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

Okay. It's 4:00. Hi, everyone. Again, my name is Valentina Dinu. I am IRO with Nuclearelectrica. And today, investors call is actually for the financial results for the third quarter of 2024. We are going to proceed with the presentation of the financial results. And for this, Mr. Daniel Adam, CFO of the company, is here to provide you with the presentation and then you can ask whatever questions you find necessary. So Daniel, the floor is yours. Thank you.

Thank you very much. Hello, everybody, I'm Daniel Adam, the CFO of the company, the new CFO of the company. And we will start with the financial highlights for the first 9 months of 2024. As you can see on noncurrent assets, we have upward variation, mainly due to the new loans for RoPower Nuclear RON 188 million. This loan was granted for the financing of the front-end engineering and design FEED 2 of the Small Modular Reactors Project. We have also downward variation due to the depreciation. On the current assets, we have a decrease of the receivables of RON 319 million. This is on the heels of the revenue and energy price reduction in 2024 versus last year. And we have also a decrease of RON 270 million in deposits and cash and cash equivalents. On the other side, we have an increase of financial assets booked at amortized costs represented by state bonds and treasury certificates. On current liabilities, we have a reduction of almost RON 300 million mainly due to the reduction in trade payables and other payables represented by windfall tax. And we have an increase in current liability -- in tax liability of RON 65 million. On the performance of the company, we have a net profit reduction at 9 months of 35% or RON 692 million. The negative impact is coming, of course, due to the decrease in revenues from energy sales, 40.9% or RON 2.270 billion. This is coming not from quantity but on the price side of the revenue. We have also an increase in electricity costs that we bought resulting from the higher cost in the balancing market, where we assess it due to unplanned outages, and we have an effect of RON 218 million. We also have one increase in personnel costs, RON 40 million, mainly from the increase of salaries and employee incentives. And we have a decrease in net financial results due to lower interest revenues recorded for our deposits amounting of RON 75 million. We also have a positive impact, the decrease in windfall tax of RON 1.948 billion, which brings us the loss of revenue -- a net of loss of revenue of just RON 300-plus million. And we have also a decrease in income tax by RON 117 million as an effect of reduced profitability versus last year. As you can see in the presented waterfall, the main effects are coming basically from the regulatory market, windfall tax on one side and the reduction in pricing on the other side. And all the other effects are quite insignificant compared with the first two. On the financial highlights compared to the budget. We have a very slight increase in total revenues of 0.3%. We have quite significant reduction on OpEx without windfall tax of 7.1% or RON 112 million and resulting increased EBITDA with 6.7% or RON 114 million and an increase of net profit of 11% or almost RON 128 million. In terms of OpEx, the biggest impact is windfall tax, which decreased from RON 2 billion to RON 110 million compared to 2023. We have also an increase in cost of electricity that I mentioned in the prior slides. And I think what is to be mentioned here, we have also increase in cost of uranium, which went up by almost 17% and repairs and maintenance, a 33% increase with the repairs and maintenance program and with needs in 2024, like unplanned outages and other unplanned events. The electricity transmission, NDR contribution and NRE are quite insignificant. So we will not take time on them. Cost structure in quarter 3 versus quarter 3 2023. We had revenue from sales of electricity in 9 months in 2024, lower with 40.7% compared with 2023. Basically, this is coming from price decrease for a similar quantity of electricity that we sold. And now breaking down the markets. On [ Macy ], we have an increase of 18% or RON 276 million, both mainly from our quantity increase of 18.8%. In PCCB, we have a decrease of 83.3%, partly coming from a quantity decrease with 2,000 gigawatts or 62% and partly coming from average selling price lower with 55%. On the spot market, we have an increase of RON 322 million or 57.1% coming from quantity. We sold 1,116 gigawatts of hours or 106.3% more than last year. We have to have a reduction in selling price of RON 124 per megawatt hour or a 23.8% in price reduction. On the balancing market, we have an increase of RON 55 million or 690% coming from a 78.6% increase in quantity, 23 gigawatt hours and also a big increase in average price, 342.8%. In terms of sales structure, we discussed about the variation on the budget, it's negligible, and we discussed already about the split in the previous slide. On CapEx, in 9 months, we had CapEx expenditure of RON 64 million or 41.7% completion in September 2024 versus budget 2024. We have spent RON 547 million out of a total investment program of 1.3%. And we will move now to more details based on CapEx projects. The most important one is Unit 1 refurbishment, which is already in the second phase of implementation. And on 2020 -- June 2024, we announced the signing of a long-term framework agreement for the PMO services and preparation and implementation of the refurbishment project. This framework agreement has an approximate value of EUR 240 million and of course, represents an important step in the completion of the refurbishment project. On Unit 3 and 4, we -- as you know, we signed an agreement, more or less understanding with such a favorable credit to advance the development and financing of the China ward 3 or 4 units. We already represented the support agreement between the Romanian state and regarding the China ward Unit 3 and 4 and we already update the budget related to the LNTP works. And we already have GMS approval for the loan from Nuclearelectrica for the Energonuclear power of RON 841 million in order to finance the work, the engineering and the preliminary study for their NTP phase. And as you already know, we have a positive for EU commission on the projects. In April -- now on the small modular reactors. As you already know, in 2024, we announced the successful completion of the -- I see it follow-up mission and the site was selected. We already approved in July 2024 the conclusion of the FEED contract FEED 2 offshore and the approval of the contract. And we already have one approval for the updated loan amount of USD 243 million made available by Nuclearelectrica to RoPower Nuclear in order to finance the FEED 2 projects. On Tritium Removal Facility Project or TPRF. As you know, this is an important initiative of the company. Tritium will be captured on the heavy water in China ward, which will improving both in operational performance, economical efficiency and increased protection for the population, staff and environment in full accordance with our ECG objectives. Our Nuclearelectrica and KHNP, Korea Hydroclear Power signed in June on engineering procurement and construction contract for the conclusion of the first facility for tritium removal, China ward. KHNP was represented in engineering, procurement and construction contract following the procurement process. And yes, in June 2024, both companies and now the start of the works of the first removal plant in Europe. And as you probably have seen the press in 15th of October 2024, Nuclearelectrica from automate public, the positive conclusion of the feasibility study carry out to assess the likelihood of production of the medical result of Lutetium 177 in China ward. Lutetium 177 issues for a series of wider critical cancer treatments. So these two companies will start the project implementation and we have a window for commercial application somewhere in 2028. In terms of technical performances, we have lower than emissions in all the period up to September 2024. Also, we have good results in terms of nuclear for one factor, 100 -- in September, we are up 179 for Unit 2 and 167 for Unit 1, and we have 156 estimated average for one. On capacity factor, we have accumulated capacity for September of 86.18% in September 2024 on par with the last month and slightly lower than the beginning of the year. This is the presentation, we are waiting for questions.

Congratulations for the results. This is Kaiz from [ Erste ]. My question is regarding what is your opinion on the impact that could have on the company, the recent constitutional court's decision that the windfall taxation is unconstitutional. This is one thing. And the second thing, if you could please elaborate a little bit upon the changes in sales mix in the sense that what determines you to adopt these changes in sales mix with relationship to the regulation changes about the mechanism of the centralized acquisition of electricity.

Okay. Thank you. On the recent or the very recent Supreme Court decision, our position so far is that it's too early to speculate. We will wait to see exactly that is how to sell the regulatory impact on this topic. But if it will be an impact for sure, it will be a beneficial one. But it's too early to go into details. We want to see how the -- and for enforcing of the ruling will go on and so on. So it's too early to speculate on that. Regarding the mix of sales. I imagine you are referring...

Sorry to interrupt. Maybe we could go back to the slide and it will be easier to talk about it.

I imagine that gist of the question is referring to the high portion on the day ahead and intraday market versus last year.

So in general a,bout the March and the competitive in general, what changed the sales?

We need to make a bit of a history on how much impacted us. In December 2023, it was decided that for 2024, we should have 80% of the production intended for this channel of sales. And this 80% was kind of splitted in 40% -- half of it 40% in annual March sales and 40% in monthly deals. What happened in March this year, basically March became somehow voluntary and the request for this monthly part of March that we foreseen in last year, December didn't really materialize. In a way, this came at a very, how to say, the market was low. As you know, quarter 2 is kind of the historical low season of the energy market due to the abundance of water, less usage for heating, absence of the cooling consumption and so on. So basically, in quarter 2, for quarter 2, starting in March, we had to go on a short-term basis for this intraday market, MPO market because basically foreseen volumes from March did not really happen. This -- the hardest effect we are looking now on a cumulative table, but the hardest effect was in quarter 2. Already for quarter 3, we have lowering of sales towards this very short-term market. And this trend of moving back to longer-term contracts, we will see even more in quarter 4. So we were kind of obliged to go in this short-term market due to the fact that March kind of disappears on a very short notice. Yes. I'm answering now to text question. On -- it is true in these days, we are seeing a bit of higher prices in the market. As you know, the market is also competitive and also quite open. We are also importing and exporting outside Romania. It is true that we are seeing some price increases, but we want to refrain in making any prediction that this situation will last or it will go on for months and so on.

Laura Simone from DNB. I have a question regarding the supplier of nuclear fuel. Do you still use the Canadian company as a supplier? And when do you think you'll be able to produce your own bundles in Feldioara. And if the production there at Feldioara will be enough or you will still have to supply from external markets.

Thank you for the question. In terms of bundles, we are producing within our group 100% of the bundles. We are not importing bundles. And I think this was true for all the year.

So starting this year, you are producing the bundles internally, 100%.

Laura, this is Valentina. We have always been producing bundles internally at such an arbitrage. What we acquire is actually raw material, which is uranium oxide from the international market and have it processed into uranium dioxide in Feldioara, then have the uranium dioxide transported to Feldioara for the manufacturing of the bundles.

Yes, I was referring to the process that should take place in Feldioara. So you are not supplying from the Canadian company anymore.

No. We are only supplying raw uranium. The processing is done within our group here in Romania.

So you are not linked anymore to just this one company as was the case in the past.

No, no.

You can have various suppliers now for the raw uranium.

Yes.

Yes, because that's a commodity and you have choice in the market. So from price safety and availability, it's very okay like this.

Any more questions please. Well, if not, thank you very much for joining us in. As usually, after this call, we're going to post on our website, Investor Relations page, the audio file and the presentation and a bit later also the conference transcript for further questions, you know where to reach us. Thank you very much. Have a good evening. Thank you, Daniel.

Thank you very much. Thank you.