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Interim report for the first nine months of 2021

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  • 80JT.L
  • IGN.L

Interim report for the first nine months of 2021: Green Generation in the spotlight

AB “Ignitis grupė” (hereinafter – the Group) publishes that in 9M 2021 Adjusted EBITDA of the Group recorded 31.0% growth compared to 9M 2020 and reached EUR 214.5 million.

Adjusted EBITDA grew in all business segments, and Green Generation installed capacity expansion was its main driver, given the higher electricity generation due to the launch of Kaunas CHP (24 MWe, 70 MWth) and Vilnius CHP WtE unit (19 MWe, 60 MWth) as well as better results from Kaunas HPP mostly due to higher electricity market price. Further on, Customers & Solutions also grew due to temporary positive effect on natural gas performance as a result of natural gas inventory revaluation due to increasing natural gas prices in the market, which is likely to switch direction if natural gas prices normalize. Finally, higher distributed volumes effect in the Networks segment, driven by higher consumption compared to 2020, was also a supporting factor, adding to the Group’s Adjusted EBITDA (after recalculated numbers for 9M 2020 due to Networks Methodology update). Worth noting, the elevated distributed volumes effect will level off over the course of this year.

After the reporting period, NERC updated Networks Methodology, in essence RAB calculation method changed from LRAIC to similar to Historical cost model resulting in recalculation of Adjusted EBITDA. However, sustainable regulatory framework was maintained through the newly established additional tariff component, which offsets the change in RAB calculation method. As a result, our outlook, dividend policy and investment plans remain unchanged.

Outlook for 2021

Driven by robust 9M 2021 financial results, the Group reiterates Adjusted EBITDA guidance of EUR 300–310 million for 2021. The negative effect of changes in the Networks Methodology update is offset by better than expected results of the electricity generation asset portfolio in the Green Generation and Flexible Generation segments mainly due to higher electricity market prices as well as better than expected results in the Customers & Solutions segment due to the temporary positive impact of natural gas inventory revaluation driven by increasing natural gas prices.

Shareholder return

The Extraordinary General Meeting of Shareholders approved the dividend of EUR 43.75 million in dividends (or EUR 0.589 dividend per share) for the first half of 2021 (in line with the Dividend Policy). The dividend was distributed in October 2021.

Strategy delivery

During the reporting period, the Group increased its Green Generation installed capacity by 19 MW to 1,120 MW compared to 9M 2020, as a result of the launch of Vilnius CHP’s WtE unit (19 MWe, 60 MWth) in March 2021.

Additionally, in Q3 2021 the Group’s Green Generation pipeline increased by around 160 MW due to the conditional acquisition of 3 early stage wind farm development projects in Latvia. After the reporting period we further expanded our Green Generation portfolio in Poland by signing a conditional SPA to acquire up to 80 MW solar development projects (Polish solar portfolio II).

All Green Generation projects are fully on track with exceptions for Pomerania WF (94 MW) and Polish solar portfolio I (up to 170 MW). In Pomerania WF, due to COVID-19 and other typical development project risks, we are experiencing around an 8-month COD delay (from Q1 2021). Currently it generates electricity on a merchant basis as we are still waiting for the regulator to process its applications for a generation licence and the CfD (mostly COVID-19 related delay). In the Polish solar portfolio I we continue agreement renegotiations with the developer (Sun Investment Group) as no projects were awarded a CfD tariff in the last two auctions.

In the Networks segment, the Group concluded an agreement with a supplier, which will be responsible for the smart metering infrastructure, and set a framework to comply with all high market standards, including cybersecurity related, which resulted in the replanning of the project end date to 2025 (from 2023).

In 9M 2021, the Group’s investments amounted to EUR 131.0 million and were lower by 51.6% compared to 9M 2020. It is mainly due to lower investments in Vilnius CHP mostly due to WtE unit’s COD in March, Kaunas CHP as it was launched in August 2020, and Pomerania WF as it is approaching commercial operation date. That said, the decrease was partly offset by higher investments in the Networks segment.

Sustainability

In Q3 2021, the Group submitted for the first time the CDP climate change questionnaire, which will serve as an additional comprehensive disclosure of its environmental performance as well as the alignment of its strategy and risk management with climate-related issues.

As a result of the efforts to move towards ESG excellence, the Group is now ranked as a leader among global industry peers rated by MSCI, with an ESG rating of ‘AA’ (on a scale of ‘CCC’-‘AAA’), which was upgraded from ‘A’ in July 2021. This upgrade, placing us two notches above the utility sector average (‘BBB’), is in large part due to the recognition of the Group’s continuous commitment to climate action, expansion of renewable energy portfolio, and the streamlining of key social and governance practices.

After the reporting period, the Groups’ GHG emission reduction targets were validated by the Science Based Targets initiative (SBTi). The Group is the first Lithuanian capital company to be validated by SBTi.

Furthermore, for the third year in a row the parent company received the highest possible A+ rating and was recognised as a leader in the category of large SOEs as well as a frontrunner in sustainability in the Good Corporate Governance Index.

Corporate governance

There were significant changes on the Group’s corporate governance front. First, in Q3 2021, the term of the former Supervisory Board has ended. As a result, after the reporting period, on 26 October 2021, new members of the Supervisory Board were elected by the General Meeting of Shareholders for a four-year term. The majority of the newly elected Supervisory Board members are independent, including the Chair. In terms of diversity, 4 out of 7 of them are women, 3 members worked in the previous term of Supervisory Board office, thus ensuring continuity, and 5 out of 7 members are international (more information can be found here). Further on, the Supervisory Board committees were formed, and the remaining candidates were submitted to the General Meeting of Shareholders for the election to the Audit Committee. Finally, after the reporting period, the selection process for a new term of the Management Board has been initiated.

Key financial indicators (APM1) for the 9M 20211,2

EUR, millions

9M 2021

9M 2020

Change

EBITDA

249.6

229.4

20.2

Adjusted EBITDA

214.5

163.8

50.7

Adjusted EBITDA margin

19.0%

20.4%

(1.4 pp)

Net profit

94.4

108.3

(13.9)

Adjusted net profit

83.7

50.6

33.1

Investments

131.0

270.9

(139.9)

FCF

21.6

39.5

(17.9)

ROE LTM

9.7%

9.3%

0.4 pp

Adjusted ROE LTM

7.4%

6.2%

1.2 pp

ROCE LTM

8.9%

7.0%

1.9 pp

Adjusted ROCE LTM

6.8%

4.9%

1.9 pp

2021.09.30

2020.12.31

Change

Net debt/Adjusted EBITDA LTM, times

2.11

2.47

(0.36)

FFO LTM/Net debt

51.0%

52.1%

(1.1 pp)

1 All, except net profit are Alternative Performance Measures. Formulas of the Group’s financial indicators are available on the Group’s website (link).
2 Due to Networks Methodology update, all adjusted financial indicators were recalculated retrospectively for the year 2020 (for more information, see First nine months 2021 Interim report section ‘Results by business segment’ part ‘Networks Methodology update’). Negative impact of the Networks Methodology update on Adjusted EBITDA for the period of 9M 2021 amounts to EUR -35.0 million and for the respective period of 2020 – EUR -35.2 million.

Earnings call

In relation to the announcement of the interim report, an earnings call will be held on 30 November 2021 at 11:00 am Vilnius / 9:00 am London.

To join the earnings call please register at: https://edge.media-server.com/mmc/p/q84o35ah

Alternatively, you can join the earnings call through the dial in numbers below:

United Kingdom, London: +44 20 7192 8338
Lithuania, Vilnius: +370 5 214 0081
United States, New York: +1 (646) 7413-167

Event Passcode: 8299707

All questions can be directed in advance to the Group’s IR, when registering for the earnings call or live during the call.

Presentation slides will be available prior to the conference call:
https://ignitisgrupe.lt/en/reports-and-presentations

The interim report will be available for download at:
https://ignitisgrupe.lt/en/reports-and-presentations

---

Interim Report for the first nine months 2021 is attached to this notice. The Group also published it and previous reports on its website at: https://ignitisgrupe.lt/en/reports-and-presentations

For additional information, please contact:

Communications

Artūras Ketlerius
+370 620 76076
arturas.ketlerius@ignitis.lt

Investor Relations

Ainė Riffel-Grinkevičienė
+370 643 14925
aine.riffel@ignitis.lt


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