Q3 2022 Report

Executive summary - 9M 2022

§ The consolidated net profit of the Electrica Group, for the first 9 months of 2022, is RON 534 mn, an increase of RON 462 mn compared to the same period last year

§ EBITDA recorded a value of RON 1,104 mn, an increase of RON 629 mn compared to the first nine months of 2021

The operating revenues of Electrica Group, in the first nine months of 2022, recorded a value of RON 10,221 mn, an increase of 5,061 million RON compared to the same period of the previous year.

Supply segment:

o  revenues from the supply of electricity and natural gas increased by RON 1,886 mn, mainly from the net effect of the 54% increase in sales prices on the retail market and the reduction by 9% of the amount of energy supplied on the retail market;

o  revenues from subsidies amount to RON 2,063 mn, recorded in 2022 without having a corresponding value in 2021, as a result of the application of the electricity and natural gas price ceiling mechanism, the reimbursements requests for the amounts owed being submitted in 2022 also for the differences from 2021.

Distribution segment:

o  the electricity distribution revenues have increased by RON 536 mn, positively influenced by the increase in the distribution tariffs starting with 1 January 2022, by an average of 8.6% compared to 2021, followed by the average increase in distribution tariffs by 20.3% on 1 April 2022, compared to the first quarter of 2022, offset by the negative effect of the decrease in distributed electricity volumes by approximately 3.2%;

o  the revenues from the production of intangible assets, worth RON 780 mn, are recorded in 2022 without having a corresponding value in 2021 and represent the capitalization of the additional cost with the purchase of electricity made in 2022, in order to cover the NL (network losses), compared to the costs included in the tariffs approved by ANRE for 2022.

In the first 9 months of this year, the Group recorded a good performance in the supply segment, achieving a net profit of RON 239 mn and a positive EBITDA of RON 327 mn (September 30, 2021: loss of RON 23 mn and negative EBITDA of RON 18 mn), mainly as a result of the increase of revenues due to the increase in electricity sales prices combined with the internal efforts to mitigate the risks regarding the purchase of electricity needed for resale and to control operational costs.

In the distribution segment, the result recorded in the first 9 months represents a net profit of RON 314 mn, a significant positive impact being the result of the capitalization of additional costs with the purchase of electricity to cover network losses (NL), in the form of revenues from the production of intangible assets worth RON 780 mn for the period from 1 January 2022 to 30 September 2022. The additional costs consist of the value determined as difference between the purchase price of electricity for covering NL versus the ex-ante purchase price recognized by ANRE in the related regulated tariffs for 2022, multiplied with the quantity attributed to the network losses (NL).

The capitalization of the additional cost with the purchase of electricity made in 2022, in order to cover the NL compared to the costs included in the approved tariffs for 2022, is provisioned in GEO no. 119/2022, for the modification and completion of GEO no. 27/2022, and ANRE Order no. 129/2022 approving the Methodological Norms regarding the recognition in the tariffs of additional costs with the purchase of electricity to cover network losses compared to the costs included in the regulated tariffs published in the Offical Gazette no. 1019/19.10.2022.

According to the relevant legislation, the capitalized costs are amortized over a period of 5 years from the date of capitalization and are remunerated with 50% of the regulated rate of return (RRR) approved by ANRE, applicable during the amortization period of those costs. They are recognized as a distinct component in the regulated tariffs, called the "component related to additional costs with NL".

Also, as a result of GEO no. 27/2022, the distribution tariffs have registered an increase starting with 1 April 2022 to cover the additional costs related to NL from 2021, estimated at 363 million RON. Thus, starting from Q2 2022, for the distribution operator within the Group (DEER), the tariffs have increased by approximately 28%, on average, compared to 2021. Implicitly, the revenues from electricity distribution are higher, thus covering the difference between the price recognized in the tariffs and the one achieved in 2021, with a favorable impact on the operational performance for the distribution segment. The tariffs applicable starting with 1 April 2022 will not change until 1 April 2023.

The consolidated EBITDA has a positive value of RON 1,104 mn, up by RON 629 mn compared to the value in the first 9 months of 2021. The increase in EBITDA is mainly determined by the capitalization of NL.

Evolution of the main indicators in the first 9M of 2022:

§ EBITDA - positive, amounting to RON 1,104 mn, an increase of RON 629 mn compared to the first nine months of 2021

§ Net result - profit of RON 534 mn, an increase of RON 462 mn compared to the first 9 months of 2021;

§ The volume of distributed electricity decreased by 3.2% compared to the first 9 months of 2021;

§ The volume of electricity supplied on the retail market decreased by 9% compared to the first 9 months of 2021;

§ The revenue from the production of intangible assets in the amount of 780 million RON, representing the capitalization of additional costs with the purchase of electricity in order to cover NL;

§ The revenue from subsidies in the amount of RON 2,063 mn, representing amounts related to the reimbursement requests resulted from the application of the electricity and natural gas price ceiling mechanism;

The main results are presented below and are extracted from the simplified and unaudited interim consolidated financial statements as of and for the period ended 30 September 2022:

Source: Electrica

* Revenues from the production of intangible assets representing the capitalization of additional costs with the purchase of electricity** Amounts are rounded to the nearest whole value

Operating expenses increased, mainly as a result of the increase in electricity prices, the largest share being recorded in the cost of energy purchased for the purpose of resale, for the supply segment.

OTHER IMPORTANT INFORMATION

§ Electrica Group distributed, in the first nine months of 2022, approximately 13.4 TWh (3.2% decrease compared to the same period of 2021) to a number of approximately 3.85 million users;

§ In the first nine months of 2022, Electrica Group supplied to the retail market approximately 6.4 TWh (9% reduction compared to the same period of 2021) to a number of approximately 3.51 million consumption places.

Statement of Alexandru Chirita, CEO of Electrica S.A.:

"If the results recorded at the level of the Electrica Group in the first half of the year were marked significantly by both the external context and the changes in the domestic regulatory framework, at the end of the nine months of 2022 we are happy to be able to see that the efforts made by the whole team are reflected in the obtained positive results, especially considering the ongoing challenging conditions in the energy market. In this regard, I want to thank my colleagues for the involvement, dedication and efficiency that they have shown during this period.

Moreover, we have maintained our role as a responsible company towards our employees, customers, shareholders and partners and, in addition to ensuring solid prospects for the development of the companies within the Group, we have been able to quickly respond and adapt to the challenges which continued to appear. As a result of all these efforts, 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 the similar period last year: the value of the consolidated net profit exceeded the one recorded in 2021 by RON 462 million, reaching RON 534 million, EBIDTA 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.

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."

Starting on 15 November 2022, 20:00 p.m. (Romanian time), the simplified consolidated interim financial statements as of and for the nine-month period ended 30 September 2022, drawn up in accordance with OMFP no. 2844/2016, for the approval of the Accounting Regulations in accordance with the International Financial Reporting Standards adopted by the European Union with subsequent amendments, and the consolidated directors' report for the nine-month period of 2022 will be accessible, both in Romanian and in English, in electronic format, on the company's website, at www.electrica.ro, section "Investors>Results and Reports>Financial Results", at: http://www.electrica.ro/investitori/rezultate-si -reports/interim reports/..

All these documents may be accessed also in hardcopy, at the Company's headquarters in Bucharest, 9 Grigore Alexandrescu Street, District 1, which is open from Monday to Thursday between 08:00-17:00 (Romanian time), and on Fridays between 08:00-14:30 (Romanian time), excepting the legal holidays.

The support documents for 9M 2022 results are available on Electrica's website at this link

Contact details:

Electrica Investor Relations

E-mail: [email protected] 

Chief Executive Officer

Alexandru-Aurelian Chirita

Disclaimer

This report does not represent a recommendation/ offer/ invitation to contract or buy shares. This report contains information regarding preliminary key-operational indicators of Electrica Group's companies, so this forward-looking information is neither guarantees for future performance nor a forecast for the real data or otherwise, being risky or uncertain. The real results could differ significantly from the data in this report.

Therefore, Electrica undertakes no responsibility/liability for any damages that may occur from using this forward-looking information. The data in this report are selective and may requires updates, revisions and changes in the certain circumstances. Electrica assumes no obligation or commitment to publish any update, revision or modification of any information contained in this report, unless required by the applicable law.