H1 2020 results of EP Infrastructure Group
15. 9. 2020
We are pleased to confirm that in the six months ended 30 June 2020, EP Infrastructure, a.s. (“EPIF”) and its subsidiaries (collectively the “Group“) continued to successfully operate their traditional energy infrastructure assets in Central Europe. The Group’s core activities remain the transmission, distribution and storage of natural gas, the distribution of electricity and district heating.
The Group owns and operates:
- the gas transmission pipeline through Slovakia, one of the largest corridors for supplies of Russian gas to Western, Central and Southern Europe;
- the distribution network of natural gas in Slovakia;
- the electricity distribution network in Slovakia as one of the country’s three main distributors of electricity;
- the largest gas storage capacities in Central Europe and gas storage operations in Bavaria, Germany acquired in 2018; and
- significant heat distribution networks and heat production plants in the Czech Republic and Hungary.
A summary of the financial results is attached. The core operations of the Group reported strong results in the first half of 2020 as compared to first half of 2019 despite the current challenging macroeconomic conditions given by the COVID-19 outbreak, i.e. EBITDA and Adjusted EBITDA reached EUR 817 million and EUR 771 million, respectively. For the 12 months ended 30 June 2020, EBITDA and Adjusted EBITDA reached EUR 1,566 million and EUR 1,536 million, respectively, which represents a minor decrease in Adjusted EBITDA of EUR 70 million (-4%) compared to extraordinary results of 2019.
The pleasing results delivered in the 12 months ended 30 June 2020 are driven by the fact that operating performance is primarily driven by long-term contracts and regulatory based payments. Revenue from these contracts represents majority of the Group’s operating profit. The minor decrease in Adjusted EBITDA compared to 2019 was caused primarily by frontloading of gas shipments to Europe from 2020 to 2019 as there was an uncertainty regarding to a renewal of the transit contract between Russia and Ukraine. As result, gas shippers shifted a portion of their flows planned for 2020 into 2019, which impacted the Transmission segment results. Further, a mild weather pattern namely during the first three months of 2020 had an adverse impact on heat sales, which, coupled with a decline in power prices, caused a drop in the Heat Infra segment performance. On the other hand, results of the Gas Storage segment were positively impacted by an increase in summer-winter spread price, which is the major driver for gas storage revenue.
From the cash generation perspective, the Group generated Adjusted Free Cash Flow of EUR 969 million for the 12 months ended 30 June 2020, a decrease of 12% compared to the result for fiscal year 2019 (EUR 1,107 million), mainly driven by the aforementioned EBITDA decline and different timing of income tax payments.
Alongside with delivering positive business results, the Group has continued to optimize its capital structure. In January 2020, the Group signed a new bank financing agreement for the total amount of EUR 800 million. The funds comprise a term loan of EUR 400 million and a committed revolving credit facility of up to EUR 400 million both with 5-year maturity. The Group used the funds to fully refinance the existing EPIF’s bank debt which was due in 2023 in full. In June 2020, eustream, a.s. issued 7-year senior unsecured bond in the total amount of EUR 500 million. Proceeds, combined with own cash sources, were used for a repayment of the SPP Infrastructure Financing B.V. bond of EUR 750 million due in July 2020.
The Group’s Proportionate Net Leverage Ratio of 4.1x as at 30 June 2020 (31 December 2019: 3.9x) confirmed the Group’s commitment to a stable and predictable capital structure and remained in line with and indeed below the net leverage target of the Group. Owing to this and other positive factors in 2020, the EPIF Group’s investment ratings previously awarded by renowned rating agencies Moody´s Investors Service, Fitch Ratings and S&P Global Ratings were all affirmed, all of them with outlook stable.
Since the beginning of March 2020, the EPIF Group has concentrated its efforts on mitigating the impact of COVID-19 outbreak, particularly in the area of health and safety. The key implemented measures included distribution of adequate protective equipment to on-site employees and remote working for staff whose on-site presence is not essential. Continuity of commodity supplies and other essential services for our customers is ensured through special separation regime for personnel working in critical infrastructure, such as dispatchers.
In conclusion, the Group again proved its role as a leading infrastructure player in the Central European region. Václav Paleček, EPIF’s Finance Director, stated that “The Group displayed resilience and performs positively despite the current economic downturn caused largely by the COVID-19 outbreak. The strength of our operations is underpinned by largely regulated or contracted revenues, extraordinary cash conversion ability, strict control over counterparty risk and sufficient committed revolving credit lines. The Group’s financial health is strong thanks to well-managed funding strategy and low leverage”.
For more details on the results, as well as the financial indicators used, please refer to https://www.epinfrastructure.cz/wp-content/uploads/EPIF_H1-2020_Press-Release.pdf .