MVV steps up pace of energy transition and will become #climatepositive by 2035 already

“2023 was a strong financial year for MVV, one in which we defied tough conditions and successfully seized opportunities with our #climatepositive course and our broad-based business portfolio”, summarised Dr. Georg Müller, Chief Executive Officer of the Mannheim energy company MVV Energie AG (ISIN: DE000A0H52F5; WKN: A0H52F), at the Annual Results Press Conference for the 2023 financial year (1 October 2022 – 30 September 2023) held at the Stock Exchange in Frankfurt am Main on Thursday.

Despite a challenging environment, MVV significantly improved both its sales and its earnings in the 2023 financial year. The company increased its adjusted sales by Euro 3.3 billion to Euro 7.5 billion (previous year: Euro 4.2 billion). This increase was chiefly due to the high level of wholesale electricity prices.

MVV’s adjusted EBIT of Euro 880 million marks a striking new record for the company (previous year: Euro 353 million). These exceptionally high earnings are the result of two developments. Firstly, earnings were positively influenced by disposal gains generated from the sale of Czech activities and the shares held in Stadtwerke Ingolstadt. Comments Dr. Müller: “We have ambitious climate protection targets within our Group. In keeping with these, we regularly review and assess our portfolio of investments based on factors such as strategic compatibility, economic viability and contribution to our decarbonisation targets. The proceeds from these disposals will boost our ability to make investments in the years ahead.”
Secondly, the Commodities business field in particular, i.e. MVV’s activities in marketing renewable energies and trading, posted an exceptionally good performance. Here, MVV benefited from systematically expanding its marketing and management of renewable energies while maintaining a conservative approach to risk management. Moreover, conventional energy trading had a positive impact in a portfolio management context.

MVV’s other operating reporting segments also contributed to the growth in adjusted EBIT, if to a lesser extent. Higher earnings contributions came from, among other areas, the environmental energy business thanks to high electricity and steam revenues, as well as from the company’s wind turbines and biomethane plants. In addition, improved plant availability reduced the negative impact of this factor compared with the previous year.

The very strong earnings performance is reflected in MVV’s adjusted annual net income after minority interests, which showed a significant improvement of Euro 337 million to Euro 513 million.

For the current 2024 financial year, from an operating perspective MVV expects its adjusted EBIT, i.e. excluding disposal gains, to be within +/– 10 % of Euro 400 million. “That is an earnings target which, apart from 2023, is still significantly higher than in previous years”, stressed the company’s CEO. “In terms of its earnings performance, MVV is advancing to a whole new level.”

Distribution of a one-off dividend and establishment of a charitable foundation

For its dividend, MVV is again adhering to its principle of basing its policy on continuity and the development in operating earnings. In view of this, the Executive and Supervisory Boards will propose to the Annual General Meeting in March 2024 that the regular dividend should be increased by Euro 0.10 per share to Euro 1.15 per share. To mark the 150^th anniversary which MVV commemorated in 2023 and given its exceptional earnings performance, MVV is also proposing the distribution of a special one-off dividend of Euro 0.30 per share.

MVV took its anniversary as an opportunity to establish the “MVV Foundation for the Future”. This way, the company aims to promote the change in energy and through energy. Drawing on charitable funds, it intends to support implementation of the energy transition, as the current transformation process thereby involved also confronts society with questions that cannot be answered only from an entrepreneurial perspective.

Accelerated tempo thanks to enhanced Mannheim Model

MVV views its strong business performance in 2023 and the progress made to date in transforming the energy system as a motivation to update its strategy and significantly raise its climate protection ambitions. “We will become #climatepositive by 2035, five years earlier than originally planned. We will exploit all available potential to implement the energy transition, and thus achieve genuine climate protection, with all our strength and greater tempo,” explained the company’s CEO. To this end, MVV would channel around Euro 7 billion into its Group-wide green growth in the decade until 2033. This corresponds to more than twice the investment volume previously envisaged. In the 2023 financial year, MVV already invested Euro 344 million in sustainable growth and its existing business, its highest volume of investment in the past eight years. Here, the company invested above all in expanding green generation methods for heat and electricity, as well as in strengthening its grids, i.e. investments sustainably preparing the infrastructure for the transition.

MVV’s Mannheim Model, with its three dimensions of heat transition, electricity transition and green customer solutions, remains the guiding framework for the company’s even faster and even more focused course to becoming #climatepositive. Here, the company is raising its climate protection targets across all components of the Mannheim Model. By 2030, MVV will make district heat generation in Mannheim and the region, as well as in Offenbach, 100 percent green. This way, MVV will far exceed the political target of 50 percent district heat by 2030. This conversion will be completed by 2035 at the Kiel location, and thus Group-wide, once the state-of-the-art gas-fired CHP plant there is operated with hydrogen. As part of the heat transition, for example, MVV has recently launched operations in Mannheim with what is Germany’s largest river heat pump integrated into a district heat system. Moreover, the company is increasing the density of its district heat grid and further expanding its range of decentralised heat solutions, especially heat pumps, to enable it provide all Mannheim residents with decarbonisation options for their future heating solutions.

MVV has also unveiled an even more ambitious tempo for the electricity transition. By 2030, the company will more than triple its proprietary renewables-based electricity generation – from 633 megawatts currently to 2,000 megawatts in 2030. It will convert its remaining fossil-based generation to green energies by 2035. To significantly expand its proprietary green generation portfolio, MVV will increasingly retain domestic wind power and photovoltaics projects developed by its Juwi subsidiary within the Group. Here, MVV already took over several ground-mounted PV parks in the 2023 financial year, while also making preparations to take over further windfarms.

And with regard to its customer solutions, by 2035 MVV will only offer 100 percent climate neutral products and services and gradually convert its existing customer contracts to green solutions.

#climatepositive by 2035

As an interim step as it heads for a #climatepositive future by 2035, MVV will also shrink its overall CO₂ footprint to net zero. MVV includes all sources of greenhouse gases in its climate balance sheet, including those in the upstream and downstream value chains and at its shareholdings.

In addition, MVV will actively withdraw CO₂ from the atmosphere by working with BECCUS (Bioenergy Carbon Capture Usage and Storage) and permanently bind, use or store this gas. The company reached its first major milestones in this field in the 2023 financial year already. At a pilot plant in Mannheim, MVV is currently testing the capture, liquefaction and loading of CO₂ in a complete process setup. In Dresden, the company already operates the Group’s first #climatepositive facility at the bio-waste anaerobic digestion plant. Based on the experience gained with these operations, MVV will gradually apply this technology at its other plants. This way, MVV will not only offset its own unavoidable residual emissions but, thanks to volumes additionally withdrawn, reach negative overall emissions by 2035 already and thus become #climatepositive.

“Despite difficult current times, we will extend our pioneering role in the energy transition with our accelerated #climatepositive course and thus further boost our resilience”, explained Dr. Müller. “Our target of becoming #climatepositive by 2035 means that today we are already on the threshold to the energy system of the future. Turning climate protection into business success will remain MVV’s hallmark in the years to come.”

Energy policy decisions required

With a view of geopolitical conditions and the energy policy framework, there was also a need for action. “We have to make sure the supply remains secure even in an unsettled world, and do so without threatening the energy transition”, commented Dr. Müller. He affirmed the targeted energy policy decisions already taken, but also pointed to shortfalls that still urgently needed to be addressed. Completion of the most important legislative processes from the European Green Deal had created an important legal framework for converting the energy supply. The company CEO was also positive in his assessment of measures taken to accelerate the expansion in wind and solar power, even if further steps would be required to “achieve even greater momentum”. The “overriding public interest” which the Federal Government had finally introduced into the legislative framework to speed up wind and solar projects, for example, still had to attain its full effect, particularly in approval processes. Furthermore, detailed specifications of the legal framework for wind power were still outstanding. The debate surrounding the amendment to the German Building Energy Act (GEG) and the German Heat Planning Act (WPG) had cost a great deal of credibility “because the Federal Government completely underestimated the individual concerns people have about heating”, established Dr. Müller. “This legislation has nevertheless put in place the urgently needed regulatory framework enabling local authorities and energy suppliers to work together to structure the heat transition.” In close cooperation with MVV, the City of Mannheim would assume a pioneering role here in future, the company’s CEO confirmed, but also referred in this respect to the municipal resolutions still outstanding that are due to be adopted at the beginning of 2024.

That said, energy policy had still not created a framework for some key issues. One example involved the future of gas grids: Where no options could be drawn on to convert these to green gases, they would have to be decommissioned by the time at which the heat supply was fully decarbonised. Dr. Müller referred in this context to a corresponding study by MVV, which set out recommendations for the legal and regulatory framework still needed. In addition, clarity was urgently required when it came to planning new power plants. In particular, no robust investment framework was available for developing climate-neutral flexibly controllable power plant capacities. The same applied to capturing CO₂ from unavoidable emissions, which the company’s CEO viewed as “crucial for Germany to reach its emissions targets and indispensable for MVV’s #climatepositive target”. Here too, the Federal Government’s planned carbon management strategy would have to lay foundations for a legal framework and initial financing. Overall, the ruling by the Federal Constitutional Court on the generation of funds from the Climate and Transformation Fund now made it necessary to achieve a new balance of financing instruments for the energy transition. This should also provide the industry with the security needed for future investments. Dr. Müller viewed CO₂ pricing as the central lead instrument, one that would have to be backed up by regulatory instruments and subsidy programmes, not least to fairly distribute the costs within society. “Cancelling or postponing the energy transition is not an option. Once the basic need for a financing framework has been met, the energy industry and all companies involved in supplying energy will have to take responsibility and draw on this framework boldly and with great dynamism”, affirmed MVV’s CEO.

The complete Annual Report is available on the internet at www.mvv.de/investors.