Profit was down by 72% compared with the same period of last year due to the application of the “Taglia prezzi” Decree (Decree-Law 21 of March 21, 2022) and “Sostegni-ter” Decree (Decree-Law 4 of January 27, 2022, ratified by Law 5 of March 28, 2022). The estimated impact of the two laws in the first quarter was in excess of 100 million euros, meaning that net profit fell to 27 million euros compared to 98 million euros in the same period of 2021*.
Edison's Board of Directors met yesterday and reviewed the Interim Report at March 31, 2022. Against the recovery in industrial activity after the restrictions imposed by the pandemic, Edison reports a sharp decline in profits due to the application of the “Taglia prezzi” Decree (Decree-Law 21 of March 21, 2022) and the “Sostegni-ter” Decree (Decree-Law 4 of January 27, 2022, ratified by Law 5 of March 28, 2022).
In details, during the first quarter EBITDA increased by 105 million euros (+41.7%) compared to the same period of 2021, primarily driven by thermoelectric power generation, gas businesses and a number of non-recurring items. This result more than offsets the drop in hydroelectric generation, which suffered from low water resource availability in the period, and the negative impact of higher prices on end-customer sales margins. Against the rising prices environment, Edison took action to protect its customers. This had a negative impact on the profitability of its downstream activities.
Financial debt as at March 31, 2022 shows a cash position of 226 million euros (debt of 104 million euros as at December 31, 2021). This outcome is due to strong cash generation from operating activities, partially balanced by investments to strengthen the strategic repositioning of the company in energy transition activities.
* This value doesn’t include the impact of the new package of measures approved by the Government on May, 2
EDISON GROUP HIGHLIGHTS
| in millions of euros |
Q1 2022 |
Q1 2021 |
|---|
| Sales revenues |
7.111 |
2.131 |
| EBITDA |
357 |
252 |
| EBIT |
242 |
144 |
| Profit from continuing operations |
66 |
98 |
| Group interest in net profit (loss) |
27 |
98 |
Scenario and energy market at March 31, 2022
After a 2020 and 2021 dominated by the pandemic, the current geopolitical tensions triggered by Russia's invasion of Ukraine are weighing heavily on the business environment. The escalation of the Russia-Ukraine conflict has exacerbated the volatility of commodities – especially energy commodities – causing a further rise in prices and increasing inflationary pressures with consequent impact on household and business spending.
In the first quarter of 2022, electricity demand stood at 80.3 TWh, up 2.5% from the same period in 2021, when Covid-19 restrictions were still in place. In terms of production, thermoelectric generation increased to 52.1 TWh (+17.8%), offsetting the strong drop in hydroelectric generation (-44.2% to 5.8 TWh) and the decrease in imports (-20.6% to 9.6 TWh). Other renewables grew, with wind-power generation up 11% (6.8 TWh) and photovoltaic production up 10.9% (5.3 TWh). Overall, about 88% of Italy’s total electricity demand was met by domestic production. On the price front, the Single National Price (PUN) averaged 249.3 euros/MWh in the quarter – four times higher than in the first quarter of 2021 (59.3 euros/MWh).
Gas consumption rose by 1.2% to 25.5 billion cubic metres. During the period, thermoelectric consumption grew (+11.6% to 7.2 billion cubic metres), while residential uses were stable (-0.6% to 13.6 billion cubic metres) and industrial decreased (-7.8% to 4.3 billion cubic metres) due to the deterioration in the broader economic and energy context. The average spot gas price in Italy during the first quarter of 2022 was 103.7euro cents per cubic meter (19.8euro cents per cubic metre in Q1 2021). As mentioned above, the rise in prices and the high volatility in European gas markets are the results of geopolitical tensions and growing uncertainty over Russian pipeline supplies. Oil prices followed the same trend, averaging 97.3 US dollars per barrel in the first quarter of 2022, up 59.3% compared to the same period in 2021./p>
Outlook
Characterized by extremely high price volatility and ongoing governmental decisions on several regulatory changes affecting the energy sector, the current context does not yet allow to provide an annual EBITDA forecast. However, the company believes that its operational performance should remain close to that of 2021.
Main events during the first quarter of 2022
January 20, 2022 – Edison completes the acquisition of Energia Italia, a company that owns 10 mini hydroelectric plants positioned in Piedmont's main watercourses. With an installed capacity of over 30 MW, the 10 plants generate more than 80 GWh per year.
February 24, 2022 - Edison announced that the rating agency Standard & Poor's had confirmed the company's long-term rating at BBB and revised the outlook from stable to negative, following the downgrade of parent company EDF by one notch to BBB with negative outlook. While noting the solid results achieved by the company in 2021, and in particular the 45% growth in EBITDA, S&P's methodology limits Edison's rating to that of its parent company EDF, given the strategic importance of Edison as a driver of growth in Italy, a priority market for EDF.
Edison also announced that Moody's Investors Service had lowered the company's long-term rating from Baa2 to Baa3 with negative outlook, for similar reasons following the downgrade of the parent company EDF by one notch with negative outlook. Both S&P and Moody's noted Edison's strong operating performance, solid credit metrics, improved risk profile and progress on strategic repositioning.
Main events occurring after March 31, 2022
April 1, 2022 - Edison, Italgas and Marguerite signed a binding agreement for Edison to acquire a majority interest in Gaxa, a company owned 51.85% by Italgas and 48.15% by Marguerite. Gaxa operates in Sardinia as a distributor of natural gas, LPG and propane air for residential use. Under Gaxa's new shareholding structure, Edison will hold 70%, Italgas 15.56% and Marguerite 14.44%. The transaction strengthens Gaxa's commercial presence and development prospects in light of the major investment plan for Sardinia brought forward by Italgas, involving the construction of new "digital-native" distribution networks.
April 4, 2022 - Fenice Spa, a wholly owned subsidiary of Edison, and the EDF Group’s Citelum SA, a group that provides lighting services to the public administration, signed a binding agreement for the acquisition by Fenice Spa of the entire share capital of Citelum Italia Srl. The sale is expected to be completed by the end of the second quarter of 2022. By acquiring Citelum's Italian and Spanish operations, Fenice will be able to expand its range of local and urban energy services. The deal also creates substantial synergies with Edison's services for the energy transition and local and urban decarbonisation, looking ahead to the smart cities of the future.
Documentation
The Edison Group's Interim Report at March 31, 2022, approved yesterday by the Board of Directors of Edison Spa, will be available to the public as of May 5, 2022 at the Company's headquarters, on the Edison Spa website (http://www.edison.it/it/bilanci-e-documenti-correlati) and via the authorised storage mechanism "eMarket STORAGE" (www.emarketstorage.com).
