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

Thank you very much for joining us for this conference call. The purpose of this conference call is the presentation of the financial statement -- preliminary financial -- preliminary and unaudited financial statements for 2024. The presentation is going to be delivered by my colleague, CFO of the company, Daniel Adam. [Operator Instructions] This being said, Daniel, the floor is yours. Thank you.

Hello, everybody. This is Daniel Adam. So we are -- we'll go with the 2024 preliminary financial results, unaudited, of course. As you can -- as you can see -- as you can see, we had a very robust result for the previous year, RON 1.7 billion, lower with 32% versus 2023 but with RON 400 million or 30.5% above the revised budget. As we discussed also in quarter 3 call, the main reason for the deviation versus 2023 is the sale of electricity namely the lower average selling price, also for a slightly lower total for quantity of 2.6%. This lower revenue was counterbalanced by lower windfall tax, compared with a price cap of RON 450 until April 2024 and RON 400 per megawatt going forward afterwards to the year-end. In terms of financial results, we have almost RON 100 million lower result than last year, 2023. This is mainly coming from the reduction of the interest income on the heels of the reduction of interest rates in 2024 versus 2023. In terms of OpEx, we have an increase of 14.4%. On the reason of the inflation that affected all sectors of economy, including ours. And we do have in this result an income tax, which includes a RON 40 million provision for the 15% minimum income tax. Due to the lack of norms at the closing of this preliminary results, we choose to improve this provision, and we hope to clarify this until the final audited results, pending some clarification in norms from the Minister of Finance. We have on this preliminary financial highlights slide, the details we mostly covered in the previous slide, the main deviations and the happenings. What I would stress on this one is that compared with the budget we run a series of savings on the cost including personnel and others. And we have a slightly higher revenue for 2024 compared to the budget. I will not go again into the 2024 versus 2023 because we mainly discussed the topic in the previous slide. In this waterfall, it is very clear where the deviation came, sales for electricity in large part compensated by the reduction in windfall tax. We do have a higher cost of both electricity and traded electricity, mainly coming from the higher prices in 2024 for this type of purchases that we made. I think we can go on. In terms of financial position, we have an increase of 8.4% of noncurrent assets for RON 636 million. These are largely coming from the increases in the loan granted to RoPower around RON 356 million as well as to Energonuclear, our subsidiary, another RON 361 million including interest. On -- this was further reduced by the value of the depreciation recognized through the year. And of course, we have some rights of use qualified under IFRS 16. In terms of current assets, we do have quite significant increase of 6%, almost RON 332 million. This is mainly driven from large acquisition and receivable of uranium quantity in December 2024, valued at RON 690 million. And we have -- on the heels of the price decreases in the market, we have also a decrease in trade receivables of RON 277 million and the decrease in cash and cash equivalents, including deposit of RON 150 million but we do have an increase of other financial assets, namely treasury certificates. In terms of current liabilities, we have an increase of 33%. This is coming mainly due to increase of the account payables in this category, which are following the general inflationary trend for the year. We are happy to report that this financial position at the end of 2024 does not include any borrowings as Euratom loan was fully repaid in November 2024. So we are debt free for the year-end. And we have increase of 7.3% equity due to the profits of the period. In terms of, we have also a waterfall on the sale of electricity. As you can see, we do have an increase in spot market in 2024, and a decrease in competitive market. This is coming -- and I think we discussed also in the previous call for quarter 3, this is coming from the fact that at the end of quarter 1 MACCE became voluntary, not mandatory. So all that quantity, which was not required for this program has to be placed kind of in short notice on the spot market. This was mainly impacting quarter 2. From quarter 3 quarter 4 and continuing to 2025, we are going more and more on the forward market, not on the spot. In terms of the sales structure compared with 2023, MACCE was 50% kind of a similar level on last year. And as we discussed the competitive market took up back from 41.6% to 25.5%, with our company the increase in the spot market, which went up from 11% to 24%. Again, coming from this quarter 2 effect when MACCE became voluntary and when the market is at its lowest in terms of liquidity. In terms of OpEx, we do see some -- compared with the budget, as you can see, we have savings along all the lines. When compared with 2023, we do have some increases in terms of personnel, a slight increase of 0.4% personnel cost. We do have quite a large increase from the traded electricity that I explained prior, coming mainly to higher price but also higher quantity. We do have a cost increase for the uranium fuel. This is coming also on the heels of the actual commodity price increase, which was above 20% but also other components which are going into the fuel bundles, like zircaloy and so on. Slightly higher increases versus 2023 on repair and maintenance, 17%, also due to higher outages. And this is coming also together with the cost with the spare parts. And the windfall tax much more smaller than 2023 but we do have here an increase versus the budget 2024, mainly due to the fact that towards the end of the year, the prices really increased versus much the windfall tax level of RON 400. So in November and December, we incurred much more in windfall tax income. In terms of CapEx, during 2024, we have completion degree of 98.7% in terms of CapEx program, which is significantly higher than the one in 2023 of almost 89.9%. So here, we don't have any other things to report. We are happy with this progress. And I will go also like last time through the main CapEx projects, the unit refurbishment, the new units 3 and 4, the SMRs, the CTRF and the medical isotope project. In terms of refurbishment, we are going into the second phase of implementation. In -- as you know, in June last year, Nuclearelectrica and Canadian partners announced the signing of the PMO contract. And on 19th of December 2024, Nuclearelectrica in the consortium Candu Energy, Ansaldo and Korea Hydro & Nuclear Power ceremonially signed the engineering procurement and construction of the EPC contract for the advancement of Cernavoda Unit 1 refurbishment. The contract value, as you may already know, it's RON 1.9 billion and it was approved by the General Meeting of Shareholders. On Unit 3 and 4, I'm focusing on the last 3 points because the other ones were already presented in the past. In November 2024, the Extraordinary General Meeting of Shareholders approved the conclusion of the EPCM contract between Energonuclear and joint venture formed by floor for energy transition, Candu Energy and Asaldo, and Sargent & Lundy signed the Engineering Procurement and Construction Management, the EPCM contract for the limited notice to proceed phase of the advancements of Units 3 and 4 Cernavoda. This was signed in Baku with the occasion of COP29. The value of the contract for both LNTP and FNTP, the final notice to proceed phase of the EPCM contract, which estimated at RON 3.2 billion. This EPCM contract with an estimation of duration of 108 months, is structured in 2 phases, the LNTP one, 24 to 30 months and subsequently subject to the establishment of the approval of the commercial terms and taking the final investment decision in accordance with the support agreement between the Romanian State and Nuclearelectrica, we'll have the FNTP phase, which should carry on for 80 to 84 months. So we are expecting that the LNTP phase will be finished even at the end of next year in 2026. In terms of SMR projects, on -- we don't have anything special to report. This was quarter 3 project. We are carrying on phase to phase. And in the meantime, RoPower Nuclear together with SNN are working on some EMP facilities for -- with United States EXIM Bank. So these are continuing at this stage. The Tritium Removal Facility Project or CTRF as we call it, it's already been in progress. As you know, on June 2024, SNN and Korea Hydro & Nuclear Power, KHNP, and announced the start of the work of first tritium removal plant in Europe and I think the sector in the world. This initiative, as you know, marks an important step forward in nuclear technology and environmental protection in according with the sustainability objectives of Romania and the European Union. In October, and the last one mentioned here is medical isotope project. As you may know, in October 2024, Nuclearelectrica and Framatome made public the positive conclusion of the feasibility study carried out to assess the likelihood of production of the medical isotope Lutetium 177 in Cernavoda. Lutetium is used for a wide range of critical cancer treatments and is considered one of the more friendly isotope for the patient. The 2 companies started the project implementation, which includes detailed design, purchase, installation and commissioning of the irradiation system to Units 2 of the Cernavoda power plant. We expect launching a commercial radiation service somewhere in 2028. Now we are going quickly for some technical performances in terms of radioactive emissions. We don't have any special thing to report. We are well under regulatory and internal framework. The nuclear burn up factor, the same, we are in a very good position. With megawatts per kilogram, we are at 177 in Unit 2 and 168 in Unit 1, the older one. The capacity factor accumulated for 12 months for both units was at 88.34. And of course, we have the planned outage in May to June 2024. Valentina, back to you all now. Thank you. We are awaiting your questions.

Do you have any questions, please?

This is Eduard from BT Capital Partners. I was just wondering if you're planning to revise the company's hedging policy, given the recent increase in foreign exchange losses?

Yes. On the hedging is a more complicated story. We are planning to look into that. We have to look into that also together with some government institutions like the Court of Accounts. There are some sort of restrictions on this topic imposed by this institution. But we are not worried actually about the current results on exchange losses. We want to revisit on this subject. Due to upcoming construction loans that we will have to take for the refurbishment project, where the need of hedging strategy for more interest but also FX would be much more important.

And we have a question on the chat from Cristian Petre from NN regarding Unit 1 refurbishment, what is the updated figure as in the recent GMS, the figure proposed was much higher?

Regarding the refurbishment, we didn't change the figure. What you might have is that end of presentation that we have now, we discussed above the EPC contract of RON 1.9 billion. But mind you that overnight cost for the project includes also some other contracts like the PMO, the PPC 1, PPC 2, the procurement for the turbine. So the overnight -- total overnight cost for all the contracts and all the project is around RON 3 billion I guess this is the...

So just Cristian Petre coming here. So what I remember from the large EMS was around RON 3.7 billion for the Unit 1 refurbishment total cost.

Yes. Yes. I said that it's RON 3 billion overnight cost, of course, due to the fact that the project goes to 2030, the RON 3.7 billion includes also inflation through this period as well as financial cost like interest. Overnight cost is free.

Okay. So overnight you mean without this financial costs and inflation cost?

Yes, with all the inflation interest cost, the financing costs.

And regarding Unit 3 and 4, are there any news regarding the price, guarantee mechanism like CFD or PPAs?

Can you repeat? I didn't hear the question.

Regarding the -- can you hear me now?

Yes.

Regarding the Unit 3 and 4 projects, are there any news regarding the CFD mechanism or PPAs, some kind of guarantee for the price levels?

No, this for sure it will have in this for 3 and 4 and being such a large and important project. We'll have a whole basket of measures. This will include also CFD or other offtake mechanism, including PPA. And you can have also both because if you have the CFD, the PPA will get excluded from the CMD calculation. So at this stage, since we are in this LNTP phase, it is too early to have these details but some sort of offtake mechanism for 3 and 4 will have to be in place.

So Andrew, focusing a little bit on your question, what exactly do you mean by trending over the next few years? Andrew, can you hear me?

Basically, this contract will -- let me try to answer as we partly understand it, I think. This RON 1.9 billion Unit 1 refurbishment contract because this is only the EPC part with the consortium, does not include, for example, the refurbishment of steam turbine and the PMO contract in some others. This is the cost for which includes long-lead items, design, mobilization, and so on and construction. So this will be split from 2025, actually, to 2031, the project will finish. And it has some cannibalization for it.

Thank you, Daniel. We have one more question on the chat regarding the SNN plans to release the budget for 2025 and as well as the dividend proposal for '24. Any insights on the expected timeline would be really appreciated? The GMS is already -- yes, the GMS for the approval of the 2025 budget is already convened. It was convened on -- it is for April 9. And you can already find the -- we have to publish the materials on March 6. So the materials are going to be published on March 6, the GMS will take place on April 9. As it regard the dividend proposals, for 2024, Daniel?

This is according to the law. We don't have anything other to add up.

And the law says 50%?

Yes.

Any more questions, please. Okay, thank you very much...

Sorry, this is Alina from Swiss Capital. I would also like to ask if are there any updates regarding the windfall tax, which was declared unconstitutional by the [ CCR? ]

No. As far as we know, the [ CCR ] didn't publish the motivation, I think it's called in English. So we know about it. As you know, it was extended in some form of quarter 2 of 2025. This would be reflected in the budget. But there is no sign from the Supreme Court on this topic besides what we know from November or December, I think. As you may know, they are busy with some topics.

Yes.

Yes, thank you. When we have something on this, we'll come back but so far there is no progress on that.

Okay. I presume there are no more questions. Thank you very much for joining us. We are going to publish the presentation, the audio file and the transcript of this teleconference in a little while. Also for those of you who will have confirmed by email, I'm going to send the presentation and the audio file directly to you. For everybody else, you can find it on the website in about 1 hour, 1.5 hours. Thank you very much. Have a great evening and a great weekend.

Thank you.