H1 2021 Results of EP Infrastructure Group

10. 9. 2021

We are pleased to confirm that in the six months ended 30 June 2021, 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.

A summary of the financial results is attached. The Group reported Underlying EBITDA and Adjusted EBITDA of EUR 665 million and EUR 663 million, respectively, in the 6 months ended 30 June 2021 in comparison to Underlying EBITDA and Adjusted EBITDA of EUR 817 million and EUR 771 million, respectively, in the 6 months ended 30 June 2020, which represents a decrease in Adjusted EBITDA of EUR 108 million (-14%). In the 12 months ended 30 June 2021, Underlying EBITDA and Adjusted EBITDA reached EUR 1,470 million and EUR 1,418 million, respectively, which represents a decrease in Adjusted EBITDA of EUR 108 million (-7%) compared to results of full year 2020.

The decrease in Adjusted EBITDA compared to full year 2020 was caused by a combination of disposal of assets from Heat Infra segment in last quarter of 2020 and decline in Gas Transmission segment driven by lower volume of flows, which was partially offset by positive weather impact on Heat Infra segment and Gas Distribution business. In particular:

  • The Group disposed of its ownership in Pražská teplárenská a.s., its subsidiaries and associates, and PT Transit, a.s. (collectively, the “PT Group”), a major heat distributor in Prague, and Budapesti Erömü Zrt. (“BERT”), a key producer of heat in Budapest. The disposed entities generated cumulatively EUR 48 million of Adjusted EBITDA in the 6 months ended 30 June 2020;
  • Gas Transmission segment recorded a decline in its Adjusted EBITDA by EUR 101 million in 6 months ended 30 June 2021 as compared to 6 months ended 30 June 2020, which was primarily driven by lower reverse gas flows due to the fact that the balance of gas storages in Ukraine was fairly high in the first months of 2021 (affected by significant injections in the second half of 2020) coupled with increasing gas market price throughout the first half of 2021, which resulted in lower-than-usual incentives to transmit the gas to Ukraine;
  • Heat Infra segment and Gas and Power Distribution improved their performance by EUR 21 million and EUR 17 million, respectively, in 6 months ended 30 June 2021 as compared to 6 months ended 30 June 2020, which was to major extent driven by favourable weather pattern.

The Group results continue to benefit from the fact that operating performance is primarily driven by long-term contracts and regulatory based payments. Revenues from these contracts represent majority of the Group’s operating profit and the Group can rely on them as a stable component even in a year affected by a decline in reverse gas flows to Ukraine and related short-term bookings on relevant exit points.

From the cash generation perspective, the Group generated Adjusted Free Cash Flow of EUR 961 million for the 12 months ended 30 June 2021, a decrease of 8% compared to the result for fiscal year 2020 (EUR 1,046 million), mainly driven by the aforementioned EBITDA decline.

Alongside with delivering stable business results, the Group has continued to optimize its capital structure. On 2 March 2021, EPIF issued a new 10-year EUR 500 million bond priced at 1.816% in reaction to favourable market conditions. Proceeds were used for an early repayment of EPIF term loan of EUR 400 million originally due in January 2025. In addition, EPIF made early repayment of two Schuldschein facilities totaling EUR 182.5 million and EUR 70 million private placement bond instrument. The loans were originally due in years 2024-2027. The Group has also successfully refinanced EUR 500 million bond due in June 2021 at SPP – distribúcia, a.s. with a new EUR 500 million bond priced at 1.0% and due in June 2031.

The Group’s Proportionate Net Adjusted Leverage Ratio of 4.02x as at 30 June 2021 (31 December 2020: 4.05x) 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 the conservative capital structure, 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.

In conclusion, the Group has once again proved its role as a leading infrastructure player in the Central European region. Václav Paleček, EPIF’s Finance Director, stated that “after reporting exceptional results in years 2019 and 2020, the EPIF Group experienced a rather expected decline in its operational performance stemming from a lower volume of gas shipped through our network during the first half of 2021. Nevertheless, the EPIF Group has yet again displayed resilience as lower flows were to certain extent offset by a favourable weather effect on our district heating and DSOs. The Group’s financial health remains strong thanks to well-managed funding strategy and sufficient committed revolving credit lines.”

For more details on the results, as well as the financial indicators used, please refer to https://www.epinfrastructure.cz/en/investors/results-centre/