MVV in favour of accelerated expansion in renewable energies and combined heat and power generation:
Positive signals sent by Grand Coalition will have to followed up with specific implementation
Mannheim-based energy company calls for effective corrections to tender design, special tenders for onshore wind power and further development of CHP legislation - Operating earnings up 5 percent to Euro 223 million in 1st half of 2018 financial year - Earnings forecast affirmed for 2018
“The commitment shown by coalition partners to the 2030 and 2050 climate targets and the accelerated expansion in renewable energies and combined heat and power generation mean that the Federal Government has sent out a positive signal for the further conversion in the energy system.” According to Dr. Georg Müller, Chief Executive Officer of the Mannheim-based energy company MVV (WKN: A0H52F, ISIN: DE000A0H52F5), in the next stage it will now be necessary to “take specific decisions and enact relevant legislation”. At the presentation of MVV’s results for the first six months of the 2018 financial year (1 October 2017 - 31 March 2018) on Tuesday, Dr. Müller spoke out in favour of making effective corrections to the tender design, special tenders for onshore wind power and the further development in the German Combined Heat and Power Generation Act (KWKG).
The company successfully maintained its robust performance between October 2017 and March 2018. With basically unchanged sales of Euro 2.1 billion, MVV increased its operating earnings (adjusted EBIT) year-on-year by 5 percent from Euro 212 million to Euro 223 million in the 1st half of the current 2018 financial year. Correspondingly positive developments were also shown by earnings before interest, taxes, depreciation and amortisation (adjusted EBITDA), which grew by 12 percent to Euro 335 million, while adjusted net income for the period after minority interests increased from Euro 113 million to Euro 119 million. That corresponds to adjusted earnings per share of Euro 1.81, as against Euro 1.71 in the previous year.
Renewable energies and energy efficiency still key to the energy turnaround
With regard to the political framework, MVV’s CEO Dr. Müller believes that it will be necessary to focus “on further expanding renewable energies in a competitive manner and cutting costs on a permanent basis.” The excessive privileging of citizens’ energy cooperatives in the first three tender rounds had led to a politically unintended market distortion, one which would need to be properly remedied looking forward. That was already apparent in the results of the first tenders in 2018. Here, MVV’s Juwi subsidiary was awarded eight tenders - four wind power projects with a total capacity of more than 40 megawatts and four open-space photovoltaics projects with a total capacity of 89 megawatts.
At the same time, in effectively remedying the undesirable effects of the previous rounds, it was “only logical” that the Coalition Agreement now foresaw special tenders of additional volumes. Supplementary tender rounds of 4,000 megawatts each are therefore to be held for onshore wind power and photovoltaics in 2019 and 2020. Comments Dr. Müller: “As laid down in the Coalition Agreement, this will accelerate the conversion in our energy system. That is also consistent with our company’s basic strategic alignment.” The Federal Government intends to raise the share of electricity generation accounted for by renewable energies to 65 percent by 2030.
MVV’s CEO also welcomed the commitment shown by the Grand Coalition to the key roles to be played in the energy turnaround by efficient combined heat and power generation (CHP) and by environmentally-friendly district heating. Here, it would be necessary to improve CHP legislation to facilitate the expansion in CHP plants and district heating infrastructure and to enhance their efficiency. Adds Dr. Müller: “The signal sent by the Federal Government here is very relevant for our Supply Reliability reporting segment.”
Positive outlook for 2018 affirmed
MVV sees the robust performance of its operating business in the 1st half of the year as being due once again to its broad-based and well-balanced portfolio along the energy industry value chain. This enabled the company to offset lower gas and heating energy turnover due to milder winter weather compared with the previous year, as well as the decrease in electricity and gas trading volumes. MVV benefited from higher revenues at its proprietary wind turbines and in its renewable energies project development business, as well as from the positive development in its environmental energy business. Earnings will nevertheless be held back, also in the longer term, by the further reduction in grid fees in the context of incentive regulation.
By contrast, the company’s adjusted EBIT for the 1st half of the year was virtually unaffected by various one-off items which effectively cancelled each other out. Positive one-off items from sales of non-current assets were offset by impairment losses recognized in the project development business due to current market developments in Germany and abroad.
At the end of the first six months, the company affirmed its positive outlook for the 2018 financial year as a whole. From an operating perspective MVV is therefore confident that its adjusted EBIT will slightly exceed the previous year’s figure (Euro 224 million). Given its business performance to date, with a reduction in energy trading volumes, MVV expects its full-year sales to amount to around Euro 4 billion in 2018 and thus to roughly match the previous year’s level.
“We have the right strategy”
According to MVV’s CEO, the signal sent out by the Coalition Agreement and the company’s business success as reflected in its robust performance showed that “we have the right strategy”. MVV had been aligning its activities to the energy system of the future for many years now and invested large sums in this process. Comments Dr. Müller: “In the coming years, we will be pressing further ahead with the energy turnaround.” Key investment focuses here involved expanding the use of renewable energies, boosting energy efficiency with combined heat and power (CHP) generation and district heating and developing innovative services and products.
MVV already invested Euro 155 million in the 1st half of the current 2018 financial year - 76 percent more than in the previous year. Of this total, Euro 65 million related to growth investments and Euro 90 million to modernising and maintaining existing plants and grids. Alongside the new gas-powered CHP plant currently being built at Stadtwerke Kiel, a company which forms part of the MVV Group, the single largest projects also included shareholdings acquired to extend the range of services offered to industrial and SME companies and the takeover of an energy from waste plant in the Scottish city of Dundee. Here, MVV is building a new highly efficient CHP plant in the direct vicinity of the existing plant for a total investment of Euro 135 million. In parallel, MVV pressed ahead in Mannheim with linking up its CHP plant on Friesenheimer Insel to its regional district heating grid. All in all, the company will be investing around Euro 100 million in Mannheim alone in the years ahead.
For the 2018 financial year as a whole, MVV currently expects to invest around Euro 300 million in growth and in modernising and maintaining its proprietary plants and grids.
|MVV in figures|
|Euro million||1 Oct 2017 to 31 Mar 2018||1 Oct 2016 to 31 Mar 2017||% change|
|Sales excluding energy taxes||2,136||2,165||- 1|
|Adjusted EBITDA1||335||300||+ 12|
|Adjusted EBIT1||223||212||+ 5|
|Adjusted net income for period1||140||131||+ 7|
|Adjusted net income for period after minority interests1||119||113||+ 5|
|Adjusted earnings per share 1 (Euro)||1.81||1.71||+ 6|
|Cash flow from operating activities||58||217||- 73|
|Cash flow from operating activities per share (Euro)||0.88||3.29||- 73|
|Adjusted total assets (at 31 March 2018 / 30 Sep 2017)2||4,314||4,248||+ 2|
|Adjusted equity (at 31 March 2018 / 30 Sep 2017)2||1,559||1,490||+ 5|
|Adjusted equity ratio (at 31 March 2018 / 30 Sep 2017)2||36.1%||35.1%||+ 3|
|Net financial debt (at 31 March 2018 / 30 Sep 2017)||1,214||1,077||+ 13|
|Total Investments||155||88||+ 76|
|of which growth investments||65||25||>+ 100|
|of which investments in existing business||90||63||+ 43|
|Number of employees (at 31 March 2018 / 31 March 2017)||6,010||6,031||0|
|1||Excluding non-operating measurement items for financial derivatives, excluding structural adjustment for part-time early retirement and including interest income from finance leases|
|2||excluding non-operating measurement items for financial derivatives|