Oldenburg, Germany, 28 April 2022. In a financial year marked by two crises, EWE finished the year below its own forecast expectations. While the Group was able to balance out the effects of the coronavirus from the ongoing, consistent reaction to the pandemic in the financial year, the additional enormous price effect in the energy sector occurring at the same time had a clear impact on EWE’s balance sheet. The 2021 financial year was thus dominated by one-off effects, with severe impacts in some cases.
Due in particular to the cool weather in the first months of the year, sales rose to EUR 6,119.8 million (previous year: EUR 5,624.7 million). The pro rata inclusion of the joint venture Alterric resulted in an increase in sales, which was however lower than forecast due to months with very little wind. At EUR 354.7 million, the key indicator for operating activities – operating earnings before taxes and interest (OEBIT) – was 19.8 per cent below the previous year’s figure (EUR 442.0 million). Due to major one-off effects (derivative measurement at the end of the period), consolidated net income for the period more than doubled to EUR 607.5 million year-on-year (previous year: EUR 293.9 million). Capital expenditure also more than doubled from EUR 656.7 million in the previous year to EUR 1,171.9 million in 2021 due to the establishment of the joint venture Alterric.
Stefan Dohler, Chief Executive Officer of EWE AG: “The energy market is currently facing severe turbulence that was already clearly present in the 2021 financial year. Energy prices increased rapidly last year, forcing 39 energy suppliers to discontinue their businesses. As a basic utility provider, we have taken on several tens of thousands of new customers and ensured that their homes continue to have light and heating. The enormous price effects and their impacts on energy trading can be seen in many areas of the balance sheet and show a distorted image in some cases. Overall, the EWE Group achieved a solid result in a challenging 2021, with the coronavirus pandemic and the energy price crisis.”
He adds: “We established Alterric, a leading company in Europe for eco-power generation in the field of onshore wind energy, last year. Several new wind farms were constructed and put into operation in 2021. Our project pipeline contains over 9,000 megawatts of newly constructed installed capacity. The current situation proves just how important decentralised and sustainable energy supply is. We believe the expansion of wind energy must progress quickly and without bureaucratic hurdles. We also made progress in digitalising northwest Germany in the past year. By the end of the year, the Glasfaser Nordwest joint venture had given 183,000 homes the option of connecting to a fibre-optic network. And EWE itself has also been involved with over 100 subsidised fibre-optic expansion measures, focussing on connecting schools and businesses to the network. We have also equipped an additional almost 100 new housing developments with fibre-optic cables.”
Energy price crisis was still manageable in 2021
In 2021 we were again able to prevent serious consequences of the coronavirus pandemic thanks to the continuation of our consistent crisis management. With over 5,000 employees working from home and consistent protection measures for critical infrastructure business areas, the EWE Group managed to navigate the pandemic without restricting supply. Altogether the economy recovered significantly in the past year, resulting in a higher level of energy consumption.
“In the second half of the year, energy prices started to climb, with enormous turbulence observed at the end of the year,” explains Stefan Dohler. “Thanks to our long-term purchasing strategy for gas and electricity, we were able to react to the exponential rise in energy prices at the end of the year with moderate price adjustments – although we purchased and stored additional natural gas to ensure security of supply. We were only forced to enact further price adjustments due to the extremely high number of customers who came to us as a basic utility provider as a result of some energy suppliers ceasing to deliver. The current situation with the war in Ukraine has led to the price situation deteriorating further.”
Focus on security of supply – creating more alternatives
As a result of the war in Ukraine, securing the supply of energy is EWE’s top priority currently. In the past, EWE had already made an early switch to alternative and sustainable energy generation and is still pursuing this path. Providing energy-saving tips and advice to all consumers is a matter of course for EWE and we have been doing this for many years.
In order to ensure short-term security of supply, EWE took the precaution of storing additional volumes of natural gas in the autumn of last year. The mild weather this spring until now also meant demand for gas was lower. The current heating period was and is therefore secured.
“EWE is working intensely on short-, medium- and long-term solutions to secure energy supply. It is important that we place energy supply on a broad base. The enormous dependency we have on one supplier like Russia is a mistake that must not be allowed to occur again,” explains Stefan Dohler. “We would currently be unable to compensate for a supply stop on gas for Germany.”
The EWE Group is currently also looking into the option of using the coal-fired power plant in Bremen-Hastedt beyond 2023 if it proves necessary for ensuring the security of supply. Another option for replacing the natural gas from Russia that is currently still being used is LNG. The terminals necessary for discharging the liquid gas tankers in Germany are currently in planning for the German North Sea coast. EWE is directly involved in the task force initiated by the state of Lower Saxony for the expedited expansion and connection of the LNG terminal in Wilhelmshaven. The EWE Group’s task will be to store the liquid gas that arrives and ensure gas distribution in northwest Germany. “We can make use of existing infrastructure in connecting the LNG terminal in Wilhelmshaven. EWE therefore only needs a short additional gas pipeline of 45 kilometres to connect our storage facility to our network area in Lower Saxony,” reports Stefan Dohler. “What is important for all measures we take for the LNG terminal, is that the infrastructure can take eco-friendly hydrogen in future so that we can make a contribution to the security of supply in the short term and lay the foundations for a climate-friendly future in the long term.”
Climate target remains – new housing developments without gas connections
Part of the long-term solution is the heating transition. Natural gas is currently a major energy source for heat. “We have to convert our heating systems – that means moving away from heating purely with natural gas and using more eco-power. Renewable electricity production has to be ramped up massively – we have to expand wind and solar power faster. And we need a hydrogen economy that opens up a much broader spectrum of procurement,” emphasises Stefan Dohler. “EWE is working intensely in all these areas. We are massively expanding wind power plants on land and need support from the authorities, too, in the often very slow approval process. We aim to develop a hydrogen economy in northwest Germany and will cover the entire value chain. From next year onwards EWE will also set up not connecting new housing developments to gas as standard. These measures will bring us closer to our goal of being climate-neutral by 2035.”
In 2021 EWE continued to reduce carbon emissions in areas it could directly influence. The specific carbon emissions from electricity production in grammes of CO2 per kilowatt hour almost halved year-on-year from 265.34 g CO2/kWh to 134.07 g CO2/kWh (-49.47 per cent). The main reasons for this were the discontinuation of a coal-fired power plant in Bremen and the establishment of the joint venture Alterric. The volume of electricity generated from wind energy rose by 168.4 per cent, from 1,447,410 MWh in 2020 to 3,885,315 MWh in 2021.
Development of key indicators in the 2021 financial year
Commenting on the development of the company’s OEBIT, Wolfgang Mücher, CFO of EWE AG says, “Our results are influenced by months with low amounts of wind as well as the optimisation of the gas storage method which will lead to a shift in the results in favour of financial year 2022. Gas volumes, due to be taken off gas storage facilities in 2021, were left in storage and only taken off in 2022. This had a negative impact on OEBIT in 2021 and a positive impact on OEBIT in the current year.”
“The enormous price increases at the end of the year led to the very high consolidated net income for the period. The measurement of energy procurement on the reporting date led to that result climbing sharply. But this is a purely theoretical value as we have already sold the energy we procured at fixed prices. It is not cash-effective profit,” explains Wolfgang Mücher. The consolidated net income for the period covers the operating business and non-operating effects as well as net interest income and taxes.
With regard to sales development and the balance sheet total, Mücher remarks: “Group sales increased in 2021 due to the higher volume of gas sold in the first months of the previous year and the general economic recovery. The first inclusion of the joint venture Alterric and the measurement mentioned above of energy procured led to the balance sheet total doubling.”
An average of 9,575 employees (2020: 9,141 employees) were employed by the Group in the 2021 financial year.
The separate financial statements of EWE AG in accordance with the German Commercial Code (HGB) for the 2021 financial year amount to EUR 185.4 million (2020: EUR 186.9 million). The Board of Management and the Supervisory Board therefore propose a dividend of EUR 84.1 million (previous year: EUR 186.9 million). The low proposal is in reaction to the current high level of risks and uncertainties resulting from the war in Ukraine.
“The company’s management would like to express its gratitude to the shareholders for their understanding in relation to the dividend distribution. The unique energy price developments are having an enormous impact on our balance sheet. The high consolidated net income for the period according to IFRS is offset by a low result according to the German Commercial Code (HGB) and a negative tax balance. The measurement effects at EWE Trading mean that EWE will not have to pay any trade or income tax for the 2021 financial year,” states Wolfgang Mücher.
Outlook for 2022
In this financial year EWE will be focussing on ensuring security of supply and the further expansion of renewable energies. An increase in earnings is expected in the onshore wind energy segment in particular. In the market business area, characterised as it is by turbulent electricity and gas prices, the company anticipates a positive result in 2022. “In the short term our focus is on security of supply, which may in the coming years be ensured at the expense of EWE’s carbon balance. But this does not influence our long-term climate goals or our drive to expand renewable energy generation,” states Stefan Dohler.
EWE will publish its report for the first half of the year on 26 August 2022.
You can find an overview of the most important key figures in the PDF version of the report.