Societatea Energetica Electrica S.A. (EL) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. The Electrica teleconference is starting now. Thank you.

Hello, everyone. I'm Raluca Kasap, Head of Investor Relations and together with the entire management of Electrica, I would like to thank you for joining the electrical conference call and live webcast to present and discuss the third quarter 2020 financial results. [Operator Instructions] Kindly note that the entire conference is being recorded. [Operator Instructions] Now we will begin the presentation of the financial results followed by a question-and-answer session at the end. At this time, I would like to turn the conference over to Mr. Alexandru Chirita, Elecrica CEO.

Thank you. Good afternoon, ladies and gentlemen. The financial results at the end of 9 months of 2022 demonstrate the group's above-average performance in ongoing challenging conditions in the energy market, results that encourage us to continue our strategic efforts to maintain a top position in the energy sector. We have approved to be a responsible company towards our employees, customers, shareholders, and partners. And in addition to ensuring solid prospects for the continuous development of the group, we have been able to quickly respond and adapt to the challenges that kept arising. As a result of the efforts made by the whole Electrica team at the end of the third quarter of the year, the values of the most important financial indicators of the Electrica Group are above those of similar period last year. The value of the consolidated net profit exceeded the one recorded at the end of September 2021 by RON 462 million, reaching RON 534 million. EBITDA increased by RON 629 million, reaching RON 1,104 million, and the operating revenues increased by RON 5,061 million to the value of RON 10,221 million. Distribution segment recorded in the first 9 months of 2022 or recorded net profit of RON 314 million and an EBITDA of RON 811 million. The most significant positive impact being the result of the capitalization of additional costs with the purchase of electricity to cover the network losses in the form of revenues from the production of intangible assets worth RON 780 million for the ninth month period in 2022 as per the regulations enforced. There was also a positive impact from the distribution tariffs, which increased starting with the beginning of the year by an average of 8.6% compared to 2021, followed by an additional average increase by 20.3%, starting on 1st of April 2020 compared to the first quarter of 2022. Talking about the previously mentioned capitalization, I'd like to highlight the positive impact of over RON $740 million on the 2022 consolidated budget approved by the GMS in April. You can find more details in the announcement published by Elecrica on the 15th of November. Our distribution subsidiary continues the ambitious investment program carried out since the beginning of the previous regulatory period, aimed to modernize the network infrastructure and accelerate the expansion of smart metering on a large scale, leading to reduction of network losses in line with regulated targets. In the first 9 months, the actual network losses is below the regulated annual target for all 3 areas. The supply segment recorded again a good performance in the first 9 months of the year, way above what we have always considered sustainable 2.5%, achieving a 5.5% EBITDA margin. The numbers, a net profit of RON 239 million and a positive EBITDA of RON 327 million come mainly from the increase in electricity sales prices combined with the internal efforts of our colleagues to mitigate the risks regarding the purchase of electricity needed for resale to control operational costs to digitalize and to increase customer satisfaction. In the green production, we currently have an operational photovoltaic parks in 2020 and interest in 5 projects, photovoltaic and wind total installed capacity of 296 megawatts with attach electricity storage capacity of 60 megawatts. -- which are in different stages of the imputing operations. Our strategic aims to develop a portfolio of electricity generation capacities from the renewable resources in the photovoltage with a total capacity of 400 megawatts in parallel with electricity storage capacity with an installed capacity up to 100 megawatts by 2024. It is our intention, and we are working towards a goal of total installed capacity of 1 giga by 2026. These results as well as the strong team that we have make us confident in the business strategy we have adopted at the group level and in the decisions taken, and we will continue to pursue the sustainable development objectives of all our business segments in parallel with maintaining a high degree of resilience in the face of future challenges. I would like to turn the presentation over to Stefan to present the financial results in detail.

Thank you, Alexandru. So going into more deep dive, the results and explaining the drivers of the various evolutions of the financial indicators. I'll first ask my colleagues to go to Slide 3 of our presentation, where you see basically the evolution in the revenues, which is driven by the evolution of the prices in the energy market, and you should note that these are excluding the part related to revenues from the support scheme from the subsidiaries related to the support scheme. Then in terms of EBITDA, we have a result which is significantly impacted by the capitalization of the costs with the difference of price for the energy for the network losses. But even without this part of 780 million, we still have an EBITDA which is positive, and I think it's consistent in this current complex market context. One more comment I would post here related to the slide on the position of debt to net cash. Basically, we needed to bring this year to finance to prefinance the support scheme for the Supply segment and also to finance the difference of price for the energy catalanes, and this is why it is this position in terms of net debt compared with the previous period. Now to go into more detail. I will switch to Slide #4. And Slide #4 consists of an analysis of EBITDA and the net results at consolidated level, basically contributed EBITDA at 9 months 2022 is RON 1.1 billion. It's RON 629 million higher than in the similar period of last year, and this is due to the following main factors. On the Distribution segment, there is a positive factor related to the increase in the revenues from energy distribution, which is resulting from the increase of the tariffs at the beginning of the year with 8.6% and then starting with 1st of April, following the Ordinance27 based on which we are getting the increase in tariffs to recuperate the difference from metrologist from the previous year. We had a transfer increase in tariffs of 20.3%. So basically, this generated a positive effect in terms of revenues from tariffs of distribution, slightly reduced or netted by the decrease in the volumes of electricity distributed on average 3.2% for the 9 months following a decrease of the consumption. On the other side, on the distribution segment, we have the negative effect related to the increase of expense with purchased energy, covered net or losses as a result of the increased energy price, RON 962 million. As you know, the extra on the price is 450 lay, which was not completely recognized in tariffs at the beginning of the year due to the limitations of methodology. And the actual prices in the market were around RON 970 per megawatt. On the Supply segment, we have also a positive impact of RON 424 million, which comes from 2 directions. One direction is related to the increase of the energy and natural gas revenues in relation with the increase of the price in the market. Another positive effect is related to the operating revenues from subsidies, which was not existing in the previous year. And then we have a negative effect of RON 3.5 billion, which is related to the increase in the cost of energy purchase for supply. But on net result, we have overall in terms of upper P&L of the supply of the supply subsidiary, we have a positive effect, which is the proof of our efforts to mitigate the risk in terms of sorting of energy for the contract from long-term products and for our contract. Now the other element to be mentioned is the element of other revenues, which I also briefly mentioned in the previous slide, there is a net effect of RON 757 million. This is mainly due to this capitalization of the additional costs with the purchase of energy for the distribution subsidiary. The amount is around RON 780 million, which is calculated based on the -- on the estimation, according to the order of the regulator. The actual value was RON 823 million, but the capitalization was constituted based on the order of the regulator based on some estimations which took in the petition the seasonality from the previous year. So basically, the idea is since the difference from the network losses price for this year is to be recuperated based on Ordinance27 and then Ordinance 119 on a 5-year period, this capitalization is basically also put in the expense on these 5 years. I'm constituting a capitalized asset during this period so that I'm not recognizing the entire expense on this on this period, and I'm amortizing this during the following 5 years. Also, we have some variation of OpEx. Net impact is negative RON 26 million is related to some adjustments of trade receivables according to IFRS 9, but it's also related to favorable impact in change of provisions, some reversal of provisions for potential obligations that did not materialize and an increase in cost in distribution subsidiary, which is related to utility costs, the costs for energy, water, et cetera, in our locations and also for the uncomfortable cost related to the switch to 3-month meters readings. The net results at the group level is RON 462 million variation compared with the 9 months of 2021. Total results at 9 months is RON 534 million, and it's mainly due to this effect of the positive evolution of EBITDA, we have a negative evolution from the financial result, RON 86 million, which is impacted by the cost of the financing that we mentioned previously because all these financings for covering the refinancing of the support team and the network loss is different, they do have a cost. And this generated an increase in costs with interest and a negative impact on financial results. Also, we have an impact of the expense of the income tax which is on the IFRS related to the basically stack credit related to the loss that we had registered in GBS Media. Now moving to the segments. In Slide #5, we have a summary of the distribution subsidiary. And in order not to repeat Mata mentioned at the overall view. I would just would like to point out the graph at the bottom of the presentation. So basically, you saw that in terms -- you can see that in terms of operational expenses, we don't have significant impact in the analysis of evolution of EBITDA. We have the effect of the energy revenue that I've mentioned in relation with the increased tariff we have the negative effect of the network losses cost. And then we have the other revenues, which comprises mainly of the revenues from this capitalization of the difference of price but with the energy. Now also in terms of the distribution subsidiary, I would also mention that there is an increase in net debt compared with the first half of 2021, which comes from increase in credit lines because we needed to find the difference of price for the network losses. Now moving to the next slide in the slide -- the following slide, we have details about the distribution segment. In Slide #6, you have some regulatory information related to the current regulatory period. This is something that we included in our presentation following the questions that are coming from analysts and as also previously discussed and if this matter's related to regulation, which are reasonably complex raise questions, we are welcoming your questions in the subject. Second, following slide, Slide #7 is the slide related to the analysis of regulated net results. Yes, going from the total revenue going through the regulated result and then to the IFRS results so that you can see the various adjustments. And we also pointed out the effect of the net loss capitalization with the green in so that you can see the impact related to that. Slide #8. In the next slide, we have the analysis from AirBar to the result on the OMS standards and then dialed results for the full year, putting perspective a little bit to the element of the various corrections and elements of adjustment for the result. And then in the following slides, we have the details about each of the distribution networks. I will go through this and keep directly to the Slide #12, where I will mention, I have spoken already about the decrease in the TPT energy, the net rollouts were covered in the previous slide. And I would also mention that in terms of investments for the end of third quarter, the commissioning program for the investments for 2022 is achieved 33%. We should mention that, of course, for a distribution operator which needs to refinance the natural losses, which are doubled in the CapEx amount for this year, there is always a matter about prioritizing the financings in terms of covering both network losses differently, but also the CapEx plan. We do have according to the agreement with the regulators with the methodology, the possibility to recuperate, and we are confident that we'll repeat to the plan of investments in the following 6 months of next year. In fact, as of today, this is significantly higher than the 3%. Going to Electrica serve. The Energy Services subsidiary, we have a situation where basically the EBITDA remained at approximately the same level compared with the previous year. We had an increase in income, which is related of approximately RON 11 million, which is related to the fact that the increase of demand for photo-applied systems is triggering increase of contracts and of work contracted for the subsidiary. But then, of course, also this demand is generating an increasing in expenses with materials, raw materials, but approximately around RON 10 million. So would have a net result of RON 1 million on that. Going to the Supply segment. The Supply segment is also showing a positive result. EBITDA significantly increased compared with the 9 months of 2021 with RON 344 million with the result of EBITDA being RON 327 million for the 9 months of 2022. This is mainly a result of, as I mentioned, the positive margin on energy on the upper P&L of the supply, which is reflecting basically the fact that we took good measures in terms of covering the contracts for the end consumers with term contracts for purchasing the energy, and we had this cover after half of the year, we only have -- we had basically 100% of the need covered from term contracts. This is slightly compensated by some for unfavorable effect on the operation of green certificate, RON 24 million and then another RON 55 million from impairment losses on trade receivables. This is a matter related mostly to the recoverability analysis based on IFRS 9, but you'll see in the slide later related to the receivables that we don't necessarily have a collection receivables collection matter. Of course, the net profit increased by RON 262 million, mainly due to the positive evolution of EBITDA with a negative effect related to the financial results because we have the increased cost for refinancing the support scheme and with a favorable effect related to the income tax effect considering the tax credit on IFRS in connection with the negative EBITDA last year. Net debt increased by RON 1.1 billion compared with the year-end 2021. Basically, we took credit lines from our partner banks in order to refinance the support team and the net debt was at the level of RON 1.36 billion at 9 months 2022. As an overview of the supply market in the next slide on Slide 15, you can see that in terms of positioning of the market, Electrica is still one of the strongest players we do have in terms of number of consumption places, the first place. And in terms of market product by volume, we are on the second place on the market. NL comprising under the same umbrella ENEL ENERGIE MUNTENIA they have a higher subsidy of energy EBITDA is also related to the fact that they're distributing the [indiscernible] where, of course, the consumption is higher. If we go into the next slide, I will go to the Slide 17 and just brief you up with some details related to -- you have also the graph of the evolution of the price evolution on the day head market and on the balancing market. And some details related to the changes in legislation in terms of the support scheme, which were incenting our activities. Basically, we had government finance in '19 last year, which was then approved through RON 259 million of 2021. And then we had prolongation of the support scheme through government scheme from 2022, which basically prolonged the application of the support scheme for February and March and decreasing ceilings of the price and including non-household customers in the capping. And then we had governance Ordinance 27 of 2022 in -- which continued the scheme for the period April 2022 and March 2023. And also in September, government Ordinance 119 from 2022. And now recently, we had the government Ordinance 153 from 2022 regarding asset in the form of regulated market for next year. As main factors, which affected the evolution of results for the supply part, we should mention that we had a higher selling price versus budgeted, which generated a positive impact with higher price with RON 70 per megawatt. The purchase price was lower by RON 78 per megawatts if you like the budget. And we had the revenue from capping higher by RON 265 million invested budget, which is generated by the increase in the difference between the average purchase costs and the purchase component to be recovered from the final consumer basically is related to the fact that we took some consumers and some quantities in the spirals results segment. And for this part, we sourced from the head market for the energy before that and this was increasing the component, which is to be recuperated from the budget. Going to the next slide. about receivables in Funizara, I mentioned that we don't necessarily have an issue with the receivables. You can see the details about aging of receivables. The receivables might seem that they increase but when you adjusted the turnover and tenant increase of the price of energy, then you see that basically that they are lower than at the end of last year. Also apparently, we might have in certain periods, some delays in terms of collecting of receivables, but these are related in fact to the delay in invoicing because, for example, every time the Ordinance is coming and this is changing the algorithm for calculating the capping scheme, et cetera, out, it's changing the ceiling and so on. We need to make some changes in our IT system and make some development for some time between a couple of weeks of not invoicing. So then some invoices related to a week of -- a certain amount of consumption might seem that they are collected later. But this is mainly related to the kind of delays in order to implement and accommodate the changes from the support scheme. In terms of group liquidity, you see that the situation have slightly improved from mid-June. In terms of cash, we have pretty much the same position, but we have additional credit lines from the banks. We should mention that we got during this entire year the support of our partner banks, which granted us the needed financing in order to refinance the support team and the difference of prices for the network losses. And of course, we appreciate all these efforts from their side. Next slide are related to the dividend distribution. As you know, we paid a dividend also this year, even if the results for last year at the level of the group were a loss, but we wanted to send a signal that the group then Energy and Utility Group would like to pay dividends. To the shareholders and as a sign of the confidence that we can turn around the situation in a positive way. And I think this is shown by the results in this year. Also, there are some mentions about the strategic operator in the group and the sustainability value. These are also reflected in the sustainability report that you can find on the slide. And then the main corporate governance events are summarized also here, so that it's easier for you to get a grip on them without going to the administrator report. So I will end here my presentation, and I'll pass through to my colleague, the Head of a AlucaCasape to welcome your questions.

I just wanted to mention that in the appendices to the presentation, you can find more information about the group structure, the market share in distribution and supply as well as the corporate governance bodies, the shareholder structure and also the evolution of the shares on the Buca Stock Exchange and on the London stock exchange. And in the last many slides, you can find more details about the regulatory aspects affecting our distribution and supply business units. Should you have any questions, now we will begin the Q&A session. You can address questions. You can address questions through the website, through the Q&A section on the website for those of you connected online. For those of you who connected only through the phone [Operator Instructions] And then we will take a 5-minute break to receive questions, and then we will get back to you with the answer. Thank you.

[Operator Instructions] The first question is from the line of Andrea Ana with Alpha Bank Romania.

Hello. Thank you for the presentation. Can you hear me?

Yes, we can hear you.

Okay. First of all, I would like to know if you can tell us if the revenues from the capitalized losses can be distributable to shareholders or they are a noncash item, what's the condition? And as a follow-up question on this side, can we see some dividends, some distribution of dividends in 2022, maybe from other results.

Yes. Thank you for your question. So the revenues from the capitalization of the difference of the cost related to the difference of price of energy price for the net losses for sure, cost -- noncash revenue, the fiscal revenue is hard to say. Of course, they can be that taxable and I mean, they can be distributed as dividends. But the issue is that the expiration of these revenues will follow in 5 years. So basically, this is just an accounting measure in which since the expiration of the difference of price in network losses for this year is to be recuperated in 5 years from increasing future tariffs as stipulated by Ordinance 7, then also the expense related to the difference is also to be amortized on these 5 years. So what I would like to mention is that making a move to the question about the dividends, I think that the fact that we paid the dividends also during this year. even if the results at the level of the group level loss at the end of last year are showing that we have the commitment, and we have also the details in our dividend policy to provide the dividends also during next year. Of course, this is subject to the proposal that the executive directors will make to the Board and the Board with the further proposed to the GMS meeting. But these -- the capabilities to pay dividends would also need to be related to the cash availability at the level of the group, considering how the support scheme will evolve, how the prices in the energy market will evolve and all these kind of elements. And also considering that the group has quite important targets in terms of further investing in developing the fourth pillar of the green energy production and also in investing -- further investing in the distribution network because if you take a look at what is stipulated in the F45 and Europe and all these kind of initiatives, all these initiatives, which basically mean a transformation of the energy segment, energy sector in Europe. These are built a lot on improving capabilities of digitization and the flexibility of all the distributors here -- operators in Europe. So the distributors will need to further invest for the period, probably in 2030 at a significant level, similar with the ones from the figures here. So I think it's -- I hope this is answering your question.

Can I have another question, please? I would like to know when will be the next adjustment in tariffs. It's going to be in April or later on in September 23, because it's mentioned there that you have a fourth and fifth intangible asset recognition from April to August. Why?

Because this is what is stipulated in the Ordinance 119 in the Ordinance 119, which was approved in September, this was covering also the support scheme on the supply side. But on the distribution side, this was also related to giving the proper details in order to have this capitalization further regulated further put into law by the order of the meter finance and order of the regulator. And in that ordinance, this is stipulated that the capitalization will not only function for this year, but will function also for next year until August. And then it's stipulated that the capitalization will be done on a quarterly basis. So then you start with the first one at the end of September this year and then quarterly, you are having this. And at the end, we have only 2 months for the July and August. It's not a full quarter. But this is how it was regulated in Ordinance 119 and then this is how it was also reflected in the order of the meeting of finance acting 3,900 from this year and also from the RNA order.

I'm sorry. Maybe it's my connection to poor. I'm not sure I understood your answer. So basically, the first adjustment on tariffs, we'll see in April, starting with April.

The first increase in -- yes, the capitalization of the expenses start this year with the first one now at 30th of September. And yes, it's the increase in tariffs, the first increase in tariffs will be starting with April. It's not a perfect match, but this is how it turns out from the legislation. It's not a perfect world in which we are living. There is a slight... the revenue and... Sorry.

Yes. And you'll have an adjustment there that will be recognized over a 5-year period and will go beyond the 7% limitation, right?

Yes, that is correct, but it's stipulated in the Ordinance 119 but also in the subsequent regulations by the Anaren but basically, it's a separate component. It does not add up to the corrections, which are subject to the 7% cap.

Okay. I have one more question regarding the subsidies. You've registered -- just to be clear, you've registered 2 billion subsidies and around RON 1 billion remains to be received from the Ministry of Energy. Is it this is correct?

From where you draw this conclusion, the subsidies, which you see in the P&L, it's related to the entire period revenues from subsidy. If you look…

Ms. Andrea, did you finish with your questions?

Yes. Thank you.

Yes, right. You are correct. If you look at the balance sheet at the end of September, you have RON 1 billion there. But starting from there, this was also further repaid. So we started to collect also from that part. So this is rotating, but there are some peaks in this September show the peak is correct.

The next question is from the line of Iuliana Ciopraga with Wood & Company.

A couple of questions. So first, what volumes have you hedged already for 2023 in supply and also in distribution?

No, I will not necessarily don't give too much details in terms of numbers for this because it's also some like not public information and like commercial sensitive information, also, especially in relation to the supply segment, but I put a little bit of context into that. The idea is that they were not the there were not so many quantities of energy available for purchasing for next year in the market because also the producers were waiting to see how the changes in legislation will unfold for the period to follow. There was a legislation which stipulated a long-term strategy of sale of energy for the producers, which is stipulated by Ordinance 19. And then there was also some matter related to the expectations in respect of where the market prices will evolve. And then this is the reason for which I don't know how relevant is for this year to see which are the percentages of coverage. And on the distribution, I would mention that there are additional factors for which basically, we were not in the position to hurry to purchase energy because there are all these discussions about single buyer, these discussions about having a basket of purchasing energy for the distributors. There was this element about star taxation, which is -- was hoping to favor the sale of energy to the distributors at 450 lapregawatt, which is the Exane cost. So -- and then you saw recently the ordinance 153, which, of course, will be further probably discussed the one when people pass to the parliament. But at the first glance, it should secure a significant part of the energy for the distributors at 450 is why on the distribution, it was not really such pressure to go on that. On the supply, what I would say is that we do have quite -- we are confident that we have a quite important part of energy purchase for next year. According to the -- what we have as information from the market and the transactions in the market, you believe we're at a higher percentage than our peers. And just to anticipate your product question, it is the cost and average cost, which is significantly lower than the 1,300 on cap, which is in the ordinance 119.

So basically, we should conclude that for distribution, you probably didn't have much, but you did hedge something but below the threshold that was included in the Ordinance -- you had something for supply but below the threshold. Okay. And should I understand that the tariffs to be set in April, excluding the amortization of these additional credos of course, will be subject to that limitation inflation by 7%?

Sorry. I'm not sure I heard you right. Well...

I was just wondering if the increase in tariffs from April, excluding the amortization of the addition of [indiscernible] will it be subject to the cap inflation plus 7%... So the increase excluding that?

Yes. Yes. Yes, it's correct. According to the methodology, it's correct.

At what price -- I mean, how do you think that the regulator will look at the loan cost for next year?

I think that the regulator will analyze the market price at the moment versus the based on the price that they will consider. It's kind of a little.

How much minimum exposure on that market because...

Provided this adjustment of price. I could take this decision based on the methodology, the methodology provides the mechanism.

I see. And -- but how much -- what will be the minimum exposure on spot? Because via the centralized market, most of the grid losses are covered, but I guess you still -- you would remain exposed on the spot market. How -- what would be the minimum exposure on the spot market basically. 20% around 20%.

You are referring to this ordinance 150, sorry, I'm hearing you quite -- maybe it's me on the connection, but I don't necessarily understand your question. So you are referring to -- I think you are pointing out to the ordinance 153 or...

Actually, yes, via 150, you will be able to buy power at 450. But what would be -- but you still need to still be exposed to the spot market. So you still need to buy some volumes from the spot market. What would be the minimum to be acquired from the spot market?

Well, if you look at the ordinance 153 million in the way in which is set up now, but again, this might be further adjusted when go to the parliament for the distributors, we are speaking about 75% of the need for next year, okay, less what they have already purchased. -- of course. And then if you look lower, the priority for allocation is for the DSO. So at least 25% would be exposure to the -- not necessarily to the spot market, but we can get us opportunity on term contracts, but would be exposure to the market Maximum 25.

And a final question for me. This year, you're recovering RON 350 million from 2021. Next year, in principle, we should no longer see this adjustment, but we do see an impact right now on the profitability. Should we expect a lower profit on distribution because of that?

No. I'll give -- listen, I think it's good to pass through this to my colleague, Jana to which is having the distribution regulation part.

Yes. The idea is the tariffs for 23 will reflect the correction from 2021. Basically, we always said, this year, we had RON 360 million, which was the difference for network losses for last year. In the next year, I will have starting from next year for 5 years I'll have a correction for the distribution for this year.

But that's why what you recover from April will no longer be reflected in the P&L because you have the amortization as well. So it's 0 impact on P&L from the amortization from what will be included in case. So that's actually by asking this because we see an impact right now in profit because everything is basically included in the balance sheet. The difference will be easy to drive now in the balance sheet. But we still have an impact on profit from the RON 360 million.

For 2023 at 1st April are will do the correction for 2021 and for this EUR 363 million already received in 1st April 2022, they will not do an entire correction in order to track this value from our revenue. But they will do a correction because of the price for Q1 for or first quarter of 2023 will be impacted by this 300 million received already 1st April 2022. So yes, there will be a correction but not reach the entire correction of RON 353 million. It's okay for you? Is clear?

Iuliana in perfect world, the estimation of Exente from Anre should be closer to the real effective price of purchasing energy for network losses. So then the difference will not be that high. The situation is that the previous years and this year are showing a very high difference in that. Of course, probably there are also some precautions related to the increase of tariffs. And basically, the RON 365 million that I got in this year is just to compensate me for the difference from last year. And then, okay, I will not have it starting from next year, but on 5 years, I will have the difference in or compensating for recuperating the different in natolosses price from this year.

Indeed, but not only on cash flow, it's a catch-up and it moves in the cash flow, but no longer in the P&L. So I was just wondering about the P&L effect, indeed, in cash flow, it will be -- should be a reasonable cash flow next year compared with this year. But actually, we won't be seeing that in the P&L. And there was more one bring about the profit from the P&L, what will be reflected in the P&L from that? Because indeed, I mean, I see what you mean. But on the other hand, you are losing that RON 360 million, which are right now in the profit.

Iuliana, the right answer for your question is that this amount will not disappear from the 2020 profitability. This is the right answer. If you want to discuss more detail, I think that we can discuss..

The next question is from the line of Strol Alexandro with BT Capital Partners.

Hello, can you hear me?

Yes, we can hear you.

First of all, congrats on your I have a couple of questions. First, regarding the subsidy collection. So for the third quarter, how much subsidies did you actually collected from the government? And also, if you can provide some insight in terms of the collection process? Has it and has it been much better now with the fact that the legislation became more clear, let's say, in terms of collection?

So there were some evolutions of the let's say, there was a certain, let's say, seasonality, I don't know, a certain evolution on the collection in the sense that when new ordinance was coming and the new mechanism was established, there was a delay in order to have all the details clarified in terms of the metrics for reporting and all sorts of things, especially if the algorithm was significantly changed. So there were some delays in the past. In the current -- I would just say that in the current form of the algorithm, I cannot file in for the refinance request. -- sooner than 1 month to 2 months from the month of consumption. Why? Because I need to wait for the results from the equilibrium market because this needs to be fed in and included in the calculation there. So basically, if I'm speaking about the month or the month of September, yes, it's only now starting from now that I'm able to file in the report because I have all information. I have the information from the equilibrium market. Then also, there is a learning process also with us and also with the regulator and the ministry. Once the algorithm is changing for the first month, it's more complex to prepare the report to think of all the details, et cetera. Once the algorithm is the same from one month to the other things are also starting for oil up and the process runs smoother. So basically, considering this, what I've told you, I would say that right now, the collection is where you should be considering these limitations of the algorithm. Yes? So we filed in for August, we got most of the amounts for August, September, we can only file it now.

Okay. But... you don't have the numbers for the third quarter exactly right... Of how much you can in terms of subsidies.

Altogether for market...

Only for the third quarter. So from August to October.

From the third quarter from the total, I think -- but I just -- it's coming from my mind, it's an estimation, we can get to the more, let's say, clear details with you. I think we collected something like RON 350 million for the third quarter.

I have another question. If you could please provide us some insight regarding the current situation of bank overdraft, I saw that at the 6 months ended, you had something like RON 2.3 million in banks overdraft at the group level. And at the 9m results, the situation hasn't changed very much. So you do not need to refinance anymore or what happened there? Because I was expecting overdraft to increase.

I think this is -- of course, we would like to also be cautious about managing our indebtedness level because we do know that also banks and analysts and everybody taking a look at the ratios of indebtedness and I will not necessarily look to getting indebted to the sky levels. The other element is that we got quite early in this process of securing the financing. And we were probably the first to talk with the banks about the needs for financing for this year, you saw that we had 2 GMS meetings where we approved some quite large ceilings, which we believe it was proved that we're large enough to ensure for us to go through that and prefinance the support scheme and finance the difference of price for the network losses. And basically, we are in the situation in which we secured in the first part of the year, the main lines. I think after half of the year, we just signed one major other line in addition. I mean, you can also see from the graph with the liquidity. And now there is a discussion with the banks where they are looking to facture a product of factoring where basically for these requirements of -- for the rest of refinancing from the pad, they would act that as some form of factoring. We should not be with recourse on my balance sheet, it will be with risk on the state. And this is something that also, of course, all the industry is looking at because it might help me to reduce the indebtedness on my balance sheet and have the liquidity ensured in a way which is more optimal from my balance sheet.

Two more questions. I think they were touched upon. But if you have any guidance regarding the revenues from capitalization for the fourth quarter, and this is somehow related to the -- to what cost of what megawatts, we expect for the network losses for the fourth quarter.

We see the price in the market, Ardakin down both in the prices of the market for the overhead market, which you can also check on the tone, but also in the price of transactions for the term contract? What I can say is that there are transactions in the market, which are included for December at prices which are in the range of the RON 1,300 per megawatt cap. And let me check if I can just brief you with some estimation of capitalization in Q4. Cyber emission for capitalization for quarter 4 is RON 300 million profit and probably the price average price, something like a ballpark figure, RON 1,000 per megawatt 1,000 yes.

[Operator Instructions] There are no further audio questions. Ladies and gentlemen, please note that we will take a brief 5-minute break for any written questions, and we will resume our conference. Thank you. Ladies and gentlemen, thank you for holding. We are to resume our conference.

So there is one more question coming from you. There is a question related to do you maintain your budgeted figure of RON 166 million adjusted upwards with the additional income from capitalized losses from Q3 and Q4. Yes, we do maintain these in terms of budgeted figures, but please note that yes, that, of course, in terms of the evolution of the prices until end of the year, especially in relation with the network losses, there might be also some adjustments onwards in terms of effective acquisition price of the network losses but with the mechanism of capitalization, these are to be not put on this result -- the result of this year, but amortized on 5 years. So yes, we are confident that at least the result in the budget, we will achieve by the end of the year. And there is one more question. Can you please explain how the centralized market 153 Okay. The line 153 would work for the supply market. Basically, the mechanism, as we read from the ordinance, which is not necessarily a very scheduled text is the following. There are some needs which are to be covered on the estimation the needs are calculated as 75% of the need for the network losses for the distribution, Minot what they have already purchased already for next year. And then there is another part related to 80% of the supply segment, yes, the need for the customers in the portfolio despite segment, minus what it was already purchased for next year. But if you look at the producers which are subject of the ordinance subject of this mechanism of centralized market, yes, they will not cover all this estimation, both for the distribution and TSO and for all the suppliers. So then there is this rule which is stipulating the priority for the distributors. So we see that the distributors would get probably most of the need for the energy for the network losses covered through the centralized market at 450. And then for the suppliers, it will remain something which should be not so significant. But I cannot really advance any percentage now because we are still running our calculations and our estimations of impact, and then we will also like to see the end of the debate and of the discussions and how the legislation will unfold in a final form. And then when we'll have something more certain, we will get back to you with the estimation and communication. The book value for the assets included in the RAP. This is mentioned -- yes, this is also mentioned in the notes to the financials, and I will give you also the number now. So the value is roughly RON 5.5 billion at the end of December 2021, and it's included in the note in the financials with the details about the concession agreements. If there are no further questions, I would end up this conference now. I would like to mention 2 things. Any questions you do have we're always here with our team of Investor Relations. You can contact my colleagues, headed by Raluca Kasap. And we will also -- we are here in terms of the finance team for the electrical and for the subsidiaries, we'll be able to provide everything all the information that you asked to be as transparent as possible. I would also like to say something all these results and the fact that we've proven resilient in this year, and we have proven that we are able to post a positive result is something for which I would like to thank to all my colleagues, all my colleagues here in the headquarter of Electrica but also all my colleagues in our subsidiaries, which are making efforts every day and which are doing all their best to adapt to the market conditions and to post these regards being paying attention to the control of the costs, operational costs, paying attention to the mitigating the risk in terms of purchasing energy for the network start portfolio of supply. And also, we are well together a team where we do have also the support of our member the board members in the subsidiaries. We are really deep this year. But we worked as a team and we were able to prove our resilience and to our capability that in this context of complex market conditions, we pulled through with some strong results. Thank you. Thank you all.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.