The Board of Directors approves the interim financial report at June 30, 2020

PRESS RELEASE

 

 

The Board of Directors approved the 

half-year financial report at June 30, 2020

 

 GROWING EBITDA AND IMPROVING DEBT DESPITE 

CHALLENGING TIMES  

 

Company performance not significantly impacted by Covid-19 crisis 

 

 

RESULTS

• Revenues at Euro 195.3 million compared to Euro 185.4 million in the first half of 2019 ^[1] (+5.3%);
• EBITDA^[2] stands at Euro 106.3 million (Euro 107.9 million with the exclusion of two one-off effects ^[3] ) up compared with Euro 104.9 million for the first half of 2019; 
• Profit/(loss) for the period Euro 28.4 million (Euro 32.4 million with the exclusion of two operating one-off effects and the one-off adjustment of deferred tax liabilities in the United Kingdom) compared to Euro 33.8 million for the first half of 2019; 
• Profit/(loss) attributable to owners of the parent Euro 21.3 million (Euro 24.3 million with the exclusion of the one-off effects described) as compared with Euro 26.3 million for the first half of 2019;
• Net financial debt, including the fair value of derivatives, improving to Euro 692.5 million (Euro 691.2 million with the exclusion of the cumulated one-off effects) compared to Euro 720.8 million at December 31, 2019; 
• Capex Euro 63.0 million compared to Euro 70.7 million for the first half of 2019;
•  New 2020 Guidance: EBITDA between Euro 194-198 million; Profit/(loss) attributable to owners of the parent between Euro 34-36 million, already including the one-off relating to deferred taxes in the UK; Net financial position (including the fair value of derivatives) down at Euro 740 million.

INDUSTRIAL HIGHLIGHTS

 

• Significant growth in production compared with the first half of 2019 (+24%); excellent wind conditions in the United Kingdom (+22%) and France, the consolidation for the entire half-year of the plants in France (Julia) and the increase in scope (+106.8 MW in Sweden, Norway and Spain); downturn to wind power production in Italy as compared with the first half of 2019 (-10%) due to below-average wind levels;
• Significant reduction of comprehensive “captured” prices of electricity for wind power plants (-11% in the United Kingdom and -6% in Italy), below the decline seen in wholesale prices, thanks to volumes covered with the active energy management policy;
• PPA signed for the energy produced by the Brattmyrliden wind power plant (Sweden), expected to start operating towards the end of 2020, which construction is progressing without interruption;
• 682 GWh dispatched by the Energy Management Unit (significant growth compared with 265 GWh in the first half of 2019), equal to 100% of the energy produced by the Group in Italy (423 GWh), in addition to production managed on behalf of third parties (259 GWh);
• Company activities continued throughout the semester without significant Covid-19 crisis interruptions, except for the impact on the downstream business, which decreased by Euro 1.2 million in the first half of 2020, compared with the same period of 2019. Almost doubled, compared to the first half of 2019, expenses and investments in development, digitization and downstream business.

 Milan, August 4, 2020 – The Board of Directors of Falck Renewables S.p.A. met today, examining and approving the half-year financial report as at June 30, 2020.

 

 Chief Executive Officer Toni Volpe commented as follows: “We recorded a first half with significant industrial growth, despite the crisis that has hit the world’s major economies and the sharp fall in wholesale electricity prices. During this semester we continued to invest without interruption in our energy transition business model, focusing on economic and sustainability objectives, in line with the Industrial Plan presented in March.” 

 

 Consolidated results for the period ended June 30, 2020 and June 30, 2019 

 

 

(thousands of Euro)
		6.30.2020	6.30.2019*
A	Revenue	195,289	185,417
	Direct costs	(103,320)	(94,693)
	Personnel costs	(22,615)	(19,697)
	Other income	9,506	5,178
	Administrative expenses	(16,666)	(12,591)
	Net margin from trading activities	96	(47)
D	Operating profit/(loss)	62,290	63,567
	Financial income/(expenses)	(20,806)	(19,463)
	Investment income/(expenses)	(31)
	Share of profit of investments accounted for using the equity method	(780)	887
E	Profit/(loss) before tax	40,673	44,991
	Total income tax expense	(12,272)	(11,175)
F	Profit/(loss) for the period	28,401	33,816
G	Profit/(loss) attributable to non-controlling interests	7,118	7,472
H	Profit/(loss) attributable to owners of the parent	21,283	26,344
	Basic profit/(loss) attributable to owners of the parent per share	0.0736	0.091
	Diluted profit/(loss) attributable to owners of the parent per share	0.0734	0.091
	EBITDA **	106,251	104,935

 

 

 

(*) Data as at June 30, 2019 has been restated to reflect the adjustments made following the application of IFRS 3 – Business combinations to the acquisitions of Energy Team SpA and Energia Eolica de Castilla Sl.

(**) The Falck Renewables Group measures EBITDA as profit for the period before investment income and costs, net finance income/costs, amortization and depreciation, impairment losses, charges to risk provisions and tax.

 

 Results for the period ended June 30, 2020 

 

 

In the first half of 2020, the Falck Renewables Group achieved consolidated revenue of Euro 195.3 million, up 5.3% compared to Euro 185.4 million for the first half of 2019. The increase in the production recorded in the United Kingdom and France, coupled with the growth in the number of operating plants, more than offset the lesser production in Italy and Spain as well as the decline in wind power electricity sale prices, including the incentive component, recorded in Italy (-6%), the United Kingdom (-11%) and Spain (-31%).

 

 In detail, the performance of revenue is mainly: 

• Up for approximately Euro 3.1 million, thanks to the change in the consolidation perimeter due to the 2019 acquisitions of 5 French wind farms, with a grid capacity of 56 MW;
• Up for around Euro 5.5 million, thanks to the coming into operation in late December 2019 of the Hennøy (Norway) and Åliden (Sweden) wind power plants, with a grid capacity of 96.8 MW, and at the beginning of February 2020 of the Spanish Energia Eolica de Castilla (Carrecastro) plant, with a grid capacity of 10 MW;
• Up for approximately Euro 8.3 million, thanks to the higher production in the wind segment in the United Kingdom and in France, partially offset by the lower production in Italy and Spain, and down for approximately Euro 1.7 million thanks to the lower production in the photovoltaic, biomass and WtE segment, mainly due to the Rende biomass plant, which was shut down for planned maintenance;
• Down for approximately Euro 11.6 million due to the downturn to the electricity sale prices as compared with last year, mainly due to the United Kingdom, Italy and Spain. The prices of conferral of the Trezzo sull’Adda waste-to-energy plant instead made a positive contribution for approximately Euro 0.7 million;
• Up for approximately Euro 5.8 million, thanks to the greater volume of energy sold by Falck Next Energy Srl.

 

The GWh produced globally by all Group technologies came to 1,464, as compared with the 1,177 of H1 2019 (+24% on the same period of 2019).

 

Furthermore, with reference to production in the United Kingdom, the average devaluation of the pound over the euro was 0.1% in the first half of 2020 compared with the same period of last year.

 

Below are the main changes in consolidated revenue by operating segment:

 

 Wind power: this segment reported revenue of Euro 130.0 million, up by 4.4% compared with Euro 124.6 million in the first half of 2019 thanks to the above-mentioned increase in the scope due to the coming into operation of the Hennøy (Norway) and Åliden (Sweden) wind farms and the Spanish Energia Eolica de Castilla (Carrecastro) plant, as well as the production of energy by the 5 French wind farms – an acquisition completed in March 2019 – for the entire half. The excellent wind conditions in the United Kingdom and France more than offset the decrease in production in Italy and Spain and the lower energy prices.

 

The GWh produced by the wind power segment totaled 1,275 as compared with the 982 of the first half of 2019 (+30% on the same period of 2019).

 

Photovoltaic, Biomass and WtE: this operating segment reported revenue of Euro 31.8 million, down approximately 3.9% compared to Euro 33.1 million for the first half of 2019, primarily as a result of the planned downtime of the Rende biomass plant and the resulting drop in production (-20% compared with the previous period). This effect was only partially offset by the prices for waste disposal and treatment of the Trezzo sull’Adda waste-to-energy plant and the positive contribution of the photovoltaic plants in the United States of America (production +7% on the previous first half of the year), also thanks to the coming into operation of the storage system at the Middleton plant and a positive exchange effect (+2.5%).

 

Services: the segment records revenues for Euro 20.2 million, down 4.7% on the Euro 21.2 million booked for the first half of 2019, due to lesser intercompany assets and the reduction in certain Energy Team S.p.A. services, which, during the lockdown period, was forced to slow technical sales and installations of metering products as well as assistance services.

 

Other businesses: revenues of Euro 34.3 million are down by 7.3% on the Euro 37.1 million booked in the first half of 2019 and mainly derive from the lesser volumes managed in relation to the Group plants, partly offset by revenues, for the same business, from management on behalf of third parties.

 

Revenues for the first semester 2020 are broken down as follows by business category:

 

(thousands of Euro)

	6.30.2020	%	6.30.2019	%
WtE, Biomass and Photovoltaic	31,844	16	33,121	18
Wind Power	130,009	67	124,563	67
Services	20,224	10	21,222	11
Other Businesses	34,343	18	37,064	20
Sub-total	216,420	111	215,970	116
Elimination of intercompany revenue	(21,131)	(11)	(30,553)	(16)
Total	195,289	100	185,417	100

 

Other income is up by Euro 4.3 million to Euro 9.5 million, thanks to greater revenues from the provision of services for Euro 1.9 million, mainly to Novis Renewables, LLC and the capital gain of Euro 4.0 million realized following the Group’s sale of 50% of the shares held in Novis Renewables, LLC (and therefore of the joint control) to Eni New Energy US Inc., with consequent deconsolidation of the same and initial recognition at fair value of the remaining 50% interest. The effect was partially offset by lower insurance compensation by Euro 1,204 thousand compared with the previous period.

 

EBITDA for the first half of 2020, equal to Euro 106.3 million, despite seeing a reduction in the prices of electricity, was up on the Euro 104.9 million of the first half of 2019; this was thanks to better production, growth in perimeter and other income, partially absorbed by higher costs linked mainly with the increase in operating capacity, the two-yearly downtime of the biomass plant and the strengthening of the structure, necessary to cope with the development of new initiatives envisaged by the Business Plan. The operating margin is also affected by higher “one-off” costs linked to the Long Term Incentive Plan relating to the 2017-2019 plan and costs in favor of the local communities and territories where the Group operates in support of the “Covid-19” emergency, for a total value of Euro 1.7 million: without this effect EBITDA would have amounted to Euro 107.9 million.

 

Operating profit/(loss) came to Euro 62.3 million (Euro 64.0 million without taking into account the two “one-off” effects described above) as compared with Euro 63.6 million in the first half of 2019, due to the greater amortization linked to the increase in installed capacity.

 

 

Net financial expense is up on the first half of 2019 by Euro 1.3 million. The increase is due to the write-down of financial receivables due from companies with which joint development agreements have been stipulated, higher costs for surety in support of business development, greater foreign exchange losses, partially offset by lesser financial expenses referring to a lower average non-recourse financing debt and measures taken by management to enhance the efficiency of financial costs.

 

During the first half of 2020, the Falck Renewables Group recorded a Positive profit/(loss) before tax and before non-controlling interests of Euro 40.7 million (Euro 42.4 million without taking into account the two “one-off” effects), down on the Euro 45 million booked for the first half of 2019.

 

At June 30, 2020, income tax expense amounts to Euro 12.3 million (Euro 11.2 million during the first half of 2019) and this was negatively impacted by the one-off adjustment of deferred tax liabilities in the United Kingdom for a total of Euro 2.7 million, following the failure to reduce the income tax rate to 17% (as had been previously approved and subsequently abrogated), and the lesser profits from consolidation entered in 2020 for approximately Euro 0.6 million.

 

As a result of the factors described above, the Profit/(loss) for the period comes in at Euro 28.4 million (Euro 32.4 million without taking into account the operating “one-off” effects and the one related to taxes adjustment in the United Kingdom), as compared with Euro 33.8 million at June 30, 2019.

 

The Group profit/(loss) for the period stands at Euro 21.3 million as compared with the Euro 26.3 million for the first half of 2019. Without the aforementioned one-off effects, the Group’s profit/(loss) for the period would have been Euro 24.3 million (down approximately Euro 2.0 million on the first half of 2019).

 

Net Financial Position 

 

 et financial position, inclusive of the fair value of derivatives, is Euro 692.5 million (Euro 691.2 million without taking into account the cumulated “one-off” effects), compared with Euro 720.8 million at December 31, 2019.

 The improvement to the Net financial position, equal to approximately Euro 28.3 million, is mainly due to the sale of assets in the USA, net of the investments in the development company Novis Renewables LLC, which had a positive effect of Euro 55.6 million, in addition to cash generated from operating activities for Euro 43.3 million. The improvement was partially absorbed by investments in construction plants made during the period, for approximately Euro 63 million, by the change in the fair value of derivatives for 5 million, by the adjustment of the existing rights of use in accordance with IFRS 16 for Euro 4 million and the payment of dividends for approximately Euro 22.2 million.

An additional improvement to the financial position was sparked by the devaluation of the pound sterling against the euro, for Euro 23.6 million.

Excluding the fair value of derivatives, Net financial position amounts to Euro 653.6 million (Euro 688.2 million as at December 31, 2019).

 

Investments

In the first half of 2020, total investments came to Euro 63.0 million.

Investments in property, plant and equipment amounted to Euro 57.9 million, due mainly to the construction of the wind farms of Brattmyrliden (Euro 48.6 million) in Sweden, Falck Renewables Vind (Euro 1.9 million) in Norway, Energia Eolica de Castilla (Euro 1.9 million) in Spain, and the revamping of Actelios Solar (Euro 0.4 million) in Italy.

Investments in intangible fixed assets amount to Euro 5.1 million and refer to expenses for operating software and licenses for Euro 3.5 million and development costs for Euro 1.6 million.

 

Installed production capacity 

 

The following table illustrates installed capacity (MW), analyzed by technology:

				(MW)
	Technology	At 6.30.2020	At 6.30.2019	At 12.31.2019
Wind power		932.7	825.9	922.7
WtE		20.0	20.0	20.0
Biomass		15.0	15.0	15.0
Solar power		128.6	128.6	128.6
Total		1,096.3	989.5	1,086.3

Installed capacity has increased by 106.8 MW compared to June 30, 2019.

The wind power plants in Hennøy (Norway) and Åliden (Sweden) began operating at end December 2019, for a total of 96.8 MW. In addition, in February 2020, the Spanish Energia Eolica de Castilla plant came into operation, increasing the Group’s installed capacity by 10 MW.

Most important management events in the half-year

 

On January 30, 2020, Falck Renewables Vind AS signed a 10-year power purchase agreement (PPA) for the sale of 70% of the electricity produced by the wind power plant in Hennøy (Norway) to one of Europe’s leading energy players.

On February 7, 2020, the Spanish Energia Eolica de Castilla plant came into operation, increasing the Group’s installed capacity by 10 MW. The plant was built as part of a partnership with Ascia Renovables SL. The company signed a long-term power purchase agreement with Holaluz, a Spanish energy supplier, which will generate a steady flow of revenue.

On March 20, 2020, Eni New Energy US Inc. (“ENE US”) and Falck Renewables North America Inc. (“FRNA”) completed the strategic agreement announced on December 20, 2019. This agreement provides for the creation of a jointly owned (50:50) platform for the development, construction and financing of new renewable source projects, like solar photovoltaics, onshore wind power and storage. At the same time, according to the terms of the agreement, FRNA transferred 49% of its interests in the plants currently operating in the United States to ENE US. These shared regarded a total portfolio of 112.5 MW. The total value paid by ENE US to FRNA is roughly 71 million dollars.

On March 27, 2020, Falck Renewables S.p.A. completed the acquisition of the shares held by Ascia Renovables SL in Energia Eolica de Castilla S.L. As a result of this transaction, Falck Renewables S.p.A. holds an equity investment equal to 100% of the shares of the company, whose plant came into operation in February 2020.

 

On April 22, 2020, the Group launched an international program – for a total value of Euro 720 thousand – to support the local communities living near the wind and solar plants in the United Kingdom, Italy, France, Spain and the United States, where the Covid-19 pandemic is generating significant health and social consequences. Falck Renewables is also providing support to two research studies being conducted at the University of Milan on Covid-19 treatments. The aid program is aligned with the Group’s approach of creating shared value with the communities living near its plants, considering its presence in an area a factor of sustainable development both for the community and for local businesses.

On May 7, 2020, the Shareholders’ Meeting appointed the Board of Directors from the two lists of candidates filed, which will remain in office until the approval of the financial statements as at and for the year ending December 31, 2022. It also approved the proposal for a new buy-back plan and the “2020-2022 Stock grant plan”. For more information, please refer to the specific press release.

 

Subsequent events

 

On July 22, 2020, Brattmyrliden Vind AB signed a Virtual Corporate Power Purchase Agreement (“PPA”) with Ball Corporation, a leading multinational in the supply of aluminum packaging.

The 10-year contract will regard the supply of approximately 70% of the electricity produced by the wind power plant. The Virtual PPA will cover approximately 39% of the energy needs of the drinks packaging production plants owned by Ball Corporation in Europe, except for Russia, starting 2021.

 

Risks linked to the “Covid -19” emergency

Given that the Group operates in a segment whose market dynamics are often connected with exogenous variables that are not always predictable, it is concerned by the negative effects that may ensue following the continuation and spread of the “Covid-19” pandemic and the emergency health situation that, starting late 2019, has struck most of both Europe and indeed the world, resulting in an unprecedented upheaval in how personal and social relations are managed, also within corporate life, as well as the macro economic effects being experienced worldwide.

 

The directives and measures issued by the countries involved in the crisis, with a view to limiting the spread of contagion, established increasingly restrictive rules on the mobility of individuals and goods and on the reduction/suspension of production activities in the areas with higher contagion risk (“lockdowns”) with ensuing negative impacts on production activities in all industrial segments and trade at both national and international level.

 

A similar situation gave rise to certain negative effects in the first half of 2020 on the Group’s business, which were mainly limited:

to the decline in the prices of sale of energy produced on the Italian market and on the other markets on which the Group operates (as concerns the product component exposed to spot price volatility on the electricity markets) correlated with a reduction in the demand for electricity and liquidity on the markets, as the main effect of the prolonged lockdown see in March and April. The negative effects were partly neutralized by the Group thanks to its hedging against the 2020 portfolio, which successfully minimized the exposure connected with the growing market volatility;

to a temporary decline in the services provided by the Group companies (e.g., Energy Team and Vector Cuatro) directly at customer plants (e.g., audit and energy monitoring services, sale and installation of components to boost energy efficiency, asset management and technical services) due to the forced absence of personnel, reduced mobility throughout the country and internationally, or the closure of customers’ production activities due to the lockdown.

It should be noted that these impacts so far have not produced significant effects on the income statement or uncertainties such as to reflect negatively on the going concern assumption.

Against these scenarios, the Group since the very early stages of the pandemic has always implemented all analyses and strategies to ensure continuity, defined in its operative plans, to best manage the effects described, as well as to reduce the risk of contagion amongst its personnel in the workplace. On this latter point, it is important to stress that more than 90% of personnel in all sites across Italy and abroad, right from the early days of the crisis, were encouraged to adopt long-term, extensive smart working solutions, which continue to allow the Group to significantly reduce its exposure to a great many of the related risk factors, including personnel mobility, yet all the time assuring an excellent service level.

Considering the current context of the pandemic, which still today sees a spread in contagion that continues to grow worldwide, we cannot exclude the possibility that the second part of the year may see a risk of new waves of contagion and restrictive lockdown measures in the countries in which the Group operates, the negative effects of which remain, however, difficult to quantify insofar as they are closely linked to the continuation and/or spread of the health emergency and the macro-economic emergency that is consequently ensuing worldwide. 

To date, the other areas of the Group that are held to be potentially impacted by new crises are:

–         any delays in plant development, construction and commissioning (as concerns the timing and management methods of the administrative procedures for the issue of the necessary authorizations for plants under development by the relevant public entities, or the methods of procurement and supply of the various components, both for wind and solar power);

–         the management of operational continuity in the continuous cycle heating plants (as regards the issues linked to the forced absence of internal and external personnel from the workplace where physical presence is required, or the operational limitations connected to biomass supply activities, the conferral of waste and the disposal of slag or planned and unplanned maintenance activities, managed through the activation of the applicable business continuity plans).

           

Management outlook

The Group results in FY 2020 will benefit from: (i) the coming into operation of the Åliden (Sweden), Hennøy (Norway) and Carrecastro (Spain) wind power plants for a total of 106.8 MW (ii) the production of the companies owning a portfolio of 5 wind farms operating in France, for a total grid capacity of 56 MW, for the entire year, which have made an important contribution during the first half of 2020.

With reference to the “Coronavirus (or Covid-19) crisis”, a present, greater serenity is seen on the financial markets. Specifically as regards the short-term prices of electricity, these prices show a slight rise on the minimum prices booked in March and April 2020. Forward prices for the remaining part of 2020 and 2021 are currently lower than the Industrial Plan presented in March 2020. There has also been an albeit gradual restart of relations with industrial customers in the downstream business.

The Company reserves the right to update the management outlook during the following reports, if the “Coronavirus (or Covid-19) crisis should re-arise and generate material impacts on the Group’s economic and financial indicators.

At present, various investment options are being assessed in the geographic areas of interest included in the Business Plan.

 

 

Guidance 2020

 

As regards the Guidance envisaged for 2020, due to the results of the half-year financial report, to forward market price references and to current estimates of Covid-19 impacts:

– EBITDA goes from the range Euro 196-202 million to the range Euro 194-198 million;

– Profit/(loss) attributable to owners of the parent goes from the range of Euro 40-42 million to Euro 34-36 million, already including the one-off relating to deferred taxes in the UK, for a value of about Euro 1.7 million, not included in the reference of the range 40-42 previously mentioned;

– Net financial position (including the fair value of derivatives) down at Euro 740 million.

***

 

The Manager assigned to prepare the accounting documents, Paolo Rundeddu, certifies – in accordance with paragraph 2, article 154 bis of the Consolidated Financial Act (TUF) – that the accounting information contained in this document corresponds to documentary evidence, books and accounting records.

***

The Half-year financial report at June 30, 2020, including the Independent Auditors’ Report, will be made available to the public in accordance with the terms envisaged by current legislation at the corporate office at Corso Venezia 16 in Milan, in the Investor Relations section of the website www.falckrenewables.com and on the authorized eMarket Storage mechanism (www.emarketstorage.com).

***

At 6:00 p.m. on August 4, 2020, a conference call will be held for analysts, investors and banks to present the interim financial report. Details on how to participate are available at www.falckrenewables.com, in the Investor Relations section. Support material will be made available on-line in the Investor Relations section when the conference call begins.

 

 

 

***

Falck Renewables S.p.A., listed on the Italian stock exchange in the STAR segment and included in the FTSE Italia Mid Cap Index, develops, designs, builds and manages power production plants from renewable sources, with an installed capacity of 1,133 MW (1,096.3 MW according to the IFRS 11 reclassification) in the United Kingdom, Italy, United States, Spain, France, Norway and Sweden, using wind power, solar power, WtE and biomass technologies. The Group is an international player offering technical consultancy for renewable energy and third party asset management, through its controlled subsidiary Vector Renewables, which provides customers with these services, for total installed capacity of roughly 2,800 MW, thanks to experience accrued in more than 40 different countries worldwide. Moreover, Falck Renewables provides highly specialized energy management and downstream services to both energy producers and consumers. 

Visit www.falckrenewables.com and connect with us on LinkedIn and Twitter (@falckrenewables).

Contacts:

Falck Renewables

Giorgio BOTTA – Investor Relations – Tel. 02.2433.3338

Alessandra RUZZU – Media Relations – Tel. 02.2433.2360

SEC Newgate S.p.A

Daniele Pinosa, Fabio Leoni, Fabio Santilio – Tel. 02.6249991

CDR Communication

Vincenza Colucci – Tel. 335 6909547

 

 

[1] Data as at June 30, 2019 has been restated to reflect the adjustments made following the application of IFRS 3 – Business combinations to the acquisitions of Energy Team S.p.A. and Energia Eolica de Castilla Sl.

   

[2] EBITDA – The Group measures EBITDA as profit for the period before investment income and costs, net finance income/costs, amortization and depreciation, impairment losses, charges to risk provisions and tax. 

   

[3]  The effects relate to higher costs for the 2017- 2019 Long Term Incentive Plan and costs in favor of the local communities and territories where the Group operates in support of the Covid-19 emergency.