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

My name is Valentina Dinu. I work in the Investor Relations department at Nuclearelectrica. We are going to start the teleconference for the financial statements for 2024, the entire year. But before that, I would like to start recording. So I would like you all to know that this teleconference is recorded for the purpose of being published on our website and available to everyone else interested in this. So please bear with me for one second. So hello, everyone, again. My name is Valentina Dinu, with Nuclearelectrica. The purpose of the teleconference is the presentation of the financial statements for 2024. With me CFO of the company, Mr. Daniel Adam. So as usual, we are going to go ahead with the presentation and then follow up with questions from you. So Daniel, thank you. The floor is yours.

Hello, everybody. Daniel Adam here. So we'll go to the 2024 financial results highlights. As an opening comment, we don't have any differences from prior data presented as preliminary financial statements. So we'll go ahead. In terms of financial results we ended 2024 with net profit of RON 1.7 billion almost RON 800 million less 2023. But we're RON 400 million better than 2024 revised budget. As you may already know the main drivers are the electricity prices and we have the 37% lower average price in 2024 versus 2023 and also slightly lower energy quantity sold in previous year. Also linked to the electricity prices. We have RON 2.3 billion less windfall tax coming from the prices, which was cap of RON 450 until April 2024 and the new cap of RON 400 from April 2024 onwards. The financial result is lower with RON 100 million mainly based on the reduced interest on the deposits that we have in the year following the lower interest curve we had in the market. We also have one OpEx increase of 14.4% following the economical trends and inflation experience in the corresponding years including 2024. What we have here, we have also a provision for the minimum income tax. This will be revised once the norms for the specific legislation will be published, which was not done yet. We have also the detailed income statement, but we will not spend too much time here. We will go on the net result evolution. As you can see, basically we have 2 big drivers in the reduction of net profit, one is reduced revenue from the electricity sales and positive one the reduction in windfall tax. And these are the main two drivers for the decrease in net profit in 2024 versus 2023. In terms of financial position, we have one increase in non-current asset of RON 663 million (sic) [ RON 636 million ], RON 720 million is increase in financial assets. Basically, these are the loans that we provided for water project company RoPower Nuclear for the SMR project, plus RON 356 million and also the loan drawdown by Energonuclear RON 361 million including interest. And we have also a netting reduction on the tangible assets mainly recognizing the depreciation related to the year. In terms of current assets, we have one interest of 5.9% or RON 332 million this is coming mainly form increasing the inventory due to large acquisition of uranium in December 2024 so at the year end. And a decrease in the trade receivable for RON 277 million. Basically, these are coming on the heels of the reduced prices in the market. And also, we have reduction in cash and cash equivalent including deposit of RON 150 million. But this is netted by an interest of RON 69 million on interest of our financial assets, basically -- mainly treasury certificates. And we have an increase in current liabilities of 33% or RON 343 million. This is coming from increase in payable account, main impact here is the prices in the market. And a good news, in December 2024, we don't have any leverage, no borrowing as the EURATOM loan was fully paid in November 2024. In terms of sales of electricity, basically we see here also the impact on the pricing split on the different markets. Basically the main impact is coming from the competitive market where we have the largest deviation of RON 2.5 billion coming from the pricing and very small one, RON 830,000 coming from the quantity. In terms of sales structure, we can see here very well the evolution of the sales prices based on the different markets, much as spot competitive and also the average. Basically on average we dropped from 2023 price level of RON 706 per megawatt towards a point of RON 451 per megawatt. Basically, this is market recovery after the post-Ukraine war shocks in 2022 and 2023 and also the effect of the much regulatory structures. On competitive market, the quantity of electricity sold during 2024 was 25.5% of the sales compared to 41.6% in 2023. And on the pricing, we had an average price of RON 474 per megawatt without transport, a 55% decrease compared to the average price with 2023 of RON 1,500 -- RON 1,055 per megawatt also without transport. Also on the spot market, we had lowering of price from RON 513 almost per megawatts to RON 423 per megawatt. In terms of OpEx, the 2024 OpEx was lower with RON 2 billion versus 2023 or 40% lower and RON 240 million versus the rectified budget. The drivers for the OpEx basically the windfall tax, the contribution to the Transition Fund, which was a decrease of RON 2.33 billion also on the heels of the lower energy prices. We had a significant interest on traded electricity of 144%, mainly due to an increase of the days of unplanned outage and also with the impact on the balancing market. In terms of uranium, the cost of uranium fuel, we had and expense increase of 32.4%, basically coming from increase in the weighted average cost of fuel bundles. And also uranium as a commodity experienced a quite significant increase in 2024. And also in terms of the other cost with repairs and maintenance, water and energy, we had increases in cost. In CapEx in 2024, we have spent almost RON 1.3 billion. In 2023 it was only RON 630 million out of the total investment program of RON 1.31 billion. We had an increased degree of completion compared to the similar period in previous years, 98.7% versus 2023 of 88.8%. Basically, it's for growth of increased [indiscernible] of our CapEx programs like the refurbishment and also 3 and 4 and the other projects. Now we'll go on presentation on the update on the large CapEx project. In December -- on 19 December 2024, Nuclearelectrica and the international consortium formed by Candu Energy, Ansaldo Nucleare, Canadian Commercial Corporation and Korea Hydro & Nuclear Power signed the Engineering, Procurement and Construction contract for the advancement of the Cernavoda Unit 1 refurbishment. The contract estimated value of EUR 1.9 billion, which was also approved, of course, by the SNN General Meeting of Shareholders. In terms of Unit 3 and 4 projects, one through our project company, Energonuclear. The main happening here was the signing -- the approval and the signing of the EPCM contract between Energonuclear and our joint venture formed by Fluor Energy Transition, Candu Energy, Ansaldo, Sargent & Lundy Engineers and Sargent & Lundy Energie for the engineering, procurement and construction management contract for the limited notice to proceed phase for the new reactors 3 and 4. This was signed in Baku with the occasion of the COP29. The value of the contract for both LNTP phase and the FNTP final notice to proceed phase, it's estimated at EUR 3.2 billion. It has a duration of 108 months, 24 to 30 months for the LNTP phase and subject to investment decision approval, we have also the FNTP phase of 80 to 84 months. This LNTP phase should have a deliverable towards the end of 2026 when we will have more data in order to assess the project. In terms of the SMR in December 2024, we had the Chairman's resolution approving the negotiation started by RoPower with EXIM regarding credit facility of USD 98 million necessary to finance the FEED 2 stage of the SMR project. Tritium Removal Facility Project, as you know, in June, KHMP and Nuclearelectrica signed the EPC contract. And we have here a deadline of 2027 for the finalization of the project. I mentioned again that this will be the first tritium removal plant in Europe and one of the few in the world. And this initiative marks an important step forward in nuclear technology and environmental protection also in accordance with the sustainability objectives of the European Union. Last but not least, as you know, in November 2024, Nuclearelectrica and Framatome announced the signing of the collaboration agreement for the production of the medical isotope Lutetium-177 in the Cernavoda nuclear plant. As you may already know, this specific isotope is highly regarded as very effective in the treatment of cancer. And we are foreseeing a commercial application of this project in year 2028. I will not go through the technical performances. As you may see on the graph, we don't have anything special to report on this topic. I want also to mention an update the quarterly report for the first quarter of the year 2025. It will be in 22 of May instead of 14th of May based on some new regulations regarding the publication of consolidated financial statements, and you have also the calendar -- the updated calendar on your screens. Thank you very much. We are standing by for your questions.

It's Andrzej Rembelski [indiscernible]. I have 1 question. Can you give an update on your Unit 3 and 4 project, what are key milestones planned for this year? Can you elaborate a bit on this?

Sure. here, it's the EPCM contract was signed in November last year. And this contract will -- how to say, will have more final deliverable at the end of 2026. Out of this work we'll have sufficient information in terms of engineering, procurement, CapEx level and so on and timeline to go for investment decision gate most likely at the beginning of 2027. So now the start we see is that for 2025 and 2026, and Energonuclear team together with the consortium are working on these aspects, which are called in the EPCM contract.

And any talks with the government on CFD or any other support for these units?

As you know, for this project that is already a law passed, I think, in 2024. They -- there are a few of measures already assumed by the government, once it will be a contribution in kind, in terms of heavy water, uranium and the first nuclear loads in these reactors. So that will be a contribution in kind. And also there is mentioned the availability of state program guarantee of the loans necessary for the construction of these reactors of 100% guarantees. So it's already -- we have a strong assuming from the government of this project.

Okay. But as of now, any risks related to exceeding budget or delays are relying on the Nuclearelectrica, Am I right or not?

Yes. But basically, we don't have where to go over budget. Basically, now we are running this EPCM contract. Out of this, we'll have a clear picture actually on the budget of the project. This is one of the, how to say, deliverables that we are waiting at the end of next year.

Okay. And can you tell me what is the total budget for refurbishment of the Unit 1?

It's EUR 3.2 billion. That's overnight...

Any other questions? Since you don't have any more questions, we will close it here. Thank you very much for taking part in this teleconference. We will publish both the audio file and the presentation on the website. And for those of you who have already sent the confirmation, we are going to send the presentation and the audio file by mail as well as to you. Thank you very much. We wish you a good afternoon. Bye.

Thank you. Bye-bye.