Export of Surpluses Strengthened HEP’s Revenues, Last Year’s Profit Two Billion Kuna

The HEP Group achieved a consolidated net profit of 2.045 billion kuna last year, which is 5.4 percent higher net profit than in 2015 when it amounted to 1.94 billion kuna, according to data from the audited financial reports for the past year published by Hrvatska elektroprivreda (HEP) on Friday.

“The HEP Group has achieved an exceptionally good result for the third consecutive business year. According to the audited financial reports, a consolidated net profit of 2.045 billion kuna was achieved in 2016,” HEP stated in a press release.

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Business revenues in 2016 amounted to 14.4 billion kuna, which is 169.1 million kuna or 1.2 percent less compared to 2015.

Operating expenses last year amounted to 11.7 billion kuna and increased by 103.5 million kuna or 0.9 percent year-on-year.

Investments of 2.59 billion kuna were realized, financed from own funds without the need for additional long-term borrowing, HEP stated.

The press release also emphasizes that in 2016, the production of hydroelectric and thermal power plants increased, and the procurement of electricity on the market was enhanced.

“HEP increased electricity sales in Croatia in 2016, but with a decrease in revenues due to a drop in the overall level of unit prices of electricity for all customer categories (households and businesses), both for public service supply users and for supply under market conditions. Revenues from electricity sales outside Croatia significantly increased compared to 2015 due to higher exports of surplus electricity produced in HEP’s power plants and greater sales to customers in the region,” the press release states.

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HEP also emphasizes that last year, HEP’s market share in supplying domestic customers with electricity was stabilized.

In the segment of supplying business customers in the Slovenian market, a share of 12.5 percent was achieved, and progress was made in other neighboring markets (Bosnia and Herzegovina and Serbia), further solidifying HEP’s position as a market leader in electricity supply, the press release states.

HEP also reminds that the rating agency Standard & Poor’s raised HEP’s standalone credit rating from b+ to bb, as well as the overall rating of HEP’s credit rating from BB- to BB. This aligns the overall credit rating with the rating of the Republic of Croatia, and according to the agency’s opinion, HEP cannot currently have a better rating than the state. The positive rating is a direct result of active corporate governance of the financial position and overall operations at HEP. Furthermore, as in December 2016 there was an increase in the rating forecast for the Republic of Croatia, the agency confirmed HEP’s long-term credit rating (BB) and upgraded the outlook from negative to stable.

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“Such successful and proactive operations and the achieved respectable results of HEP in 2016 are a solid foundation for the development of HEP as a modern and efficient company comparable to similar European companies, which will be ready to respond to future market challenges,” concludes the press release.

Along with the consolidated report for the HEP Group, the revised financial report of the parent company, HEP d.d., was also published today.

Decline in Gas Sales Revenue

According to data from that report, HEP d.d. achieved a net profit of 1.3 billion kuna last year, which is about 300 million kuna lower net profit than in 2015, when it amounted to 1.6 billion kuna.

Business revenues in 2016 amounted to nearly 7.9 billion kuna and were 6.3 percent lower than the previous year, “mostly due to a decrease in revenues from gas sales on the wholesale market by 229.7 million kuna,” HEP d.d. states in the report.

“In 2016, 6,310 gigawatt-hours (GWh) of gas were sold, 255 GWh more than in the previous year, but despite this, a lower revenue of 1.2 billion kuna was achieved due to the decrease in the selling price set by the Government of the Republic of Croatia,” HEP emphasizes.

Revenues from electricity sales last year amounted to just over 6 billion kuna and decreased by 60.6 million kuna, which HEP explains by lower revenues from electricity sales in Croatia by 360 million kuna (6.5 percent) due to lower selling prices, while revenues from electricity sales abroad increased by 301.6 million kuna (61.6 percent) to 790.8 million kuna, resulting from greater engagement and intensified activities in the regional market.

HEP d.d.’s business expenses last year amounted to just over 7 billion kuna and were lower by 112.1 million kuna (1.6 percent) compared to the previous year, due to lower electricity procurement costs, the report states.