15. February 2019| MVV Energie

Speed of renewable energies expansion will determine speed of coal exit

Mannheim energy company MVV welcomes final report presented by Commission on Growth, Structural Change and Employment – Setback in renewable energies expansion in 2018 leaves expected mark on 1st quarter of 2019 financial year – MVV confirms full-year forecast for 2019

MVV, the Mannheim-based energy company (ISIN: DE000A0H52F5; WKN: A0H52F), views the recommendations made by the Commission on Growth, Structural Change and Employment as a foundation for an orderly roadmap for exiting from coal based on a viable consensus within society in Germany. “But now the Federal Government will have to act quickly to create the legal framework for sustainably implementing the measures and structures needed for the energy system of the future”, stressed Dr. Georg Müller, CEO of MVV, when presenting the company’s results for the 1st quarter of its 2019 financial year (1 October 2018 – 31 December 2018) in Mannheim on Friday.

Here, stepping up the further expansion in renewable energies would play a key role. Comments Dr. Müller: “The speed of renewable energies expansion will determine the speed of the coal exit.” After 2017 and 2018, two wasted years in terms of energy policy in which the expansion noticeably lost momentum due to inappropriate wind power tender privileging, politicians now had to set their sights effectively and firmly on the energy system of the future. “If we aim to achieve our climate targets and raise the share of renewable energies to 65 percent by 2030, then we cannot afford to lose any more time. Climate protection cannot wait.”

According to the German Wind Energy Association (BWE), only 743 wind turbines were added to the grid last year. One year earlier, this figure still amounted to 1,800. Newly installed capacities fell by more than half from 5,330 MW to just 2,400 MW. This nationwide downturn also left its mark on MVV, a development expected and already communicated by the company. “Awarding tenders to privileged projects lacking the necessary approvals, rather than to professional project developers, means that no windfarms can be developed and built at such times”, adds Dr. Müller. “And then the volume of newly added capacities also plummets.”

As a result, earnings in the “New Energies” reporting segment fell to Euro 23 million in the months from October to December 2018, down half compared with the previous year’s quarter. MVV therefore saw the suspension of these privileges, a move since taken, as representing the right approach. In the subsequent tender rounds held on fair competitive terms in 2018, MVV’s project development companies Juwi and Windwärts received tenders for 13 onshore wind projects and five open-space photovoltaics plants in Germany alone.

Having increased its shareholding in Juwi to 100 percent, a step whose execution has now been completed, MVV has included all of the shares in Juwi in its balance sheet for the first time. Given the substantial upturn also apparent in Juwi’s international business, with new projects awarded in South Africa, the USA, Australia, Japan and Vietnam, MVV’s CEO expects earnings in the “New Energies” reporting segment to rise significantly by the end of the 2019 financial year.

Operations absolutely on course – forecast confirmed

One additional factor adversely affecting the year-on-year comparison of MVV’s quarterly earnings involved the proceeds from two sales in the previous year, which had generated positive one-off items of more than Euro 30 million in the “Customer Solutions” and “Supply Reliability” reporting segments. This was not matched by any equivalent income in the current year. Moreover, earnings for the 1st quarter of 2019 were negatively influenced by further smaller-scale charges amounting to around Euro 12 million in total. These resulted from follow-up costs for the joint power plant in Kiel (Gemeinschaftskraftwerk Kiel – GKK), which is due to be taken from the grid in the coming months, as well as from lower heating energy turnover due to the mild winter weather seen to date, lower wind volumes, leading to weaker electricity generation volumes at proprietary wind turbines, higher transport costs due to low water levels on the Rhine and higher substrate costs at biogas plants due to the persistently dry weather in the past summer.

Accounting for all these factors, MVV reported adjusted EBIT of Euro 67 million for the 1st quarter of the 2019 financial year, as against Euro 133 million in the previous year. Comments Dr. Müller: “Due to the one-off factors already listed, this figure only represents a momentary snapshot, and one that is not especially meaningful. Our operating business, by contrast, is absolutely on course.” With a view to the 2019 financial year as a whole, MVV has therefore confirmed its forecast and still expects to generate operate earnings at around the previous year’s level of Euro 228 million. The same pplies to MVV’s sales, which came to Euro 3.9 billion in the previous year but dropped year-on-year by 17 percent to Euro 934 million in the 1st quarter of the current year.

The complete quarterly statement is available online at www.mvv.de/investors .

MVV in Figures
       
  1 Oct 2018 to 31 Dec 2018 1 Oct 2017 to 31 Dec 2017 % change
       
Sales excluding energy taxes (Euro million) 934 1,125 - 17
Adjusted EBITDA1 (Euro million) 114 177 - 36
Adjusted EBIT1 (Euro million) 67 133 - 50
       
Adjusted net income for period1 (Euro million) 38 85 - 55
Adjusted net income for period after minority interests1 (Euro million) 32 69 - 54
Adjusted earnings per share 1 (Euro) 0.48 1.05 - 54
       
Cash flow from operating activities (Euro million) 15 37 - 59
Cash flow from operating activities per share (Euro) 0.23 0.56 - 59
       
Adjusted total assets at 31 Dec 2018 / 30 Sep 20182 (Euro million) 4,277 4,152 + 3
Adjusted equity at 31 Dec 2018 / 30 Sep 20182 (Euro million) 1,580 1,550 + 2
Adjusted equity ratio at 31 Dec 2018 / 30 Sep 20182 (%) 36.9 37.3 - 1
Net financial debt at 31 Dec 2018 / 30 Sep 2018 (Euro million) 1,222 1,075 + 14
       
Investments (Euro million) 71 104 - 32
of which growth investments 48 53 - 9
of which investments in existing business 23 51 - 55
       
Number of employees at 31 Dec 2018 / 31 Dec 2017 5,981 6,086 - 2
1  Excluding non-operating measurement item for financial derivatives, excluding structural adjustment for part-time early retirement and including interest income from finance leases
2  Excluding non-operating measurement item for financial derivatives

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