MVV’s earnings boosted by renewable energies and energy trading
Significant earnings growth at Mannheim energy company MVV due to exceptional performance in renewable energies trading and expansion in international renewable energies project development business – Forecast raised for current financial year – Price cuts announced for electricity and gas from 1 July 2023
In what was a challenging climate, the Mannheim-based energy company MVV (ISIN: DE000A0H52F5; WKN: A0H52F) concluded the first six months of its 2023 financial year (1 October 2022 – 31 March 2023) with exceptional earnings growth. MVV increased its operative adjusted EBIT (excluding disposal gains) to Euro 449 million in the first half of the 2023 financial year. Sales for the same period rose to Euro 4.1 billion. Between 1 October 2022 and 31 March 2023, the energy company also invested Euro 160 million in the energy transition and thus in sustainable growth. “Our strong first-half performance documents once again that we are implementing our #climatepositive course at full steam and that, at MVV, climate protection and business success go hand in hand”, explained Dr. Georg Müller, Chief Executive Officer of MVV.
Forecast raised for 2023 financial year
With regard to its forecast for the 2023 financial year, MVV already mentioned upon publication of its 2022 Annual Report and in its first-quarter reporting that it saw opportunities to significantly exceed the previous year’s level of operative adjusted EBIT. The energy company announced at an early stage that it planned to provide more specific information in its intra-year reporting if the situation in the overall economy and the energy industry were to stabilise.
“The positive earnings performance in our first quarter continued in the second quarter. For the further course of the 2023 financial year, we also expect to be able to generate substantial additional revenues, particularly from our renewable energies trading activities in our Commodities business, as well as from marketing our power plant capacities. In addition, we expect to see earnings growth in our New Energies and Supply Reliability segments”, commented Dr. Müller. “As the macroeconomic outlook has also stabilised in the interim period and we have come through the winter half-year, we are raising our earnings forecast for the current financial year. From an operating perspective, we expect our full-year adjusted EBIT excluding disposal gains for 2023 to amount to between Euro 650 million and Euro 720 million.”
Continuing success on #climatepositive course
At around Euro 4.1 billion, MVV’s adjusted sales for the first half of the 2023 financial year were 52 percent higher than in the previous year (Euro 2.7 billion). This growth is chiefly due to the year-on-year increase in wholesale electricity and gas prices, as well as to higher sales from the development of solar and wind projects. MVV’s operating earnings, i.e. excluding the disposal gain from the sale of the Czech subgroup completed in December 2022, amounted to Euro 449 million and were thus significantly ahead of the equivalent figure for the previous year (Euro 207 million).
This strong earnings growth was driven in particular by the exceptional performance of the Commodities business field, i.e. in MVV’s energy trading activities. While maintaining a conservative approach to risk management, the company has systematically expanded its marketing and managing of renewable energies. Thanks to these additional volumes and by drawing on price volatilities, the company was able to generate substantial additional revenues. In parallel, portfolio management activities also led to higher earnings from conventional energy trading.
Earnings further benefited from MVV’s renewable energies project development business. Here, activities at MVV’s wholly-owned subsidiary Juwi have recently gained extra momentum, particularly in its international business. In the USA, for example, Juwi is currently implementing two major solar projects with more than 223 megawatts in Colorado and 300 megawatt-peak in Washington State, as well as a 100-megawatt solar plant in Japan. Furthermore, Juwi sold the rights to an 84-megawatt windfarm in South Africa.
The construction of additional proprietary wind turbines, higher wind volumes and MVV’s environmental energy business also contributed to its earnings growth. Earnings were negatively affected, by contrast, by the prorated windfall tax in the months of December 2022 to March 2023. The Federal Government drew on the proceeds to refinance price caps adopted at the end of 2022 to ease the burden on consumers and industry.
Moreover, MVV’s heat and gas turnover decreased, with this being due in part to comparatively mild temperatures in the past autumn and winter, as well as to measures taken by MVV’s customers to save energy. Excluding weather-related factors, consumers in MVV’s Mannheim grid region thus reduced their gas consumption in the period between October 2022 and March 2023 by an average of around 16 percent compared with the previous year.
Price reductions announced for electricity and gas from 1 July 2023
MVV’s CEO also announced price cuts for MVV’s electricity and gas customers: “MVV has a forward-looking procurement strategy which reduces the attendant risks. Thanks to this sustainable procurement strategy, starting on 1 July 2023 we can pass on benefits achieved in our energy purchasing to our basic and backup supply customers, as well as to most customers in our special contract portfolio. This way, we are significantly reducing prices for both electricity and gas.” The company expects to release details of these price cuts in mid-May.
High level of investment in green energies
MVV is upholding its high volume of investment. In the first six months of the current financial year, the energy company invested Euro 160 million in sustainable growth (previous year: Euro 156 million).
The focus here was on activities to expand green energies. In particular, the company is further accelerating the heat transition which, together with the electricity transition and green customer solutions, forms a core component of the Mannheim Model. The transformation in heat generation is particularly set to gain in significance given the forthcoming amendment to the German Building Energy Act (GEG). With this legislation, Germany intends to set the standard that, from 2024 onwards and apart from specific exceptions, new heating systems must be at least 65 % powered by renewable energies.
Outlines Dr. Müller: “Alongside heat pumps and biomass heating systems, district heat is one lever enabling us to supply climate-friendly heat to buildings in future in accordance with legal requirements. We will be fully converting our district heat in Mannheim and the surrounding region and in Offenbach to green energy sources in this decade. Kiel is set to follow by 2035 at the latest. To this end, we are investing in a broad portfolio of renewable generation options.” Before the end of this year, MVV will launch operations in Mannheim with its first river heat pump and a sewage sludge treatment plant. In 2024, it will connect its biomass power plant on Friesenheimer Insel to the district heat grid. These measures will be supplemented by further green options, such as deep geothermal energy, extra river heat pumps, biomethane plants, electrode boilers and the use of further industrial waste heat.
MVV is also pressing consistently ahead with the electricity transition, and that both in its proprietary generation and for its customers. Examples here include proprietary solar plants and wind turbines, as well as the renewable energies project development business referred to above. In the first half of its financial year alone, MVV developed renewable energies projects on a scale of around 500 megawatts and thus further stepped up the pace at which it is expanding renewable energies.
“Significantly reducing emissions alone will not make Germany climate neutral”, added Dr. Müller. “Over and above that, we will have to remove greenhouse gases from the atmosphere and permanently immobilise these by using or storing them. As a pioneer of the energy transition, we will be making our contribution here as well. Before the end of spring 2023, we will be launching operations at an initial trial carbon capture facility in Mannheim for a one-year period.”
By way of conclusion, MVV’s CEO stated: “Our activities demonstrate once again that, with our #climatepositive strategy, we are already thinking of the future and are ourselves actually generating the additional tempo needed to realise the energy transition.”
MVV will publish further details of its business performance and forecast on 15 May 2023 in its Half-Year Report on the first six months of the 2023 financial year. This will be available for downloading at www.mvv.de/investors.