Strong results, on schedule with strategy

Strategy highlights:

·       On schedule with our One Planet Plan, CO₂ emissions down to 9.7 Mtons, from 10.4 Mtons in 2022.

·       Customers: Introduction of new customer propositions such as ‘Eneco Dynamisch’, for customers to follow market prices, and ‘Eneco Slim Laden’, for customers to charge their EVs at cheaper moments.

·       Integration/trade: significant growth in flexible capacity through an expansion of our Virtual Power Plant to 4 GW, increased battery storage capacity in Belgium, and the acquisition of a battery developer in Germany (Energisto).

·       Assets: Growth of installed sustainable production capacity to 2394 MW (2022: 2121MW) and acquisition of Solargrün, a German company specialising in developing solar energy.

Strategy setbacks:

·       Disappointing results from heating business, as a result of falling demand and fire at AVR.

·       Decision not to tender for IJmuiden Ver offshore wind, in light of poor risk-return ratio.

Good financial results, boosted by one-time income

·       Revenues down from €10.9 billion in 2022 to €8.4 billion for this financial year, as a result of lower prices and structural decline in gas consumption by households and companies.

·       Higher EBIT (€394 million against €345 million in 2022), EBITDA (€771 million against €743 million in 2022) and profit after income tax ( €368 million against €272 million in 2022), boosted by the sale of part of the stake in the Hollandse Kust West offshore wind farm.

·       ROACE to 7.8%, exceeding the target of 6% (after elimination of one-time income: ROACE 6.1%)

·       Investments at all-time high: €748 million in 2023 against €553 million in 2022.

Summary

Eneco has had a good year. We have started to reap the benefits of our integrated value chain strategy, with margins increasing as a result of more solar and wind farms, plus strong results in our trading activities by drawing on both conventional and renewable flex assets. This works to our customers’ advantage as well: efficient flex solutions offer greater security of supply for the lowest possible cost. Our financial results received several boosts from one-time income, including the sale of nearly our entire stake in the Hollandse Kust West offshore wind farm to our shareholder Chubu Electric Power. That sale brought in €81 million.

However, we also experienced some negatives. The results from our heating business were under severe pressure, with our heat sales down 14% compared with the year before, while the prices for procuring gas were unfavourable. We also incurred extra costs through the unavailability of waste incinerator AVR in Rozenburg, the principal source of our heating grid for Rotterdam and the surrounding area. As a result, this business unit recorded disappointing results. Eneco also decided not to tender for the IJmuiden Ver offshore wind project, based on the poor risk-return ratio.

Positives were that our customers’ energy rates fell last year, thanks to a number of factors such as the mild winter, the availability of enough power stations (to balance supply and demand) and sufficient gas (including liquid gas) being supplied. Even so, those rates are still higher than before the energy crisis, and the energy poverty affecting people requires constant attention. Eneco helps in various ways, including by contributing the Temporary Energy Emergency Fund.

Looking ahead, we see competitive market conditions, an increase in operational costs, with reduced demand, while at the same time Eneco wants to continue investing in the energy transition. Taken together, this is likely to have a downward effect on profitability for next year.

Political situation

Eneco’s sphere of operation is influenced strongly by political decisions. We have a balanced opinion of the new government’s plans. On the positive side, the current climate goals will not change, and we are also pleased that the net metering scheme will be abolished. However, we are disappointed by the announcements that heat pumps will not be made mandatory, and the lower tax on gas will not help the energy transition to move forward.

On schedule with our strategy

Eneco’s strategy consists of three pillars: helping our customers to become more sustainable, growing the production of renewable energy, and balancing and optimising the energy system. We made progress in each of these pillars.

After the energy crisis abated, Eneco was able to begin offering new fixed contracts to consumers. Next, we introduced dynamic energy contracts. The number of customer contracts changed very little.  

Our sustainable installed capacity (wind turbines, solar) continued to grow this year, reaching 2394 MW, against 2121 MW the year before. Unfortunately, the prices and price risks for the IJmuiden Ver offshore wind project made us decide, together with our partner Equinor, not to tender.

Eneco’s Virtual Power Plant Myriad continued its development last year, reaching the milestone of 4 GW in connected assets. We also introduced a number of battery solutions onto the market. Thanks to digitalisation, we can use integration between assets and customers to help balance the grid. 

It is Eneco’s ambition to become climate-neutral by 2035, through our One Planet Plan (net zero CO₂ emissions from both the energy that we use ourselves and the energy that our customers use). We are on schedule with that plan. We have already achieved a CO₂ reduction of 6.8 Mtons compared with the baseline year of 2019 (9.7 against 16.5). Compared with the previous year, we reduced our emissions by 0.7 Mtons. We also presented a plan for realising positive impacts on biodiversity for every project that we undertake from 2025 forward.

The battery market is developing steadily. Although most of Eneco’s investments were in Belgium, we will also invest more in battery development in Germany, through a joint venture with Energisto.

While we remain enthusiastic about the growth in offshore wind and hydrogen, regulations will need to be introduced to guide the demand for making the industry more sustainable.

Strong financial results

This is our second annual report on a financial year ending on 31 March. Last year, the switch to a new reporting period meant that Eneco was obliged to report, one time only, on a 15-month period: from January 2022 until the end of March 2023.

Since these are the comparative figures in the income statement, the results in this annual report do not align one-on-one with the results for the previous reporting period. The differences in the income statement are largely explained by ‘3 months extra previous period’. For a better idea of the results, this section also provides comparisons with the period from 1 April 2022 to 31 March 2023, referred to as the ‘pro forma financial year’ in the remainder of this section. The figures for that pro forma financial year have not been audited.

Revenues from energy and energy-related products and/or services were €8.2 billion, down €2.6 billion compared with the 2022 pro forma financial year. The drop in revenue compared with the pro forma financial year was caused chiefly by the lower prices for gas and electricity, but also by lower volumes.

ROACE was up from 7.2% for the 2022 pro forma financial year to 7.8% for 2023. This increase was driven mostly by the one-time income from the sale of the majority of our interest in Hollandse Kust West: without it, the ROACE would have dropped to 6.1%. 

The one-time income also boosted the total gross margin including other income, which was up by €129 million (8%) compared with the pro forma financial year. The operating profit (EBIT) was up by €49 million (14%) against the pro forma financial year, to €394 million.

The margin on energy and energy-related products and/or services was up by €55 million (3%), with performances varying between the business units. The chief reason for the improved margin lay in the new solar and wind farms that became operational, combined with favourable wind conditions in 2023. The margin on supplies also improved slightly. In Germany this was mostly from trading activities. At the same time, the margin in the heat supply chain fell. The trading division’s margins remained strong, although they were down slightly compared with the exceptional results for the year before.

High inflation and rising wages under the collective labour agreements are reflected, among other effects, in the higher employee costs for internal staff (up by €57 million (18%)), while the number of people employed by Eneco (in FTEs) rose from 3,340 in March 2023 to 3,810 in March 2024 (+14%). One reason for that increase was the acquisition of installation company Installion in Germany.

The profit after income tax was €368 million, €96 million (35%) higher than for the pro forma financial year. Besides the one-time income from the sale of Hollandse Kust West (discussed above), we also recorded a significant increase in the results from the Norther wind farm off the Belgian coast, boosted by favourable wind conditions and the positive effect of subsidy changes.

Increased investments

Once again the amount that Eneco invested – particularly in sustainable production assets – was much higher than the net profit. Of the total of €748 million, €334 was invested in new wind farms in the Netherlands and Belgium, of which €247 million in offshore assets (chiefly Ecowende and Crosswind).

The heating grids also demand large annual investments, with a total of €190 million being spent this year. That amount covered not only expansions, replacements and maintenance for the actual heating grids, but also replacements and sustainability improvements for the power plants. A further €37 million was invested in solar panels, in the Netherlands, Belgium and Germany.

Eneco also continues to invest heavily in digitalising (€59 million) operating processes, in the energy system of the future and in digital customer solutions. A total sum of €105 million was invested in participating interests and acquisitions of companies such as Installion and Solargrün in Germany.

For more information, please visit: Reports | Eneco