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

I think we can start. But before that, please let me introduce myself. My name is Valentina Dinu. I'm Investor Relations Officer. And this is the conference call for the presentation of the financial statements for the first semester of 2026. With your permission, I would like to inform you that this conference call is going to be recorded for the purpose of posting the audio file on the website in order to allow full access to everyone who might be interested. Thank you for your understanding. With me, Mr. Daniel Adam, CFO of Nuclearelectrica. So he's going to deliver the presentation and then we can have questions from your side. This being said, Daniel, the floor is yours. Thank you.

Hello, everybody. We present today the review of the individual and consolidated financial statements for the 6-month period ended June 30, 2026. I will jump to the 6 months financial results highlights. The net profit for the period was almost RON 1.2 billion with RON 317 million versus last year 2025 and above the budget with RON 26 million. Just a note here, the company absorbed in the first half of the year the effects of the unplanned shutdown of Unit 2 due to the transformer issue. Going back to the results. We have an increase from sales of electricity plus 2.7%. This is coming from better average selling prices, which increased with almost 13% due to a more favorable trading mix and also compensated by a quantity lower with almost 9%. This is the effect of the unplanned shutdown of the Unit 2. And also in -- partly in this period, we had a planned -- this time planned shutdown for Unit 1, which this year was longer than usual due to some preparation we are doing for the refurbishment of Unit 2 -- to Unit 1. The financial result was higher by RON 51 million. We had an increase in interest income. Also, the interest rates were quite high in the first half of the year and positive impact from currency exchanges. Windfall tax was, as you may know, was eliminated starting the second half of last year. And this provided a reduction with RON 500 million. And we had a small saving in spare parts and so on. The decreases, as I already stated, purchased electricity since we had to make up for the lost production we had from Unit 2. We have higher depreciation and amortization. As you may know, at the end of last year, we reevaluated the real estate assets. And we have an increase in operating expenses of RON 61 million, mainly driven by the ANDR contribution. The increased since October last year, the tariff of EUR 4 per megawatt coming from EUR 2 per megawatt prior. And of course, due to the higher results, we have also higher income tax expense. I will skip this slide since we went through the main deviations here. As you can see also in this waterfall presentation, the biggest effect of the better result this year compared to last year is the windfall tax. On the revenue side, higher sales of electricity and financial results and compensated by some negative deviations on the costs, namely traded electricity depreciation, other operating expense, and income tax. Individual consolidated financial performance, still the result situated above RON 1 billion -- RON 1.1 billion almost. We do have some consolidation effect coming from sales of energy made to EnergoNuclear. We have some processing services invoiced by our uranium processing plant, which are compensated by revenue recognized by FPCU, personnel costs of subsidiaries and so on. But the deviations are quite small versus the individual due to the smaller size of our subsidiaries. In terms of financial position, we have an increase in noncurrent assets of RON 240 million, or almost 2%. This is coming -- RON 960 million coming from an increase in net value of tangible assets, RON 1.4 billion almost represents the net impact of the inflows and outflows of tangible assets from the reporting period, mainly inflows from related -- inflows related to the investment projects and the biggest one there is the Unit 1 refurbishment project. We have a net decrease of RON 404 million, which represents the expense of depreciation and impairment of fixed assets and RON 700 million represents the current portion of the loans granted to subsidiaries which has been classified as part of the current assets due to the below 1 year time horizon. The current assets have increased with 20%, RON 879 million, mainly due to the increase in other assets measured at amortized cost resulting from the recognition of the short-term portion of the loans granted and RON 344 million due to almost 13% increase in cash and bank deposits with a maturity of more than 3 months. Noncurrent liabilities increased by RON 18 million, increase related to update of liability provisions like for the DICA storage and the low radioactive waste. Current liabilities, we had an increase of 100%, mainly due to the recognition of the dividends payable for 2025, which amounted to almost RON 1.2 billion, payment which was effected in July 2026. And on the equity, we have the normal increase through retained earnings. On the individual versus consolidated financial position, also here we have a small impact of the consolidation where the consolidated equities increased to RON 444 million versus the individual. The difference is mainly -- on noncurrent assets, the difference is mainly represented by the cancellation of intra-group transaction, loans granted and shares held in subsidiaries, of course, net of the subsidiaries' fixed assets. On the current assets, we have the elimination of the intra-group transaction that I mentioned also on the previous slide. And in the equity, we have the retained earnings from the subsidiaries' financial results following the adoption of IFRS. On the total liability side, we have the trade payables of subsidiaries remaining after the elimination of intra-group transaction, mainly the J.P. Morgan loan contracted by EnergoNuclear last year and the payables to capital asset suppliers of our Feldioara company and Nuclearelectrica Serv. On the sales of the electricity, we have one evolution of plus RON 71 million coming from first half of 2025 to 2026. As previously stated, we had better price coming from different mix, but decreased by almost 9% lower quantity due to the shutdown -- unplanned shutdown of Unit 2 during the first half of this year. In terms of sales structure, we can see versus last year an increase in all the markets, competitive, spot and also the average we have a significant increase. On competitive market for PCCB, the quantity of electricity sold in 2026 represented 85.6% of the total sales, compared with 89.8%. The average selling price during the reporting period was RON 578/MWh almost, an increase of almost 13% as we previously discussed. Also the spot market, the quantities increased, now representing 14% of the total volume and the average price was almost RON 609/MWh compared with RON 550/MWh due to the -- this we are seeing also a bit of the Iran issue, which impacted the gas, which also impacted our energy prices in the market. Now on the OpEx, we have an OpEx of RON 1.654 billion lower than last year with RON 274 million but with RON 73 million below the budget. Increasing costs in the period versus last year are coming from depreciation and amortization, RON 66 million. Cost of traded electricity we mentioned prior RON 111 million and ANDR contribution, which increased in October last year. And the windfall tax decrease of almost RON 0.5 billion -- slightly over RON 0.5 billion. And we had lower cost of uranium due to the fact that due to these outages of plant in Unit 1 and unplanned for Unit 2 also the consumption of fuel was lower. And the cost of the spare parts, we have a decrease of 34.6%. On the CapEx side, we had an CapEx spending of RON 1.360 billion in the first half of this year, slightly lower than H1 2025, which was almost RON 1.4 billion. And this compared with the total investment program for the year of RON 3.421 billion. We have a decreased degree of completion compared to similar previous period. This year we have 39.8% versus last year where we had 41.3%. But, of course, this depends on the heterogeneity of the investments. And in the first half of the year, the investments were made according to the planning. Some major aspects related to the main investments and the long-term strategic projects. Unit 1 refurbishment. In the first half of the year, regarding the PPC3 contract, reactor component manufacturing is advancing ahead of the schedule, and the fabrication of the calandria tubes has been already completed. On April 16, the EU Commission opened as a standard procedure, especially -- in all big projects, but especially also in nuclear projects, an in-depth state-aid investigation into Romanian state support of refurbishment of Unit 1. In May, SNN announced the completion of the first continuous concrete pour for the permanent structures. The most complex operation of this kind carried out at the plant since the construction on Unit 2. 3,470 cubic meters of concrete were used to execute the foundation. That's around 380 trucks of concrete. In July 2026, SNN announced through a current report that the Board of The European Investment Bank approved on 15th of July the granting of an EUR 800 million loan for the refurbishment project. On Units 3 and 4, in the first half of 2026, through an Extraordinary General Meeting of Shareholder resolution, SNN was approved acting as a guarantor for EnergoNuclear in securing a loan of up to EUR 46 million equivalent in USD from U.S. EXIM. And by different resolution in July 2026, the shareholders approved the loan agreement of up to EUR 75 million between the EnergoNuclear as a borrower, SNN as a guarantor, and Export Development Canada as a lender for the financing of the Units 3 and 4 Project. On SMR, in February 2026, the SNN shareholders approved the adoption of the FID -- for the FID of the Doicesti project. And in July 2026, SNN shareholders rejected the approval of the initiation of steps to assess the feasibility of updating the implementation strategy for SMR project. For CTRF, the Tritium Removal Facility project, in the first half of 2026, KHNP continued negotiating contracts for the noncontracted procurement packages, reaching 19 signed contracts out of 23 by the end of June. Construction activities were focused at the 95M level, encompassing the structural metalwork assembly, formwork installation, bush-hammering and so on. On June 2026, SNN announced the commencement of works on Europe's first Tritium Removal Facility located at Cernavod? developed in partnership with Korea. I think it's earlier. On the Medical Isotopes Project, in the first quarter of 2026, CNCAN approved the design change related to the project implementation. Also, a number of documents pertaining of Conceptual Design stage were reviewed and approved. The Nuclear Safety Reviews were completed and led the identification of the best solution for certain equipment so that the nuclear safety and production continuity will not be affected. On the technical performances in terms of combined radioactive emissions for both units, everything is in green. We are at a cumulative level of 2 millisieverts versus an annual limit of 10. In terms of nuclear fuel burn-up -- in terms of nuclear fuel burn-up, we are in the normal parameters and envelope. Of course, you can see the effects in May and June on the planned or unplanned outages. The same here on the capacity factor. Both units were affected by the planned or unplanned outages in May-June. And that's all. Thank you very much for your attention.

Could we start with a question on the chat? I have a question from Cristian Petre from NN regarding the progress on the refurbishment of Unit 1 compared to schedule, it will still be finalized in 32 months as it is scheduled. It was mentioned that it is going ahead of schedule, but planned -- but achievement increase is 39%.

Yes. On the first question, we are with the total schedule on time and also on budget. So the time line of the project to have the commercial operation date in summer of 2030 didn't change. What we mentioned that is going ahead of the schedule is part of the refurbishment, meaning the fabrication of the calandria tubes. And in terms of planned versus the achievement, we are comparing the achievement in June out of the 100% schedule for the year. So it is not a lack of performance. It may just be from the fact that more works are scheduled during autumn than in spring. So in terms of project performance, we don't have any red flags up until now, neither on time, neither on budget.

Thank you, Daniel. If you have any other questions, please. Okay, if no other questions, thank you very much for joining us in. We are going to publish the presentation, the audio file, and, of course, the transcript of this conference. And we have 1 more from Cristian Petre. Can you comment on drought and Force Majeure?

Sure. On -- as I'm sure everybody knows, yesterday, it was also the planned shutdown of -- the controlled shutdown because it was not planned -- the control shutdown of Unit 2 due to the severe drought that we are experiencing on the Danube. Unit 1 was also shut down in a controlled and safety manner on 28th of July. This is coming on historically low levels of the Danube. Basically, Danube is a 1/3, not only Romania, across the basin -- it's 1/3 of the multiannual July or August levels. And we I think a couple of -- a week ago or something like that, we already surpassed the record for low levels, which was standing since 1985, so 40 years ago, something like that. And Unit 1 was stopped in the end of July, Unit 2 yesterday. There were a lot of efforts done by -- also by the government to address a bit some of the issue and they did have a temporary benefit. As a general rule, there is a project which is mentioned also in the support law for Unit 3 and 4 Bala II underwater dam. I think it's a good explanation. That would solve this issue and provide the necessary water also for 3 and 4. That project would increase the levels available in more than Cernavod? with more than 1 meter as far as I understood. On Force Majeure, following the stoppage of Unit 1 in the end of July, the company started the process of obtaining from the Chamber of Commerce the branch of Constanta, a Force Majeure Certificate for our energy delivery contracts. This were awarded or issued to us last -- this week, actually, yes, this week. And following that, we notified our customers that as of Wednesday, we are declaring a Force Majeure towards the end of -- until the end of August. I think 30th of August is the exact date. Of course, if the situation and the drought persists, probably we'll have to extend that. We don't have a clear prognosis on the water on the Danube. There is some expectation that things will improve towards the end of August or beginning of September, but we shall see. So far, there are forecasts and not certainties.

Okay. Thank you, Daniel. If there are no more questions, as I said, we're going to publish the presentation, audio file, and transcript on our website by the end of this day. We do have one more question. Ms. [ Irina Railean ], please.

Yes, I also wrote it in the chat, but raised the hand just to make sure it will be addressed. Regarding this, if you have any estimate of the financial impact of this forced shutdown, how do you think the profitability will be impacted, if you have a guidance for us at this point? And what this Force Majeure exactly implies for Nuclearelectrica from the commercial perspective? Will just a certain amount of revenues will not be recorded in Q3? If there will be any penalties or any obligations for any quantities to buy at the market price to honor them. If you could a bit detail what we should expect from next quarter's financials and how the impact will be. And also, if you have any guidance on the shutdown costs and restart costs for this operation.

We don't have -- at least for investor use -- not certain enough to disclose this. Our expectation is that this will be solved in the beginning of September. And depending on how long it will be, then a more thorough and precise calculation can be done, which, of course, we will share with you at a later date. What I can say is that both the profitability and cash flow can sustain some hits. In terms of what Force Majeure implies, according to the law because this is part of the Civil Code actually, based on this Force Majeure Certificates and of course, as you know, also the government declaring the Southeast of the country this alert and emergency situation, that means that we are allowed since Wednesday, I think it was this week, to suspend the execution of our sales agreements due to this reason. This will allow us not to be obliged to buy from the market the energy that we cannot produce in the reactors. But mind you, we did that since the stoppage of Unit 1 until we had the certificates of Force Majeure, we did buy from the market in order to honor the agreements. And I think it was another question.