-on-year by one million euros to Euro 94 million.

The company’s earnings benefited in particular from the strong performance of the environ-mental energy business, higher revenues from proprietary wind turbines and the success of cost-efficiency measures. These factors enabled the group of companies to more than offset weather-related downturns resulting from the milder winter and lower grid fees due to regulatory factors. By contrast, one-off items cancelled each other out and thus hardly impacted on the company’s adjusted EBIT for the past financial year. Alongside milder weather conditions, the slight reduction in sales was due above all to lower trading volumes in the electricity and gas businesses due to market developments.

Looking ahead to the future of its own business, the company referred to increased volatility in the group’s overall earnings performance. The energy turnaround required greater flexibility and an active willingness and ability to embrace change accompanied by a clear focus on cus-tomers and projects. Adds Dr. Müller: “That too is part of the new climate and something we have to be aware of.”

That applied not only to project development activities in the renewable energies business, where the privileging of specific project categories in the 2017 tenders brought the expansion virtually to a halt. MVV therefore welcomes the suspension of these privileges since spring 2018 and the reintroduction of the requirement for all wind projects wishing to participate in a tender to have received approval. This way, equality of opportunity has been restored for all market participants.

In the tender rounds subsequently held in 2018, MVV’s project development companies Juwi and Windwärts were awarded tenders for a total of 13 onshore wind projects and five open-space photovoltaics systems. Comments Dr. Müller: “This pleasing development shows we can succeed and operate competitively in the new tender system for renewable energies when there is a level playing field.” Renewable energies project development would therefore remain a key strategic pillar of the MVV Group in future as well. The company announced that it would be increasing its own stake in Juwi AG to 100 percent in the coming weeks.

Reliable roadmap for coal exit

Turning to the current energy policy debate surrounding the exit from fossil fuel-based energy generation, MVV’s CEO called for rapid action and a reliable roadmap: “Climate protection is the only option and cannot wait any longer.” Dr. Müller spoke out in favour of effective reductions in greenhouse gas emissions. Economic logic and ecological responsibility meant that the most sensible approach, also in the energy industry, would be to start by avoiding carbon dioxide in those areas where reductions were easiest to implement. First and foremost, that meant coal-fired power plants only generating electricity – and in this case brown coal before hard coal.

According to MVV’s CEO, further expansion in renewable energies, and that faster than before, was the prerequisite for the exit from coal. “If we take climate protection seriously and do not wish to build any new nuclear power plants, then the coal exit will have to be accompanied by stepping up the expansion in renewable energies.”

Accelerated expansion in renewable energies

Consistent with this, Dr. Müller called for the rate of expansion in renewables to be significantly stepped up to enable the target set by the Federal Government, namely of raising the renewable share of electricity generation to 65 percent by 2030, to be met. Onshore wind power, as the most important pillar of the German energy turnaround, would continue to play a crucial role. Drawing on a regional quota, onshore wind power had to be expanded where demand for electricity was at its greatest – i.e. also in southern Germany. This kind of smart, regional management would also ease the strain on electricity grids and reduce the need for grid expansion.

MVV itself increased its own installed renewable energies capacities by three percent to 467 MW in the past 2018 financial year and raised the renewable share of its fully consolidated electricity generation activities from 56 percent to 63 percent. The volume of electricity produced from renewable energies rose by 7 percent to more than 1.1 billion kilowatt hours. MVV also managed to reduce its direct CO2 emissions by 6 percent. Comments Dr. Müller: “Sustainability is and will remain a core component of our corporate strategy. This way, we are actively helping to meet the ecological and social challenges of our times.”

Dr. Müller is also convinced that, alongside the electricity market, renewables will shape devel-opments in the heating energy market as well in the longer term. Having said this, the “exit fossils and add renewables” formula could not be mapped onto the heating energy market. Low-CO2 substitute solutions would first have to be put in place before fossil fuel-based heating energy generation could be phased out. MVV’s CEO therefore expects highly efficient combined heat and power plants to be the last conventional plants to be disconnected from the grid: “District heating will retain its key role in the heating energy turnaround.”

Investments as basis for future earnings

Given these factors, Dr. Müller stressed that MVV’s corporate strategy would focus on expanding renewable energies and enhancing energy efficiency with combined heat and power generation in conjunction with environmentally-friendly district heating. To this end, the company invested a total of Euro 290 million in the past 2018 financial year, around 50 percent more than in the previous year. “The investments we make in our growth and our existing business form the basis for our future earnings.”

To this end, MVV will be investing three billion euros in the year ahead. Dr. Müller announced a further increase in investments for the current 2019 financial year. This way, the group aims to step up its role as an active shaper of the transformation in our energy system, while continually developing its own strategy further. “And this will centre again and again on tackling the three big Ds of the energy turnaround, namely decentralisation, decarbonisation and digitalisation.”

MVV is currently focusing on three major investments. The Küstenkraftwerk – the most up-to-date gas-fired power plant in Europe – is just a few months from being completed in Kiel, while a new highly efficient energy from waste plant is under construction in Dundee in Scotland. Back in Mannheim, the company is investing in connecting its CHP plant on Friesenheimer Insel to the city’s district heating grid and is also integrating an innovative phosphorous recycling technology. MVV is channelling around Euro 100 million into the Friesenheimer Insel location, which will thus play an even more important role as a component in the energy turnaround and a recycling-based economy for the city of Mannheim and the Rhine-Neckar metropolitan region.

The company is also in the process of accessing a new business model in its renewable energies activities. This involves organic waste fermentation, a field in which MVV took over its first plant in Dresden in April. A second plant, also using organic waste to generate biogas, is being planned for Bernburg/Saale in Saxony-Anhalt.

As well as investing in building new generation plants, or expanding existing plants, the Mannheim energy company is also complementing its portfolio of products and services, particularly for business customers, by acquiring targeted shareholdings in innovative companies or forging strategic partnerships with such companies. In the spring, for example, MVV acquired a stake in the Bonn-based Recogizer Group. Together, the two companies are now exploiting the opportunities offered by artificial intelligence to generate energy savings in buildings and enhance plant availability levels at medium-sized companies, industrial companies and in the housing industry.

“Our business customers benefit from a combination of energy industry know-how, software intelligence and great experience and expertise” commented MVV’s CEO with regard to the concept. The services offered include the energy monitoring and energy efficiency solutions developed together with MVV’s subsidiary Econ Solutions and the state-of-the-art metering services offered in the housing industry by MVV’s joint venture Qivalo.

Further focuses referred to by Dr. Müller include the further expansion in e-mobility – in terms of the charging infrastructure for industrial and business customers and of suitable combined solutions involving electric vehicles, photovoltaics systems and charging points for private customers – and the further development of the forward-looking “Smart Cities” concept as a partner to local authorities and innovative municipal utility companies.

Positive outlook, high payout ratio

Looking to the years ahead, MVV’s CEO Dr. Müller expects energy industry companies to face further challenges due to the underlying framework. He voiced his confidence in this respect: “MVV has already been aligning itself to the energy system of the future for years now”. After four years of earnings growth, from an operating perspective the company expects to generate adjusted EBIT at around the previous year’s level in the 2019 financial year. MVV also expects its sales to move sideways.

In terms of its dividend, the company will uphold its continuity-based approach for its share-holders. For 2018, the Executive and Supervisory Boards will propose an unchanged dividend of 90 cents per share for approval by the Annual General Meeting due to be held in Mannheim on 8 March 2019. That once again represents a high payout ratio of 63 percent.

The complete Annual Report is available on the internet at www.mvv.de/investoren . Here, you will also find our new MVV Magazine, 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 2018 FY 2017 % change
       
Financial key figures      
Sales excluding energy taxes (Euro million) 3,903 4,010 - 3
Adjusted EBITDA1 (Euro million) 443 407 + 9
Adjusted EBIT1 (Euro million) 228 224 + 2
       
Adjusted annual net income 1 (Euro million) 111 107 + 4
Adjusted annual net income after minority interests1 (Euro million) 94 93 + 1
Adjusted earnings per share 1 (Euro) 1.43 1.41 + 3
Dividend proposal/dividend per share (Euro) 0.90 0.90 0
       
Cash flow from operating activities (Euro million) 331 474 - 30
Cash flow from operating activities per share (Euro) 5.03 7.19 - 30
       
Adjusted total assets at 30 September2 (Euro million) 4,152 4,248 - 2
Adjusted equity at 30 September2 (Euro million) 1,550 1,490 + 4
Adjusted equity ratio at 30 September2 (%) 37.3 35.1 + 6
Net financial debt at 30 September (Euro million) 1,075 1,077 0
       
ROCE (%) 8.5 8.2 + 4
WACC (%) 6.3 6.1 + 3
Value Spread (%) 2.2 2.1 + 5
Capital employed (Euro million) 2,674 2,734 - 2
       
Investments (Euro million) 290 194 + 50
of which growth investments 124 64 +94
of which investments in existing business 166 130 + 28
       
Non-financial key figures      
Direct CO2 emissions (Scope 1) (tonnes 000s) 1,547 1,646 - 6
Net CO2 savings (tonnes 000s) 485 482 + 1
       
Installed renewable energies capacities (MW) 467 455 + 3
Share of renewable energies in own electricity generation (%) 63 56 + 13
Concluded development of new renewable energies plants (MW) 1,011 411 >+ 100
       
Number of employees at 30 September 5,978 6,062 - 1
of which women 1,701 1,740 - 2
of which men 4,277 4,322 - 1
Share of female managers at 30 September (%) 14 16 - 13
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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