Change % 2% 8% -6%
Q3/13 952 608 345
FY 2013 FY 2012 Change % 3, 652 2, 342 1, 310 3,794 2,210 1,584 -4%
6% -17%
963 603 360
Comments to preliminary Full Year 2013 Group results
The persistently difficult macroeconomic conditions in various
countries of the Euro zone during FY/13 had a negative influence on
the demand for refined oil products. In particular, an important
contraction in consumption took place in Spain and in Italy, which
are the markets where the Saras Group conducts its marketing
activities. Notwithstanding such context, the Marketing segment
posted a satisfactory performance, improved versus the previous
year. In the Italian market total demand for oil products in 2013
registered a drop versus 2012, with gasoline consumptions down by
4.8% and total gasoil down by 2.8%. Although the trend was still
negative, the pace of the shrinking movement seemed to be slowing
down during the second half of the year. In this scenario, Arcola
Petrolifera sold 2,342 ktons, up 6% versus FY/12, thanks to
important efforts in consolidating and developing customers in the
highest profitability channels, especially the unbranded retail
stations. This approach also allowed Arcola to defend its gross
margin at a satisfactory level, close to the level achieved last
year (-4%). Demand for the main refined oil products sharply
contracted also in the Spanish market (gasoline dropped by 5.7%,
and total gasoil was down by 2.3%). Consequently, the Spanish
subsidiary Saras Energia continued its defensive policy,
rationalising sales (-17% versus FY/12), while at the same time
improving the gross margin (+5%), thanks to its focused commercial
efforts towards the channels with greater profitability. Overall,
comparable EBITDA of the Marketing segment stood at EUR 33.7 ml in
FY/13, up by 7% versus EUR 31.6 ml in FY/12. Indeed, 2012
performance was penalised by a weak fourth quarter. Finally, total
CAPEX was EUR 3.7 ml in FY/13.
Comments to Fourth Quarter 2013 results
Both the subsidiaries of the Saras Group had a solid performance in
Q4/13, with a total comparable EBITDA for the Marketing segment
standing at EUR 11.9 ml. Conversely, as previously mentioned, Q4/12
results were particularly weak, in an extremely unfavourable market
context. From an operational stand point, Arcola continued its
efforts to increase the volumes sold (603 ktons, +8% versus Q4/12),
while Saras Energia further rationalized sales (-6%).
10
Power Generation
Below are the main financial and operational data of the Power
Generation segment, related to the subsidiary Sarlux Srl, which
operates also an IGCC (Integrated Gasification Combined Cycle)
plant, with a total nameplate capacity of 575MW, fully integrated
with the Group's refinery, and located within the same industrial
complex in Sarroch (Sardinia).
EUR Milion E BITDA Com parabl e EBITDA E BIT Com parabl e EBIT E BI
TDA ITALIAN GAAP E BI T ITALIAN GAAP CAP EX
Q4/ 13 61. 2 61.2 40. 5 40. 5 59. 8 40. 1 4.1
Q4/12 55. 5 55. 5 35. 4 35. 4 43. 7 32. 2 4. 6
Change % 10% 10% 14% 14% 37% 25%
Q3/ 13 39.2 39.2 27.0 27.0 43.9 32.6 2. 2
FY 2013 FY 2012 Change % 182.4 182.4 (123.0) 109.5 184.8 131.2 16.
9 226. 8 226. 8 147. 0 147. 0 178. 3 133. 2 8.7 -20% -20% -184%
-26% 4% -2%
Other figures
Q4/13 E LECTRICITY PRODUCTION P OWE R TARIFF P OW E R IGCC
MARGIN
MWh/100 0
Euro cent /KWh
Q4/12 974 12. 5 4. 0
Change % 14% -5% 18%
Q3/ 13 1, 068 11.5 3. 3
FY 2013 FY 2012 Change % 4, 217 11. 9 3. 8 4,194 12. 2 4.2 1% -3%
-10%
1,111 11. 9 4.7
$/bl
Comments to preliminary Full Year 2013 Group results
From the operational point of view, the Power Generation segment
achieved very solid results in FY/13. The power production reached
4.217 TWh, slightly higher (1%) than in FY/12 because in the two
years under comparison the same scheduled maintenance activities
were carried out, albeit with different timings within the year.
From the financial point of view, at the end of June an important
regulatory change took place. Indeed, regarding the CIP6/92 tariff,
which regulates the selling price of electricity from Sarlux Srl to
the National Grid Operator (GSE Gestore st dei Servizi Energetici
SpA), the Decree Law 69 of 21 June 2013 (the so called "Decreto del
Fare") introduced a new methodology to determine the "Avoided Fuel
Cost" component (CEC), taking as a reference the gas prices in the
spot market, and not anymore the Brent crude oil prices, as it used
to be in the past. On the basis of the long-term scenarios
considered for the gas prices (provided by a leading independent
consultant specialising in that sector), the new calculation
methodology produces a modest reduction of the CIP6/92 tariff in
the financial year 2013, but the reduction could become significant
starting from the following financial year. Conversely, the results
calculated according to IFRS have been impacted by the full
devaluation of the CIP6/92 contract between Sarlux and the GSE
(equal to EUR 232 ml pre-tax) accounted for in the consolidated
financial statements only, as determined by an independent
appraisal, which established the new value in use of the contract
on the basis of the new calculation methodology of the CIP6/92
tariff, pursuant to the previously mentioned Decree Law 69/2013.
However, a positive impact on the results, in Q4/13, came from the
change in the expected scenarios used in the calculation of the
CIP6/92 tariff, as per the equalization procedure required by IFRIC
4 and IAS 17. Lastly, it should be mentioned that on the 29
November 2013 the AEEG (the Italian Authority for the Energy and
Gas) published its Resolution 553/2013 in order to establish the
final value of the "Avoided Fuel Cost" component (CEC) for the year
2008, in accordance with the verdict of the decision of the
Advisory Council of State. The final value of the 2008 CEC is
higher than its previous determination, and it produces a
contribution of approx. EUR 3 ml to the results calculated
according to Italian GAAP. According to the above, the Italian GAAP
EBITDA in FY/13 stood at EUR 184.8 ml, up 4% versus FY/12,
notwithstanding the lower sales of steam and hydrogen (down approx.
EUR 8 ml), and a slight decrease of the CIP6/92 power tariff (11.9
EURcent/kWh, -3%).
th
11
IFRS EBITDA (which is coincident with the comparable EBITDA) was
EUR 182.4 ml in FY/13, down 20% versus FY/12, mainly because of the
previously discussed application of the new CIP6/92 tariff,
calculated according the Decree Law 69/2013, and also because of
the lower sales of hydrogen and steam. CAPEX in FY/13 was EUR 16.9
ml, coherently with the ordinary scheduled maintenance activities,
which were carried out during the year.
Comments to Fourth Quarter 2013 results
From the operational point of view, the IGCC performance in Q4/13
was good, with a power production standing at 1.111 TWh, 14% higher
than in Q4/12, mainly because of the different maintenance
activities carried out in the periods. Indeed, in Q4/13 it came to
completion the standard review of one train of "Gasifier combined
cycle Turbine", which began towards the end of the third quarter.
On the other hand, in Q4/12 maintenance was carried out on one
train of "Gasifier combined cycle Turbine", and also on one of
the two "H2S Absorber" units. Italian GAAP EBITDA was EUR 59.8 ml
in Q4/13, up from EUR 43.7 ml in Q4/12, primarily because of the
higher production of electricity, which more than compensated the
modest decrease of the CIP6/92 tariff (11.9 EURcent/kWh, down 5%
versus Q4/12), and the higher sales of steam and hydrogen (up
approx. EUR 2 ml). Finally, as commented in the results for the
full year 2013, the Q4/13 EBITDA includes also EUR 3 ml, due to the
determination of the final price for the CEC in 2008. IFRS EBITDA
(which is coincident with the comparable EBITDA) was EUR 61.2 ml in
Q4/13, up 10% versus Q4/12, because new "forward" curves for gas
and oil prices (published by a leading independent consultant in
the December 2013 update) were used in the calculation of the
CIP6/92 tariff. Moreover, the results include also the revenues
from the higher sales of hydrogen and steam which, as it is well
known, are not subject to the IFRS equalisation procedure. CAPEX in
Q4/13 was EUR 4.1 ml.
12
Wind
Saras Group is active in the renewable power production and sale
through its subsidiary Sardeolica Srl, which operates a wind park
located in Ulassai (Sardinia). Below are the financial and
operational highlights of the segment.
EUR million EB ITDA Com parabl e EBITDA EB IT Com parabl e EBIT
Q4/ 13 5.1 5.1 4.1 4.1
Q4/ 12 7.6 7.6 5.0 5.0
Change % -33% -33% -18% -18%
Q3/ 13 1. 8 1. 8 0. 6 0. 6
FY 2013 FY 2012 Change % 22. 7 22. 7 18. 3 18. 3 20. 0 20. 0 9. 6
9. 6 14% 14% 91% 91%
Other figures
Q4/13 ELE CTRI CI TY PRODUCTION POWER TARIFF GREE N
CERTIFICATES
MWh
EURc ent/KWh EURc ent/KWh
Q4/ 12 59,302 5.6 9.5
Change % -32% 0% -8%
Q3/ 13 23,220 5. 8 7. 9
FY 2013 FY 2012 Change % 197, 042 5. 7 8. 9 171, 050 7. 1 8. 0 15%
-20% 12%
40, 212 5.6 8.7
Comments to preliminary Full Year 2013 Group results
In FY/13, the IFRS EBITDA of the Wind segment (which is equal to
the comparable EBITDA) stood at EUR 22.7 ml, up 14% versus FY/12,
thanks to favourable weather conditions, especially during the
first half of the year, which pushed the production of electricity
up to 197,042 MWh (+15% versus FY/12). Moreover, the decrease in
the value of the power tariff (-20%, with an yearly average of 5.7
EURcent/kWh) was partially compensated by the increase of revenues
coming from the sale of Green Certificates (8.9 EURcent/kWh, up 12%
versus FY/12).
Comments to Fourth Quarter 2013 results
In Q4/13 the Wind segment results were lower than in the same
period of last year, because wind conditions in Ulassai were not as
good, and the production of electricity reached 40,212 MWh, down
32% versus the fourth quarter of 2012. IFRS EBITDA (which is equal
to the comparable EBITDA) stood at EUR 5.1 ml, down by 33% versus
EUR 7.6 ml in Q4/12, mainly because of the lower production of
electricity. Also the Green Certificates (8.7 EURcent/kWh) gave a
lower contribution to the results (-8% vs. Q4/12) while the power
tariff (5.6 EURcent/kWh) was substantially aligned with the same
period of last year.
Other Activities
The following table shows the financial highlights of the
subsidiaries Sartec SpA, Reasar SA, and others.
EUR Million E BITDA Com parable EBITDA E BIT Com parable EBIT Q4/
13 2. 5 2. 5 2. 3 2.3 Q4/ 12 0. 1 0. 1 (0. 1) (0. 1) Change % 2400%
2400% 2400% 2400% Q3/ 13 0. 0 0. 0 0. 0 0. 0 FY 2013 4. 2 4. 2 3. 9
3. 9 FY 2012 Change % 2. 2 2. 2 1. 9 1. 9 91% 91% 105% 105%
13
CAPEX by Business Segment
EUR Million REFINING POWE R GENERATION MARKETING WIND OTHE R
To ta l
FY 2013 87.1 16.9 3.7 0.2 1.7 109.6
FY 2012 97.0 8.7 8.2 3.8 1.6 119.3
Between the end of the second quarter and the beginning of the
third quarter of 2013, the revamping project of the
MildHydroCracking2 Unit (MHC2) was completed. This project,
dedicated to growth and technological improvement of the Sarroch
industrial site, will deliver benefits which, when fully
operational, can be quantified in approx. 600 ktons/year of
additional diesel production (instead of heating gasoil), and it
will also increase refinery runs of approx. 650 ktons/year.
Strategy and Outlook
The outlook of the European refining industry shall remain
difficult in 2014, according to the forecasts of many prominent
institutions specializing in the sector, but a recovery from 2013
lows should still materialize, thanks to a gradual pick up of the
economic cycle. Moreover, there are expectations for the resolution
of a few specific geopolitical factors which are relevant to the
Saras Group. In particular, the progressive restart of the Libyan
production and export of crude oil is considered highly possible
during 2014, and there could be also the conditions for the lifting
of the sanctions against Iran. In such context, Saras' industrial
strategy with regards to the Refining and the Power Generation
segments will remain prudent and based on the improvement of the
production efficiency, cost optimization, and tight control of the
financial position. In particular, the main areas of attention will
be the following: · Full utilization of the refinery's conversion
capacity, in order to take advantage of the recovery in the
refining margin, the renewed availability of paraffinic crude oils;
· Implementation of the improvement programmes, aimed at increasing
operational performance, energy efficiency and cost control, which
stem out of "Project FOCUS", ongoing since 2011; · Limited CAPEX,
directed mainly on "HSE" and "maintain capacity" initiatives; ·
Careful management of the working capital and the oil inventories,
in order to achieve a tight control on the net debt. Regarding the
development of a commercial Joint Venture between Saras and
Rosneft, the recent announcement of Rosneft's intention to purchase
Morgan Stanley's oil commodity trading business, further reinforces
the programmes to enhance commercial activities, adding new
dimensions and opportunities. Therefore, at this stage both
companies intend to confirm their commitment to develop joint
commercial activities, and they will pursue this objective
consistently with the acquisition by Rosneft of Morgan Stanley's
oil trading business. Finally, with regards to the other segments,
the Group strategy will strive to consolidate the current
positions, and possibly there will be some rationalisation of some
"non-core" activities, which are not strategically integrated.
Main events after the end of the FY 2013
Respectively on the 4 February 2014 and 5 February 2014, the Board
of Directors of Saras SpA and the th Shareholders Meeting of Arcola
Petrolifera Srl, by resolution filed with the Companies Register of
Cagliari on the 12 February 2014, approved the Merger by
incorporation of Arcola Petrolifera Srl in Saras SpA, following the
notices given th th on 14 November 2013 and 11 December 2013. The
Merger aims to rationalise the Saras Group's structure, placing the
business carried out by the subsidiary in the Italian market,
within Saras SpA as a division of the latter.
th th
14
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