Premier Energy PLC (PE) Earnings Call Transcript & Summary

Good morning, and welcome Premier Energy's conference call, where we will be presenting the consolidated results for the first half of 2026. Before we begin, please note that this call is being recorded and that the recording will be made available on our website later today. By joining this earnings call, as indicated in the call in a automatically and implicitly consented to being recorded. if you do not wish to be recorded, please leave the call. I would like to mention that we might be making forward-looking statements today during the regarding future performance of Premier Energy and the actual results may differ materially. We encourage you to review the disclaimer that we have included in the presentation, which you can see right now on the screen. This disclaimer applies equally to all statements made in today's call. Thank you for your attention. So we can begin the call. My name is [ Zuzanna Kurek ], and I'm Investor Relations Officer of Premier Energy, and I will be your moderator during today's call. I am joined by Jose Garza, Chairman of the Board and CEO of Premier Energy; and Petr Stohr, member of the Board and the Chief Financial Officer. Regarding the structure of the call, let me walk you through the setup. First, Jose Garza will deliver the opening remarks highlighting key financial and operational CPIs. Following that, Petr Stohr so will present a detailed overview of our financial results once the presentation concludes, we will made into the Q&A session. [Operator Instructions] So thank you for your patience. And I would like now to invite Jose to share the opening part.

Thank you, Zuzanna. Good morning, everyone, and thank you for joining Premier Energy's results call for the second quarter and first half of 2026. Before I turn the call over to our CFO for a detailed review of the financial results, I would like to provide some context and commentary on the environment which we are operating; secondly, highlight the principal developments across the group; and lastly, explain how we see from your energy position for the remainder of the year. In the first half of 2026, which included a very good second quarter, it confirms our strategic direction with which we have pursued for the recent years, building a vertically integrated energy platform capable of creating value across the entire energy chain from generation to distribution and supply. Let me state that the Romanian energy sector continues to undergo a significant transformation. The end of the electricity price support scheme in July of last year restored an extremely competitive supply market. This has been a positive step towards market normalization, but it has also resulted in more active customer switching and in some cases, aggressive and irrational customer acquisition pricing. At Premier Energy, we remain disciplined in this environment. Our objective is not to pursue volumes at any cost. It's to build a sustainable customer-driven business secondly, to price risk appropriately and thirdly, to generate attractive returns over the long term. Electricity markets remain volatile, the rapid expansion of renewable generation and consumer capacity is changing the production profile of the system. The market can and will continue to experience very low or negative prices. At other times, the limited flexible generation in the system and network constraints and difficult hydrological conditions, which will only worsen in the future, produce sharp pricing. This creates challenges for generators, producers, suppliers, particularly in forecasting and balancing. However, it creates opportunities for companies like ourselves able to combine new generation, supply, storage, balancing capabilities and network infrastructure. This is precisely the direction in which we have been developing. Romania's need for additional investment in networks and system flexibility is becoming increasingly clear. The energy transition cannot be achieved through renewable generation alone. It requires modern distribution networks stronger interconnection, digitalization and substantial energy storage capacity. These trends reinforce our conviction in our diversified and vertically integrated business model. Against this background, Premier Energy delivered strong first half 2026 results. Normalized revenue increased by 10% and year-on-year to EUR 871 million, while normalized EBITDA increased by 27%. Renewable generation was one of our strongest contributors owned renewable electricity production increased by 46% year-on-year to 334 gigawatt hours, while installed owned renewable capacity increased to 370 megawatts at the end of June, which is 85% higher than a year earlier. The electricity production segment recorded normalized revenue of EUR 53 million, up 39%, and normalized EBITDA of EUR 33 million, up 72%. These results show the contribution of capital that we have deployed into acquired and developed generation assets. Our regulated distribution activities continued to provide stability. Electricity distribution served approximately 1 million customers in Moldova. Our remaining natural gas network continues to expand across electricity and gas distribution, our regulated asset base reached approximately EUR 280 million. Our supply business also performed extremely well in an increasingly competitive environment. Although electricity supply volumes declined mainly because of the disposal of life capital and our continued discipline in customer acquisition. Natural gas supply volumes by contrast, increased by 27% to 4.3 terawatt hours. The supply segment generated normalized revenue of EUR 750 million, up 8%. The improvement reflects a lower-than-anticipated impact from intraday electricity price volatility and as well as our continued focus on procurement, cost control and efficiency. This growth was complemented by the 158-megawatt wind portfolio acquired in Hungary in January, together with the newly commissioned assets in Romania and Moldova. The Hungarian portfolio has performed better than expected and has meaningfully expanded and diversified our generation base. In May, we completed the transaction through which we consolidated our ownership in several renewable generation assets while disposing of our interest in the Alive Capital to simplified our structure and increased our direct participation in renewable assets that are central to our strategy. We have also recently committed to procure LNG cargo through [ Alexandru ] terminal for the upcoming gas year. We will begin receiving gas on 1st of October. This will further diversify our natural gas procurement sources and will enhance our profitability and will serve our growing customer base. Our development pipeline continues to advance. During the first half, we invested approximately EUR 20 million in renewable developments. We also completed construction and testing works for 137 megawatts of solar capacity. All 3 projects received energization notifications in June and began generating revenue and our undergoing final testing with Transelectrica. We expect to receive production licenses in the early fall. In parallel, we commenced construction of our 200-megawatt, 400-megawatt hour battery energy storage near Iasi, with an estimated total development and construction cost of approximately EU R75 million it's expected to become one of the largest battery storage facilities in Eastern Romania. The most transported development of the period was our agreement to acquire Evryo Group's power distribution network, including Distribution Energie Oltenia. DEO operates Romania's third largest electricity distribution network covering approximately 80,000 kilometers and serving around 1.5 million customers. The transaction received shareholder approval and committed financing during the period. Subject to the remaining customary regulatory clearances, we continue to expect closing in the second half of 2026. This acquisition represents a major step in Premier Energy's evolution and will add a large-scale regulated electricity distribution platform in Romania and will further strengthen the balance between our regulated and our market-facing activities. This will also bring the group closer to a fully balanced platform combining electricity generation, distribution and supply alongside natural gas distribution and supply. I also want to recognize that our balance sheet includes more than EUR 100 million invested in assets, which did not contribute or revenue or profit during the first half. As these projects become operational, they should further support growth in the earnings pace. Looking towards the remainder of 2026, we continue to operate in an environment shaped by a regulatory change energy price volatility, fiscal uncertainty, grid constraints and geopolitical risk. We don't underestimate these challenges. However, our first half performance demonstrates that Premier Energy can grow and deliver in this environment. Our diversification provides resilience and our renewable and storage pipeline provide future growth. our planned expansion into remaining electricity distribution will materially strengthen the group certain profile. Based on our current expectations, we continue to project approximately EUR 1.5 billion of revenue and approximately EUR 150 million to EUR 160 million of EBITDA for the full year. Our priorities for the second half are clear: complete the DEO acquisition, bring solar and battery assets into full operation, execute our storage and renewable development pipeline and maintain discipline in supply and procurement and continue to allocate capital carefully. So with this, I will now turn it over to my partner, Petr, who will walk you through the second quarter and first half financial and operational mortgages or detail.

Thank you. Thank you for that, Jose. Moving on to some of the more detailed financial aspects. So you will see that our revenue on an IFRS basis increased by 4% with the normalized revenue increasing by 10% and our EBITDA on an IFRS basis, down 29%. But again, here, we have the reversal of the tariff deviations. So really, on a normalized basis, the EBITDA grew by 27% with the, we call it illustrative because there's a lot of some assumptions in there, but the normalized net profit increasing by 32%. If you recall last year, EUR 103 million of IFRS EBITDA, we were always explaining that it's really more of a 63 number because of the tariff deviation of overearning on the tariffs in 2025, a which we are now sort of paring back. And we actually earned EUR 6 million less than we should have in the first half of the year on a normalized EBITDA basis. Moving on just very quickly on those tariff deviations, again, EUR 6 million impact. So we underearned by EUR 6 million being in 2026. So on the other end in 2025, this is the full year number. We earned by more than EUR 42 million. And that's a result of all of that is that we ended the -- on June 30, we had a situation where we had over earned by EUR 29 million. And this -- when you then look at the second quarter, you will see that we actually earn more than we should have. But here, we're talking about the first half numbers. We went from a situation where at the end of the year, we had over earned throughout the roll-off the regulatory period of, call it, 20 years by EUR 35 million, that is now down to EUR 29 million as we were under by EUR 6 million. A little bit about -- and I know there are some additional questions on this about the price volatility, not only on sort of seasonal basis or what's sort of going on right now in the markets, but also on a daily basis, you can see that there continues to be quite a bit of a difference in the prices for electricity throughout the day. You can see that the sort of new to early after new dollars, the prices are very small. And then in the evening, they continue to be very much elevated and you see the difference being, okay, it was a little bit less this year than last year, although actually on a sort of relative basis, if you actually look at it on a on a euro basis, it's a bigger difference. It just so happens that overall, the prices were higher in the second quarter this year than last year. And some of that is driven by some of the things reading in the paper, some of the things we're seeing; the drought, the issues with the nuclear energy that is reflected here in the higher overall price in Premier Energy in the second quarter of the year. A little bit about our balance sheet continues to be very strong. You can see a bit of a decline in current assets as we've been able to shrunk the working capital need of the business, trade receivables came down receivables for the government came down a little bit. and the gas and storage came down from the end of the year, while the assets of the business, the noncurrent assets continue to grow as we invest in the renewable production plans. So this would include the acquisition in Hungary from December. And the debt on a current basis, the short-term debt came down, but again, this is primarily driven by the decrease in working capital. And then you will see an increase in the long-term debt as the financing for the Hungarian acquisition what was added in January of this year. And then the equity is a small decrease, but that's really driven by the Alive Capital transaction where the minority interest amounts from quite a bit. So the equity attributable to shareholders actually increased. A little bit about the net debt analysis. We had a net debt position of EUR 230 million. If you adjust it for working capital, gets to about EUR 58 million. These levels, combined with our last 12 months EBITDA, that is around EUR 164 million, EUR 165 million. including full year impact of the Hungarian acquisition. So it's about 1.4x EBITDA on a net debt basis. It's basically [ 20.3 ] on working capital on net debt adjusted basis. And then you can see kind of what's what is making up some of that net debt. So the government supports the receivable EUR 97 million, came down a little bit in the second -- and actually, sort of stay stable during the second quarter, but there's been some payments done recently, so it's come down. And if you think about our net debt number, we are carrying a EUR 97 million receivable from the government that this kind of illustrates what that means. And then we have our investments into some of our larger projects. This is the 26-megawatt solar the 480-megawatt solar, which are the 2 out of the 3 current solar and battery parts, which are in the final testing phase here, the CapEx, the investments have been made. It's about EUR40 million, if you look at those 2 together, and those assets, and there's been some questions, they are starting to generate revenue, smaller amounts now because it's still in a testing phase, but hopefully, pretty soon, you're a much larger amount as those plans become fully operational. And then we've also already invested EUR17 million in the battery construction and development. So if you adjust for that, the net debt number, we didn't make those investments and we didn't have the receivable from the government. We have a net debt of EUR75 million basically our adjusted working capital and that will be 0. And then finally, we're also showing kind of the impact of the gas and storage that we currently or that we had as of June, the numbers are a little bit higher now as we are starting to enter the fall and winter season, but that was at EUR 33 million, EUR 34 million number. Okay. A little bit about the segments. Here on our production segment, very nice growth. The segment is performing very well. Some of the growth is driven by the Hungarian acquisition. It's -- we are now up to 370 megawatts of capacity that is fully operational that we have had 137 million, of which 74% is consolidated. Those are the 2 solar and battery packs I just discussed but that's in final testing. So once we get that in, we will be over 500 megawatts and then we have 180 ready to build, and then there's another pipeline behind that that's already been created. But one of the things about our pipeline is we have it pretty strategically timed so that when the solar and battery parts were completed. And again, now there in the final testing phases, we start working on the battery. And pretty soon, I think we'll probably start discussing some of our wind developments and get those constructed after the batteries constructed. So a very nice steady pipeline of some very good production assets. But overall, revenue increased by almost 40% to EUR 53 million. EBITDA from EUR 19 million to EUR 33 million. You can see the production being nicely and then a little bit more again about the pipeline and the portfolio, including the batteries portfolio, which we have 446 megawatts under construction. A bit about our Distribution segment, very stable. You'll see the revenues increased a bit. normalized EBITDA really kind of flat, let's say, it came down a little bit, and that's really driven by the return decrease in Moldova, which went from almost 12% to an almost 10% return on that out there. So that created a bit of a decline in the EBITDA there. On the other hand, we have a bigger regulated asset-based value there. You can see that regulated asset-based value in Moldova increase to USD 207 million to USD 260 million. The distribution points in Moldova continue to -- it sounds like every year, every quarter, it did still increase by about 1%, 2%. And then on our gas distribution network, there's actually 4% growth in our own network. And then we did have the reallocation of the last resort distribution networks in the fourth quarter of last year. So very stable. And this is the segment where once the DEO acquisition is completed. This is the segment that DEO will enter into, of course. A little bit about our supply business. We've got nice growth on the top line, a nice almost 30% growth in EBITDA, the electricity supply there's a decrease, again, driven by the -- primarily by the Alive transaction, the divestiture, and also by the fact that we are not chasing volumes. You can see on the gas side, we actually increased our supply quantities. And yes, on the customer evolution a bit of a decrease. As again, Jose has mentioned to this, we are not chasing volumes, we want to do this as we are very much being sustainable here in this business. And with that, I would like to open it up to questions. And I know that we already have some, so maybe we can already start go through those.

Thank you. Just as a reminder, if you have a question, please type it in the chat. For the benefit of those who will be watching the replay of this teleconference, I will read each individual question allowed first and then Petr and Jose will be addressing those one by one. As Petr mentioned, we did receive a large number of questions. I have already uploaded in the chart, so that you can see them. So we avoid doubling the questions. And I think we can jump right in and start with the first one. Could you provide an update expected time line for the completion of the Evryo acquisition, including the remaining regulatory approvals and the targeted structure of the long-term refinancing. What normalized net debt-to-EBITDA range should investors expect immediately following closing and by the end of 2027?

Very good question. Listen, the acquisition is going through the regulatory approvals. We expect those to be received over the next several weeks. And then we will close shortly thereafter. So we believe it will be a second half event. And once the transaction closes, and we did put out a presentation on this, I think, in late April, we believe we will have a long-term financing structure with long-term debt, whether that's a syndicated loan or a bond in place. We may even have that in place before the closing. It's maybe a potential state long in place before the closing. But all in all, keep in mind, we do have a bridge loan facility, which is already in place with JP -- underwritten by JPMorgan and UniCredit. So it will be long-term debt, and it will take our leverage level to -- on a working capital adjusted basis from 0.2 0.3 to about 2.5x EBITDA. And on a net debt basis, you look at that presentation, I think we were right around 3x, maybe just slightly over 3x EBITDA, levels that we feel very comfortable with, given the infrastructure strength of the business and the diversification of the cash flows of the business. So it's -- again, as a presentation from late April, and there's really been no changes to that. So we kind of get into that 2.5 to 3x leverage level once it is -- once the transaction closes. And we will start consolidating this business as soon as closing happens.

Of the approximately EUR 100 million invested in assets that did not contribute to results for the first half of 2026, what EBITDA contribution do you expect in the second half of 2026 and for the full year 2027? Please separate the contribution from the 137 megawatts solar portfolio, the Hungarian wind assets and the best projects?

We won't go through the contribution in the second half of 2026. But I can state that on a full year operating run rate, we would expect this EUR 100 million assets to contribute approximately EUR 20 million to EUR 25 million of EBITDA business. Yes.

Thank you. Could you provide formal guidance for normalized EBITDA net profit and growth CapEx for 2026 and 2027, both excluding Evryo and including Evryo? What are the key assumptions underlying this guidance?

So listen, I think we've provided formal guidance on the EBITDA of EUR 150 million to EUR 160 million. I think the EUR 150 million is a very conservative number. In fact, I wouldn't be surprised if we hit on 60 and probably go above EUR 160 million, but keeping things in line for this for 2026. Now just to be clear, that guidance excludes the Evryo acquisition. Again, whenever we acquire everyone, we will start consolidating those results. And if we have an acquisition at the end of September, then we will pick up the quarter, the fourth quarter would include the entirety of the Evryo business for that quarter. So I would obviously change the numbers and increase them quite a bit. But keeping that aside, but including the Alive Capital transaction, we, again, feel very good about that EUR 150 million to EUR 160 million guidance with some conservatism in there on the lower side of things, just given where we are in the environment and some of the volatility that's in place.

Perfect. Electricity supply volumes declined in the first half of 2026, including on a like-for-like basis. How do you see customer retention, competitive pricing pressures and the EBITDA margin of the supply business evolving in the second half of 2026 and in 2027?

I think we've seen a pullback from some of our competitors who were pricing extremely competitive in the earlier part of the year. These competitors are somehow short electricity. And now they are having to purchase large quantities of electricity at current market pricing. So we don't expect we do not expect a continuation of the aggressive customer acquisition policy at or below market pricing to continue in the future. So we view that as a positive going forward. So we expect our customer supply evolution to more or less be stable and possibly even increase in the near future.

Could you explain why 2026 normalized EBITDA guidance moved from approximately EUR 150 million to EUR 160 million? And what drives the lower end of the new range? I believe you already addressed that.

Yes, it's just being extremely next year, but being very conservative -- it's really going to volatile where the prices. Now there's -- in our business, there's pluses and minuses, but we actually benefited some of them, but we're just being very conservative there and there's also effects in play, although we normalized for some of it. But just being conservative.

What proportion of Romanian electricity supply volumes for Q3 and Q4 is already hedged and covered by bilateral contracts, including with [ Nuclearelectrica ]? And at what average acquisition drive? How much remains exposed to spot prices? And do you expect second half unit margins to come under pressure?

So what we can tell you is we have about 80% to 85% of our needs of our total electricity needs already contracted None of it is with nuclear electric. In fact, we have spoken to some of our suppliers, that's the ones we have contracts with, and they also do not have exposure to Nuclearelectrica. So the Nuclearelectrica issue is on a direct basis, is not really an issue with us. The reason we're not -- we're actually at 100% of our base load. So our base load, we've been at 100% since last fall. This goes back to our prudent and risk management. So we don't really see that. Where we do have where we are open is for some volume in the evenings, and that is obviously priced into our prices. And right now, I would say the prices were a little -- the evening prices were a little bit lower than our expectations earlier in the year throughout the spring. In the summer, it has been higher than we had been expecting, but it's a relatively small amount of the quantity. And there's just no product in the market for us to buy that evening electricity on some sort of a evening price, there's no product for us to purchase there. And if we were to be -- if we were to buy additional baseload capacity, would then be selling electricity during the day which at times is at very low prices. So I think we are actually, what I would say is we are -- we have purchased what we wanted to purchase. So our we're at 100% of what we can realistically purchase for the second half of the year.

When do we expect the 137 megawatts solar portfolio to become fully commercially operational? And what second half of 2026 EBITDA contribution is included in guidance?

There is -- it's a good question. The portfolio is undergoing the final testing. These things take a few months, you then need to actually get certified by [ Onrad ]. So I think it's probably a couple -- still a couple of months away. And then while the assets are already generating some revenue through the testing period is significantly lower than what would be once it becomes fully operational. And our guidance does not include any material numbers from these plants in the second half of the year.