Oldenburg, 27 April 2023. The EWE Group concluded fiscal year 2022, which was defined by the energy crisis, with a good result. The turbulence on the energy market caused by the Russian war of aggression against Ukraine in particular clearly had an impact. A combination of several measures enabled EWE to ensure consistent security of supply for all its customers as well as the commercial stability of the company.
“In a fiscal year that was defined by the war in Ukraine, we succeeded in achieving the good result we need to continue to actively drive the ongoing transition to an energy supply that is as self-sufficient and sustainable as possible,” reports Stefan Dohler, CEO of EWE AG.
Higher sales and costs
Sales increased to EUR 8,605.1 million (previous year: EUR 6,119.8 million) primarily due to the initial full-year recognition of joint venture ALTERRIC. They were also impacted by the massive change in prices on the energy market. Price trends also drove up cost of materials to EUR 5,999.6 million (previous year: EUR 3,613.7 million).
At EUR 664.7 million, operating earnings before interest and taxes (OEBIT), which is the leading indicator for the operating activities of the EWE Group, exceeded the figure for the previous fiscal year (EUR 354.7 million). The increase is largely attributable to the energy trading and storage business – in particular a deferral of earnings from 2021, which had an overall effect of EUR 120 million – and to income generated by the ALTERRIC joint venture. ALTERRIC is fully included in the consolidated statement of financial position of the EWE Group. However, profits are allocated to the shareholders on a pro rata basis (50 per cent). Consolidated profit for the period, which was defined by special effects last year (valuation of derivatives as of the reporting date), declined by 22 per cent year-on-year to EUR 463.5 million (previous year: EUR 597.5 million). At EUR 768.0 million, investments in fiscal year 2022 were below the previous year’s expenditure (EUR 1,171.9 million). This is due to deferred investments in wind energy and to the formation of joint venture ALTERRIC, which was recognized in 2021. The turbulence on the energy market is clearly reflected in the HGB result. These consolidated financial statements, which significantly influence the dividends to be paid, amounted to EUR 35.5 million in fiscal year 2022 (previous year: EUR 185.4 million). The decline is attributable above all to the additional energy purchased and stored, and its valuation at the end of the year.
Financing a quicker energy revolution
EWE CEO Stefan Dohler: “We adapted quickly last year to a very dynamic energy market.” By taking prudent action at an early stage, we have been able to weather the gas shortage well up to this point in time. Our gas storage facilities were completely full at the start of winter and our gas reserves remain high even now in spring. We are working dynamically on our future pipelines, which will allow us to fill up our storage facilities this winter with the liquid gas that arrives in Wilhelmshaven. However, we cannot relax our efforts to make savings. We will continue to save as much gas as possible. We believe the energy market will remain volatile this year too due the situation surrounding the supply of gas. We will not see a sustained easing until we manage to largely convert our energy system to use our own renewable energies. EWE is also working intensely on this.”
He added: “With ALTERRIC, we have a leading company in Europe for eco-power generation in the field of onshore wind energy. We continue to invest in hydrogen technology and in expanding the power grids. Nonetheless, we are also aware of the intense cost pressure in this regard. The cost of constructing a wind turbine has increased by more than 20 per cent in this year alone. This is a major burden. We also recorded a sharp increase in costs for hydrogen and storage technologies. Increasingly higher investments are therefore necessary to further expand the decentralized and sustainable supply of energy. To this end, we are using current proceeds to implement the vital transformation of energy supply systems as quickly as possible.”
State relief measures implemented
The energy crisis dominated the entire fiscal year 2022. Besides the challenges of filling the gas storage facilities for winter and providing the necessary energy in the absence of deliveries from Russia, state relief measures also determined the energy business of the EWE Group. As a basic utility provider in large parts of northwest Germany, EWE took on many new customers. This was because many energy providers were not prepared to make further contract offers or their prices were significantly higher than EWE’s basic supply tariffs. This forced EWE to subsequently buy energy on the energy exchanges at very high prices in the last fiscal year to meet the needs of additional customers that were not anticipated beforehand. Within a short space of time, EWE had passed on the state relief measures for energy customers that were agreed in fall, such as reduced VAT on gas and a price brake on gas and electricity, to its customers in its billing systems.
“We supplied many new customers last year and implemented all the relief measures provided by the state. This involved huge financial expense and logistical effort. Unfortunately, this also impacted our customers, with billing delayed in some instances,” Stefan Dohler reported. “However, we continue to work intensely – as we did in previous months – to process all customer concerns as quickly and efficiently as possible.”
Potential for investing billions in independent and sustainable energy transition
The EWE Group envisages potential for investments of up to EUR 14 billion in the coming decade to further develop the energy revolution. The areas of growth are renewable energies, energy services, energy networks, telecommunications, mass storage/hydrogen and electric mobility. Stefan Dohler explains: "We will continue to drive the energy revolution. This includes developing renewable energy sources with onshore wind farms and photovoltaics with our joint venture ALTERRIC. We are also investing in intelligent power grids to distribute the very high supply in the future and serve the similarly higher demand for eco-power as best as possible. We will use hydrogen primarily in industrial facilities and heavy-duty transport. Hydrogen will also be used in future as a storage medium in our chambers to ensure that we always have sufficient green energy when there is little sun and wind. We also want to significantly develop the infrastructures to bring our region into the digital age and considerably expand electric mobility. We have the best prerequisites in northwest Germany to shape the energy world of the future. This area has ports for importing green hydrogen in the future, wind to produce renewable power and green hydrogen, and the right geological situation with salt domes for storing this hydrogen.”
Development of key indicators in fiscal year 2022
Wolfgang Mücher, CFO of EWE AG, explains the development of OEBIT: “The positive performance of operating EBIT is mainly attributable to the trading business, gas storage and wind energy. The changes in energy prices had a rather adverse effect on the result generated from private and business customers. Deferred earnings in gas storage from 2021 in favour of fiscal year 2022 resulted in positive effects in the past fiscal year. Gas volumes due to be taken off gas storage facilities in 2021 were left in storage to ensure supply security and only taken off in 2022.”
At EUR 463.5 million, consolidated profit for the period, which represents non-operating effects, as well as net interest income and taxes, is down EUR 134.0 million on the previous year. “In addition to lower year-on-year valuations of derivatives as of the reporting date, rising interested rates affected the consolidated profit for the period,” explains Wolfgang Mücher.
With regard to sales development, Mücher states: “Group sales rose in 2022 because of the initial full-year recognition of joint venture ALTERRIC.”
Together with its subsidiaries and growth areas, the EWE Group remains an important employer in the region: in fiscal year 2022, the Group had an average of 10,185 employees (2021: 9,575 employees).
The separate financial statements of EWE AG in accordance with the German Commercial Code (HGB) for fiscal year 2022 amount to EUR 35.5 million (2021: EUR 185.4 million). The Board of Management and the Supervisory Board therefore propose a dividend of EUR 35.5 million (previous year: EUR 168.7 million).
“The consolidated financial statements in accordance with HGB are decisive for determining the dividend to be proposed for the shareholders. The Board of Management therefore proposes a dividend in the amount of the HGB result. The HGB result fell significantly short of our expectations and was shaped by the war in Ukraine and the energy crisis. The additional energy we had to supply at short notice in 2022 led to lower HGB financial statements. This was due to higher purchase prices and the price trend that followed,” explains Wolfgang Mücher.
Hedged corporate financing
EWE responded quickly in the energy crisis and employed various instruments to secure the Group’s financial flexibility. Syndicated, revolving credit facilities of more than EUR 2,850.0 million (previous year: EUR 950.0 million) are available as a liquidity reserve. An existing credit option in the amount of EUR 750 million, which was originally set to expire by November 2023, was replaced by a new contract in the first half of 2022. The EWE Group also concluded a credit option in February 2022, which meanwhile comprises EUR 1,900 million.
“We were able to cover the very high level of liquidity required to trade on the energy exchanges through our energy partners, and continue to do so. While some utility companies and municipal utilities relied last year on state loans granted by Kreditanstalt für Wiederaufbau, EWE is able to provide the necessary liquidity on the basis of its own credit standing,” reports Wolfang Mücher.
Outlook and investments for 2023
EWE’s activities this year will focus on the security of supply and the accelerated energy revolution. EWE expects the OEBIT in the Renewable Energies business area to decline and anticipates an increase in the Market segment. Furthermore, EWE will also continue to take into account the heightened efforts taken to become self-sufficient in the energy sector this year and further develop renewable energies, electricity-based heating solutions and the LNG infrastructure.
