S.N. Nuclearelectrica S.A. (SNN) Earnings Call Transcript & Summary

Hello, everyone. My name is Valentina Dinu. And today, we have the conference call for the annual results for 2021. Today, with me there is Mr. Dan Niculaie. He's the CFO of the company. He's going to deliver the presentation for you. And then we are going to follow with Q&A. So Dan, the floor is yours. Thank you.

Hello, good morning. Thank you, Valentina. Good morning, everyone. Thank you for here. So I will present today the audited individual financial statements for the year-end 2021. The audited financial statements for 2021 are in line with the preliminary financial statements and in line with the elements presented in February. I will go through quickly through the presentation. First of all, I would like to discuss a little bit about the financial highlights and then about the sales of electricity, OpEx and CapEx considerations, technical performance and future financial calendar. So in terms of financial highlights, as anticipated, we have managed to sell better than budgeted. We are -- we have recorded a 7% increase in sales as opposed to the budget, which, in turn, generated a higher EBITDA, RON 1.7 billion EBITDA, representing a 16% increase over the budgeted figure. And of course, this translated into a larger net profit, the difference being almost RON 200 million. In terms of -- in this slide, we're presenting the big differences. So as mentioned, the largest driver of our financial performance was an increase in the sales of electricity. We had a little bit of cost increases, but cost increases were linked to the cost of traded electricity in the market. Other than that, most of the OpEx items, most items are in line with our budget figures. In terms of balance sheet situation, nothing has -- nothing dramatically has happened here. We are slowly decreasing our debt levels, and we foresee that this will be -- will reach almost 0 this year. So we are sitting on a large pile of cash. And we will probably increase our cash position in order to fund the investments in the foreseeable future. In terms of sales of electricity, as presented in this slide, we were foreseeing RON 2.4 billion revenue from -- so we had RON 2.4 billion sales of electricity in 2020. And this year, 2021, we managed to increase it to RON 3.1 billion almost. And this is the result mainly of the fact that we managed to sell more under the competitive market. And this, together with the average price of electricity sold drove the revenue higher. Okay. This is a very detailed -- this slide presents a very detailed structure analysis, 2021 versus 2020. You will see here that we managed to increase our average prices a lot on the competitive -- on the spot market, which, of course, drove the overall performance of the sales. In terms of OpEx, everything is in line with what we have budgeted, with a little bit of increases in the cost of traded electricity, which mirrors the fact that we are -- during the outages, we need to buy electricity from the market and the overall average price was higher than anticipated. We had an increase in the cost of uranium, 16.3%. And this was also driven by the market. Other than that the major cost, personnel expenses, it's -- we're talking only about almost 1% increase in the overall cost, mainly as a result of the increase in the number of employees. Going further in terms of CapEx investments, we budgeted RON 356 million. We managed to achieve 72% -- sorry, 99% degree of completion, which is better than last year. Other -- with regards to the main projects of the company, CapEx investments, you probably know about our desire to refurbish Unit 1, and we are quite advanced in this project. We anticipate that starting from 2026, 2027, we will basically close the production of electricity from Unit 1 and enter into the hard core refurbishment. In terms of Unit 3, Unit 4, the plan is going -- the project is going as planned. We are working closely with Candu Energy, a member of the SNC-Lavalin group and the Design Authority to advance the project. And we are keeping a close eye on this project and working towards completion. In terms of radioactive emissions, everything is progressing as anticipated. No changes. No significant problems. Nothing to report. In terms of nuclear fuel burn factor, we are working as anticipated. I'm going fast through this presentation. The capacity factor is one of the best in the world. So we have -- we are very proud of this. Cumulated 2021, 91.6%. And the last slide, the next presentation will be on 12th of May with the publication of the first quarterly report. And later on, on 12th of August with the publication of the first half year report 2022. So this is in a nutshell what we've managed to achieve in 2021. If there are any questions, I'm more than happy to respond. Thank you.

This is [indiscernible] from [ ECR Pensions ]. First of all, congratulations on the results. And I have 2 questions, so both related to regulation. So if you can give us an overview of the regulations that have impacted Nuclearelectrica last year and the outlook for this year, both in terms of energy overall regulation and fiscal regulation related to price gaps or things like that?

Thank you. So we don't have a price gap in 2021. We sold competitively on the regulated markets. In terms of legislation, you probably know that we were impacted by a regulation with regards to taxation of supplementary revenues. And this -- you probably know that this regulation has been expanded also in 2021 with some sort of cap on extra profits completed under a certain formula. I don't think this will be -- it will impact us a lot in 2022. We are -- we managed to sell most of our energy already. And we are foreseeing to stay within the budget or even better.

So if you can just remind me what is the regulation more precisely. So the exceptional tax where we can see it on the P&L statement, it's a tax on profit exceeding something?

Yes. Yes. It was -- now if you remember, there was a regulation. If I remember correctly, it was inactive in the last quarter of 2021, which created an additional tax on revenue exceeding a certain value. And then in -- if I remember correctly, in March 2022, the formula has been clarified. And whatever exceeds -- there is a certain calculation of profit made under a formula. So whatever profit exceeds RON 450 is taxed with 80%. I -- if you want, I can give you the name of the ordinance regulating this supplementary taxation of revenues. So...

Yes, I think it's clear, but we see here income tax charges included. So it is included also this exceptional tax, which you see on the slide that is on the screen this RON 167,000.

Just one second, just to see it a little bit better. You're looking at slide...

Yes, I'm looking at financial highlights, which are on the screen. So I want to see where is this tax reflected in the P&L?

Exactly. But I will come back to you and I will tell you exactly what it is...

Okay. But I understand there's no change, and I don't see is material. So I don't have the -- I'm not an expert in the regulation, but I want to see a certain percentage of the profit roughly, it's less than 10% or it's...

No. No, it has a marginal impact on our P&L. Okay. There will be -- it will be a little bit higher in 2022 because if we managed to sell and we are foreseeing that we are going to sell, the average selling price will be higher this year than in 2021. And given this new regulation enacted in 2022 or the taxation of additional profit, it will be -- it will have an impact, but it will not deteriorate our P&L position. So it will stay within the budget or even better.

Okay. Congratulations again on the good results of last year.

Thank you. We work together with the market to increase the prices. No, it's a joke, sorry for this. It's -- we -- our operational capacity is within the best ones in the world. So -- and the rest is mainly driven by market considerations, the financial performance.

I would like to ask an additional question regarding this windfall tax, especially regarding cost of traded electricity, I want to ask, if you buy electricity from the market and then sell this electricity to fulfill your long-term contracts for more than capped price, will you pay for this acquired electricity? Will you pay this windfall tax for extra revenue or not?

My understanding is that you're only paying a tax on windfall profits only on the sales, not on the cost. So when we're buying electricity, we're paying the full price. That's it. However, when we're selling the electricity produced internally and if we are selling this at a higher -- at over RON 450, then we are subject to not RON 450 profit, we are then subject to this windfall tax.

So only for the electricity, you have produced, not the electricity you have purchased?

It's a very complex. We have -- we are selling our electricity on -- mostly on the regulated market. From the perspective of the -- from a fiscal perspective, it doesn't matter. There is no difference between the electricity that was produced internally or both in order to fulfill and comply with our contracts. So it's the only element is the selling price.

Okay. Okay. And another question regarding the amounts of electricity but will be sold on the [indiscernible] market versus long-term contracts. Is there any clarity? You mentioned that you sold most of your electricity for 2022, but how much as a percentage you already sold?

It's more than 80%.

Can you hear me?

Yes, of course.

So do you have any more questions for Dan.

No, I have none.

Okay. So we also received several questions from Mr. [indiscernible]. And you are going to receive the answers on e-mail, if that is okay with you.

Yes. Sure.

Okay. Thank you very much. Thank you all for joining us in. As well, I'm going to send you in a couple of minutes the presentation and the audio file. You can also find those on our website on our Investor Relations page. Thank you all once again, and have a good weekend. Thank you.

Thank you. Goodbye.

Bye.

Thank you, Valentina. Thank you. Bye-bye.

Bye.