Societatea Energetica Electrica S A : Financial results – 2022

PRESS RELEASE 07.03.2023

Financial results - 2022

• At consolidated level, the net profit of Electrica Group, in 2022, is worth RON 558.8 million, compared to a loss of RON 552.9 million in 2021
• In 2022, Electrica S.A. obtained an individual net profit of RON 24.3 million
• The revenues of the Electrica Group reached RON 10,010 million, up 39.4% compared to 2021

In 2022, the net profit of the Electrica Group amounted to RON 559 million. The result was mainly generated by the performance of the supply segment and secondarily by the application of the new regulations regarding the own technological consumption (NL), on the background of the increase in the unit price of electricity, as well as the existing deficit in the European Union.

Statement of Alexandru Chiriță, CEO Electrica S.A.: "The financial performances recorded by the Electrica Group in 2022, an atypical year for the energy market, and not only, are the result of a continuous process of optimization and adaptation to economic and legislative developments.

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.

In the coming period, we will continue the process of adapting our 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".

Starting with September 30, 2022, Electrica Group applies the provisions of GEO no. 119/2022, whereby the additional costs with the purchase of electricity made during the period 1 January 2022 - 31 August 2023, in order to cover its own technological consumption, compared to the costs recognized in the regulated tariffs, are capitalized quarterly. The Group registered revenues from NL capitalization in the amount of RON

951.6 million, representing the additional NL calculated as the difference between the net cost with the acquisition and the cost of NL included in the regulatory tariff, for the period 01 January - 31 December 2022.

9, Grigore Alexandrescu street, District 1, Bucharest, 010621

Email: [e-mail]

The capitalization of the additional cost with the acquisition of electricity in 2022, in order to cover the NL against the costs included in the tariffs approved for 2022, is provided by GEO 119/2022, for amending and supplementing GEO no. 27/2022, and by ANRE order no. 129/2022 approving the methodological norms regarding the recognition in tariffs of the additional costs with the acquisition of electricity to cover the NL compared to the costs included in the regulated tariffs published in MO 1019/19.10.2022.

According to the applicable legislation, capitalized costs are amortized for a period of 5 years from the capitalization date 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 regulated tariffs, referred to as the 'component related to additional costs with NL'.

Financial	2022	2021	2020
results*	(RON million)	(RON million)	(RON million)
Operating revenues, out of which:	13,840	7,375	6,666
Revenues from subsidies	2,687	-	-
Income from the production of intangible	989	-	-
assets*
Operating expense	13,011	7,980	6,215
(Loss)/Operating profit	829	(606)	459
EBITDA	1,363	(128)	953
(Loss)/Profit net	559	(553)	388

• Income 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

Source: Electrica

In 2022, consolidated EBITDA increased by RON 1,491 million compared to 2021 (vs. decrease of RON 1,081 million in 2021 compared to 2020), while the net profit margin increased by RON 1,112 million (vs. decrease of RON 940 million in 2021 compared to 2020).

The evolution of the consolidated EBITDA was mainly generated by the performance of the supply segment, as a result of the risk mitigation strategy by covering with forward contracts for the purchase of energy, the cost control strategy, as well as the implementation of the provisions of GEO no. 119/2022. By means of the Ordinance, the additional costs with the purchase of electricity realized between January 1, 2022 and August 31, 2023, in order to cover distribution's own technological consumption, compared to the costs recognized in the regulated tariffs, are capitalized quarterly.

The revenues of the Electrica Group, in 2022, amounted to RON 10,010 million, representing an increase of 39.4% compared to the previous year.

9, Grigore Alexandrescu street, District 1, Bucharest, 010621

Email: [e-mail]

Supply segment:

• Revenues from electricity and natural gas supply increased by RON 2,413.6 million, mainly from the net effect of the increase in retail prices by 53% and a slight increase of 8.7% in the amount of energy supplied on the retail market;
• Revenues from subsidies amounted to RON 2,687 million, without having a corresponding value in 2021, as a result of the application of the electricity and natural gas price capping mechanism, the statements for the amounts due being submitted in 2022 and for the differences in 2021.

Distribution segment:

• In 2022, revenues from the electricity distribution segment increased by approximately RON 665.8 million, or 24.4%, to RON 3,396.6 million, from RON 2,730.8 million in 2021, mainly from the effect generated by the increase of RON 110.9 million in revenues recognized in accordance with IFRIC 12 (respectively the recognition of network investments in connection with concession agreements), to which were added the increase in distribution tariffs and the decrease in the volume of electricity distributed, with a net impact of RON 554.9 million or 24.9%;
• Income from the production of intangible assets, in the amount of RON 989.3 million, are recorded in 2022 without having a corresponding value in 2021 and represent the capitalization of the additional cost with the acquisition of electricity realized in 2022, in order to cover the NL against the costs included in the tariffs approved by ANRE for the year 2022.

In the supply segment, the net profit in 2022 was of RON 261 million (compared to the loss of RON 390 million in 2021) and positive EBITDA of RON 390.9 million (compared to a negative value of RON 439.7 million from 2021), mainly as a result of the increase in revenues due to the increase in electricity sales prices, in conjunction with internal efforts to mitigate the risks related to the purchase of energy needed for resale and control of operational costs.

In the distribution segment, the result reached in 2022 represents a net profit of RON 308 million and positive EBITDA of RON 1,017 million (RON 372 million in 2021), a significant positive impact resulting from the capitalization of additional costs with the purchase of electricity to cover own technological consumption (NL), in the form of incomes from the production of intangible assets in the amount of RON 989.3 million, for the period January 1, 2022 - December 31, 2022. Additional costs are understood as the value determined as the difference between the purchase price of electricity for NL against the ex-ante purchase price recognized by ANRE, multiplied by the amount attributed to own technological consumption (NL).

9, Grigore Alexandrescu street, District 1, Bucharest, 010621

Email: [e-mail]

In 2022, Electrica S.A. obtained an individual net profit of RON 24.3 million. The gross dividend proposed to be distributed from the individual profit of 2022, recorded by Electrica S.A., is worth 0.1178 RON/share. The total gross value of the dividends is RON 40 million.

OTHER RELEVANT INFORMATION

• The Electrica Group distributed, in 2022, approximately 17.73 TWh (down 4% compared to 2021) to a number of approximately 3.9 million users;
• In 2022, the Electrica Group supplied to the retail market approximately 8.6 TWh (increasing by 8.7% compared to 2021) to a number of approximately 3.5 million places of consumption;
• In 2022, Electrica Furnizare was the market leader with a share of 17.61%. At the same time, the company was also a leader on the SoLR (suppliers of last resort) market, with a share of 30.53%, on the competitive market with a share of 12.82% (according to the September 2022 ANRE report);
• The Electrica Group continues to pursue the expansion of its portfolio in the field of electricity production, especially from renewable sources.

***

The results presented in this release are based on the individual and consolidated financial statements prepared in accordance with the Order of the Minister of Public Finance no. 2844/2016 for the approval of the Accounting Regulations compliant with the International Financial Reporting Standards.

No later than 27 March, 2023 the financial statements prepared in accordance with the IFRS-EU will also be published.

Until 31 December 2021, the consolidated financial statements prepared in accordance with OMFP no. 2844/2016 were equivalent to IFRS-EU.

Starting with 31 December 2022, according to Order of Ministry of Public Finances (OMFP) no. 3900/2022, a new clause was included related to the regulatory accounts to cover for own technological consumption network additional expenses for actual energy costs as compared with the ex-ante ANRE prices recognised in distribution tariffs, through quarterly capitalization of these additional expenses as intangible assets.

In the IFRS-EU set of financial statement, these expenses have a different accounting treatment.

For more information about the financial results of the Electrica Group in 2022, please see the following link:

https://www.electrica.ro/en/investors/results-and-reports/financial-results/financial-statements-for-2022/

9, Grigore Alexandrescu street, District 1, Bucharest, 010621

Email: [e-mail]

The Electrica Group is a key player on the electricity distribution and supply market in Romania, as well as one of the most important players in the energy services sector.

The Electrica Group offers services to approximately 3.9 million users and has a national coverage area

• with a coverage of 18 counties in three geographical areas for the distribution of electricity: North Transylvania, South Transylvania, North Muntenia and throughout the country for supply of electricity and for energy maintenance and services.

Since July 2014, Electrica is a company with majority private capital, listed on the stock exchanges of Bucharest and London. Electrica is the only listed Romanian company in the field of electricity distribution and supply in Romania.

More information about the Electrica Group can be found on the company's website: www.electrica.ro.

9, Grigore Alexandrescu street, District 1, Bucharest, 010621

Email: [e-mail]