Romania: Pandemic affected Electrica through low demand and legislation

, SEE Energy News

The coronavirus pandemic affects electricity distributor and supplier Electrica on two levels – through lower electricity demand and negative impact of the measures adopted by the Government in the context in which the company had a lower net result last year than the previous year, according to Romanian brokerage company Tradeville.

Thus, on one hand, the demand for electricity has decreased by about 5 % in Europe, amid massive business closures. Electrica is therefore in a position to maintain its activity at normal standards in a market with poor demand. On the other hand, some of the measures recently adopted by the Government affect the revenues and cash flow of electricity and natural gas suppliers. Companies in the energy sector will no longer be able to increase tariffs for electricity or natural gas above the levels from the date of issuance of the order, but only to reduce them according to demand and supply.

Another change is that utility bills will be delayed for small and medium-sized businesses, which will have negative effects on the company’s cash flow, as the Group’s management warns. Last week, Fitch Ratings announced that it has revised the outlook of Electrica’s long-term issuer default rating (IDR) to negative from stable and reaffirmed the rating at BBB. Last September, Fitch Ratings assigned Electrica a first time BBB rating with a stable outlook.

Electrica recorded a net profit in the amount of 43 million euros in 2019, which is some 10 % lower compared to the previous year. The company’s operating profit fell to 48.4 million euros in 2019, from 54 million euros in 2018. Revenues rose to 1.3 billion euros 2019, compared to 1.16 billion euros in the previous year. Electrica’s total assets amounted to 1.61 billion euros at the end of 2019, up from 1.55 billion euros at end-2018.