EnBW reports stable earnings in first half of 2022 despite large swings in energy markets

Karlsruhe. The first six months of the 2022 financial year were marked by an ongoing volatile market situation as a result of the Russian war in Ukraine. Despite the resulting negative impacts, the Group was able to hold operating earnings largely stable year-on-year. This was mainly due to positive performance in Renewable Energies, which offset adverse impacts in other areas. EnBW CFO Thomas Kusterer: “The persistent high energy price volatility on wholesale markets presents us, like others, with considerable challenges. However, EnBW’s integrated lineup spanning the entire energy value chain and our solid internal financing capability ensure stability here. We are therefore maintaining our full-year guidance at Group level unchanged, while keeping a very close watch on what continues to be a difficult market environment.”

With a workforce of 26,312 (+6%), EnBW generated revenue of €27.12 billion in the first half-year and an operating result (adjusted EBITDA) of €1.42 billion, marking a slight decrease of 3.7% on the same period a year earlier (€1.48 billion).

The difficult overall ongoing situation was reflected above all in the System Critical Infrastructure (Grids) and Smart Infrastructure for Customers (Sales) segments, in part with significant shortfalls in earnings (by 9% and 49% respectively). In the case of Grids, the main factor was an increase in the cost of the grid reserve. This relates to reserve power plants that are only deployed at the request of the transmission system operator in order to safeguard grid stability. To maintain security of supply, the reserve power plants had to be activated much more frequently and at significantly higher cost than budgeted in the first half of 2022 than in the first half of the previous year. For Sales, the steep year-on-year increase in electricity and gas purchase prices resulted in lower earnings.

At the same time, Renewable Energies substantially increased their contribution to earnings, mainly due to significantly better onshore and offshore wind conditions, higher market prices and the commissioning of new large solar farms constructed without any subsidies in Brandenburg.

Kusterer: “Even against the backdrop of the Russia-Ukraine war, we are sticking to our strategic lineup and our climate targets. Rapid expansion of renewables and grids is the only way for us to become independent of fossil fuels in the long term. This is now the prime task for the combined efforts of business and policymakers. We must significantly accelerate the transition in Germany to carbon-neutral energy supplies for the long-term future. This is why the vast majority of our investment is on expanding renewable energy sources and the expansion of grids and electric mobility. But it is also necessary to hedge in the short term against any energy shortages in order to protect households and industry as well as possible from further price increases.”

Despite heightened uncertainty due to the volatile ongoing market situation, EnBW has left its Group-level earnings guidance for the full year 2022 unchanged. Adjusted EBITDA for the 2022 financial year is expected to be in a range between €3.03 billion and €3.18 billion, corresponding to a year-on-year increase of 2% to 7%.

Net profit attributable to the shareholders of EnBW AG increased from €−162.8 million in the previous year’s period to €563.9 million in the first half of 2022. The increase year-on-year mainly reflects around €700 million in impairment losses recognised last year in the conventional generation business.

The Smart Infrastructure for Customers (Sales) segment recorded a significant fall in earnings. Adjusted EBITDA decreased by around 49% year-on-year to around €115 million in the first six months of 2022. The main reason for the lower earnings in the first half of 2022 was the sharp increase in electricity and gas procurement costs relative to the previous year.

In the System Critical Infrastructure segment (Grids), the adjusted EBITDA of approximately €588 million is 9% down year-on-year. The fall in earnings is mainly due to the increased cost of the grid reserve to safeguard system stability.

Adjusted EBITDA in the Sustainable Generation Infrastructure segment (Renewable Energies and Thermal Generation and Trading) increased by around 17% to approximately €852 million. The higher earnings relate to the Renewable Energies business, where adjusted EBITDA rose by 43% to approximately €547 million. This earnings increase was mainly due to significantly better wind conditions at offshore and onshore wind farms, better market prices and newly added solar farms. In Thermal Generation and Trading, adjusted EBITDA was down 12% year-on-year to approximately €305 million in the first half of 2022. The negative impact came from expenses due to the cut in Russian gas supply quantities at subsidiaries and the resulting high procurement cost to replace the shortfall in gas volumes. This was partly offset by higher earnings contributions from trading activities.

The EnBW Group’s investment, at €1.07 billion in the first half of 2022, was at a similar level to the same period of the previous year (€1.08 billion). Most of this total investment was for growth projects such as grid expansion, securing seabed rights for the development of an offshore wind farm off the Scottish coast and the rollout of charging infrastructure for electric vehicles.