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GEK TERNA SOCIETE ANONYME
HOLDINGS REAL ESTATE CONSTRUCTIONS
85 Mesogeion Ave., 115 26 Athens, Greece
General Commercial Registry No. 253001000
(former S.A. Reg. No. 6044/06/ Β /86/142)
ANNUAL FINANCIAL REPORT
for the period
1 January to 31 December 2022
In accordance with article 4 of L. 3556/2007 and the relevant executive Decisions
by the Board of Directors of the Hellenic Capital Market Commission
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CONTENTS
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I. STATEMENTS BY MEMBERS OF THE BOARD OF DIRECTORS
(according to article 4 par. 2 of L. 3556/2007)
We
1. George Peristeris, Chairman of the Board of Directors and Chief Executive Officer, Executive Member of the Board of Directors
2. Apostolos Tamvakakis, Vice Chairman, non-Executive Member of the Board of Directors
3. Penelope Lazaridou, Executive Director, Executive Member of the Board of Directors
STATE THAT
To the best of our knowledge:
a. The attached separate and consolidated Financial Statements of GEK TERNA SOCIETE ANONYME HOLDINGS REAL ESTATE CONSTRUCTIONS for the period from January 1 st 2022 to December 31 st 2022, prepared in accordance with the effective accounting standards reflect in true manner the Assets and Liabilities, the Shareholders’ Equity and the Total Comprehensive Income of the Company, as well as of the companies included in the consolidation in aggregate, and
b. The Board of Directors’ Report presents in true manner the developments, the performance and the position of the Company, as well as of the companies included in the consolidation in aggregate, including the description of main risks and uncertainties they are facing.
Athens, 26th April 2023
Chairman of the BoD and
Chief Executive Officer
Georgios Peristeris
Vice Chairman of the BoD, Executive Director,
non-Executive Member Executive Member of the BoD
Apostolos Tamvakakis Penelope Lazaridou
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GEK TERNA GROUP
Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
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II. ANNUAL MANAGEMENT REPORT OF THE BOARD OF DIRECTORS FOR THE FINANCIAL YEAR 2022 ON THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
Dear Shareholders,
Pursuant to the provisions of Law 4548/2018 as well as Law 3556/2007 article 4 paragraph 2c, 6, 7 and 8 of the decisions issued thereon 8/754/14.04.2016 of the Board of Directors of the Hellenic Capital Market Commission and the Company’s Articles of Association, we are hereby submitting to you the Annual Report of the Board of Directors for the closing year from 01.01. 2022 to 31.12. 2022.
This report contains financial and non‐financial information regarding GEK TERNA Group, for the financial year 2022 and describes the most significant events that took place during as well as after the reporting period of the financial statements. Moreover, the report outlines the key risks and uncertainties the Group may face in 2023 and records significant transactions between the Company and its related parties.
Α. Financial Developments and Performance for the Year 2022
Despite the prolonged war in Ukraine as well as the substantially surging energy costs, according to ELSTAT's provisional data, the Greek economy following the high GDP growth of 2021 (8.4%) expanded by 5.9%, in 2022 with total GDP accounting for 192 bn euros versus 181 bn euros in 2021, confirming the economy’s ability to further grow.
A significant contribution towards the achievement of the 5.9% annual growth rate came from the absorption of funds amounting to 11.4 bn euros (approximately 6.4% of GDP) in the context of the Recovery and Resilience Mechanism. Those funds were injected into the Greek economy from 2021 until the end of 2022. Other contribution factors included the Greek State’s investment program which reached 11.0 bn euros, foreign direct investments of 6.24 bn euros, as well as the great increase in tourism and shipping revenues as well as the increase in private consumption. It should be noted that at the end of the year 2022, corporate and household deposits exceeded 188 bn euros, i.e. the highest level since 2021, creating significantly improved liquidity conditions in the domestic market and economy.
On the contrary, the rising inflation created unfavorable conditions in the market due to the upward trend in prices of energy products and food items. According to ELSTAT's latest data for the entire period of 2022, the annual increase in Consumer Price Index stood at 9.6%, despite the deceleration seen in the last quarter of the year due to the declining energy prices.
From a fiscal perspective, according to the latest available figures, the Greek economy has achieved better performance in relation to the existing targets. The primary deficit according to the estimates of the Minister of Finance was expected to be zero for 2022 against the target of 1.6% of GDP. The above was made feasible due to the increased tax revenues and the higher growth realized in the economy, and despite the household support measures taken by the authorities to offset the impact from inflationary pressures. At the same time a primary surplus of 0.7% is estimated for 2023. It should
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
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be noted that according to data from the Ministry of Finance, the Greek government supported households and businesses against the energy crisis with 10.7 bn euros in 2022.
The yield to maturity of the Greek 10-year government bond followed the broader economic developments and evolved in line with the respective course of interest rates in the rest of the Eurozone countries, surpassing the levels of 4%. In total, during the year 2022 the Greek government borrowed from the international markets 8.3 bn euros via bond issues, while the country's credit rating was improved by one notch by all 3 major rating agencies (Standard and Poor's, DBRS, Rating and Investment). At the beginning of 2023, Greece was only one notch below the investment grade level according to Scope, DBRS, Standard and Poor's, Rating and Investment and Fitch, and three notches below according to Moody's.
In this international uncertain and ever changing environment where due to the high inflation it is anticipated that restrictive monetary measures will continue to be taken leading the economies to deceleration in terms of GDP growth, the Greek economy having as driving factors: a) the contribution of the Recovery and Resilience Fund (RRF) targeting an amount of 30 bn euros until 2026 as well as the financial support from the EU budget for the period 2021-2027 for an amount up to 40 bn euros, and b) the expected credit rating upgrade of the Greek economy by the international rating agencies, anticipates higher investments which can mitigate the repercussions of contraction of the global economy. The above will allow the Greek economy to maximize its growth potential and achieve further improvement. According to the estimates of Bank of Greece, GDP growth is expected to rise from 2.2% in 2023 to almost 3% in years 2024 and 2025.
In the medium term horizon, the outlook for the Greek economy remains positive due to the important projects being implemented. A main determinant factor has been the increased investments for: a) the production of clean electricity through RES, b) the increase of energy storage capacity, c) the construction or improvement of infrastructure and d) the development of upgraded tourist accommodation, so that Greece takes further boost from its obvious comparative advantages over other countries (such as geographical location, climatic conditions, and high employee education level).
In this changing economic and geopolitical environment, GEK TERNA Group, which is one of the most important Greek corporate groups and holds a leading position in the fields of infrastructure and construction, clean energy, electricity generation and trading, as well as concessions, implements and seamlessly expands its investment plan with regard to “green development” mainly in the fields of Renewable Energy Sources, Concessions and Infrastructure, as its capital structure remains healthy and strong. At the same time the Group continues to have a selective presence in countries outside Greece.
The main consolidated financial results from continuing operations of the year 2022 based on the International Financial Reporting Standards compared to the corresponding period of 2021, are as follows:
Revenues from third parties from continuing operations amounted to 3,938.3 mn euros, compared 1,144.2 mn euros in 2021 posting an increase of 2,794.1 mn euros attributed to: a) the increase in sales of the Energy Sector which comes mainly from full consolidation of the companies HERON ENERGY S.M.S.A. (full consolidation as subsidiary as of 14.02.2022 with percentage 100%) and HERON ΙΙ VOIOTIAS S.A. (full consolidation as subsidiary from 11.10.2021 with percentage 100%), which in the
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
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previous corresponding period on the one hand, HERON ENERGY S.M.S.A. was consolidated as jointly managed entity according to the Equity method and with a smaller participation rate of 50%, and on the other hand HERON II VOIOTIA S.A. was consolidated for the period 01.01.2021 to 10.10.2021 via the Equity method and with a participation rate of 25%, b) the increase in revenues of the Construction Sector and c) the increase in revenues from the Concessions Operating Segment. The analysis of each operating segment’s performance is discussed below.
The Adjusted EBITDA (EBITDA from continuing operations plus non-cash results included therein) amounted to 661.8 mn euros in 2022 against 323.5 mn euros in the corresponding period of 2021, posting an increase by 338.3 mn euros, which is mainly due to: a) the full incorporation of the increased operating profitability of the Energy Segment, in the current fiscal year due to the full consolidation of the companies HERON ENERGY S.M.S.A. (i.e. from 14.02.2022 with 100% share) and HERON II VOIOTIAS S.A. (i.e. from 01.01. 2022 with a 100% share) which in the previous corresponding period, on the one hand the first company was consolidated as joint operation with the Equity Method and with a 50% share and on the other hand the second company was consolidated for the period 01.01.2021 to 10.10.2021 with the Equity Method and with a 25% share, b) to the increased operating profitability of the Construction Segment and c) to the increased operating profitability of the Concessions Segment.
Operating Results before interest and taxes (EBIT) from continuing operations amounted to 415.8 mn euros compared to 192.5 mn euros in the corresponding period of 2021 and these results are significantly improved for the reasons set out above.
Earnings before taxes from continuing operations stood at 243.3 mn euros compared to 145.6 mn euros in the corresponding period of 2021, and these results are also significantly increased for the aforementioned reasons. It is noted that the results of the current period include events that have the characterization of non-operating result: a) gain of 21.7 mn euros, which was recognized as a result of the acquisition of control of HERON ENERGY S.M.S.A. versus 60.9 mn euros in the corresponding period of 2021, and b) loss of 76.3 mn euros compared to 11.9 mn euros in the corresponding period of 2021, mainly from the decrease in the fair value of the embedded derivative, which has been recognized in the context of the subsidiary company's operations CENTRAL GREECE MOTORWAY CONCESSION S.A.
The valuations of interest rate swap derivative contracts and the embedded derivative, which are recognized in accordance with the provisions of IFRS in each reference period, arise taking into account, among other things, the corresponding changes in Euribor and the yield of the country's borrowing bonds. According to the structure and correlation of the above contracts for their entire duration, the changes in said valuations will not have any substantial impact on the Operating results, Cash Flows and Equity of the Group respectively.
Earnings after taxes from continuing operations amounted to 177.3 mn euros compared to 130.2 mn euros in the respective period of 2021 (non-including the losses from the discontinued operations of 94.4 mn euros) of which these that are attributed to the shareholders of the Parent company stood at 136.5 mn euros for the year 2022 compared to 85.1 mn euros in the respective period of 2021.
Earnings after taxes from continuing operations without the effect of the above non-operating items, amounted to 215.1 mn euros for the year 2022 compared to 78.7 mn euros in the respective period
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
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of 2021, of which 174.4 mn euros are the ‘’adjusted’’ earnings attributed to the shareholders of the Parent company, compared to 33.1 mn euros in the respective period of 2021.
Total Earnings attributed to the Shareholders of the Parent company amounted to 273.5 mn euros in 2022, compared to 132.6 mn euros in the respective period in 2021.
The Net Debt of the Group stood on 31.12. 2022 at 1,501.6 mn euros, compared to 1,231.7 mn euros on 31.12. 2021 posting an increase by 269.9 mn euros.
Investment expenditures for the year 2022 settled at 338.4 mn euros, compared to mn euros in the respective period of 2021. It is noted that almost the entire amount has been spent on the operating segment of Renewable Energy Sources and also on the segment of Electricity Production from Thermal Sources and Energy Trading as well as on the Real Estate segment.
The Total Assets of the Group on 31.12. 2022 stood at 5,978 mn euros, compared to 4,812 mn euros on 31.12. 2021.
In the section “B Significant events for the period 01.01 31.12.2022” there are presented in detail the significant events of the period, as well as the key financial performance of the operating segments.
B. Significant Events for the Financial Year 2022
During the financial year of 2022 the following significant events took place:
On 12.01.2022 the subsidiary company TERNA S.A. signed a contract with OURANIA INVESTMENT S.A. for the project "Demolition of a Building (gas station), Metal Roofs and Demolition of Asphalt/Construction of a New Complex of Office Buildings with 2 basements at 64, October 26 Street and Frixou Street in Thessaloniki" of an indicative contractual amount of 27.6 mn euros with a planned duration of up to 30.06.2023.
On 20.01.2021 completed as part of the implementation of the corporate, the transfer to GEK TERNA KASTELI S.M.S.A. of the interests held by TERNA S.A. in the company under the name INTERNATIONAL AIRPORT HERAKLION CRETE CONCESSION S.A.
On 26.01.2022 the subsidiary company TERNA S.A. signed the contract for the construction of the 6th Electricity Generation Unit at the Vasilikos Power Plant, with the Cyprus Electricity Authority (CEA).
The project, with a total budget of 149.8 mn euros, includes the design, supply, installation, inspection, and initial operation of the unit.
The unit, with a total maximum capacity of 160 MW will consist of two gas turbines, two heat recovery boilers and a steam turbine and will run on natural gas as the main fuel, while it will be able to operate on diesel as an alternative fuel.
Based on the project completion schedule, the new production unit is expected to be in commercial operation before the summer season of 2024.
The new, modern, and efficient generation unit will add to Cyprus Electricity Authority’s (CEA) existing total generation capacity from conventional stations and will contribute to the adequacy of electricity and towards securing the required reserves of the country.
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
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On 31.01.2022, the amendment of the Public-Private Partnership (PPP) Agreement for the Integrated Waste Management of the Peloponnese Region was signed, between the Peloponnese Region and the company ENVIRONMENTAL PELOPONNESE , member of TERNA ENERGY Group. The amendment makes feasible the initiation of the Transitional Management in the project units that have already been completed (Transitional Management Unit in Paleochouni Arcadia and Transfer Station in Nea Kios, Argolida). On 14.02.2022, the Transitional Waste Management in the Peloponnese Region commenced, which will serve Arcadia, Corinth and Argolida.
On 11.02.2022 PIRAEUS TOWER S.A. and TERNA S.A. signed the contract for the 2nd Phase of the Construction and electromechanical works for the completion of communal installations, basements, roofs, and premises of Piraeus Tower.
This agreement is an extension of the existing contract from 06.08.2021 (A’ Phase) with TERNA S.A., along with a budget of 15.4 mn euros and provides for an additional construction project with a respective budget of 26.1 mn euros and delivery on 30.06.2023. The total budget of the project (A’ and B’ Phase) amounts to 41.6 mn euros approximately.
Piraeus Tower with 22 floors and a height of 88m will be the first digital and bioclimatic skyscraper in Greece to receive the highest Platinum certification, according to the international sustainable development standard LEED (Leadership in Energy and Environmental Design). The project is intended for the use of offices, commercial stores, and catering facilities in a total built-up area of 34,623.74 square meters.
On 14.02.2022, in implementation of the agreement from 12.07.2021 for the acquisition of 75% and 50% of the shares of the companies HERON II VOIOTIAS S.A. and HERON ENERGY S.M.S.A. respectively, GEK TERNA acquired the additional 50% of shares of HERON ENERGY S.M.S.A. After this acquisition, the total percentage of the Group amounted to 100% in the respective companies (the acquisition of 75% in HERON VOIOTIAS S.A. had been completed as of 11.10.2021) which operate two electricity production plants with a total capacity of 588MW fueled by natural gas.
On 15.03.2022 the Joint Venture APION KLEOS, in which TERNA participates with 28.7%, signed with the Concession company OLYMPIA ODOS S.A. the amendment of the Construction and Study Contract (CSC) of the project "Elefsina-Corinth-Patra-Pyrgos-Tsakona" for the re-inclusion of Patras-Pyrgos Road section in the project of Olympia Odos, with a contractual price of 295 mn euros. On 29.03.2022, the subsidiary TERNA S.A. signed a contract with APION KLEOS Joint Venture for part of the construction of Patras - Pyrgos motorway, from the km spot 54+530 until 74+500, I/S Gastounis to I/S Pyrgos. The contract amount was set at 78.6 mn euros and contract duration was agreed at 36 months.
On 31.03.2022 the Joint Venture TERNA - THEMELI, in which TERNA S.A. participates with 50%, signed with ATTICA METRO a contract for the execution of the project "Extension of a Tram depot to Elliniko", a contractual amount of 10.3 mn euros.
On 06.04.2022 the members of Companies Association MGE HELLINIKON BV MGGR LLC GEK TERNA S.A. with the distinctive title ATHENS IRC, launched the company CASINO CORPORATION BROAD SPECTRUM OF ELLINIKO S.A. and with distinctive title EKAZ HELLINIKON S.A., with initial share capital of 1 mn euros.
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
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On 14.04.2022, the sub-Group TERNA ENERGY proceeded with the acquisition of the entire share capital of the companies KEY ILIAKI ENERGEIAKI P.C. and KASTRAKI ILIAKI ENERGEIAKI P.C. These companies develop Photovoltaic Stations in the wider area of the Regional Unit of Thessaly. Specifically, among the acquired companies, KEY ILIAKI ENERGEIAKI P.C. is in the licensing phase and is developing a Photovoltaic Station with a capacity of 50 MW, while KASTRAKI ILIAKI ENERGEIAKI P.C. is in the licensing phase and developing four Photovoltaic Stations with a total capacity of 172.3 MW. On the same day, a preliminary purchase agreement was signed for all the shares which are to be licensed for a 50 MW Photovoltaic Plant in the Regional Unit of Arta. Furthermore, the Company proceeded to the signing of a pre-purchase agreement of 70% of shares of a company that is developing a cluster of eight wind farms with a total capacity of 230.7 MW in the region of Aitoloakarnania.
On 19.04.2022, TERNA ENERGY sub-Group proceeded to sign an agreement for the potential future acquisition of a company in Bulgaria which is expected to be licensed for the construction and operation of a Photovoltaic Park with approximately 140 MW capacity. The transfer process is expected to be completed by the end of 2023.
On 29.04.2022 the subsidiary TERNA S.A. signed a contract with PPC for the lease of an air turbine unit (with a right to purchase at the end), for the needs of covering additional power in Kos - Kalymnos for a period of 27 months, with a contract value of 39.1 mn euros.
On 09.05.2022, the Companies Association INTERNATIONAL PORT INVESTMENTS KAVALA in which GEK TERNA S.A. participates with a percentage of 35%, was declared as a Preferred Investor for the assumption of the right to use, operate, maintain, and exploit a multi-purpose station in a part of the Philip II port, of Kavala Port Organization S.A. Following the finalization of the contractual documents, which is in progress, it is estimated that the above association will sign, within the second quarter of 2023, the sub-concession agreement with Kavala Port Authority (KPA S.A.) for a period of 40 years. The one-time sub-concession fee amounts to 1.8 mn euros, while on an annual basis the sub-concessionaire will pay the Greek State a mixture of fixed and variable remuneration.
On 25.05.2022, the Companies Association GEK TERNA S.A. - AKTOR CONCESSIONS S.A. - INTRAKAT in which GEK TERNA participates with a percentage of 55%, was declared as the Temporary Contractor for the project "Northern Road Axis of Crete (NRAC): Study, Construction, Financing, Operation and Maintenance of the Part Hersonissos - Neapoli, with PPP" . It is estimated that the above contract will be signed within the second quarter of 2023 for a period of 30 years, against availability payments for a total amount of 188.65 mn euros in net present value, which will be paid on an annual basis after the end of the work period (4 years).
On 27.05.2022, GEK TERNA, pursuant to Regulation (EU) 596/2014 of the European Parliament, informed the investor community that the Board of Directors of the Company decided the initiation as 30.05.2022 of a plan to purchase the Company’s bonds that were issued pursuant to the Common Bond Loan Scheme from 01.12.2021 and the Common Bond Loan Scheme from 19.06.2020, and which are traded in the Fixed Income Securities category of the Regulated Market of the Athens Exchange. Bonds were traded with a minimum purchase price of 80% and maximum purchase price of 105% of nominal value. The purchases of treasury bonds will be conducted for the period from 30.05.2022 until 30.11.2022. The bonds in custody, cumulatively for both bond
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
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loans, will not exceed in value at any time the nominal value of one thousand (1,000) bonds of the above issues.
On 08.06.2022, the Concession Agreement was signed between the GREEK STATE as Concessionaire and the company EKAZ HELLINIKON S.A. (EKAZ) as the Concessioner, regarding the granting to EKAZ of the operating license for a Casino Corporation of wide spectrum activities in the Metropolitan Area of Elliniko - Agios Kosmas which was ratified by law by the Hellenic Parliament (Law 4949/2002 G.G. A' 126/30.06.2022). The duration of the concession is 30 years.
On 16.06.2022, the Minister of Finance issued the Ministerial Decision provided for by Law 4512/2018, pursuant to which EKAZ that includes the development of: (a) a five (5) star hotel, (b) a conference and exhibition center, (c) an audience gathering area for sporting or cultural events and (d) casino area. The amount of the relevant private investment is expected to exceed 1bn euros, while the construction works of the project, which will be undertaken by GEK TERNA's 100% subsidiary, TERNA S.A., are expected to start in the second semester of 2023 and last approximately 3 years, therefore bringing the start of operation of the entire complex into the year 2026.
On 17.06.2022 the companies GEK TERNA S.A. and TERNA ENERGY I.C.S.A. informed the investor community that, as it has been reported by the Management of both companies in the context of the official developments that are being publicly announced (e.g. analyst days on the annual financial results of 2021, TERNA ENERGY Investor Day), TERNA ENERGY has attracted this year, as in previous periods, the interest of major international investors. This interest is being evaluated, without currently having any development to announce. As part of the two companies' standard policy, the investor community will be informed in time for any new development. On 29.06.2022 and following the relevant question as of 28.06.2022 of the Hellenic Capital Market Commission, regarding the existence of a decision for the sale of a specific exempted asset and the use of the net proceeds that could arise from this sale, GEK TERNA SOCIETE ANONYME HOLDINGS REAL ESTATE CONSTRUCTIONS (the "Company") informed the investor community of the following:
"The Company on a permanent basis seeks the optimal management of its assets with the main criterion being the maximization of the value of the Company. During the previous period, the Company has received interest from investors for its assets (including its subsidiaries), without having taken a decision to enter into any relevant transaction. Among the other issues the Company examines before making a relevant decision is whether the liquidity that would result from such a disposal would serve the identification and capturing of new investment opportunities."
On 23.06.2022, GEK TERNA and the HARD ROCK Group announced their cooperation for the construction and operation of an integrated tourist complex of high standards, which includes, among other things, a 5-star hotel, an exhibition and conference center, an entertainment area, catering facilities, retail stores and a casino. The agreement concerns the entrance of the HARD ROCK Group into EKAZ HELLINIKON with a percentage of 51% through the acquisition from GEK TERNA of the entire share capital of the company MGE HELLINIKON B.V. (shareholder of EKAZ), after receiving the necessary approvals from the Gaming Supervision and Control Committee.
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
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On 28.06.2022, the Ordinary General Meeting of Shareholders of GEK TERNA was held, in which 129 Shareholders holding 54,125,371 shares and voting rights, i.e. 55.63% of the Share Capital, were legally present.
On the same day, GEK TERNA informed the Investor Community about the decision of the Ordinary General Meeting of Shareholders to increase the share capital of the Company by the amount of 12,410,794.92 euros with the capitalization of part of the special reserve of share premium via an increase in the nominal value per share from 0.57 euros to 0.69 euros and a simultaneous reduction of the share capital by the amount of 12,410,794.92 euros with a corresponding reduction in the nominal value of each share from 0.69 euros to 0.57 euros and a capital return of 0.12 euros per share to the Shareholders.
On 30.06.2022 the repeated Meeting of bondholders of the Company's common bond loans amounting to 500 mn euros (CBL 2020) and to 120 mn euros (CBL 2018) provided the consent of the Bondholders for the use of net proceeds from the sale of an Excluded Asset in accordance with the uses provided for in items (i) (vi) of condition 8.1 (n) of the CBL 2020 and CBL 2018 Scheme, without time limitation, by way of derogation from conditions 8.1 (o) and 14.1 (b) of the CBL 2020 and CBL 2018 Scheme, as long as the sale (i.e. the obligational agreement for the transfer of the Excluded Asset) takes place within 24 months from the decision of the Bondholder Meeting. The Bondholders also acknowledged the non-exercise of the rights of clause 11.2 (b) of the CBL 2020 and CBL 2018 Scheme regarding the above deviation and there was the Bondholders' waiver of any relevant right.
On 01.07.2022 the company GEK TERNA S.A. informed the Investor Community that in order to implement the stock option plan approved by a decision of the Extraordinary General Meeting of shareholders of GEK TERNA S.A. on 9 December 2019 and following the achievement of a set of performance measurement indicators related to the financial figures of the Group's operating segments, such as the construction sector, renewable energy sources, concessions, the Company decided to allocate to seventeen (17) Corporate Executives a total of 528,034 treasury shares, for the exercise of stock options, which represented 0.5106% of the paid-up share capital, against a total price of 1,056,068.00 euros. It is noted that, according to the terms of the stock option plan, the beneficiaries were required to hold the shares for two (2) years.
The options were exercised through an over-the-counter transaction on 01.07.2022.
Total number of treasury shares held directly and indirectly after the transaction of 01.07.2022 settled at 7,440,283, i.e. 7.1940%.
Following the above transaction, the shares directly and indirectly held by the Company are as follows.
The number of treasury shares, directly held, after the transaction of 01.07.2022 amounts to 5,632,638, i.e. a percentage of 5.4462%.
The number of treasury shares held by the subsidiary TERNA S.A. after the transaction amounts to 1,190,810, i.e. 1.1514% of the share capital.
The number of treasury shares held by the subsidiary company ILIOHORA S.A. after the transaction amounts to 616,835, i.e. 0.5964% of the share capital.
On 01.07.2022 the subsidiary TERNA S.A. signed a contract with DESFA S.A. for the construction of the "Detailed Engineering Procurement and Construction of Booster Compressor for TAP in Nea
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
15
Messimvria" project, which concerns the construction of a Compressor Station in Nea Messimvria, which will supply the Trans Adriatic pipeline. The project’s budget settled at 38.9 mn euros.
On 06.07.2022 the Joint Venture TERNA S.A. - MYTILINEOS S.A. in which TERNA S.A. participates with 50%, signed a contract with ERGOSE S.A., for the execution of the project "Construction of Electric Drive System and Anti-noise Sound Curtains in Kiato - Rododafni Section". The project’s budget settled at 55.4 mn euros.
On 25.07.2022, the subsidiary HERON II THERMOELECTRIC STATION VOIOTIA S.A. assigned TERNA S.A. the project "Restructuring of the Emergency Department for installation of a New CT Scanner and for Small-Scale Works in the area of the existing CT Scanner", in the general hospital EVANGELISMOS POLYCLINIC. The company allocated an amount of 150,000 euros in the form of a donation.
Within July, TERNA ENERGY sub-Group acquired the entire share capital of the company TEKAL AIOLIKI G.P. which is developing a 21.5 MW wind farm in the Pieria Regional Unit.
Within July, the Group allocated an amount of approximately 27.4 mn euros for the acquisition of plots and agricultural land in various areas of the Peloponnese for further development and utilization.
Within July, the company under the name TERNA ENERGY PUMPING-STORAGE I S.M.S.A. was established, which is a special purpose vehicle for the construction and operation of pumped- storage projects in the Regional Unit of Aitoloakarnania.
On 04.08.2022 the subsidiary TERNA S.A. signed a contract with PPC RENEWABLES S.M.S.A. for the construction of the project "Study, Civil Engineering Works, Procurement, Transportation, Installation and Commissioning of Four (4) Photovoltaic Stations with a Total Nominal Power of 93.98122MW, within the Lignitic Center of Western Macedonia, at the Locations "Haravgi 1" (36.0004MW), "Haravgi 5" (24.993MW), "Pteleonas 1" (14.988 MW) and "Pteleonas 2" (18.00018MW) of the Municipalities of Eordaia and Kozani, of the Region of Western Macedonia and Expansion Works of the Existing Substation 33/150kV "Haravgi" with the Addition of Two (2) New Gates M/S 33/150KV" . The project’s budget settled at 62.3 mn euros.
On 25.08.2022, the subsidiary TERNA S.A. signed a contract with DESFA S.A. for the construction of the project "Networks of Samos, Chios and Lesvos Areas", with a budget of 32.7 mn euros.
At the end of August 2022, the payment of the first instalment was made, amounting to 100 mn euros, with regard to the investment subsidy through the Public Investment Scheme for the project "Sub-project 1 Pumping-Storage Station of Western Greece (Amfilochia), with a capacity of 680 MW" which has been included in the Recovery and Resilience Fund.
On 01.09.2022, GEK TERNA, following the decision of the Company’s Ordinary General Meeting of Shareholders as of 28.06.2022, and also following the registration as of 25.07.2022 with no. Prot. 2664931 in the General Commercial Register (G.E.MI.) of the decision of Ministry of Development and Investments - General Secretariat of Commerce, which approved the amendment of paragraph 1 of article 5 of the Company's Articles of Association, as a result of the increase and decrease of the share capital and the notification as of 12.08.2022 made to the Corporate Transactions Committee of Athens Exchange regarding the increase and subsequent
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
16
decrease of the nominal value of the company's shares, informed the investor community that the share capital of the Company amounts to a total of fifty-eight million nine hundred and fifty- one thousand two hundred and seventy-five euros and eighty-seven cents (58,951,275.87 euros) and is divided into one hundred and three million four hundred and twenty-three thousand two hundred and ninety-one (103,423,291) common voting registered shares with a nominal value of fifty-seven cents (0.57 euros) per share.
Following the above, from Tuesday, September 6, 2022 (cut-off date) the Company's shares were trading on the Athens Exchange with the new nominal value of 0.57 euros per share and without the right to participate in the capital return via a cash payment to the shareholders for an amount of 0.12 euros per share. The commencement date for the payment of the capital return was Tuesday, September 13, 2022 and it was carried out by the paying bank "BANK OF PIRAEUS S.A." which in turn paid the amount of the capital return.
On 09.09.2022, GEK TERNA announced the signing of a Real Estate Agreement between subsidiary company EKAZ and the company HELLINIKON S.M.S.A. (100% subsidiary of LAMDA DEVELOPMENT S.A.) according to which a piece of land in Elliniko was granted to the company EKAZ HELLINIKON, where the latter aimed to develop the Integrated Touristic Resort which will host a five (5) star hotel, a conference and exhibition center, an audience gathering place for sporting and/or cultural events and a casino. The duration of the Real Estate Agreement was set at 30 years and will take place in accordance with the provisions of the Concession Agreement.
On 26.09.2022, the subsidiary TERNA S.A. signed a contract with CHRISTOS KANELLAKIS S.A. for the construction of the project "Complex of Apartments in a Five-Storey Building with a Lower Open House and Two Basements, on 35-37 Posidonos Street and Bakoyanni Street in Glyfada" , with a budget of 15 mn euros.
With the under no. 53/3/20.10.2022 EEEP decision approved the indirect acquisition of control of EKAZ by the company SHRE/SHRI L.L.C. through the transfer from GEK TERNA S.A. of 100% of the shares of MGE HELLINIKON B.V.
On 04.11.2022 the subsidiary TERNA S.A. signed a contract with DESFA S.A. for the construction of the project "Detailed Engineering, Procurement and Construction for the Connection of "THERMOILEKTRIKI KOMOTINIS" Power Plant and the NNGTS at Komotini Industrial Area" , which concerns the Construction of a 1.5 km pipeline, two gas stations and a measuring station for the connection of TERNA - VIPE KOMOTINI power plant with DESFA. The project’s budget was set at 5.95 mn euros.
On 10.11.2022, the subsidiary TERNA S.A. signed a contract with the company ANTLISIOTAMIEFSI I M.A.E. for the construction of a project entitled "Amfilochia Pumped Storage Electric Energy Station" with a capacity of 680 MW. The project’s Phase A concerns Road Construction and Channel Works with a budget of 36.3 mn euros.
On 22.11.2022, the Joint Venture TERNA S.A. – MYTILINEOS S.A. in which TERNA S.A. participates with 50%, signed a contract with ERGOSE S.A., for the execution of the project "Construction of Railway Stations and Stops (buildings, docks, shelters and surrounding area), Infrastructure, Electrification, Signaling - Remote Control, ETCS, Telecommunications and E/M Installations of
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
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Panagopoula Tunnel for the route Kiato - Patras in Rododafni - Rio section" . The project’s budget was set at 129.5 mn euros.
On 28.12.2022, the Group and the National Technical University of Athens signed a contract providing for the Establishment and Financing of a Professional Interdepartmental Master's Degree Program entitled “Infrastructure and Construction Project Management” (PIMDP - ICPM). The Group undertook the full financing of PIMDP - ICPM by paying each year the amount of 80,000 euros for five academic years from 2023 to 2028. It is expected that up to thirty-five postgraduate students will participate each year.
On 30.12.2022, the subsidiary TERNA S.A. signed a contract with NOVAL PROPERTY S.A. for the project "Construction of a 3-storey office building with a solar glass wall space and 4 basements (Building B), extension of an existing building (Building A), shaping of the surrounding area and reconstruction of the facades of an existing building (Building A)" in the area of Marousi, Athens, Greece. The budget of the project was set at 25.6 mn euros.
Key Financial Performance of the Operating Segments for the Year 2022
The financial analysis of the operating segments mentioned below records the performance of these segments, before performing the intersegmental elimination, which are accounted for in accordance with the provisions of IFRS for the purposes of preparing the consolidated financial statements of GEK TERNA.
Construction Operating Segment
The Group, mainly through its fully owned by 100% subsidiary company TERNA, is one of the leading and dynamic Greek construction groups, specializing in complex and demanding infrastructure projects, along with international partnerships, with significant experience inside and outside Greece and with large synergies with the other business segments of the Group in concessions and energy. Revenues from construction activities increased significantly, while the backlog of construction works has been maintained at high levels, on 31.12.2022 reaching approximately 2.9 bn euros and at the same time the Group is expecting to sign contracts for new projects as qualified bidder amounting to 2.4 bn euros.
The Turnover of the Construction Operating Segment settled at 1,024.2 mn euros compared to 600.6 mn euros in the corresponding period of 2021 posting an increase of 70.5%. The growth in turnover was due to stronger construction activity in public infrastructure projects (E-65, etc.) and third-party private infrastructure projects, and also derived from the implementation of the Group's investment plan in wind farms, waste management units. Turnover growth was also due to the construction of the new state-of-the-art Combined Cycle Gas Turbine Station with natural gas as fuel with an installed gross capacity of 877 MW in Komotini, Greece, owned by the company KOMOTINI THERMOELECTRIC, where the Group participates with 50%.
The Adjusted EBITDA (EBITDA plus non-cash results included therein) amounted to 80.6 mn euros compared to 52.8 mn euros in the respective period of 2021 higher by 52.7%, due to the increase in construction revenue and the maintenance of the profit margin of ongoing projects at a satisfactory level.
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(Amounts in thousands Euro, unless otherwise stated)
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Operating Results before interest and taxes (EBIT) amounted to 62.8 mn euros compared to 42.4 mn euros in the respective period of 2021 significantly improved by 48.1% due to the aforementioned reasons.
Earnings before taxes in 2022 amounted to 66.4 mn euros compared to 39.7 mn euros in the corresponding period of 2021.
Earnings after taxes in 2022, stood at 47.9 mn euros compared to 28.5 mn euros in the respective period of 2021.
The revenues of the Construction segment towards third parties arise from the operations: a) in Greece and Cyprus at percentage of 95% and b) in Balkan countries at percentage of 5%.
The Net Debt of the Construction Operating Segment stood at minus -120.7 mn euros approximately, compared to minus -247.2 mn euros on 31.12.2021.
Energy Production Operating Segment from RES
GEK TERNA Group, operating in the energy segment through the sub-Group TERNA ENERGY I.C.S.A. since the mid - 1990s, is one of the leading players in the Renewable Energy Segment (RES).
The shift to Renewable Energy Sources (RES) is confirmed worldwide, with the sector being one of the top investment destinations for the coming years. In this context, TERNA ENERGY sub-Group continues the development of selected RES projects in Greece at a high pace, in order to lay the solid foundation for the company's sustainable development which is the long-term objective of its strategic planning for the next 10 years and at the same time, by capitalizing on its experience TERNA ENERGY is intensifying its efforts in order to further expand its presence in Poland and Bulgaria.
The energy needs of the country are covered mainly by imports (crude oil and natural gas) and to a lesser extent, by domestic production of solid fuels and renewable energy sources (RES).The dependence index on primary energy imports in Greece amounts to approximately 85% compared to a level of 60% in the European Union, indicating the country's high energy dependence. However, this dependence is partly offset by the country's diversified sources of energy supply as a result of its geographical location and the investments that have been made in related infrastructures.
Recently the Greek Government presented the draft of the new National Energy and Climate Plan (NECP) using the RePowerEU policy package as a reference. The new NECP aims at the following:
i) Reduction of greenhouse gas emissions by 55% in 2030 compared to the emissions level in 1990, and achievement of climate neutrality in 2050.
ii) Indicator for RES as percentage of gross final energy consumption in 2030 equal to 40% (or 45%), along with fulfilment of individual targets per consumption sector (electricity, heating-cooling and transport).
iii) Energy efficiency in 2030 equal to -13%, measured as a percentage change in the final energy consumption compared to the projection made for the year 2030 with the year 2020 being the Reference Scenario.
iv) Targets for mixing biofuels (advanced and with upper limit in conventional) and renewable gas of non-biological origin as a % in transport fuels.
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(Amounts in thousands Euro, unless otherwise stated)
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In the electricity sector, NECP aims to increase the installed RES capacity in the country to 25 GW by the year 2030, with RES covering approximately 80% of the demand for electricity and 45% of the total demand for energy.
TERNA ENERGY sub-Group possessed, as of 31.12.2022, 2,000 MW of power from RES electricity generation units, which are in operation, under construction or ready for construction in Greece, Central and Eastern Europe.
In particular, the total installed capacity of the sub-Group in Greece and abroad amounted to 905.3 MW at the end of 2022 increased by approximately 10 MW compared to the end of 2021, as the gradual trial operation of the Kafirea wind farms began. It is noted that the total power capacity of the project accounts for 330 MW and the initial operation of the entire project is expected to be completed within the year 2023. Upon completion, it will comprise the largest wind park in the country and is expected to contribute significantly to the profitability of the sub-Group. Also during the year 2022, the preliminary construction works of the project "Pumped Storage Station of Western Greece (Amfilochia), 680 MW" commenced. It is noted that in August 2022 the subsidiary company received the first tranche, amounting to 100 mn euros, of investment aid through the Public Investment Program, for the project "Sub-project 1 Pumping-Storage Station of Western Greece (Amfilochia), with a capacity of 680 MW" which has been included in the Recovery and Resilience Fund.
Furthermore, a portfolio of over 180 MW of photovoltaic parks in Greece are currently ready for construction.
It is noted that the sub-Group's portfolio includes additional projects of various technologies (on-shore and off-shore wind, photovoltaic, hydroelectric, pumped storage, storage, etc.) in various stages of maturity, while the broader portfolio is constantly developing with the addition of new projects and exceeds the level of 12 GW.
Specifically in the energy sector, the installed capacity settled as follows:
TOTAL
GREECE
POLAND
BULGARIA
WIND PARKS
876.4
744.4
102
30
HYDROELECTRIC
17.8
17.8
PHOTOVOLTAIC
8.5
8.5
BIOMASS
2.6
2.6
TOTAL
905.3
773.3
102
30
Revenues from continuing operations during the year 2022 in the segment of Electricity Production from Renewable Energy Sources, amounted to 236.2 mn euros compared to 224.4 mn euros in the respective period of 2021, recording an increase of 5.3%. The respective increase is attributed to the operation of new wind parks as well as to the improved wind conditions.
The Adjusted EBITDA (EBITDA from continuing operations plus non-cash results included therein) settled at 161.1 mn euros compared to 161.5 mn euros in the respective period of 2021 meaning that it remained almost unchanged between the two periods.
In accordance with the Article 37 ("Extraordinary levy on electricity producers") of Law 4936/2022 (Government Gazette 105'A 27.05.2022), an extraordinary levy was imposed on the
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
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revenues from the participation of RES electricity production units for the period from 01.10.2021 until 30.06.2022, calculated on the increase of the gross profit margin of each of the production units. According to the circular under protocol no. RAE O-98571 and the Joint Ministerial Decision under no. YPEN/DΙE/111281/4111/26.10.2022, the amount of the above levy for the Company was determined at 3,595,499.43 euros. This amount has been included in EBITDA calculation.
Finally, according to article 122 ("Temporary Mechanism for the Return of Part of DAM Day Ahead Market Revenues (Electricity)") of Law 4951/2022 (Government Gazette 129'A 04.07.2022) and the Decisions under no. YPEN/DIE/70248/2434/05.07.2022 and no. YPEN/DIE/115180/4229/04.11.2022, a maximum selling price of electricity was set out for the electricity production units that fall within the framework of operation of the Temporary Mechanism for the Return of Part of DAM Day Ahead Market Revenues (according to article 12A of Law 4425/2016) with implementation date as of 07.08.2022 (day of physical delivery). Through this legislation, part of revenues deriving from the sales of electricity production units in the Day Ahead Market was withheld, which for the period 07.08.2022 31.12.2022 amounted for the Company to 13,317,173.00 euros.
Operating Results before interest and taxes (EBIT) from continuing operations amounted to 71.7 mn euros compared to 118.6 mn euros in the corresponding period of 2021 posting a decline of 39.5% as a result of the expense recorded for the company’s stock options plan, i.e. distribution of bonus shares, amounting to 48.8 mn euros.
As at 31.12.2022, in accordance with the provisions of IFRS 2, the Company performed the valuation of the free share distribution plan, which resulted in the recognition of a cost of 48.8 million in the Statement of Comprehensive Income and the recording of an equal amount of a special reserve in Equity. The above accounting treatment of the free share distribution plan does not have any impact on the Company's Equity. Furthermore, for cash flow purposes, that valuation is a non-cash item. Finally, it is noted that the new shares that will result from the free share allocation plan represent approximately 1.3% of the shares already outstanding after the deduction of treasury shares held by the Company.
Earnings before taxes amounted to 34.1 mn euros compared to 90.1 mn euros in the corresponding period of 2021 , negatively affected by the expense recorded for the company’s stock options plan, i.e. distribution of bonus shares, amounting to 48.8 mn euros.
Earnings after taxes accounted for 18.0 mn euros in 67.8 mn euros in the corresponding period of 2021 , negatively affected by the above factor. It should be noted that the earnings in 2021 do not include the losses from discontinued activities in the USA, of approximately minus -94.0 mn euros.
The Net Debt in the segment of Electricity Production from Renewable Energy Sources settled at approximately 668.3 mn euros compared to 600.5 mn euros on 31.12.2021.
The investments of TERNA ENERGY sub-Group amounted to 244,5 mn euros in 2022.
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
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Operating Segment of Electric Energy Production from Thermal Energy Sources Electric Energy
Sales
GEK TERNA Group is active in the field of Electricity and Natural Gas Production, Distribution and Trading through the subsidiary companies HERON ENERGY S.M.S.A. and HERON II VOIOTIAS S.A.
The Group, in the context of its decision to increase investments in the area of Thermal Energy Sources and Electricity Trading, completed within the year 2022 the implementation of the agreement from 12.07.2021 for the acquisition of the additional equity stakes of 50% and 75% in the companies HERON ENERGY S.M.S.A. and HERON II VOIOTIAS S.A., which operate two power plants with a total capacity of 588 MW, fueled by natural gas. In particular, since 11.10.2021, the Company is the sole shareholder of 100% of HERON II VOIOTIAS S.A. and since 14.02.2022 it is also the sole shareholder of 100% of HERON ENERGY S.M.S.A. From the above dates these companies are being fully consolidated as subsidiaries according to the full consolidation method, while up to and before these dates the above companies were consolidated as jointly controlled entities and the consolidation of their financial accounts was carried out via the equity method.
In the Electric Energy Production segment, the Group managed to ensure the uninterrupted, competitive and flexible supply of its generation stations, successfully coping with the challenges arising from new market conditions. Those conditions included the unprecedented volatility of international natural gas prices, the extremely high liquidity needs to ensure supply, especially when importing liquefied natural gas, but also the constantly changing production costs of the generation stations, mainly in relation to the electricity clearing prices of the neighboring countries. As direct consequence of all the above, the total participation of the energy production units of the companies HERON ENERGY S.M.S.A. and HERON II VOIOTIAS S.A., with a total capacity of 588 MW, settled during the year 2022 at 11.3% of the broader energy production from natural gas plants in Greece, thus comprising a strong pillar in the country’s strategy to ensure energy sufficiency. The Group's production derives to a very large extent from the operation of HERON II combined cycle plant, which produced a total of 2,127 GWh during the financial year of 2022 far exceeding pre-pandemic production levels and posting an increase of approximately 18% compared to 2021.
In the area of Electricity Distribution to final consumers, the increase in energy prices has resulted in strong customer mobility among electricity providers. Despite this trend, the company HERON ENERGY S.M.S.A. managed to fully cope with the difficult market conditions and even increase its market share to 7.6%. As a result the company is among the leading independent suppliers in the domestic energy market.
Revenues from continuing operations in the Electricity Production from Thermal Energy Sources Electric Energy Sales settled at 2,661.1 mn euros compared to 252.6 mn euros in 2021, marking a significant increase mainly due to the following reasons:
a) the full consolidation of 100% subsidiary HERON II VOIOTIA’s results for the year of 2022 (acquisition of control on 11.10.2021) and the full consolidation of 100% subsidiary HERON ENERGY’s results for the period 14.02- 31.12.2022 (acquisition of control on 14.02.2022). The above subsidiaries during the corresponding comparative period of 2021 were consolidated as jointly controlled entities applying the Equity method and with percentages of 25% and 50% respectively,
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
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b) The increased volumes of production and sale of electricity as result of the improved market shares of the Group's subsidiaries
c) The higher electricity sale prices following the increase in the wholesale price (DAM Day Ahead Market) due to the significant increase of the Natural Gas prices in Europe, as a result of the recent geopolitical developments, but also the high CO2 prices which also resulted in the overall increase of energy cost.
The Adjusted EBITDA (EBITDA plus non-cash results included therein) amounted to 335.5 mn euros compared to 33.2 mn euros in the corresponding period of 2021 and it was significantly improved due to the aforementioned factors.
In accordance with the Article 37 ("Extraordinary levy on electricity producers") of Law 4936/2022 (Government Gazette 105'A, 27.05.2022), an extraordinary levy was imposed on the revenues from the participation of the two electricity production units, using natural gas as fuel, of the companies HERON ENERGY S.A. and of HERON II V O IOTIA S.A. for the period from 01.10.2021 until 30.06.2022, calculated on the increase of the gross profit margin of each of the production units. According to the circulars under protocol no. RAE Ο-98561, Ο-98563 and the Joint Ministerial Decision under no. YPEN/DΙE/111281/4111/26.10.2022, the amount of the above levy for the Company was determined at 14,916,566.57 euros. This amount has been included in EBITDA calculation.
Finally, according to article 122 ("Temporary Mechanism for the Return of Part of DAM Day Ahead Market Revenues (Electricity)") of Law 4951/2022 (Government Gazette 129'A 04.07.2022) and the Decisions under no. YPEN/DIE/70248/2434/05.07.2022 and no. YPEN/DIE/115180/4229/04.11.2022, a maximum selling price of electricity was set out for the electricity production units that fall within the framework of operation of the Temporary Mechanism for the Return of Part of DAM Day Ahead Market Revenues (according to article 12A of Law 4425/2016) with implementation date as of 08.07.2022 (day of physical delivery). Through this legislation, part of revenues deriving from the sales of electricity production units of the companies HERON ENERGY S.A. and of HERON II V O IOTIA S.A. in the Day Ahead Market was withheld, which for the period 08.07.2022 31.12.2022 amounted for the Company to 24,082,994 euros.
Operating Results before interest and taxes (EBIT) from continuing operations amounted to 276.0 mn euros compared to 27.9 in the corresponding period of 2021 posting a significant improvement for the reasons mentioned above.
Earnings before taxes amounted to 260.3 mn euros compared to 22.8 mn euros in the corresponding period of 2021.
Earnings after taxes amounted to 198.4 mn euros compared to 23.1 mn euros in the period of 2021.
The Net Debt of the segment of Electricity Production from Thermal Energy Sources Electric Energy Sales amounted to approximately minus -6.2 mn euros compared to 47.8 mn euros on 31.12. 2021.
The Group's investments in the segment of Electricity Production from Thermal Energy Sources Electric Energy Sales amounted to 59.9 mn euros in 2022.
Concessions – Self or Jointly Financed Projects Operating Segment
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
23
In the Operating Segment of Concessions, the Group owns 100% of the Motorway Concession companies NEA ODOS SOCIETE ANONYME CONCESSION and CENTRAL GREECE MOTORWAY SOCIETE ANONYME CONCESSION, 17% of the Motorway Concession company OLYMPIA ODOS SOCIETE ANONYME CONCESSION, as well as 32.46% of the Concession Company of Kasteli Airport INTERNATIONAL AIRPORT HERAKLION CRETE SOCIETE ANONYME CONCESSION.
The Group will participate with a percentage of 49% through the company IRC HELLINIKON S.A. in the construction, development, and operation of (a) a five (5) star hotel, (b) a conference and exhibition center, (c) an audience gathering place for sports and cultural events and (d) a casino area. The duration of the concession is 30 years.
The Group also participates with a percentage of 70% in the Electronic Ticket Service Provider Societe Anonyme - HELLAS SMARTICKET S.A., which undertook from the Athens Urban Transport Organization S.A. (AUTO), the Partnership Agreement for the Study, Financing, Installation, Operational Support, Maintenance and Technical Management of a Unified, Automatic Toll Collection System for the AUTO Group of companies based on a PPP scheme. The term of the concession has been set at 10 years after the construction period.
The Group participates through the sub-Group TERNA ENERGY:
with a percentage of 100% in the company AEIFORIKI EPIRUS S.M.S.A.S.P., which is active in the operation of the Waste Management Unit of Epirus with a maximum annual capacity of 105,000tn, the operation of which started on 27.03.2019. The duration of the Concession has been set for 27 years.
with a percentage of 70% in the Joint Venture TERNA ENERGY - INDIGITAL - AMCO with which it signed a contract for the project "Digital Transformation, Telematics, and the Unified Automated Collection System for Thessaloniki (ACST)" . The total budget of the project amounts to 30 mn euros plus VAT, whereas the commencement of works has been scheduled for the year 2023, and
with 100% in PERIVALLONTIIKI OF PELOPONNESE S.M.S.A. which has undertaken the construction of PPP project "Integrated Waste Management of Peloponnese" . The total duration of the contract has been set at 28 years and includes the two-year construction period and the 26-year operating period. The amount of the investment settles at 152 mn euros, of which 62.5 mn euros derive from an NSRF (ESPA) subsidy.
On 14.02.2022 the Transitional waste management began in the Peloponnese Region which will serve Arcadia, Corinthia, and Argolis, while on 25.08.2022 following the issuance of a relevant certificate by the Independent Auditor, the Waste Transfer Station of Corinthia was set into operation. At the same time, the construction of the Transitional Management Units of Messinia and Laconia and further the construction of the OSDA Units is in progress. This project is implemented with the main aim of providing modern waste management services targeting at protecting the environment, ensuring public health, and providing multiple benefits to local communities as development cells of the circular economy.
Finally, during the year 2022, the Group continued its activity in the area of Management and Operation of Car Parking Stations, whereas the capacity of these stations corresponding to the Group accounted for 2,171 vehicles.
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
(Amounts in thousands Euro, unless otherwise stated)
24
Revenues of the Concessions Operating Segment amounted to 202.0 mn euros compared to 173.0 mn euros in the corresponding period of 2021. This increase is mainly attributed to the increased traffic observed during the period in motorways NEA ODOS and CENTRAL GREECE (Kentriki Odos), as a result of the elimination of travel restrictions that were previously imposed due to COVID-19.
The Adjusted EBITDA (EBITDA plus non-cash results included therein) settled at 111.7 mn euros compared to 101.8 mn euros in the corresponding period of 2021 posting an increase of 9.7%. %. In calculating the segment’s adjusted EBITDA the following were included:
a. compensations from the Greek State, due to the non-operation of toll stations under the responsibility of the State, as well as due to a respective state order to suspend the collection of tolls at the Gavrolimni toll station (Ionia Odos) - amounting to 23.3 mn euros in 2022, compared to 14,5 mn euros in the corresponding period of 2021, the calculation of which is based on relevant provisions of the concession contracts. Until the approval of the Financial Statements, the above amount had not been collected. It is noted that during the corresponding period of 2021, compensations for loss of revenue due to the COVID-19 bans totaling 16.4 mn euros were also included in the calculation of adjusted EBITDA.
b. the provisions for heavy maintenance of the motorways are not included, which in the year 2022, amounted to 22.6 mn euros compared to 24.1 mn euros in the corresponding period of 2021.
Operating Results before interest and taxes (EBIT) stood at 41.1 mn euros compared to 33.6 mn euros in corresponding period of 2021, posting an increase of 22.3% which was due to the stronger motorway revenues following the abolition of travel restrictions that were previously imposed due to COVID-19.
Results before taxes amounted to -80.8 mn euros compared to -19.1 mn euros in the corresponding period of 2021. The increase in the loss as compared to the corresponding period of 2021, is solely due to the change in the receivable’s fair value from the subsidiary's embedded derivative of the concession company CENTRAL GREECE MOTORWAY S.A., as well as from the valuations of the IRS, which amount in total to minus (74.7) mn euros, as a consequence of the increase in interest rates and the discount factor used for the accounting valuation. It was also due to the reduction in the value of the discounted future cash flows of collections from the Greek State. The above increase in interest rates of the Greek Government debt is not due to a change in the country’s credit risk profile but is linked to the broader increase in interest rates at the European level, due to the geopolitical developments, the energy crisis, and the inflationary pressures. Changes in the above valuations will not have any material impact on the Group's Operating Results, Cash Flows and Equity respectively.
Results after taxes settled at -51.1 mn euros compared to -2.1 mn euros in the corresponding period of 2021. The increase in losses is due to the decrease in the fair value of the embedded derivative, as mentioned above.
The Net Debt of the Concessions Operating Segment amounted to approximately 618.8 mn euros compared to 529.5 mn euros on 31.12.2021.
Real Estate Operating Segment
GEK TERNA Group is active in the management and sale of real estate assets holding a broad portfolio of 123.8 mn euros in Greece, Bulgaria and Romania that includes shopping centers, industrial parks,
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leisure parks, hotels, plots, and lands in tourist destinations, etc. In this context, with cautious steps the Group has restarted its investment activities in the domestic real estate market. At the same time, the Group examines alternative scenarios for the utilization of its portfolio and whenever it deems appropriate it will proceed with additional investments.
Revenues of the Real Estate Operating Segment amounted to 3.9 mn euros compared to 4.5 mn euros in the corresponding period of 2021.
The Adjusted EBITDA (EBITDA plus non-cash results included therein) was negative at -0.2 mn euros compared to 0.5 mn euros in the corresponding period of 2021.
Operating Results before interest and taxes (EBIT) settled at -0.9 mn euros compared to -0.6 mn euros in the corresponding period 2021.
Earnings before taxes stood at 2.9 mn euros compared to -0.8 mn euros in the corresponding period of 2021.
Earnings after taxes settled at 2.6 mn euros compared to -0.8 mn euros in the corresponding period of 2021.
The Net Debt of the Real Estate Operating Segment amounted to approximately 83.3 mn euros compared to 55.9 mn euros on 31.12.2021 .
Industry/Quarry Operating Segment
The Group, via the fully owned by 100% subsidiary TERNA MAG (through the mining licenses and concessions it possesses), is active in the mining and processing of limestone and magnesium, as well as in its industrial processing for the production of caustic and refractory magnesia products of various qualities and chemical characteristics, which are being sold mainly to foreign customers.
Revenues from the Industry / Quarry Operating Segment, despite the problems that existed in the first half of 2022 in the transportation of goods abroad, settled at 18.7 mn euros in 2022, compared to 10.0 mn euros in the corresponding period of 2021, posting an increase of 87.0%. The above increase was mainly due to the quality upgrade of the sales mix, the increase in the number of customers and the increase in the selling prices of the extracted products.
The Adjusted EBITDA (EBITDA plus non-cash results included therein) settled at 0.4 mn euros during the year 2022, compared to -0.4 mn euros in the corresponding period of 2021. The favorable improvement was due to the following factors: the higher revenues, the quality upgrade of the sales mix, the increase in the number of customers and the increase in the selling prices of the extracted products.
Operating Results before interest and taxes (EBIT) settled at minus -3.3 mn euros compared to -3.7 mn euros in the corresponding period of 2021. The positive difference was due to the reasons mentioned above.
Earnings before taxes settled at -17.2 mn euros compared to -5.4 mn euros in the corresponding period of 2021. The significant increase in the loss was due to the re-valuation of the activity following the utilization of higher interest rates when estimating the present value of future results.
Earnings after taxes settled at -16.3 mn euros compared to -5.5 mn euros in the corresponding period of 2021. The change was due to the above mentioned factor.
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The Net Debt of the Industry / Quarry Operating Segment amounted to approximately 106.1 mn euros compared to 98.7 mn euros on 31.12.2021.
Holding Operating Segment
Adjusted EBITDA (EBITDA plus the non-cash results) settled in 2022 at -12.4 mn euros compared to - 14.0 mn euros in the corresponding period of 2021, positively and mainly affected by the reduced expenditure in the current year and versus the previous year in relation to the stock options plan, i.e. distribution of shares to the members of the Board of Directors.
The Operating Results before interest and taxes (EBIT) settled in 2022 at -15.7 mn euros compared to -15.9 mn euros in the corresponding period of 2021.
Earnings before taxes in 2022 settled at -6.6 mn euros compared to 29.5 mn euros in the corresponding period of 2021. The significant difference in earnings between 2022 and 2021, was due to the existence of non-recurring gains from the measurement at fair value of the participation in companies in which the percentages of third-party shareholders were purchased by the Group during the years 2021 and 2022. These companies have now become 100% subsidiaries. The non-recurring gains during the year 2022 amounted to 21.7 mn euros, whereas in 2021 amounted to 60.9 mn euros.
Earnings after taxes in 2022 settled at -6.3 mn euros compared to 30.2 mn euros in the corresponding period of 2021.The change in earnings was also due to the reasons mentioned above.
The Net Debt of the Holding Operating Segment amounted to approximately 151.8 mn euros compared to 146.4 mn euros on 31.12.2021.
Intersegmental Transactions
During the year 2022, Revenues of Intersegmental Transactions amounted to 210.6 mn euros compared to 122.7 mn euros in the corresponding period of 2021. The significant increase in Revenues was due to the higher investments in the segment of Electricity Production from Renewable Energy Sources and in the construction of the Waste Management Units of the Peloponnese region.
Adjusted EBITDA (EBITDA plus non-cash results included therein) settled in 2022 σε at -15.0 mn euros compared to -11.9 mn euros in the corresponding period of 2021.
Operating Results before interest and taxes (EBIT) stood at minus -15.9 mn euros compared to -10.0 mn euros in the corresponding period of 2021.
Earnings before taxes settled at -15.8 mn euros compared to -11.0 mn euros in the corresponding period of 2021.
Earnings after taxes settled at -15.8 mn euros compared to -11.0 mn euros in the corresponding period of 2021.
C. Significant Events after the end of the period 01.01 – 31.12. 2022
From 01.01.2023 until the date of approval of the attached financial statements, the following important events took place:
On 09.01.2023, the decision under number 226/09.01.2023 of G.E.MI. Service was registered in the General Electronic Commercial Registry (G.E.MI.) with Registration Code 3409259. The
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decision approved the amendment of article 1, par. 1 and of article 3, par. 2, case (iii) of the articles of association of the Limited Company under the name CASINO OF WIDE SPECTRUM SOCIETE ANONYME COMPANY, the distinctive title EKAZ HELLINIKON S.A. (EKAZ) and G.E.MI. number 163658901000, according to the decision of the Extraordinary General Meeting of shareholders dated 09.01.2023. After the above, the name of the company was formed as follows: INTEGRATED RESORT COMPLEX HELLINIKON SOCIERTE ANONYME and with the distinctive title: IRC HELLINIKON S.A.
On 09.01.2023, the subsidiary TERNA S.A. signed a contract with DESFA S.A. for the project "Detailed Engineering and Construction for the anti-flood works and damage restoration in the Ampelia Station (1788/22)" which concerns anti-flood works, with a budget of 2.5 mn euros.
On 09.01.2023, the subsidiary TERNA S.A. signed a contract with DESFA S.A. for the project "Detailed Engineering, Procurement and Construction of the ''Relocation of Ampelia Karditsa Trikala Pipeline'' Project (1789/22)" which concerns the relocation of the pipeline of Karditsa - Trikala section to Ampelia Farsalon, with a budget of 4.9 mn euros.
On 10.01.2023, the subsidiary TERNA S.A. signed a contract with INSIGNIO M.A.E. for the Phase A of the "Construction of Bearing Structure from reinforced concrete" of the project "Construction of a New Complex of Office Buildings with 2 Basements and Planted Roof in the Municipality of Marousi" , with a budget of 7.9 mn euros. The total budget of the project (Phases A and B) amounts to 9.5 mn euros.
The Hellenic Gaming Commission with the decision under no. 3/26.01.2023 approved the change of the conveyor of technical experience towards IRC HELLINIKON, i.e. from HR Atlantic City L.L.C.
On 10.02.2023, the subsidiary TERNA ENERGY S.A. acquired the entire number of share units of the company ANAX which was renamed into TERNA ENERGIAKI SAPPON. The latter company is developing a Photovoltaic Plant with 246.35 MW capacity in the Regional Unit of Evros, Rodopi, Greece. The total price of the acquisition, based on the terms of the Agreement for the Sale and Transfer of Shares, will depend on the successful outcome of the process required for securing the relevant permits for the installation of electricity generation units from Photovoltaic systems.
On 13.02.2023, the subsidiary TERNA S.A. signed a contract with BLUE IRIS INVESTMENTS S.M.S.A. for the construction of the project entitled "5-Star Luxury Resort in Kalo Livadi Mykonos" with a budget of 78.6 mn euros.
On 15.02.2023, the subsidiary TERNA S.A. signed a contract with DESFA S.A. for the "Detailed Engineering, Procurement and Construction for the "Alternative Interconnection of Thermoilektriki Komotinis New Power Generation Unit with NNGTS" Project" , with a budget of 3.6 mn euros.
On 17.02.2023 the subsidiary TERNA S.A. signed a contract with THERMOILEKTRIKI KOMOTINIS S.A. for the project entitled "Construction and Supply of Materials for the 400KV HV Lines Connection between National Grid and the New Power Plant located at VIPE Komotinis area" , which concerns the construction of a double circuit input-output line of the station and the modifications of the existing installation 400kV/2B'B' Philippoi - N. Santa. The project’s budget was set at 6.2 mn euros.
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On 24.03.2023, the subsidiary TERNA S.A. signed a contract with DESFA S.A. for the project entitled "Detailed Engineering, Procurement and Construction for the "LVS and Hot Tapping Connection for the New Power Plant of Thermoilektriki Komotinis, west of LVS Komotinis" Project" , with a total budget of 1.9 mn euros.
On 06.04.2023, KOMOTINI THERMOELECTRIC, in which GEK TERNA participates jointly with MOTOR OIL Group with 50% each, signed a Common Bond Loan agreement with Greek creditor banks for a total amount of 325 mn euros for the purpose of developing and building the new state-of-the-art Combined Cycle Gas Turbine Station with natural gas as fuel aiming at an installed gross capacity of 877 MW in the Industrial Area of Komotini, Greece.
On 21.04.2023, the company PASIFAI ODOS S.A., in which GEK TERNA participates with a percentage of 55%, signed the contract for the project "Northern Road Axis of Crete (BOAK): Study, Construction, Financing, Operation and Maintenance of the Hersonissos Neapoli Section, with PPP" .
D. Risk Factors and Uncertainties
The Group's operations are subject to various risks and uncertainties, such as the return of macroeconomic uncertainty, market risk, credit risk and liquidity risk, wind and weather conditions, the uncertainty of the results from the impact of emergency events (COVID‐19) which may have a prolonged and unforeseen term.
1) Financial Risks
To address financial risks, there is a management plan aiming to reduce the adverse impact on the financial results of the Group, arising from the inability to project financial markets and fluctuations in cost and sales variables.
The financial instruments used by the Group mainly comprise bank deposits, mainly long‐term and secondarily short‐term loans as well as derivatives, trade debtors and creditors, other accounts receivable and payable. The impact of the main risks and uncertainties on the Group's activities is analyzed below.
Credit risk
Credit risk entails the possibility that a counterparty will cause financial loss to the Group and the Company due to the breach of the counterparty’s contractual obligations.
The Group continuously monitors its receivables, either separately or per group and encompasses all the arising information into the credit audit. When deemed necessary, external reports or analyses related to effective or potential clients are used.
The Group is not exposed to significant credit risk arising from trade receivables with regard to its business activities, except for the trading of electric energy. This is attributed, on the one hand, to the Group’s policy, which is focused on cooperation with reliable clients and, on the other hand, to the nature of the Group’s operations.
In particular, total receivables, whether related to the narrow or the broader public sector, or private sector clients with significant financial position in Greece and abroad, are under special monitoring and
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the Management constantly assesses the reliability of its customers, their financial sizes regardless of whether they are a broader public or private entity, for potential implications, in order to take the necessary measures to minimize any adverse effects for the Group.
The Group is exposed to credit risk from end consumers due to the sale of electricity and natural gas to them. The control carried out to ensure the collectability of receivables is systematic. Wherever required, adequate reserves are being created through provisions to minimize any potential adverse impact. Apart from the above, and in addition to safeguarding collectability, the Group makes sure to issue monthly bills concerning the probable consumption per month, so that with the issuance of the settlement invoice that is being made in the fourth month of consumption, there is no large outstanding balance to be settled. It should be noted that at the start of cooperation with customers, an amount equal to the indicative cost of consumption for one month is paid by the customers in the form of a guarantee.
The credit risk regarding cash and cash available and other receivables is considered limited given that the counterparties are reliable Banks with high quality capital structure, the Greek State and the broader public sector and strong Groups of companies.
The Management assumes that all the financial assets, for which necessary impairment is calculated, are of high credit quality.
Foreign exchange risk
Foreign exchange risk arises when the fair value or future cash flows of a financial instrument are subject to fluctuations due to changes in exchange rates. This type of risk may arise, for the Group, from foreign exchange differences at the valuation and conversion into the Group’s currency (Euro) of financial assets, mainly financial receivables, and financial liabilities, related to transactions that are carried out in a currency other than the operating currency of the Group’s entities. The transactions mainly concern purchases of fixed assets and inventories, commercial sales, investments in financial assets, loans, as well as net investments in foreign operations.
The Group operates mainly in Greece and Eastern Europe for investments in renewable energy and selectively in the undertaking of construction projects, and therefore may be exposed to foreign exchange risk that may arise from Euro exchange rate with other currencies. To manage this risk category, the Group’s Financial Management Department uses the financial instruments and offset the Group's exposure to foreign exchange risk on the basis of specific policies, whenever it is necessary.
Regarding the Group's transactions with foreign companies, these are usually carried out with European Groups where the settlement currency is the euro. To reduce this risk, the Group utilizes the locally produced cash available in local currency to pay the expenses incurred, minimizing the creation of foreign exchange risk.
Interest rate risk
Interest rate risk entails the probability that fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates.
The Group's policy is to minimize its exposure to the interest rate risk of long‐term financing. Under this policy, medium‐term loans are mainly in Euro, with fixed spread and a floating base interest rate
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linked to Euribor. In order to reduce the interest rate risk associated with long‐term financing and to reduce the consequent volatility of financial expenses, the Group implements specific policies that include Interest Rates Swaps.
The biggest component of the Group's short‐term debt is in Euro at a floating base interest rate linked to Euribor. Short‐term loans are mainly issued as a bridge financing in order to cover temporary needs during the implementation phase - construction of investments (Wind Parks) of the Group. The Group's policy is to convert these loans into long‐ term fixed spreads linked to Euribor and, where deemed necessary due to repayment time, to implement approved interest rate risk management policies through Interest Rate Swaps.
On 31.12. 2022, 37,42% of the Group’s total debt bares fixed interest rate, 32,58% bares floating interest rate that have been offset through derivatives, with which future fixed interest rate payments are exchanged against floating rate based receivables, while 30% of the Group’s loans bare floating rate based on the Euribor or wibor on a per case basis.
These loans are repaid either through collections of trade receivables, or during the collection of the relevant state grants or through the operating cash flows from the Group's operations.
Sensitivity analysis of interest rate risk
The following table presents the sensitivity of profit or loss for the period against the Groups short‐ term debt and deposits, towards a change in variable interest rates amounting to +20% –20% ( 2021: +/-20%). The changes in interest rates are estimated to be logical in relation to the current market conditions and until now they have been consistent with the previous year.
2022
2021
20%
-20%
20%
-20%
Net earnings after income tax (from interest bearing liabilities)
(1,227)
1,227
(437)
437
Net earnings after income tax (from interest earning assets)
617
(617)
15
(15)
The Group is not exposed to other interest rate risks.
Market risk analysis
The Group is not exposed to market risk regarding its financial assets.
Liquidity risk
Liquidity risk entails the risk that the Group or the Company will be in no position to meet their financial obligations when required. The Group maintains its liquidity risk at a low level.
Specifically, the Group’s liquidity, in particular, is considered satisfactory, as in addition to the existing cash and cash equivalents, the cash flows generated by the Concessions of the motorways, the
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operating wind farms, the production and sale of electric energy as well as from construction works are ongoing.
The Group manages liquidity needs by closely monitoring the progress of long‐term financial obligations, as well as the payments made daily. Liquidity needs are monitored in different time zones, on a daily and weekly basis as well as in a rolling period of 30 days. Liquidity needs for the next 6 months and next year are determined on a monthly basis.
The Group maintains cash and cash available in banks to meet liquidity needs for periods of up to 30 days. The funds for the medium‐term liquidity needs are released from the Group's time deposits and if deemed necessary, bank credits are also being used.
2) Risks arising from existing financial conditions prevailing in Greece and from the global economy
The performance of the Greek economy for the year 2022 was positive since the achieved GDP growth rate settled at 5.9% following another positive growth in 2021 (8.4%). According to estimates of the Bank of Greece GDP growth is expected to settle at 2.2% in 2023.
The Greek economy is developing at a faster pace compared to the European one, due to its lower dependence on the ongoing energy crisis which was exacerbated by the geopolitical developments in Ukraine. The effect of the reduced supply of natural gas from Russia to the European Union and its substitution with the more expensive solution of liquefied natural gas negatively affected the production of electricity, resulting in an increase in prices, which further sparkled the already high inflationary pressures in the European Union.
As a result of the above, inflation, based on the harmonized Consumer Price Index, settled for the entire European Union at 9.6% in 2022 due to the upward trend in energy needs as well as due to price increases in food items.
The estimated inflation based on the harmonized Consumer Price Index for the period 2023-2024 is expected to settle at 5.8% and 3.6% respectively, mainly due to the anticipated decline in energy prices and also due to the negative effect on the comparison basis.
The European Central Bank in its effort to control inflation, considering that the high inflation pressures were due to increased demand, proceeded with successive interest rate hikes. From July 2022 and until the preparation date of the present Financial Report, European interest rates have risen to 3.5%. The Central Bank appears determined to continue increasing its key rates in order to tighten money supply and liquidity in the markets and tame inflation pressures to an even greater degree.
To date, with the views prevailing with regard to the continuation of the energy crisis, the duration and intensity of hostilities in Ukraine, as well as the monetary policy and the interest rate hikes which are considered to be the "only way" to tackle inflation, the overall course of the economies and especially of the European Union, is negatively affected indicating a reduction or even zero growth in GDP.
The additional sources of uncertainty regarding the economic activity in Greece for the coming years that could have either positive or negative impact in terms of achievement of the ultimate GDP growth target, are listed below:
A possible prolonged period of political uncertainty.
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Delay in reducing the public debt level.
The continuous increase of interest rates which might have caused issues in the borrowers’ effort to repay the instalments of their mortgage loans for the first residence and the agricultural land.
The continued increase of inflation due to higher energy and consumer goods prices which reduces the real disposable income and household purchasing power, will create the need for additional fiscal measures to support vulnerable groups of people in the economies.
The reduction in the receipts from Greek tourism compared to 2022, due to a) the negative geopolitical developments and b) the contraction of disposable income of many countries, mainly from the European Union, from which tourists originate.
The impact of geopolitical conditions on foreign direct investments, as increased uncertainty adversely affects the investment risk of a country that has not yet reached investment grade.
The lack of acceleration towards the structural reforms and the government’s inability for the timely disbursement of European funds and any obstacles in the implementation of the investment plans.
The continuing delay in the process of granting justice.
The inability of certain sections of the Public Administration to overcome the bureaucracy, a condition that is most required in order to solve the various problems of the Greek economy.
On the contrary, in this volatile international environment, the growth potential of Greece is significantly enhanced by the contribution of the Recovery and Resiliency Fund (RRF) as more than 30 bn euros are expected to flow into the Greek Economy during the coming years. Greece is expected to lead the absorption indices of the respective funds as a percentage of GDP. Additionally, the upgrading of the country’s credit rating by the respective international rating agencies is expected to have a positive impact, which in turn would generate larger inflows of investments into the Greek economy with more favorable borrowing terms in terms of the financing required for the implementation of investments.
Despite the new conditions that have arisen due to the geopolitical developments along with the ongoing energy crisis and inflationary pressures, and given that the Group does not have any meaningful activity in Russia, Ukraine and Belarus, the outlook for the Group remains positive in the medium term due to the following factors: a) investments in the form of Concessions and PPPs, b) the important construction contracts signed by the Group and ready to be executed, c) the higher participation rate of electricity production via natural gas in the Greek economy, as well as the Group‘s potential market share increase in commercial distribution of electricity, d) the increase of investments for the production of clean energy through RES, e) the construction and expansion of energy storage areas and f) the development of upgraded tourist accommodation facilities that will allow Greece to take advantage of its comparative advantages (geographical location, climatic conditions and high level of employee education).
3) Risks related to the impact of pandemic (COVID-19)
Despite the fact that the problems which started in 2019 by the COVID-19 pandemic and its mutations were not completely eliminated in 2022, the experience that the world has gained with regard to
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protecting the population from the transmission of virus, the mass vaccination programs that started in 2021, as well as the provision of new medicines to the patients, have altogether reduced the severity of the risk, as well as the percentage of patients or infected people.
The de-escalating impact of the pandemic resulted in the withdrawal of restrictive measures, allowing the free movement of populations, and significantly improving the operation of economies worldwide. At the same time the transportation of products was exempted from the existing prohibitions which previously aimed at the non-transmission of the virus from area to area. A consequence of the lifting of the above prohibitions was the influx of tourists which had a significant positive impact on the revenues from tourism and, by extension, on the GDP growth of the Greek economy during the year 2022.
The COVID-19 pandemic and its mutations will continue to affect the global economy however with ever-diminishing intensity, due to the experience that has been gained on how to prevent and deal with the pandemic through mass vaccination programs and with the provision of new medicines to the patients.
The Group took all the necessary measures wherever it was deemed necessary in order to continue the uninterrupted development of its core activities, carrying out smoothly its construction activity, the exploitation of RES and Concessions, the operation of its electricity production plant as well as its investment program in the sectors of energy and concessions. By this manner the Group strengthened its efforts to develop the Greek economy and contribute towards employment. Specifically per segment/sector:
Construction Operating Segment
In the Construction operating segment construction works have returned almost entirely to normalcy within the year 2022, while at the same time the adjusted schedules of their implementation were met.
The subsidiary TERNA S.A. is at advantageous position due to (a) its dominant position in the construction industry in combination with the experienced and fully proven effective management team, and (b) the strong financial position of the company that is required in order to support the timely completion of all projects it has currently in the backlog and / or will undertake.
Operating Segment of Electric Energy Generation from Renewable Energy Sources [RES])
In the segment of Electric Energy Generation from RES, in Greece there was no interruption or other adverse impact on the activity of the Group's facilities that are in operation. As far as the RES facilities under construction are concerned, until today no delays have been caused due to the COVID-19 pandemic and its mutations and the estimated time of completion and launching of the projects has not changed.
Operating Segment of Electricity Generation from Thermal Energy Sources - Sale of Energy
In the Operating Segment of Electricity Generation from Thermal Energy Sources Sale of Energy in 2022, the Group continued smoothly, despite COVID-19 pandemic and its mutations, the production activity of the Thermal Power Plants of 588 MW. At the same time the commercial activity was carried out without any interruption.
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Concession Operating Segment – Self/co-financed projects
In Concession segment there are mainly included motorway concession companies (NEA ODOS S.A. CONCESSION COMPANY and CENTRAL GREECE MOTORWAY CONCESSION COMPANY S.A.) and the concession for the airport at Kastelli (INTERNATIONAL AIRPORT OF CRETE S.A. CONCESSION).
Within the year 2022, the effect of the COVID-19 pandemic and its mutations had been softened, lifting the travel restriction measures. Therefore, motorway traffic returned to normal levels and the negative impact on the Group’s operations from this factor almost ceased to exist.
Real Estate Operating Segment
This activity was not substantially affected by the impact of COVID-19 and its mutations.
Quarry / Industry Operating Segment
Reducing the time and cost of transporting products has significantly mitigated the problems that had been created in previous years due to COVID-19 pandemic and its mutations, resulting in an increase in the revenue of the particular sector.
This segment’s activity will improve as the global economy resumes its normal course.
4) Other Risks and Uncertainties
Consequences of the Russian invasion of Ukraine
The ongoing and escalating hostilities between Ukraine and Russia with the indirect involvement of the European Union and the U.S.A. through the provision of support to the Ukrainian side, weakened the possibility of a ceasefire between the two sides of war.
The adoption of restrictive measures by the European Union and the U.S.A. regarding the international circulation of funds of Russian origin, as well as the additional restrictive measures towards the same direction (asset freezes, convictions, etc.), as well as the bans on the sale of Russian products in the European Union and other countries, resulted in countermeasures taken by Russia against the European Union. Such measures included the reduction of natural gas’ sold quantities with a parallel significant increase in prices, since natural gas has been the main fuel for the production of electricity in most of the countries in European Union, including Greece. The result of all the above has the very large increase in the selling price of electricity, which is finally transferred to the final consumers, creating inflationary pressures across all economies among other problems.
In the effort to meet the demand of the European Union’s population for electricity, the member states were forced to take fiscal measures to support consumers and especially vulnerable households at the expense of their economic growth outlook. At the same time, in its attempt to control the inflationary pressures across the economies, the European Central Bank even from the 4th quarter of 2022 has decided to increase its key interest rate to 3.5% and until the date of drafting the present Financial Report. The Central Bank appears determined to continue increasing its key rates in order to tighten money supply and liquidity in the markets and tame inflation pressures to an even greater degree. This in turn creates disincentives of investment in the broader financial and economic environment.
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The Group does not have direct operations in Russia, Ukraine and Belarus, however it constantly assesses the geopolitical risks it is exposed to, having formulated specific policies and procedures, so as to mitigate the risk to the extent possible.
Specifically in the Construction operating segment there is an effect on construction costs from the geopolitical developments in Ukraine but given that in a large part of mainly important contracts, there is provision for price adjustments, the final effect on the Group is not expected to be significant. At the same time, for all the new projects in which we are the bidder or will participate in the tenders for their undertaking, the increased costs are included in the bid budgets.
In the area of Electricity Production from Renewable Energy Sources due to the fact that the majority of Wind Farms have a fixed selling energy price, the important costs are the depreciation of the equipment, and the cost of borrowing refers to fixed interest loans, the effect is insignificant.
In the operational sector of Electricity Production from Thermal Energy Sources, due to the nature of the activity and given that the selling price follows the purchase cost, typically there was no problem of substantial influence of the consequences of geopolitical developments. The support of the Greek state was also important as it covered part of the cost of electricity concerning vulnerable households, in the broader context of the government’s efforts to protect this category of citizens.
In the area of Concessions, there is a charge related to the cost of supplying electricity and fuel required for the operation of traffic control systems, as well as in relation to the cost of lighting the motorways. To reduce these costs, a series of measures have been already taken, such as changing light bulbs and using LED technology, as well as using cars with lower fuel consumption.
Following the above, the Group's prospects remain positive and not directly dependent on the war conflict in Ukraine. However, due to the dynamics of these events, new risks may arise. The Management of the Group, taking into account the existing uncertainty in the wider economic climate, tries to assess in a timely manner any indirect consequences for the Group so that the required measures can be taken to mitigate any impact.
Backlog of the construction contracts
The backlog of the construction contracts does not necessarily constitute an indication of future revenues from the Group's operations in this segment. Although the backlog of these contracts represents projects that are considered certain, no guarantee can be given that cancellations or adjustments will not be performed.
The backlog of the Group's construction contracts may fluctuate in connection with the delays in the project’s implementation and/or receivables or inability to fulfill contractual obligations.
Climate change risk
The increase in the average temperature of the planet has caused a series of extreme natural phenomena (disastrous floods, frosts, heavy snowfalls, but also large-scale wildfires from prolonged drought).
The risks arising from the effects of climate change and the transition to a low-carbon economy are expected to affect most, if not all, business entities in matters related to their sustainability.
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The Group owns and operates in Greece and abroad Wind Parks, operates two major highways, where the effects of climate change in recent years consist of intense weather phenomena and long-term natural turnarounds.
Taking into account the extreme natural phenomena that have occurred in recent years, the Group takes all necessary measures to eliminate or minimize the problems that may arise, in addition to insurance coverage for the risks that are insurable.
Cyber Security Risk
Potential violations in the security of networks, information, and operating systems, threaten the integrity of the Group's data, sensitive information, as well as the smooth operation of its business activities. Such a breach could adversely affect the Group's reputation and competitive position. Also, a possible occurrence of damages, release of fines, or loss of business (including restoration costs) could have a significant negative impact on our financial position and operating results. In addition, managing cybersecurity breaches may require a significant investment of time by the management.
In order to avoid the Cyber Security risks, GEK TERNA Group has established and implements Cyber Security Policies and Procedures, with which all the executives and the external collaborators of the Group must comply. In cases where it is deemed necessary, the IT Department provides additional instructions and guidance.
The Group is in continuous cooperation with companies providing specialized Cybersecurity services as well as with experienced consultants in the field, in order to provide full technical and organizational coverage in terms of Cybersecurity in close collaboration with its various departments. Some of the technical measures taken include the following areas:
Perimeter Security (Firewall)
The security of the Group's network
The security of executives' computers (Firewall and Antivirus)
The technological security of the Servers (Specially configured restricted areas, Antivirus,) where the data are stored
Secure remote access for users (use of secure VPN channel)
The monitoring of Cybersecurity events in real time by specialized external partners
The availability of services through the existence of Disaster Recovery Plan (DRP)
The continuous training and information of the executives in matters of Cyber Security
Supervision and coordination of Cybersecurity issues by experienced external partners (CISO chief information security officer)
Strong password and user authentication policies
Protect email from Phishing and Spam attacks
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E. Outlook and Prospects
GEK TERNA the parent company of the Group (www.gekterna.com) is listed on Athens Stock Exchange (FTSE / Athex Large Cap / Athex ESG) and comprises one of the largest business groups in Greece, with selective presence in Central and Southeastern Europe as well as in Middle East.
GEK TERNA Group with a Turnover of 3,938.3 mn euros is active in the following sectors:
a) infrastructure, b) the production of electricity from Renewable Energy Sources (RES), c) the production of electricity with natural gas fuel and the trade of electricity, d) the construction and operation of the Concessions, as well as the construction and joint operation co-financed projects (PPPs) and waste management projects, e) mining activities and f) real estate management and sale of properties.
GEK TERNA Group in the field of construction activities has a backlog of construction works, which on 31.12.2022 amounted to approximately 2.9 bn euros and at the same time the Group is expecting to sign contracts for new projects as qualified bidder amounting to 2.4 bn euros.
The total installed capacity of the Group's RES projects in operation has settled at 905.3 MW. Within the year 2023, an additional capacity of 320 MW is expected to be commissioned. In addition to the above, the Group has over 180 MW of photovoltaic parks in Greece ready for construction.
In the segment of power generation with natural gas fuel the Group owns and operates two (2) units with a total installed capacity of 588 MW, while it also participates in the construction and operation of one (1) unit of 877 MW capacity with a 50% participation stake. At the same time, it is active inside and outside Greece, in the trade of electricity.
In the field of Concessions, the Group owns 100% of the Motorway Concessions NEA ODOS SOCIETE ANONYME CONCESSION and CENTRAL GREECE MOTORWAY SOCIETE ANONYME CONCESSION, 17% of the Concession Company OLYMPIA ODOS SOCIETE ANONYME CONCESSION, as well as 32.46% of the Concession Company of Kasteli Airport INTERNATIONAL AIRPORT HERAKLION CRETE SOCIETE ANONYME CONCESSION . In addition to the above, the Group will participate with a percentage of 49% through the company IRC HELLINIKON S.A. in the construction, development and operation of: (a) a five (5) star hotel, (b) a conference and exhibition center, (c) a gathering place for sport events or cultural events and (d) casino area.
The Group is waiting for the signing of contract of the flagship motorway concession project “Egnatia Odos” in which it will participate with a percentage of 75%.
Finally, the Group is active in the management and sale of real estate assets, owning commercial properties with a total estimated value of approximately 123.8 mn euros as well as in the quarry / industrial segment through the extraction and processing of limestone and magnesium.
The Group, for the existing business activities in 2022, employed more than 4,370 employees (directly 4,116 and in its proportion through joint ventures 254) on international level.
Total investments during the year amounted to 338.4 mn euros, with the energy sector being the main contributor. In recent years, investments have exceeded 2.5 bn euros, actively supporting the Greek economy, but also the country's banking system, constantly maintaining all the Group's assets from operations in Greece in Greek banks.
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For the year 2022, the positive growth prospects of the Greek economy exceeded the initial estimates calling for 4.8% annual GDP growth, as the achieved growth rate settled at 5.9%. Respectively, the growth rate for the year 2023 according to estimates of the Bank of Greece, is expected at 2.2%, while for the years 2024 and 2025 close to 3%.
In contrast to the significant GDP growth in Greece, the European economy is growing at a lower rate and is facing significant problems, due to its greater dependence on the ongoing energy crisis, which was exacerbated by the geopolitical developments in Ukraine. The effect of the reduced supply of natural gas from Russia to the European Union and its substitution with the more expensive solution of liquefied natural gas, affected negatively the electricity production across the continent, resulting into higher product prices, which reignited the already existing inflationary pressures in the European Union.
As a result of the above, inflation, based on the harmonized Consumer Price Index, settled for the entire European Union at 9.3% in 2022 due to the upward trend in energy needs as well as due to price increases in food items.
The estimated inflation based on the harmonized Consumer Price Index for the period 2023-2024, according to the estimates of Bank of Greece, is expected to settle at 4.4% and 3.6% respectively, mainly due to the anticipated decline in energy prices and also due to the negative effect on the comparison basis.
In this international environment where the high inflation pressures lead to the adoption of restrictive financial measures that in turn force economies to be compromised with lower growth rates, the Greek economy having as driving factors: a) the contribution of the Recovery and Resilience Fund (RRF) targeting an amount of 30 bn euros until 2026 as well as the financial support from the EU budget for the period 2021-2027 for an amount up to 40 bn euros, and b) the expected credit rating upgrade of the Greek economy by the international rating agencies, anticipates higher investments which can mitigate the negative repercussions of the energy crisis.
Despite the prevailing uncertainty, the outlook for the Greek economy remains positive in the medium term, in view of a number of conditions that could facilitate the change in the pattern of economic growth, which is expected in turn to derive from investment spending to an even greater extent.
In this changing economic and geopolitical environment, GEK TERNA Group, which is one of the most important Greek corporate groups and holds a leading position in the fields of infrastructure, clean energy, electricity production and concessions, implements and expands its investment plan (mainly in the fields of Renewable Energy Sources, Concessions and Infrastructure), as its capital structure remains strong while the Group continues to have a selective presence in countries outside Greece. Furthermore, GEK TERNA Group has already proved during the Greek financial crisis (i.e. the most difficult and longest financial crisis in Europe) its ability to expand and further solidify its market position.
It is worth noting, however, that the boost of investment activity in the sectors in which GEK TERNA Group operates (such as in RES, Concessions, Constructions and Infrastructure) constitute a priority for both the Greek State and the European Union. The Greek State in the field of infrastructure has accelerated tenders for new public, concession and PPP projects. Infrastructure projects, through their
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Annual Financial Report of the fiscal year 1 January 2022 - 31 December 2022
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higher multiplier effect, contribute significantly to the increase in GDP and to the strengthening of employment.
In 2023, GEK TERNA Group will continue to implement its strategy for continuous development in the Greek and international markets in the fields of infrastructure, production, supply, and trading of electricity and in the concessions in the field of RES, Concessions in general and in the Construction sector. The objective is to maintain its leading position in the Greek market and to pursue its sustainable development in the international markets in order to achieve a satisfactory diversification of corporate risk and to maintain return on equity at satisfactory levels.
The Group's investment plan continues intensively in all areas of its activity (infrastructure, concessions - PPPs, energy production and storage, circular economy - environmental projects), with the total investments planned or in which the Group participates, in the medium term, expected to exceed the value 10 bn euros.
With the investments that are in progress and those that will follow, GEK TERNA Group creates thousands of well-paid jobs, giving the opportunity to the Greek scientific workforce, to our young men and women to live with dignity and optimism for the future in their homeland, but also to those who left we provide the incentive to gradually return back to the country.
The prospects for achieving the targets for 2023 and beyond are positive given that:
In the Construction Operating Segment:
The Group, mainly through its 100% subsidiary TERNA S.A., has been operating in the construction segment for almost half a century, both in the Middle East and in the Southeast Europe, executing a wide range of large and complex public and private projects, of high budgets and complex know‐how, such as construction of motorways and rail networks, buildings, hospitals, museums, industrial facilities, hydroelectric projects, dams, industrial facilities, power plants, etc.
The prospects for the coming years are in favor of improving the financial performance of this operating segment, while the backlog of construction objects is maintained at high levels, amounting to approximately 2.9 bn euros on 31.12.2022 whereas at the date of approval of the attached financial statements with the new agreements signed or to be signed this backlog stands at 5.3 bn euros.
In addition, the prospects of the construction sector in Greece are particularly positive, as in the coming years the budget of the new projects to be auctioned may exceed under certain conditions the level of 30 bn euros, of which a significant part is estimated to be executed by the Group.
At the same time, the existence of synergies that will result from the execution of new investments within the Group (Concession of Egnatia Motorway, development of the Integrated Tourist Complex in Hellinikon, PPP of the Northern Road Axis of Crete and implementation of the investment program in the RES sector, as well as the construction of large pumping projects) will further boost the potential financial size of the particular sector.
It should be noted that the execution of the above projects will deliver significant positive multiplier results to the Greek Economy.
The Group, with the consistency and the high sense of corporate social responsibility that distinguishes its actions for years now, will remain a leader in the construction sector and will seek to increase the
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financial size of the particular market segment, while generating satisfactory earnings to the benefit of its shareholders.
In the Energy Operating Segment:
Electricity production and commercial activity from RES
GEK TERNA Group, operating through the sub-Group TERNA ENERGY I.C.S.A. in the field of energy since the mid-1990s is one of the leading players in the field of Renewable Energy Sources (RES) in Greece.
The shift to the Renewable Energy Sources (RES) is confirmed worldwide, with the sector being one of the top investment destinations for the coming years. In this context, TERNA ENERGY sub-Group continues the development of selected RES projects in Greece at a high pace, in order to lay the solid foundation for the company's sustainable development which is the long-term objective of its strategic planning for the next 10 years and at the same time, by capitalizing on its experience TERNA ENERGY is intensifying its efforts in order to further expand its presence in Poland and Bulgaria.
The energy needs of the country are covered mainly by imports (crude oil and natural gas) and to a lesser extent, by domestic production of solid fuels and renewable energy sources (RES). The Greek Government, in order to reduce the imported energy, presented the draft of the new National Energy and Climate Plan (NECP) using the RePowerEU policy package as a reference.
In the electricity sector, NECP aims to increase the installed RES capacity in the country to 25 GW by the year 2030, with RES covering approximately 80% of the demand for electricity and 45% of the total demand for energy.
TERNA ENERGY sub-Group had, as of 31.12.2022, almost 2,000 MW of power capacity from RES electricity generation units, which are in operation, under construction or ready for construction in Greece, Central and Eastern Europe.
In particular, the total installed capacity of the sub-Group in Greece and abroad amounted to 905.3 MW at the end of 2022 increased by approximately 10 MW compared to the end of 2021. The sub- Group aims to put into operation within the year 2023 another 320 MW in relation to the wind farms of Kafirea.
Also during the year 2022, the preliminary construction works of the project "Subproject 1. Pumped Storage Station of Western Greece (Amfilochia), 680 MW" which has been included in the Recovery and Resilience Fund, commenced.
Additionally, over 180 MW of photovoltaic parks in Greece are currently ready for the construction phase.
It is noted that the sub-Group's portfolio includes additional projects of various technologies (on-shore and off-shore wind farms, photovoltaic farms, hydroelectric, pumped storage, storage, etc.) in various stages of maturity, exceeding 12 GW.
The Group, through its subsidiary TERNA ENERGY, utilizing its dominant position and know-how in RES and appreciating the favorable environment in the field, continues its investment program.
Electricity production from thermal energy sources
GEK TERNA Group is active in the field of Production, Distribution and Trading of Electricity and Natural
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Gas mainly through the subsidiary companies HERON ENERGY S.M.S.A. and HERON II VOIOTIAS S.A., which are fully owned by 100% by the Group.
The significant reduction of lignite production units for environmental protection reasons and the large penetration of RES, have subsequently increased the market’s needs for thermal units with alternative fuel possessing at the same time the necessary flexibility to cover the daily variation of the stochastic production of RES. The operation of electricity production plants using natural gas has been viewed to contribute significantly and quite efficiently to the production of energy with a smaller footprint on the environment. This ensures and enhances at the same time the country’s energy supply mechanism providing the flexibility required for an orderly operation of the Electricity System in the country.
The total participation of the energy production units of the companies HERON ENERGY S.M.S.A. and HERON II VOIOTIAS S.A., with a total capacity of 588 MW, settled during the year 2022 at 11.3% of the broader energy production from natural gas plants in Greece, thus comprising a strong pillar in the country’s strategy to ensure energy sufficiency. The Group's production derives to a very large extent from the operation of HERON II combined cycle plant, which produced a total of 2,127 GWh during the financial year of 2022.
At the same time GEK TERNA Group and MOTOR OIL Group, via the establishment of the company KOMOTINI THERMOELECTRIC with participation rate of 50% each, continue the joint development, construction, and operation of the new state-of-the-art Combined Cycle Gas Turbine Station with natural gas as fuel aiming at an installed gross capacity of 877 MW in the Industrial Area of Komotini, Greece.
The technology of the main equipment that has been selected for the Station is the most modern one and will lead to very high degrees of overall net efficiency. The construction of the new unit started in 2021, in order to be placed into commercial operation at the beginning of 2024.
The amount of the investment is estimated at approximately 375 mn euros. This investment is expected to create about 500 jobs during the construction period and about 80 jobs during the operating period.
The Group, through its subsidiaries, utilizing its know-how in energy production from the operation of factories via the use of natural gas and by taking into account the favorable environment in the particular market, continues its investment plan with positive prospects.
In the area of Electricity Distribution to final consumers, the increase in energy prices has resulted in strong customer mobility among electricity providers. Despite this trend, the company HERON ENERGY S.M.S.A. managed to fully cope with the difficult market conditions and even increase its market share to 7.6%. As a result the company is among the leading independent suppliers in the domestic energy market, aiming to establish itself in the 1st position among independent suppliers in terms of market share by the year 2023.
In the Concession Operating Segment - Self/co-financed projects:
The Group has a dominant presence in the financing, management, and commercial operation of concession projects. The ever-expanding portfolio of concession projects and PPPs, as analyzed below, makes GEK TERNA Group one of the most important concession portfolio managers at European level.
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The Group owns 100% of the Motorway Concessions NEA ODOS SOCIETE ANONYME CONCESSION and CENTRAL GREECE MOTORWAY SOCIETE ANONYME CONCESSION, 17% of the Concession Company OLYMPIA ODOS SOCIETE ANONYME CONCESSION, as well as 32.46% of the Concession Company of Kasteli Airport INTERNATIONAL AIRPORT HERAKLION CRETE SOCIETE ANONYME CONCESSION.
The Group was notified to sign on 21.04.2023 as a member of the association of companies GEK TERNA S.A. - AKTOR CONCESSIONS S.A. INTRAKAT S.A., with a participation rate of 55%, the project "Northern Road Axis of Crete (BOAK): Study, Construction, Financing, Operation and Maintenance of the Hersonissos Neapoli Section, with PPP" . The project, with a total duration of 30 years, includes payments totaling 188.65 mn euros in net present value, which will be paid on an annual basis after the completion of the period of works (4 years). The total length of the motorway is 22.5 km while the total construction objective is estimated at 140 mn euros.
The Group expects during the second half of 2023 the signing of the concession agreement between the Greek State and the Association of GEK TERNA S.A. (75%) EGIS PROJECTS S.A. (25%) for the concession of the right to commercially operate Egnatia Odos highway and its three vertical road axes for a period of 35 years, which signals an extremely positive and important development, with numerous benefits for the Group and its shareholders. In particular the Group includes in its ever- expanding portfolio of concessions the largest highway in the country and one of the largest in Europe, with a total length (including the three vertical roads) of 883 km. During the current period, the Preferred Investor is working towards finalizing the contractual documents of the main construction and operating subcontractors. It is worth noting that alongside the signing of the concession agreement and among other things, the following will be signed: the contract for the study and construction of the project between the Concessionaire and the Construction Company, i.e. the subsidiary company TERNA S.A. and the contract for the operation and maintenance of the project, between the above Concessionaire and the Operator, i.e. the legal entity that will be made up of the companies GEK TERNA S.A. (25%) – EGIS PROJECTS S.A. (75%).
The total portfolio of highways of the GEK TERNA Group, after the commencement of operation Egnatia Odos, will now exceed 1,500 km. This is the largest portfolio of highways in the country and one of the largest in Europe, further strengthening the ability of the Group to generate significant, stable, and recurring revenues in the longer run.
In addition, the Group participates with a percentage of 49% through the company IRC HELLINIKON S.A. in the construction, development, and operation of a five (5) star hotel, a conference and exhibition center, an audience gathering place for sports and cultural events and a casino area. The duration of concession is 30 years while the amount of the relevant private investment exceeds 1 bn euros. The construction works of the project, which will be undertaken by the Group's subsidiary TERNA S.A., are expected to start within 2023 and last approximately 3 years, placing the commencement of operation of the above building complex in 2026. This development project will create a high-quality reference point for the country's tourism and provide employment to more than 3,000 thousand people, generating significant revenue streams for the Greek State and creating added value to the so-called brand of Greece.
In addition to the above, the Group also participates with a percentage of 70% in the Electronic Ticket Service Provider Societe Anonyme - HELLAS SMARTICKET S.A., which undertook from the Athens Urban Transport Organization S.A. (OASA), the Partnership Agreement for the “Study, Financing, Installation,
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Operational Support, Maintenance and Technical Management of a Unified, Automatic Toll Collection System for the OASA Group of companies based on a PPP scheme” . The term of the concession has been set at 10 years after the construction period.
The Group participates through the sub-Group TERNA ENERGY:
with a percentage of 100%, via the subsidiary TERNA ENERGY in the company AEIFORIKI EPIRUS S.M.S.A.S.P., in the operation of the Waste Management Unit of Epirus with a maximum annual capacity of 105,000tn, the operation of which started on 27.03.2019. The duration of the Concession has been set for 27 years.
with a percentage of 70% in the Joint Venture TERNA ENERGY - INDIGITAL - AMCO with which it signed a contract for the project "Digital Transformation, Telematics, and the Unified Automated Collection System for Thessaloniki (ACST)" The total budget of the project amounts to 30 mn euros plus VAT, whereas the commencement of works has been scheduled for the year 2023 and
with a percentage of 100% in PERIVALLONTIIKI OF PELOPONNESE S.M.S.A. (ENVIRONMENTAL PELOPONNESE) , which has undertaken the PPP project "Integrated Waste Management of Peloponnese" . The total duration of the contract is 28 years and includes the two-year construction period and the 26-year operation period. The amount of the investment amounts to 152 mn euros, of which 62.5 mn euros will derive from an NSRF subsidy.
At the same time, the Group participates in the tender process of emblematic concession projects such as the Attica Road, the Submarine Link Salamina - Perama, Kalamata airport, as well as various Public and Private Partnerships (PPPs) for infrastructure projects and building projects throughout Greece. The successful initiation of these projects will contribute to the dynamic development of the Greek economy through the high multiplier effect on GDP.
Apart from the above, at the same time the Management continues to pursue new investments for the expansion of the Group's business activity in Greece and abroad, by constantly monitoring the developments in the Greek economy, collaborating with financial agents and expert analysts of the international markets.
The Group confirms its strategic decision to invest dynamically in the Concessions segment and in the field of PPPs, while creating satisfactory earnings and returns for its shareholders.
Taking into consideration the above, the prospects of the concessions segment of GEK TERNA Group for the year 2023 and for the following years are positive, despite the difficult period that the global economy is going through.
In the Real Estate Operating Segment:
GEK TERNA Group is also engaged in real estate development, management and sale with a broad portfolio valued at 123.8 mn euros in Greece, Bulgaria, and Romania, including business centers, industrial parks, entertainment parks, residential properties, hotels, etc. At the same time, the Group examines alternative scenarios for the exploitation of a part of the existing investments and wherever it deems appropriate, it will proceed into new investments.
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In the Quarry/Industry Operating Segment:
The Group is also involved in extracting and processing whitewash and subsequent production of magnesium products through the subsidiary company TERNA LEFKOLITHI I.C.S.A., mainly focusing on export related activities ( www.ternamag.com ).
Despite the negative results, the operating result (EBIT) in the current financial year is improved compared to the previous financial year in the industry segment, the company by having already restructured its operational activities in order to reduce production cost, estimates that the industrial sector will become a profitable business in the future.
F. Alternative Performance Measurement Indicators (“APMI”)
(In the context of applying the Guidelines “Alternative Performance Measures” of the European Securities and Markets Authority (ESMA/2015/1415el) which are applied from 3rd of July 2016 in the Alternative Performance Measures Indicators [APMI])
The Group utilizes Alternative Performance Measurement Indicators ("APMI") in its financial, operational, and strategic planning decisions, as well as in evaluating and publishing its performance. These APMI serves to better understand the Group’s financial and operating results as well as its financial position. Alternative indicators should always be considered in conjunction with the financial results prepared in accordance with IFRSs and in no case should they replace them.
The following indicators are used when describing the Group's performance by sector:
A. ‘’Net Debt/(Surplus)’’
It