Speed of renewable energies expansion will determine speed of coal exit

MVV, the Mannheim-based energy company (ISIN: DE000A0H52F5; WKN: A0H52F), views the recommendations made by the Commission on Growth, Structural Change and Employment as a foundation for an orderly roadmap for exiting from coal based on a viable consensus within society in Germany. “But now the Federal Government will have to act quickly to create the legal framework for sustainably implementing the measures and structures needed for the energy system of the future”, stressed Dr. Georg Müller, CEO of MVV, when presenting the company’s results for the 1^st quarter of its 2019 financial year (1 October 2018 – 31 December 2018) in Mannheim on Friday.

Here, stepping up the further expansion in renewable energies would play a key role. Comments Dr. Müller: “The speed of renewable energies expansion will determine the speed of the coal exit.” After 2017 and 2018, two wasted years in terms of energy policy in which the expansion noticeably lost momentum due to inappropriate wind power tender privileging, politicians now had to set their sights effectively and firmly on the energy system of the future. “If we aim to achieve our climate targets and raise the share of renewable energies to 65 percent by 2030, then we cannot afford to lose any more time. Climate protection cannot wait.”

According to the German Wind Energy Association (BWE), only 743 wind turbines were added to the grid last year. One year earlier, this figure still amounted to 1,800. Newly installed capacities fell by more than half from 5,330 MW to just 2,400 MW. This nationwide downturn also left its mark on MVV, a development expected and already communicated by the company. “Awarding tenders to privileged projects lacking the necessary approvals, rather than to professional project developers, means that no windfarms can be developed and built at such times”, adds Dr. Müller. “And then the volume of newly added capacities also plummets.”

As a result, earnings in the “New Energies” reporting segment fell to Euro 23 million in the months from October to December 2018, down half compared with the previous year’s quarter. MVV therefore saw the suspension of these privileges, a move since taken, as representing the right approach. In the subsequent tender rounds held on fair competitive terms in 2018, MVV’s project development companies Juwi and Windwärts received tenders for 13 onshore wind projects and five open-space photovoltaics plants in Germany alone.

Having increased its shareholding in Juwi to 100 percent, a step whose execution has now been completed, MVV has included all of the shares in Juwi in its balance sheet for the first time. Given the substantial upturn also apparent in Juwi’s international business, with new projects awarded in South Africa, the USA, Australia, Japan and Vietnam, MVV’s CEO expects earnings in the “New Energies” reporting segment to rise significantly by the end of the 2019 financial year.

Operations absolutely on course – forecast confirmed

One additional factor adversely affecting the year-on-year comparison of MVV’s quarterly earnings involved the proceeds from two sales in the previous year, which had generated positive one-off items of more than Euro 30 million in the “Customer Solutions” and “Supply Reliability” reporting segments. This was not matched by any equivalent income in the current year. Moreover, earnings for the 1^st quarter of 2019 were negatively influenced by further smaller-scale charges amounting to around Euro 12 million in total. These resulted from follow-up costs for the joint power plant in Kiel (Gemeinschaftskraftwerk Kiel – GKK), which is due to be taken from the grid in the coming months, as well as from lower heating energy turnover due to the mild winter weather seen to date, lower wind volumes, leading to weaker electricity generation volumes at proprietary wind turbines, higher transport costs due to low water levels on the Rhine and higher substrate costs at biogas plants due to the persistently dry weather in the past summer.

Accounting for all these factors, MVV reported adjusted EBIT of Euro 67 million for the 1^st quarter of the 2019 financial year, as against Euro 133 million in the previous year. Comments Dr. Müller: “Due to the one-off factors already listed, this figure only represents a momentary snapshot, and one that is not especially meaningful. Our operating business, by contrast, is absolutely on course.” With a view to the 2019 financial year as a whole, MVV has therefore confirmed its forecast and still expects to generate operate earnings at around the previous year’s level of Euro 228 million. The same pplies to MVV’s sales, which came to Euro 3.9 billion in the previous year but dropped year-on-year by 17 percent to Euro 934 million in the 1^st quarter of the current year.

The complete quarterly statement is available online at

www.mvv.de/investors

.