MVV: Focus on secure energy supply and climate protection even in challenging times

“It is time to act”, stressed Dr. Hansjörg Roll, a member of MVV’s Executive Board, at this year’s Annual General Meeting of the Mannheim-based energy company MVV Energie AG. Due to the coronavirus pandemic, this was again held on a solely virtual basis. Dr. Roll began his presentation by highlighting the tragedy of the war in Ukraine. This also showed the impact of changes in the geopolitical order on the provision of crucial services and thus on the reliability of the electricity, heat and water supply. It was therefore all the more important to focus on the rapid and massive expansion in renewable energies to make Germany independent of fossil-based energy sources, he added and emphasised: “The climate turnaround and compliance with the 1.5-degree trajectory will nevertheless have to remain the top energy policy priority even beyond the current geopolitical crisis. The Paris Climate Agreement, the European Green Deal and Germany’s climate targets will have to be the compass guiding our course in future as well.”

With the Coalition Agreement and the Immediate Climate Action Programme presented by the Federal Ministry for Economic Affairs and Climate Action, Germany had already set out in the right direction. However, “not all of the steps needed to structure the transition from fossil-based to renewable energy generation have been taken”, remarked Dr. Roll. He specified MVV’s calls on lawmakers in more detail: “To make optimal use of wind power, the energy sector needs at least two percent of the country’s surface to be set aside for onshore wind power, and that on a legally secure basis. We also need significantly accelerated planning and approval processes.” For photovoltaics, more binding requirements were needed nationwide for new and existing buildings. “The heat sector is the crucial lever to make a success of the climate turnaround”, added Dr. Roll. Here, the country urgently needed a subsidy programme for decarbonising district heating. In Mannheim and the region, MVV would make its district heating 100 percent green before the end of this decade. Dr. Roll: “We are deliberately skipping the interim stage of using natural gas, and that regardless of the current debate.” Turning to the coal exit, he also underlined the need for compensation for those energy companies affected by the depreciation of newer hard coal-fired power plants as a result of the political decisions taken. This was necessary to maintain trust in the political reliability of investments in Germany as a place to do business.

Strategic focus on climate protection
Thanks to its strategic focus on climate protection, MVV is consistently in line with the 1.5-degree trajectory and in accordance with the Paris Climate Agreement. This has also been certified by the international Science Based Targets initiative (SBTi) following an extensive scientific review. Dr. Roll: “This confirmation of our climate protection targets acknowledges our longstanding commitment to sustainability. It also motivates us to advance at great pace on this course.”

With its long-term and broad-based investment programme, MVV is gradually and consistently implementing the energy turnaround. The energy company invested Euro 306 million in the 2021 financial year alone, yet again underlining its pioneering role in the energy turnaround. Examples from the past financial year include the new energy from waste plant in the Scottish city of Dundee, new plants to recycle phosphorous from sewage sludge in Offenbach and Mannheim, innovative biomass plants and the construction of new wind turbines and photovoltaics systems by MVV’s subsidiaries Juwi and Windwärts.

Dr. Roll viewed these projects as offering proof that MVV is able to “implement its climate-focused strategy in a solid and well-coordinated manner”. This was also demonstrated by MVV meeting one of its sustainability targets ahead of schedule. Thanks to its investment and efficiency initiatives, by the end of the 2021 financial year MVV managed to reduce CO₂ emissions in the energy system by one million tonnes a year – five years ahead of the original deadline.

2021 financial year: climate protection and business success are no contradiction
The fact that our course of heading for climate neutrality also pays off in terms of our business performance is clear from our key financials for the 2021 financial year. Here, MVV generated record sales of Euro 4.1 million. With adjusted EBIT of Euro 278 million, it also posted the best results in its history.

Given this significant earnings growth in the 2021 financial year, the Executive and Supervisory Boards have proposed a further increase in the dividend, in this case to Euro 1.05 per share. That represents a further rise of Euro 0.10 per share. Dr. Roll thus confirmed MVV’s guiding principle of “enabling shareholders to participate in earnings in line with the company’s performance.” Due to the significant rise in the share price, the dividend yield based on the year-end closing price as of 30 September 2021 has fallen slightly to 3.3 percent. Compared with the company’s competitors, this nevertheless still represented “a very good return, particularly when the share price growth is also considered”, added Dr. Roll.

2022 financial year: further potential for profitable growth despite challenging environment
MVV upheld the previous year’s strong performance in the first quarter of the current 2022 financial year as well. At around Euro 1.3 billion, its adjusted sales were 31 percent higher than the previous year’s figure. This was due above all to higher electricity volumes and the rise in wholesale prices for electricity and gas, explained Dr. Roll.

Thanks to its long-term procurement strategy, MVV had been able to mitigate most of the effects of the rally in wholesale market prices. Above all, this benefited MVV’s existing customers. To cover the energy needs of new customers, the energy company had been obliged to procure additional electricity and gas at short notice. These customers had therefore been affected by the volatility in energy markets and the increase in wholesale prices. Dr. Roll therefore stated quite clearly: “Our good first-quarter earnings do not result from customer price increases.”

The MVV Director expects “the energy and fuel markets to remain volatile throughout the 2022 financial year and beyond, not least given the current geopolitical situation. It is not yet possible to foresee the effects of the war in Ukraine on the global economy, supply reliability, supply chains and the movements of financial funds.” This factor was exacerbated by the coronavirus pandemic, whose effects could only be predicted to a limited extent. Despite these numerous challenges in its operating environment, given its good first-quarter earnings MVV is basically upholding its full-year earnings forecast. This is nevertheless subject to developments in the external factors referred to above. Excluding these risks, from an operating perspective MVV still expects its adjusted EBIT to show a moderate increase compared with the previous year’s already strong figure. Dr. Roll: “This way, we are explicitly affirming that we are on the right course with our strategic focus on climate protection and our broad-based portfolio. This will enable us to continue generating profitable growth in future as well.”

Stepping up the pace of climate protection with the Mannheim Model
With its goal to become one of the first climate-positive energy companies in Germany, MVV is further stepping up the pace of its climate protection. This way, MVV was not just supporting the course taken by the Federal Government but was several steps ahead, remarked Dr. Roll. By 2030, MVV will even cut its CO₂ emissions by 80 percent rather than the 60 percent reduction required by law. By then, the company will also have completely converted its district heating generation in Mannheim and the Rhine-Neckar metropolitan region to climate-friendly energies. From 2040, MVV’s operations as a Group, including its supply chains and products, will be climate neutral. After that, the energy company will even become climate positive, i.e. it will permanently remove CO₂ from the atmosphere.

To succeed here, MVV is building on its Mannheim Model, which has three main focuses: the heat turnaround, the electricity turnaround and “green” customer solutions. With this model, MVV was making a “specific and measurable contribution towards reaching the 1.5-degree target set out in the Paris Climate Agreement”, explained Dr. Roll. He concluded by stressing that MVV would continue to set itself challenging ambitions.