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. I'm Raluca Kasap, I'm Head of Investor Relations. And together with the entire Electrica management team, I'd like to thank you for joining the Electrica conference call and live webcast to present and discuss the full year 2022 financial results according to the order of the Ministry of Finance 2844 for 2016. Those of you who are connected only by phone, please download the presentation in PDF format available on our website on the Results and Presentation section of the Investors section. The participants connected online or through phone can address written questions on the live webcast or they can intervene live on the Q&A session. Kindly note that since the entire conference is being recorded, all participants will be in a listen-only mode. So the attendees voices will be disabled. Should anyone need assistance during the conference call, you may signal an operator. Note that the recorded presentation will be available on our website starting late as tomorrow and the transcript as well as soon as possible. We kindly ask you to see the disclaimer on Slide 3 of the presentation in front of you. Now we'll begin the presentation of the financial results, which will be followed by a question-and-answer session. Should you have any questions at this time, please send them to the IR at electrica.com. At this time, I would like to turn the conference over to Mr. Alexandra Chirita, Electrica's CEO, to begin the presentation.

Good afternoon, ladies and gentlemen. Welcome to our conference. The financial performance recorded by Electrica Group in 2022 and a typical year for the energy market and not only is the result of a continuous process of optimization and adaptation to economic and legislative development. I thank our colleagues, clients, investors and partners who supported these efforts and contributed to the proper management of the adverse conditions in which we operated last year. Allow me to present you the 2022 financial results in a nutshell. Electrica's results for the entire year are the best since the listing to date, both at the level of total revenues as well as the level of EBITDA and net profit due to both the distribution and supply segment, as you will see in our presentation. The result was mainly generated by the performance of the Supply segment and secondary by the application of the new regulation regarding the coverage of net costs with network losses in the context of the increase in the unit price of electricity as well as the electricity deficit in the European Union. In 2022, Electrica obtained an individual net profit of RON 24.3 million and the total gross value of the dividend proposed to the OGMS to be distributed is around RON 40 million. The gross dividend share is RON 0.78 per share. We are aware that the expectation might have been different, but having in mind that we are still operating under exceptional market conditions, the decision was made to act prudently. We consider that the company's performance is good, taking into consideration the 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. Most of all, we have been focused to be prepared to quickly respond and adapt to the challenges that kept arising.  In the coming period, we will continue the process of adaptation or activities and strategy to market conditions at the same time counting on a sustainable growth of the companies in the group so that we can ensure the financial stability and efficiency of all the business lines we own in the portfolio. As for future projects following the current strategy, we'll continue to develop the production segment, taking into consideration all the restriction coming from the challenges in the supply chain area at the international level. As you know, we currently have an operational photovoltaic park, one ready-to-build photovoltaic project and interest in 4 other projects, which are in different stages of being put into operation. As we confirmed in November, our strategy still aims to develop a portfolio of electricity generation capacity from renewable sources with a total capacity of 400 megawatts by 2024 and the total installed capacity of 1 gigabit by 2026. We are already working on the new mid- and long-term strategy at group level, and the red line will be to adapt our business to the complicated ecosystem we are operating in. The regulatory environment is becoming more predictable than in the last 2 years, but there are multiple other challenges coming, for example, from the ever-growing ESG requirements of the capital market. The result were results that we are presenting today as well as the strong team that we have at group level 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 and responsible development objectives of all our business segments in parallel with maintaining a high degree of resilience in the face of future challenges. I will give the floor to Stefan to get you through the detailed financial results. Thank you.

Thank you, Alexandra. So in order to start the presentation of the numbers, I will ask first to go to Page 3 and explain a little bit the setup related to the presentation of the financial situations according to [indiscernible] 2016. As you know, starting with 30th of September 2022, Electrica Group applies the provision of the government ordinance 119 from 2022, where the additional costs for the purchase of energy made during the period 1st January 2022 until 31st of August 2023. In order to cover the on technological consumption compared with the cost recognized tariffs are capitalized quarterly basically, the expenses with the difference of price of network losses are capitalized, there are some capitalized asset constitutes, which will be amortized on the period of 5 years to match the period of the recuperation to revenue. Now from point of view of the regulations of the order of Ministry of Finance, to the order of 3900-2022, it was amended the [indiscernible] para 2016. And it was introduced a new clause related to the regulatory account for these additional expenses for the own technological consumption, yes, in the sense of partly capitalization of these additional expenses at the intangible assets. This order at 44,206 regards the localization of the IFRS rules and principles to the local market. In the IFRS IU, consolidated set of financial statements, which will be published until 27 March 2023. These expenses will have a different accounting treatment when we will publish also this. We'll publish also a presentation related to explaining the difference.  Now moving to look at the summary of the consolidated financial statements on the Page 4, I would like first to put into evidence the increased revenues, which exceeds RON 10 billion , which is due to the increased prices of the energy. EBITDA, it's at a level of 1.4, almost RON 1.4 billion. And the net result is almost RON 560 million around. In terms of net debt, net cash, you can see that basically, the position of net debt has increased with roughly RON 2 billion, which we took as additional financing during 2022 to prefinance the support scheme on the supply subsidiary, roughly RON 1.4 billion and also to finance the difference of price of net or losses of apart for the distribution subsidiaries for the difference. Moving to the next slide. In terms of the consolidated EBITDA and net result evolution, I would like to point out the main positive and negative influences for the variation of EBITDA. So EBITDA is a variation compared with the previous year, it's of RON 1.5 billion, being mainly the cumulative effect of the following factors. We have a positive variation of energy margin of RON 601 million, both in the supply and in the distribution areas. In the Supply segment, we have increased of the margin -- of the energy margin of RON 946 million, which is due basically to the fact that we were able to manage in an efficient way, the acquisition of energy, we purchased energy very early in the year, trying to be covered as much as possible and mitigating the risk in terms of being covered for the energy for the contracts with the final customers and this generated a positive margin in the Supply segment. And on the distribution segment, we have a positive effect of RON 555 million from the increase of the revenues in the energy distribution due to the increase of the tariffs starting 1st of April 2022 in order to recuperate the difference of price for network losses from 2021 with a negative effect of slight reduction in the volumes of energy distributor did up 4%. And then there is a negative effect related to the increase of expense with purchased energy to cover net or losses, the ones which, as we explained, were capitalized according to the ordinance 119. We mentioned then the capitalization of the additional costs with the purchase of energy revenue from the production of intangible assets in the amount of RON 989 million. And then as other effects, we mentioned a negative variation of OpEx of RON 75 million, which is mainly due to negative impact from a variation of the adjustments from the depreciation of trade receivables and other receivables. As a result of the receivables recoverability analysis according to IFRS 9, I should point out that this is not necessarily an effect of decreasing the quality or having an issue of collecting the receivables, but there were situations in which due to the changes in the legislation with the changes in the support scheme for the end consumers, we had the situation in which we basically issued the invoice later compared to the -- with the amount of consumption because we needed to make the necessary adjustments and development in the IT system in order to implement changes to the algorithm. So it's not necessarily initial-related to collection. We have done an increase of RON 21 million of the cost with the salaries, employee benefits from the distribution segment, which was diminished by the effect on the other -- or negative effect on the other segments. And then decrease of the costs from the Distribution segment and from the Services segment with repairs, maintenance, material expect. If we are looking at the variation of the net profit, the difference is RON 1.1 billion, and this is mainly due to the effect of the EBITDA evolution with a negative correction, a negative effect of the financial results, which is an effect of minus RON 138 million. Of course, in order to prefinance the support scheme and in order to prefinance the network losses for the decisions we needed to take loans. You saw the situation about the net debt, and those loans have interest and this interest is also -- was on an increasing trend. So we have an additional cost here. And then we have also a negative evolution of the expenses with depreciation and amortization of its assets of RON 50 million. And then of course, the impact of the expense with income tax of RON 185 million compared with the deferred income tax from last year.  Moving to the next slide. We would present some numbers related to -- like related to the position in the market. We are the leading player. We are still and continue to be the leading player in distribution and supply at per the latest available and data on November 2022. We have almost 40% co-owned the distribution in terms of volume distributed. And then in terms of market share for the supply, we have almost 18% market product January and November, and we have also relative -- is even larger market share, 30% in terms of electricity supply to customers in competitive regime, universal services start of as instant. Now if we move to analyze the segments, we go to Slide 7, and we have the details related to the distribution segment. The highlights are related to the fact that the EBITDA of 2022 increased by RON 645 million compared with the one for 2021. With the impact of the elements I mentioned below, there is a decrease in energy margin of RON 345 million that I have mentioned I have covered in the general slide about the evolution of net profit and EBITDA. Then, of course, the effect of the capitalization in terms of RON 989 million, the capitalization of the networks cost. And then we had some impacts related to favorable impact from adjustments of depreciation of receivables, RON 52 million, mainly as a result of the reversal of some provisions related to installed clients. Increase of employee benefits with RON 38 million that I also mentioned previously is a result of the alignment of the provisions in the collective labor agreements in all the 3 regions, the impact generated by salary increases and other benefits. Then we have also an increase in operating expenses to be mentioned, mainly from cost of utilities, rent cost, buildings, cars and the bank on commissions, and there is also an effect of RON 6 million from increasing uncontrollable costs because last year we moved from the frequency of readings of the meters at 6 months to the frequency of reading of meters every month and we generated an additional cost. Other operating income brought a favorable impact of RON 37 million, mainly coming from the capitalization of cost of investment work. As a result, the net result for Distribution segment increased by RON 447 million, mainly related to this evolution of EBITDA, which, of course, we had the negative impact of evolution of the financial result with a minus RON 79 million. We explain it the matter related to the financing of the difference of price for network loses, but we should mention that according to [indiscernible] 119, this capitalized asset, which is constituted for the difference of price for the expense is to be remunerated with the rate equal to half of the regulated rate of return. So basically, it is bringing back some recuperating some of the costs related to the financing. The favorable impact of the Distribution segment results mostly from the capitalization of cost of net or losses. And we have this additional cost of RON 989 million, which will be recuperated in future tariffs in a period of 5 years, starting with 1st of April 2023. And it's also worth to be mentioned that first off, starting with 1st of April 2022, we have -- we did an increase of the distribution tariffs with on average 7% in order to operate the difference for network losses from May. The increase in net debt is by RON 691 million compared with 21 million coming partly from increase of overdraft, the lines which we took in order to finance the difference of price for network losses. And this is now in process of being refinanced under facilities on 5 years in order to match the exploration. Then there are the specific details that we always include in our presentation in terms of distribution segment in Slide 8, the details regarding the correction with which we entered this current regulatory period coming from the previous ivory period. Then we have the waterfall in Page 9, which is analyzing the regulated net results by '22 for the distribution segment and the one which is more interesting for you for the analysis in Slide 10, the evolution of bar starting from era, including the correction, annual correction, net or loss differences, et cetera, where we point out all the elements that we are bringing -- are bringing us to the accounting. Then we also have the details on the regions, which are in Slide 11, 12 and 13. In terms of Slide 14, I would mention the details about the investment. Basically, at the end of 2022, we realized and commissioned in the distribution subsidiary investments, representing 80% of the value of the program planned for 2022. Of course, there was a matter regarding priority what to finance first because with the CapEx to of RON 0.5 billion run, but almost RON 1 billion to finance business of flights from metal loses. We were in antiquation slowing down in the parts related to the commissioning of investment. But we are confident considering the mild winter and the good weather that we should recuperate by mid this year. In terms of Electrica Serv, the results show an increase of RON 6 million in EBITDA compared with the same period 2021, mainly as a result of the increase in income with RON 40 million due to the fact that the situation in the world market and the increase of demand for energy generated an increase of demand for photovoltaic systems, which being -- which are representing the new focus of activity for Electrica Serv, which generated the conclusion of in-contract. The net result for 2022 increased by around RON 50 million, mainly from the evolution of the BBA but also the financial results and offset by the increase in depreciation and amortization, financial result is positive because Electrica Serv historically, has a significant level of cash, significant compared with the size of the company and basically, this is optimized and utilized to the cash flow structure at the level of the group, but the net creditor in this tantum. If we go to the supply segment, for Electrica from New Zealand, Slide 16, I have mentioned that EBITDA significantly increased with RON 831 million compared to 2021, with the effect related to the evolution of the energy margin that I also explained at the beginning, basically, we had an increase in the revenues from the supply of energy of natural gas by RON 2.4 billion. mainly as a result of the increase of price in the selling price of energy, but also other operating income increased by 2.7 billion, which is represented mainly by the subsidy in the amount of RON 2.7 billion, roughly values to be recovered as regard -- as a result of the application of the sport scheme, which was introduced initially by government ordinance 118 from 2021 and then further amended government ordinance 27 2022 and then amended in September, government ordinance 119 2022. Then in terms of purchased energy costs, this is -- we have an increase of RON 4.1 billion, which is generated by the increase of the energy purchase price. But as you see from the elements, we generated also in the energy margin, a positive result due to the fact that we had a good strategy of mitigating the risks in terms of purchasing energy early in the year on term contracts on forward contracts and not being so reliant on this by -- on the head market, sorry. We also have some small effects related to some favorable effect of the variation of green certificate purchase and the February effect of RON 94 million related to impairment losses of trade receivables, which is a result of the analysis based on IFRS 9. But as I mentioned before, this is not necessarily affecting an issue about connection. The net profit increased as a result by RON 651 million, mainly from a positive evolution of EBITDA, as I mentioned before, but also a reduction of the financial result of RON 54 million because we had increased costs in terms of the additional financing lines that we took in order to refinance the support scheme. We are, however, in the situation in which basically compared with the 7 per megawatt, which is cost of supply realized paid through the ordinance 119, we have a significantly lower cost base and we are able to recover from differences, which the efficiencies is led to us generating profit. We are able from the difference to cover the interest -- the increased interest cost. Net debt increased by RON 1.2 billion compared with year-end 2021 as a result of stators I mentioned, which offered us some multipurpose lines, mainly used to refinance the difference the support team or the supply team for endpoint consumers. In terms of supply market, you have analyzed this of the market quote in the next page in terms of also the split of portfolio between household on household, supply volume and consumption places. Also, I should like to see the evolution on Page 18 in terms of the aspects of the market. You can see that 2022 is bringing significant volume of electricity as a supplier of last resort. There was the situation in which a number of suppliers due to the current market situation with the increase of prices and not having necessarily the volume, the energy source secured through term transactions to forward transactions and having the dependency of the health market, they let some of the customers to the supply of last resort and this was taken over by us and by some other suppliers, which were suppliers of late than part. Also in terms of financial impact of the electricity market perspective evolution, you have a summary, which is showing the weighted average price evolution on the head market, 2021 compared with 2022 and also on the balancing market in terms of the evolution of the prices. Also, the next slide is presenting the evolution of receivables. In terms of outstanding receivables, you see that basically, when we adjust them with the turnover, it's not such a -- the difference is not so big as it might seem in notional terms. And then when you look at the details about IFRS that I've mentioned, in fact, there are not really some issue related to it pot being collected with delay, but sometimes it's about us being only able to invoice with delay compared with the consumption month because we needed to make some adjustments relate to the changes in the algorithm of the quarter. Page 21 is showing the liquidity position for the group. You saw the evolution of the liquidity position. I think the graph itself expanded in all detail too much. You can see that basically compared with the situation at the beginning of '22, the situation has improved. And also in terms of debilities had improved. We still are financing the support scheme, but we see that the mechanism got more operational, more oil in terms of -- also in terms of us being able to file in for the request for the subsidies, but also in terms of getting this analyzed and approved and paid. Then there is a dimension about the dividend distribution. Also, Alexandra has touched this subject.  What I would mention is the fact that basically there is always this delay in terms of when the operational subsidiaries are generating a profit and when this can be paid to the shareholders of EFSA because if the operational subsidiaries have a profit which is registered in the year, then these are to be distributed as dividends to EFSA in the year plus 1 and they constitute financial revenues for EFSA plus 1, which generate profit at the end of the year, plus 1, and this can be distributed only in the year the plus 2. So basically, we are in the situation in which basically since in 2021, we had the loss situation on the operational subsidiaries. In 2022, we didn't have any dividends paid to EFSA, which to be able to be contributed as a significant financial revenues and to be paid as dividend. Then there is also the element that was mentioned by Alexandra. We see that there is still some volatility and some uncertainty related to the market. We are very keen on securing our liquidity position, and we would not exclude -- I mean, depending on the evolution the market to see what will happen in the second part of the year. Now then you have the slides related to the presentation of the group and also details about the legislation, the main corporate governance events and so on and so forth. So I would say, plus the usual annexes that you are used to have from our presentation. So I would stop here and just invite you to provide with our question your questions, and we'll try together with our team here to answer clear crystal as possible.

[Operator Instructions] The first question is with the line of Ciopraga Iuliana with Wood & Company.

You mentioned something about financial cost for supply. Can you clarify, are you able to recover them or not? Secondly, regarding the regulated asset base, the number you provide about the reset base, is this adjusted for inflation. And also, can you clarify the -- what's the accounting value of the regulated asset base, the one that will be taken into account by the regulator? So the book value, but the one that the regulator will assess as of end 2022. And also regarding the revenue from the capitalization of the grid losses. In the fourth quarter, that was around RON 209 million. That seems a bit low if we look at the price, what was included in tariffs and the quantity. Can you explain?

So I will take from the last to the first. And if I just don't remember something, if I'm sure my colleagues will help. So in terms of the capitalized costs for fourth quarter 2022 to RON 209 million, tangible not [indiscernible]. While you mentioned that it might seem that the difference between realized prices in the first quarter and the price reconnecting tariff should be higher. The idea is the following. According to the regulation of Dan the order 129 from 2022, the amount of net losses related to fourth quarter 2022 used for capitalization was determined by allocating the annual amount of network losses forecast at the beginning of better for the regulatory period, depending on the weight of the amount of net losses realized in quarter 4 2021, in the total amount of net or losses realized for the year 2021. So basically, they came with a calculation mechanism, which was established through their order in which they took the forecast from the beginning of the regulatory period, and they made the split of fourth quarter compared with the year based on the split fourth quarter compared with the year in the previous year. So this is why this amount was generated yes. So for the total year 2022, we capitalize the difference between the net for losses costs recognized and expanding the tariff and the network loss cost to recognize tax cost... Yes. The cost of net loss is recognized as unit tariff was RON 841 million, which was established based on the quantity of net or losses approved at the beginning of the regulatory period of 2.1 terawatts with the price of RON 392 million. Now in terms of the cost -- the financing cost for the supply subsidiary, as mentioned, in the support scheme in the support scheme, which was approved through 118 from 2021 and then amended 27, 2022 and then further remaining to ordinance 119 from 2022, et cetera, we are -- we have the right year to ask for a flat amount of RON 73 per megawatt supply cost overall and even RON 80 per megawatt for the part, which is representing customers that we took in supplier of last resort. This is an amount which was established by the regulator as an amount which to cover pretty much all the suppliers. In case of a big supplier like ourselves and like the other big suppliers, we do have economies of scale, and we are able to have, on average, a significantly lower cost of supply effectively than this amount. And we are allowed to keep the difference, to save this to cash in on this efficiency. So from my effective cost up to RON 73, there is room to cover for the additional interest expenses and to generate the profit that we have also generated in 2022. In terms of RAB value...

So basically, you need to recover the financing growth from the 73. This is how it would work. There's nothing that...

We recover at each request of subsidies because of the request of subsidies. This has a component related to the difference between the cap price to the customer and the average acquisition cost plus the part related to the tariffs, distribution tariffs, et cetera, plus this part related to the supply. So in each month, we are having also be included in what we are recovering. Moving to distribution to the question about the RAB value. The bar, the RAB value at the 31st of December 2022 does not include inflation. We are in process of having an update at evaluation with inflation having intuition that we had the situation of last year, which was basically a situation of deeper inflation more than 10%. The bar depreciation is higher than the realized commissioning is RON 497 million depreciation versus RON 479 million commissioning.

Can you repeat that depreciation value?

Sorry?

I'm sorry. Can you repeat the depreciation value? Regulated depreciation?

RON 497 million was the depreciation and the RON 479 million was the commissioning Yes, we do expect that we will be able to recuperate the part related to unrealized CapEx for 2022. As you know, according to 98 from 2022 in the first month -- 6 months of 2023, investments not made in 2022 can be recovered without signs from the regulator. In terms of evolution of -- I'm also moving to your questions that you asked also in writing. If I skip something, please let me know. Authorized operation costs for distribution, excluding risk losses and supply evolving in 2023. Now this would be a forward-looking statement that I would invite you to see in the detailed materials that we publish with the budget until '27 of March for the GMS meeting from April. We are now in the last meters for finalizing the budgets, and we have the final workshops on that. And of course, evolution of operating cash flow. As you saw, just as a comment in terms of the distribution mechanism of the centralized market is basically providing us with 75%, 80% of the energy that we need to cover the network losses and at RON 450 on price. And this, combined with the fact that the market prices have decreased make us confident that in terms of the distribution, we will not see a year with pressures in terms of differences, large differences of network losses between the outlined price that will be established 1st of April and the effective average price. In terms of the supply, of course, we are monitoring tightly the station purchasing energy from the market when it's possible. We are very efficient, I think, compared also with some others in the market in terms of running the reports, filling in for the exploration of the subsidies, focusing on invoicing even when we need to stop the system to implement changes from the changes in the support scheme in the algorithm, yes, since we don't necessarily rely on intragroup loans from other companies, and we need to finance locally and we are paying a lot of attention to the overall indebtedness that this was also seen -- you saw probably that feature reaffirmed our rating last week, and we are very keen on looking on that. So this is why we are able to file in quite efficiently for the reimbursement and then validate it quite efficiently with the regulator and so on and so forth. Can you provide some details of CapEx and timing for commissioning for the pipeline? As you know, we have some projects which are in our pipeline. We mentioned details in the past. It's almost 300 megawatt. The details on the CapEx and on the quantities you will see in the budget. And for the budget, it will be -- we will use this moment, which is a forward-looking communication that we will show, we will also mention about the expectations of what we would like to commission this year. We prefer to be rather more conservative than too optimistic. Okay. Yes, some also details on some of your questions in terms of cash flow position. You mentioned we don't expect necessarily with monitoring the tightly the liquidity, we don't expect to have a cash flow position, which to be worsening compared with 2022. I think this is covering this question and moving is the revenue from related to capitalization of net or losses recorded by the NGL activity distributable to Electrica is going to be distributed by Electrica? Yes, it's a revenue, which is distributable revenue. But as you truly pointed out and there is a part of this revenue, which will be collected in 5 years. So this is not something which will best be cashed in or was cashed in at this moment. So basically, since we are focusing on growing and developing our operational subsidiaries and also the ambitious targets in terms of also investing in the CapEx of the distribution subsidiaries, both to recuperate the part not commissioned last year but also in terms of ambitions for this year, we would not consider to have a dividend distributed from the supply distribution subsidiaries just to be on paper because then I could not really get that cash out of the of the company. And in general, we would look in a position in which basically to mitigate somehow between the needs of investment of the subsidiaries versus the amortization and how much more CapEx compared with amortization is sustainable on the long run. You mentioned the new tariffs that should be announced by April. What are the main drivers for adjustments? Please tell on both the positive and negative expected impact. As mentioned, the tariffs should reflect the beginning of recuperation of the difference of price for network losses for 2022. I cannot really speculate right now on amounts or percentages, but I just can say what I think I also briefly mentioned before that we do expect that for this year, we will not have any significant difference between the average price for net or losses and the exact the price which will result from that. So basically, it should be a fairly important increase in tariffs. And as you know, the expiration of rental losses from the past from 2022, according to Ordinance 119 is stipulated as a separate component. It's not included to the cap 7%, which is in the traditional regular methodology of ANRE. I think that by the moment, of course, when this established will come with the current report pro by 27 of March, when we have also the budget proposal of budget published, we will also have this information in terms of this pricing. Do you have any visibility about distribution tariffs? Yes, we mentioned also that. I would not really like to speculate, but it should be fairly okay. How much have we cashed from total amount to be received from subsides? Just to give you a flavor of it, we do have -- so first of all, there is a delay in -- which is an operational delay in how soon can we file in from the subsidies for the subsidies. Basically from the month of consumption, I can only file in 2 months' time, yes, because I'm getting the data, so the algorithm supposed to have also calculation related for the imbursement related to the costs, which are on the balancing market. The data from the balancing market, it's only delivered a 1.5 month from the end of the consumption market. So for example, for October 2021, we were able to only have the data in mid-December. And then we need to run the reports, we need to check the reports for errors, validate them and then we batch them and send them to the regulator. And then there is a discussion about getting validated for the regulator. This works fairly quickly now with the regulator because the mechanism was oil. The regulator has established like relationship managers like dedicated persons for each of the large supply groups. And basically, they know our subsides, we know their requirements, and we are able to validate quite quickly. And then it goes to Ministry of Energy or to ANRE for being repaid. Just to give you a flavor, probably out of what we have issued last year, we have something like -- and we have filed in by the end of the year, we have something like less than RON 160 million to RON 200 million as of today to be recuperated. But please note that December, we were able to only file it in February, end of February, beginning of March. So because of this mechanism that I have mentioned. What's important to mention is that starting with the Ordinance 192 for the amount that we'll be able to start claiming beginning of January, there is a change in the mechanism in the sense that once we sent the files and the request for the reimbursement to the regulator, even before the calculation, we are entitled to get 40% to help us on the cash flow recoverability. And basically, for the difference, they consider that basically the difference is any difference in calculation or amounts which are not cleared which are not confirmed between us and the regulator are supposed to be covered by the 60%. We will see from the next request for reimbursement that we understand how this will happen. If there are other questions, I will ask some of my colleagues from Mia or the investors on the audio line.

[Operator Instructions] We have a follow-up question with the line of Ciopraga Iuliana with Wooden Co. and Company.

Just a clarification, actually, I wanted also regarding the regret asset base. So you think that the number does not include inflation. What I wanted to know for the previous year, so until 2021, there is just with intention or not? I mean, is it something specific that you've done only for 2022 when you didn't incur inflation or you haven't included it for previous years either?

Basically, the idea of -- so the idea of updating with the inflation comes from 2 drivers. The first driver is that at the end of each regulatory period for the accumulated inflation in the respective regulatory period, I am having the right from the regulator to be received an increase of the bar, which is important. But this increase is to be done only up to the net accounting value of the assets which are in the bar. What happened in the past and in the previous period and so on, is that since a long time ago, we didn't have in Romania inflation so high. So inflation accumulated was not really so significant that it was not so important as an impact. Now if you look at the episode of inflation in last year, probably the accumulated inflation for the PFI quick and that they will be 25%, 30%, I don't know, just ballpark figure. Considering also the fact that last year, we had this inflation, deeper inflation, depending on some calculation, to 13%, 14%, whatever, we initiated this revaluation of the asset in bar also in order to reflect the situation related to the hyperinflation, but also to have room in terms of this revaluation at the end of the regulatory period.

So basically, you want to be conservative. And at the moment, you did not reflect the inflation for 2022. But for the previous year, you did it. I guess you included the inflation, right? It's not significant, but it is there. And right now, you find itself limited by the book value of the asset. This is what I understand from your statement, right?

The value at the end of 2020 was RON 6 billion. This includes the inflation from the previous year. Of course, we keep this. Yes, the point is, yes, to be sure that in terms -- yes, there's one thing there is the up value, whether it includes inflation or not. And then this the net accounting value of the assets here. The up includes the inflation. The point is now since inflation is very high, we would like to have also an update on the net accounting value so that we don't have an issue with the CAP because the regulation is saying, we are getting the inflation up to the, yes.

But the RON 6.1 billion that you're mentioning right now, that does not include inflation. I mean, you included inflation up to end of 2021, right? Not 2022 because I remember it.

I will recognize now that I'm -- I will let my colleagues switch the matter more into the problem. I invite [ Jana ] to help with some clarification. Thank you.

Hello. For the end bar value 2022, this 6156, this value includes the inflation for 2022. The value is 3.76. This is inflation already included in the end bar value. But what Stefan mentioned is that we cannot keep this inflation at the end of this period if the report between net book value and bar are not the right report. 3.76 is the inflation recognized in the tariff for 2022. So this 61.6 million drawn billion okay, include this 3.76 inflation for '22? Clear?

Yes. But that means that when you have new tapes for us from starting April, at that time, most likely, you will have the actual inflation for 2022 recognized, not in revenues, not in RAB, of course. Will you adjust the RAB at that time? Or you will adjust RAB only after you evaluate the book value of the assets for the equity value?

The inflation rate will be correct in T+ 2 years. This is a mechanism already mentioned in the methodology. So for 2023, the inflation is 13.69%. This inflation for 2023 will be recognized in the tariff for '25. This is a mechanism to recognize inflation in the tariff in the T+2. we will correct the inflation aligned to the realized inflation, okay?

The adjustment weak inflation will be done in T+2, not necessarily here?

Exactly. And the inflation will be corrected for RAB just if the report between net book venue and RAB will be the right value.

And can you let us know what is the book value of the assets as of end 2022? On the remaining accounting standards, not under IFRS. Under IFRS, I think you already have the figures. I mean, what's included in the accounting of the subsidiary, distribution subsidiary? Is there 6.1?

So just ballpark figures. The RAB is RON 6 billion roughly Yes, and the net asset value of the RAB asset at the end of 2021 is 6.2 billion. So it's higher, but this is subject to revaluation now and up to 27 of March, we'll have the value and to be clear. There is another question? Yes, please.

Regarding the tariff, actually, I had a question regarding tariff, if I may. So the main adjustments that would be done in April. On the one hand, you lose the -- what was recognized in days 2021? And then -- and secondly, but you will get this adjustment for inflation for 2023. Is this what -- are these the main corrections that you expect?

We will not have correction for the price of GPT for 2021 in the tariff for April 2023 because this correction has already done. Correction is -- exactly. So we will not have this correction for 2023 for this first '23.

But then you have just the plus-on the other hand, you will have the inflation of 2023. Right now, I see an average from the prognosis Committee, whatever that's called, around 11%. That's what we'll probably see. Right?

Yes. We calculated already the inflation corrected for 2021, and we estimate for 2023 is 13.7%.

Okay. So 30% -- 13.7% includes both 2021 plus 2023. Okay.

Exactly. It's already corrected.

There is one more question. What is the payout ratio for Electrica subsidiaries? Electrica Furnizare What about this year proposal? What is the usual payment payout ratio for Electrica at what about this year proposal? So first of all, in the distribution, in the policy for dividends that we had in place last -- until last year, and we amended last year, we had a range of distribution payout between 65% and 100%, for distribution from Electrica to the shareholder, pay attention, from the net distributable profit and the same percentage was to be applied also for the for the subsidiaries. Now last year, we had an amendment of the payout ratio of the distribution policy, which basically now is not considering any percentage which to be given. And this is reflecting the fact that we would like to invest and to develop the green energy generation. So when we are in a strategy of investing and growing. We need to keep some of the profits in order to grow and generate -- have new capacities, which will generate new EBITDA and to be able to give dividends further in the future.  In terms of the subsidiaries, Electrica Furnizare is not in a position to give any dividends, although it had a profit because it needs to recover the losses from 2021. In terms of distributor, yes, there is a profit which is there and would allow for a distribution of dividends. But as explained, since part of it is not cashed in, but will be recuperated from tariffs in 5 years, the decision is just -- and on the other side, the company needs to further invest in for the CapEx plan, et cetera, not to have a payout dividend for Furnizare from distribute this time because from a cash point of view, would have meant just to get some revenues and then the cash from the subsidiary and then send it back immediately to the subsidiary because it will be part of the revenues from the capitalization of [indiscernible] will be recuperated from tariffs in 5 years. So I hope this clarifies.

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.

Thank you for participating in our event. If you have any questions at any moment, please send an email to [email protected] or call us. We're here. We'll get back to you until the 27th of March with the IFRS financial statements with the budgets that are being submitted to the ordinary General Meeting of Shareholders, and we invite our shareholders to the meeting on the 27th of April. Thank you, everyone.

Thank you.

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