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Alpiq in: Hungary
Alpiq Group

Facts & Figures

Earnings and profitability

Earnings 

Despite the lower volume of production and the unplanned depreciation, earnings of the Business Group before interest and tax remained positive in 2014. However, owing to the corporate tax and the extraordinarily high level of the sectoral extra tax, the profit or loss after taxation was in the negative field in 2014 (-178 million HUF).
Like in the previous years, the foundation of our solid performance was the outstandingly - even by world-class standards - high level of availability of the Csepel II Power Station. The drop in earnings was due to international and economic processes, but the Business Group was able to offset this trend by maintaining the previously introduced cost-saving measures, which were in line with owner expectations. Besides that, we successfully utilised the role of the power station in system-level regulation which was the direct result of those new solutions that we had introduced to keep our competitive edge. Furthermore, these technological solutions also made the regulatory capabilities of the power station even more flexible.

Profitability
The owners of Alpiq Csepel Kft. invested USD 260 million in the construction of the Csepel II Power Station in the period between 1997 and 2000. The power station started its operation on November 1, 2000 to supply electricity to MVM Hungarian Power Company and, eventually, the public utility consumers.

Project return rates (ROA) are presented in the next graph:

Return on assets

Return on assets (ROA)


In the reviewed period, the return on assets ratios of the Group were around the usual business level. ROA rates had been declining since 2009, though there was an interim period of improvement in 2012 when the provisions for overhauls were used up. Then again there was a significant drop in 2013 primarily owing to the unplanned depreciation of tangible assets. In 2014, return on assets was 4.5 %, which is slightly higher than in 2013, but significantly lower than the level of the previous years.

The heavy fall of prices in the Hungarian electricity market, which was the result of the artificially cheap imported electricity from renewable sources on the one hand, and the rapid cutback of the public utility tariffs on the other, may sooner or later lead to an unforeseen decline of the return on assets for the power generating companies. We sincerely believe that the shrinking of the markets all over Europe that has a strong impact on conventional power stations, together with the price fall of dangerous extent, will not force the owners to give up production assets and investments serving the safety of supply. Such a scenario would lead to a serious damage of the flexibility of the European power grid which would endanger the sustainability of the system itself.


Production, sales and supply

Alpiq Csepel Business reliably fulfilled all its contractual commitments in 2014. Settlements with our customers and suppliers were performed smoothly just like in the previous years. Owing to the significant drop in production levels, sales revenue from power generation and heat production decreased by HUF 11.7 billion. At the same time, direct costs of production decreased by HUF 12.0 billion, that means a HUF 0.3 billion increase in the direct gross margin of production compared to the previous year.

The following figures reflect the factors that had a strong effect on sales revenue compared to the previous year:

Sales revenue factor20102011201220132014
Power Generation (GWh)7941,8311,582922431
Heat production (TJ)1,1101,004949904822
CHP ratio46%74%65%64%57%
Availability99.97%99.03%99.67%99.57%99.74%
Forced outages (MW)0.14.11.11.01.0
Oil firing0.4%0.0%0.0%0.0%0.0%
Annual average spot of Brent crude oil (USD/Bbl)79.61111.26111.64108.5699.03

Cost management

Direct production costs represent a major share in the cost structure of the company. In 2014, production levels strongly dropped against those of the previous year, and therefore, the direct costs of fuel and production represent a lower percentage in the total cost structure. The ratio of the plant operation and maintenance costs further increased compared to the figure of the previous year, however, if inflation is excluded, those costs remained at the level of 2013. In the same way, the ratio of depreciation within the total cost increased, but the sum accounted decreased in comparison with the previous year.

Other cost types showed no major change which would have any relevance to production and operation activities.

Change of cost structure
(excl. financial expenditure and provisions)
Cost percentage
in total costs
201220132013
Fuel procurement81.6%78.6%70.0%
Other direct, variable costs of production1.1%2.0%4.1%
Other fix, direct costs of production1.3%1.8%2.0%
Total direct production costs84.0%82.4%76.0%
Depreciation5.1%6.5%8.0%
Plant operation and maintenance costs4.7%5.9%8.8%
Personnel-type expenditure0.9%0.9%0.8%
Plant insurance 0.9%1.3%2.0%
Local taxes, crisis tax 1.9%1.0%1.3%
Other indirect costs 2.5%1.9%3.0%
Total indirect costs  16.0% 17.6%24.0%
Total  100% 100%100.0%

Liquidity and financial position

The financial position of the Business Group was stable in 2014 and liabilities were met in due time. In spite of the recession, the company successfully maintained its solvency, and was not forced to introduce any cost saving scheme that might have resulted in the termination of jobs or the reduction of production capacities. Loans and interests were paid at the rate and to the extent stated in the contracts, and without involving a new current account or other credit source.


Events after the close of balance sheet

No event has occurred within the Business Group after the close of balance sheet which would have affected the 2014 statement.