By the end of 2023, Hidroelectrica recorded revenue growth of 30% YoY, an EBITDA increase of 33%, and a net income of RON 6.34bn, an increase of 42% YoY.

In total, Hidroelectrica’s revenue amounted to RON 12.2bn during 2023, growing by 30% YoY. Breaking the revenue down, total energy sales amounted to 19.34k GWh, growing by 33% YoY. Of this, Energy sold generated by H2O amounted to 17.6k GWh, an increase of 30% YoY, while external acquisitions amounted to 1.7k GWh, an increase of 70% YoY. The increase in energy produced and sold came due to the improvement in hydrological conditions in 2023, with the quantity of energy produced above the multiannual average.

Wholesale revenues meanwhile, grew by 14% YoY, with the wholesale energy sold increasing by 23% YoY to 12.66k GWh, while the wholesale price decreased by 7%, to 493 RON/MWh. Hidroelectrica further notes that this was under the influence of new operating conditions of the wholesale market (implementation of MACEE, starting 1 January 2023), as well as the variation in the SPOT price in 2023 (-60% YoY). Moving on, supply revenues related to active energy amounted to 3.49bn, a 132% increase YoY, due to the increase in the portfolio of clients, as well as the increase in the average selling price. Transferred costs (pass-through) also increased, by 126% YoY to RON 1.45bn, as a result of the increase in the client portfolio to which the increase in the regulated tariffs is added.

On the other hand, Balancing revenues decreased by 61% YoY to RON 567m, with the reduction in both the quantity of electricity (-25% YoY, to RON 433 GWh), as well as the lower balancing price (-48% YoY, to 1,310 RON/MWh). Finally, other revenues from customer contracts increased by 137% YoY to RON 154m, and this mainly relates to services provided by Hidroelectrica as the Party Responsible for Balancing. The growth in revenue in this segment then, was influenced by the behaviour of all participants in the electricity market regarding the management of imbalances.

Hidroelectrica revenue composition breakdown (2023 vs. 2023, RONm)

Source: Hidroelectrica, InterCapital Research

In terms of OPEX, it grew by 19% YoY, to RON 5.1bn. Looking at the largest categories of OPEX, transport and distribution of electricity increased by 143% YoY to RON 1.21bn, due to the evolution of the quantities delivered on the portfolio of supply, and of the regulated tariffs. Depreciation remained roughly the same (+3% YoY), while employee benefits expenses increased by 14% YoY to RON 717m. The increase here was mainly due to salary growth resulting from the negotiations with the employees’ union against the background of double-digit inflation recorded at the end of 2022, as well as the increase in the no. employees in the Group.

Next up, we have Turbinated water, which recorded an increase of 42% YoY, to RON 639m, mainly as a result of the increase in the amount of processed water used for electricity production, as well as the increase in the tariff set by ANAR to RON 1.4 per thousand cubic meters (2022: RON 1.23 per thousand cubic meters). Electricity purchased meanwhile, recorded a decrease of 30% YoY, due to the decrease in the average purchase price of electricity in 2023. Green certificate expenses also grew, by 62% YoY to RON 297m, due to H2O’s need to purchase green certificates through the Centralized Anonymous Spot Market for Green Certificates, to cover the consumption of final customers in the supply portfolio of the Company.

One other notable change recorded during the year was the net impairment loss on PP&E and intangible assets, which grew by over 8.8x YoY to RON 237m, mainly as a result of the impairment test performed on assets under construction at the end of 2023. Finally, tax for electricity producers dropped significantly, by 67% YoY to RON 225m, due to the implementation of the centralized purchase mechanism through which electricity producers will sell the amount of electricity available to OPCOM, at the fixed price of RON 450/MWh, as well as the decrease in the electricity sales prices in 2023 compared to 2022.

Hidroelectrica operating expenses composition breakdown (2023 vs. 2022, RONm)

Source: Hidroelectrica, InterCapital Research

Due to the faster revenue than OPEX growth described above, Hidroelectrica’s EBITDA grew by 33% YoY to RON 7.98bn. This would imply an EBITDA margin of app. 65%, representing an increase of 1.8 p.p. YoY. Finally, net income also grew, increasing by 42% YoY to RON 6.34bn. This would also mean that the net income margin improved, by 4.5 p.p. YoY to 51.8%.

Hidroelectrica key financials (2023 vs. 2022, EURm)

Source: Hidroelectrica, InterCapital Research

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