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GEK TERNA SOCIETE ANONYME
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 2023
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
[IMAGE]
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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 for the period from January 1 st 2023 to December 31 st 2023, 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, 29th April 2024
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 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
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II. ANNUAL MANAGEMENT REPORT OF THE BOARD OF DIRECTORS FOR THE FINANCIAL YEAR 2023 ON THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
Dear Shareholders,
Pursuant to the provisions of Law 4548/2018 and Law 3556/2007 article 4 paragraph 2c, 6, 7 and 8, of article 2 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. 2023 to 31.12. 2023.
This report contains financial and non‐financial information regarding GEK TERNA Group, for the financial year 2023 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 2024 and records significant transactions between the Company and its related parties.
A. Financial Developments and Performance for the Year 2023
Despite the ongoing geopolitical uncertainties and high inflation in 2023, along with the subsequent strict monetary policy, the Greek economy maintained a significant portion of the developmental momentum from the previous year, but at a milder rate compared to the rates of the post-pandemic period of the previous year. As a result, the real GDP in 2023 strengthened by 2% on an annual basis (compared to 5.9% in 2022), surpassing the European average by a considerable margin (estimated increase of 0.5%). It is worth noting that the growth rate exceeds the initial estimates of the Greek government's budget for 2023, which set the bar at 1.8%, indicative of the resilience and dynamism of the economy.
In terms of components contributing to the GDP growth in 2023, significant factors included: a) investments, mainly due to the construction activity, b) the increase in exports, which was supported by the strong impact of tourism, c) the increase in consumption, as a result of increased wages and pensions, and d) the reduction of energy prices.
On the inflation front, the downward trend that started at the end of 2022 continued mainly as a result of the significant decline in international energy prices. Specifically, the Harmonized Consumer Price Index (CIP) decreased to 4.2% in 2023 from 9.3% in 2022, lower than the corresponding average of 5.4% in the Eurozone according to the estimates of the Bank of Greece, for the period 2024 2025, it is expected to decrease to 2.3% and 2% respectively.
In the fiscal sector, Greece recorded a primary surplus of 1.1% of GDP for 2023, compared to initial estimates of 0.7% for the year, in contrast to 0.1% in 2022, with the main factor being the rational management of parameters positively affecting its course.
A significant event for the Greek economy in 2023 was the upgrade of the country's credit rating, which returned to investment grade after 13 years. Thus, during the second half of the year, credit rating agencies S and P (BBB-), Fitch (BBB-), DBRS (BBB low), and Scope (BBB-) upgraded the credit rating of the Greek State in the investment category. As a result of this upgrade, the yields of Greek government
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
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bonds have reduced borrowing costs compared to other eurozone countries, and at the same time, investment activity has increased due to lower interest rates.
The Greek economy is expected to maintain a growth rate in the coming years higher than the European average, with the latest estimates from the Bank of Greece aiming for GDP growth of 2.3% for 2024 and 2.5% for 2025 (compared to 0.8%-1.5% for the eurozone according to the ECB). Key driving forces of the economy in the coming years are expected to continue to be investments, exports, and private consumption.
Investments in the coming years are expected to increase significantly due to the fact that Greece is among the leaders in the EU in terms of absorbing funds from the Recovery and Resilience Mechanism, which provide a significant fiscal stimulus to the economy, having received 41% of the available funds (15 bn euros, of which 7.7 bn euros in grants and 7.3 bn euros in low-interest loans) after completing the agreed goals/milestones of its program. Finally, it should be noted that after the final revision of the national recovery and resilience plan, new investment projects have been incorporated to absorb additional funds from the European program Repower EU, totaling 5.8 bn euros, bringing the total available funds to 36 bn euros, of which 18.2 bn euros for grants and 17.7 euros bn for loans.
It should be noted that the moderation of inflation in food items has not directly followed the general inflation index, exerting significant pressure on households' disposable income. However, all indications suggest that this particular inflation will also trend downwards, allowing for greater disposable income to be available for increased consumption.
The European Central Bank, as part of its efforts to further reduce inflation, continues to implement measures to restrict liquidity, maintaining elevated interest rates, resulting in an increase in financial costs. Current indications from the ECB suggest that within 2024, it will make the first reduction in interest rates, without ruling out additional reductions, as long as the level of inflation continues to moderate. The anticipated decision by the ECB will have a direct impact on the growth rates of eurozone economies.
The potential deterioration of international trade conditions due to the ongoing hostilities in Ukraine, as well as a possible escalation of geopolitical tensions in the Middle East and the Red Sea, through which a significant portion of global trade passes, could lead to a slowdown in growth and weaken the GDP of the Greek economy.
Despite the uncertainties stemming from structural weaknesses in the Greek economy (high public debt, high current account deficits), adverse geopolitical developments and the existence of extreme weather events, the prospects for the Greek economy remain positive in the medium term due to significant projects that are implemented, with a leading role played by: a) Increased investments for i) the construction or improvement of infrastructure, ii) the production of clean electricity through renewable energy sources, iii) the increase of energy storage capacity, and iv) the development of upgraded tourist accommodations, allowing Greece to leverage its comparative advantages over other countries (geographical location, climatic conditions, high level of education of the workforce), b) the increase in exports, which was also supported by the strong impact of tourism, c) the reduction of energy prices and d) the increase in consumption, as a result of rising wages and pensions.
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
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
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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 segments of Renewable Energy Sources, Concessions and Self/Co-financed projects, 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 2023 based on the International Financial Reporting Standards compared to the corresponding period of 2022, are as follows:
Revenues from third parties from continuing operations amounted to 3,499.2 mn euros, compared 3,938.2 mn euros in 2022 posting a decrease of 439.0 mn euros, due to the decrease in revenue of the Electricity Production Segment from Thermal Energy Sources Energy Sales, as a result of the moderation of energy prices for 2023.
The Adjusted EBITDA (EBITDA from continuing operations plus non-cash results included therein) amounted to 585.5 mn euros in 2023 against 661.8 mn euros in the corresponding period of 2022, posting a decrease by 76.3 mn euros, which is mainly due to the reduction in the results of the Electricity Production Segment from Thermal Energy Sources – Energy Sales.
Operating Results before interest and taxes (EBIT) from continuing operations amounted to 393.2 mn euros compared to 415.8 mn euros in the corresponding period of 2022 and are decreased for the reasons mentioned above.
Earnings before taxes from continuing operations amounted to 268.5 mn euros, against 243.3 mn euros in the corresponding period of 2022, and the difference is mainly attributed to the increase in profits: a) of the Construction Segment, b) of the Electricity Production Segment from Renewable Energy Sources and c) of the Concession Self/Co-financed projects segment, despite the decrease in profits of the Electricity Production Segment from Thermal Energy Sources - Energy Sales.
It is noted that the results of the current period include events characterized as non-operating results, which are as follows:
a) a loss of 5.6 mn euros from the decrease in the fair value of the embedded derivative, compared to a loss of 76.3 mn euros for the corresponding period of 2022, which was mainly recognized in the context of the operation of the Concession – Self/Co-financed projects Segment,
b) a gain of 20.5 mn euros from the valuation of forward contracts for the purchase and sale of Electricity and Natural Gas, against a loss of 1.8 mn euros for the corresponding period of 2022, in the Electricity Production Segment from Thermal Energy Sources - Energy Sales and
c) a gain of 4 mn euros from the valuation of other investments, against a profit of 21.7 mn euros for the corresponding period of 2022.
The valuations of interest rate swap contracts and the embedded derivative of the Concessions - Self/Co-financed projects Segment, which are recognized in accordance with the provisions of the IFRS in each reporting period, are determined taking into account, among other factors, the corresponding changes in the 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 these valuations will not have any substantial impact on the Operating results, Cash Flows and Net Position of the Group
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
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respectively, given that the offsetting amounts have been calculated at fixed prices for the entire duration of the concessions.
Earnings after taxes from continuing operations amounted to 187.3 mn euros, against 177.3 mn euros in the respective period of 2022 , of which, the earnings that are attributed to the shareholders of the Parent company stood at 147.8 mn euros for the year 2023 compared to 136.5 mn euros in the respective period of 2022.
Earnings after taxes from continuing operations without the effect of the above non-operating items, amounted to 172.5 mn euros for the year 2023 compared to 215.1 mn euros in the respective period of 2022, of which 133.3 mn euros are the ‘’adjusted’’ earnings attributed to the shareholders of the Parent company, compared to 174.4 mn euros in the respective period of 2022.
Total Earnings attributed to the Shareholders of the Parent company amounted to 137.9 mn euros in 2023, compared to 273.5 mn euros in the respective period in 2022, with a significant portion of the difference coming from the increase in the liability arising from the revaluations in the interest rate swap contracts, due to the future gradual normalization of interest rates, recorded in Other Comprehensive Income.
The Net Debt of the Group stood on 31.12. 2023 at 1,751.7 mn euros, compared to 1,501.6 mn euros on 31.12. 2022 posting an increase by 250.1 mn euros.
Investment expenditures for the year 2023 settled at 194.8 mn euros, compared to 338.4 mn euros in the respective period of 2022 and almost the entire amount has been spent on the operating segment of Renewable Energy Sources.
The Total Assets of the Group on 31.12. 2023 stood at 6,054 mn euros, compared to 5,978 mn euros on 31.12. 2022.
In the section “B Significant Events for the Financial Year 2023” 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 2023
During the financial year of 2023 the following significant events took place:
On 09.01.2023, was registered in the General Commercial Registry (GEMI) with Registration Number 3409259, the decision numbered 226/09.01.2023 of the G.E.M.I. Service approving the modification of Articles 1 paragraph 1 and 3 paragraph 2 case (iii) of the articles of association of the Limited Company named CASINO OF WIDE SPECTRUM SOCIETE ANONYME COMPANY," with distinctive title EKAZ HELLINIKON S.A. (EKAZ) and G.E.M.I. number 163658901000, according to the decision of the Extraordinary General Meeting of Shareholders dated 09.01.2023. Following the above, the name of the company was formed as follows: INTEGRATED RESORT COMPLEX HELLINIKON SOCIETE ANONYME, and with the distinctive title as follows: IRC HELLINIKON S.A.
With the decision No. 3/26.01.2023, the Hellenic Gaming Commission (HGC) approved the change of the conveyor technical experience in IRC HELLINIKON, namely from HR ATLANTIC CITY LLC.
On 04.02.2023, the subsidiary TERNA S.A. signed a contract with BLUE IRIS INVESTMENTS S.M.S.A. for the construction of the project "5-Star Luxury Resort in Kalo Livadi Mykonos" with a budget of
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
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78.6 mn euros. Additionally, on October 31, 2023, a contract for supplementary works amounting to 6.5 mn euros was signed, bringing the total budget to 85.1 mn euros.
On 10.02.2023, the subsidiary TERNA ENERGY S.A. acquired all the corporate shares of the company ANAX PC, which was renamed to TERNA ENERGY SAPPON PC, and which is developing a Photovoltaic Station with a capacity of 246.35 MW in the wider area of the Evros prefecture.
On 16.03.2023, the joint venture TERNA - EKTER, in which the subsidiary TERNA S.A. participates with a 70% stake, in the construction of the project "Ionian Center - Creation of a Culture and Youth Center," the contract for which was signed on 11.01.2023 by TERNA S.A., with a budget of 29.4 mn euros and a construction duration of 27 months.
On 31.03.2023, the joint venture TERNA - INTRAKAT, in which the subsidiary TERNA S.A. participates with a 65% stake, signed a contract with the Ministry of Citizen Protection for the construction of the project "Construction of Artificial Barrier and Associated Works, along the Methori E/T, in the area of Psathades Didymoteicho until Kornofolia Soufli, in the Regional Unit of Evros," with a budget of 78 mn euros and a construction duration of 14 months.
On 06.04.2023, THERMOELECTRIC KOMOTINI S.A., in which GEK TERNA jointly participates with the MOTOR OIL Group with a 50% stake, signed a program for 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 a total installed capacity of 877 MW, located in the Industrial Area of Komotini.
On 21.04.2023, the company PASIFAI ODOS S.A., in which GEK TERNA participates with a 55% stake, undertook the project "Northern Road Axis of Crete (BOAK): Study, Construction, Financing, Operation and Maintenance of Hersonissos - Neapolis, with PPP." The duration of the concession is 30 years, of which 4 years refer to the construction period and 26 years to the operation period.
Additionally, the joint venture TERNA S.A. - AKTOR S.A. - INTRAKAT VOAK PPP, in which the subsidiary company TERNA S.A. participates with a 55% stake, signed a contract with PASIFAI ODOS S.A. for the project "Northern Road Axis of Crete (BOAK): Study, Construction, Financing, Operation and Maintenance of Hersonissos - Neapolis, with PPP," with a contract value of 240.4 mn euros.
On 21.04.2023, the subsidiary TERNA S.A. signed a contract with PUMPED STORAGE I S.M.S.A for the construction of the "Amfilochia Pumped Storage Electric Station" with a capacity of 680 MW. This project involves Road Construction and Tunnel Projects for the Amfilochia Pumped Storage Project, with a budget of 587.3 mn euros. This agreement constitutes an extension of the existing contract for preliminary works signed on 10.11.2022, with a budget of 36.3 mn euros. The total budget for the project amounts to 623.58 mn euros.
On 21.04.2023, the subsidiary TERNA ENERGY S.A. signed a contract with OASA S.A. for the construction of the project "Procurement, Installation, Testing, Setting to operation, Maintenance and Technical Support of a Unified, Automatic Toll Collection System Equipment (ATCSE) of the extension of Metro Line 3 to Piraeus and of the Tram Extension to Piraeus", with a budget of 6.6 mn euros.
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
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On 28.04.2023, it was announced that following the annual audit carried out by the Nominations Committee, it was confirmed that on the date of the audit, the members of the Board of Directors and of the Committees had met the individual criteria set by the Suitability Policy, i.e. adequacy of knowledge and skills, guarantee of ethics and reputation, absence of conflict of interest, independence of judgement, and availability of sufficient time. Especially for the independent members of the Board of Directors and Committees (including Mr. Angelos Tagmatarchis, third person/non-member of the Board of Directors and member of the Audit Committee) the fulfilment of the independence criteria of Article 9 of Law 4706/2020 was confirmed, with the exception of Mr. Apostolos Tamvakakis, for whom the Committee found that he had ceased to meet the independence criteria, as he had completed nine (9) years as member of the Company's Board of Directors and became a non-executive member of the Board of Directors, retaining the position of Vice Chairman and he was replaced in the position of Chief Independent Director by Mr. Spyridon Capralos.
Following the above, the composition of the Board of Directors of "GEK TERNA S.A." was formulated as follows:
1. Peristeris George, Chairman and Chief Executive Officer, Executive Member
2. Tamvakakis Apostolos, Vice Chairman of BoD, Non-executive Member
3. Gourzis Michail, Vice Chairman of BoD, Executive Member
4. Lazaridou Penelope, Executive Director, Executive Member
5. Benopoulos Aggelos, Executive Director, Executive Member
6. Antonakos Dimitrios, Executive Member
7. Lamprou Konstantinos, Executive Member
8. Moustakas Emmanuel, Executive Member
9. Souretis Petros, Executive Member
10. Afentoulis Dimitrios, Non-Executive Member
11. Apkarian Gagik, Independent Non-Executive Member
12. Delikoura Aikaterini, Independent Non-Executive Member
13. Capralos Spyridon, Independent Non-Executive member, Chief Independent Director
14. Skordas Athanasios, Independent Non-Executive Member
15. Staikou Sophia, Independent Non-Executive Member
Also, the Board of Directors decided after the loss of the status of independent member by Mr. Tamvakakis, the Nominations Committee was reconstituted into a body and Mr. Spyridon Capralos was elected as its Chairman with Ms. Delikouras, Mr. Apkarian, and Mr. Tamvakakis as its members.
On 02.05.2023, GEK TERNA sold and transferred for a price of 12.2 mn euros to the company named SHRE/SHRI L.L.C., a member of the HARD ROCK Group, all the issued shares of the company named MGE HELLINIKON B.V., which were owned by GEK TERNA. MGE HELLINIKON B.V. participates with a percentage of 51% in the share capital of IRC HELLINIKON S.A. which has signed the Concession Agreement and has undertaken the project of developing and operating a wide range of casinos in the Hellinikon Metropolitan Area. The above transfer took place after receiving the relevant approvals from the Gaming Supervision and Control Committee and following the
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(Amounts in thousands Euro, unless otherwise stated)
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transaction, GEK TERNA owns (directly and indirectly) a 49% stake in IRC HELLINIKON S.A. All construction works will be carried out by TERNA S.A., a 100% subsidiary of the GEK TERNA Group.
On 17.05.2023, the subsidiary company of the Group, ΤΕRΝΑ ENERGY S.A. jointly with the company GRID TELECOM SINGLE MEMBER SOCIETE ANONYME established the company under the name TERNA FIBER SPECIAL PURPOSE SOCIETE ANONYME COMPANY. The company is a special purpose company for the execution of the Partnership Agreement that will be signed between the Greek State through the Minister of Digital Governance (hereinafter "the Contracting Authority"), the Company and the founders - initial shareholders of the Company as third parties, for the execution of the "ULTRA FAST BROADBAND infrastructures through PPP" project for Geographical Zones 2, 4, 5 and 6, as referred to in the Invitation to Expression of Interest and in the Issue of Invitation to Submit Binding Offers.
On 19.05.2023, the joint venture TERNA S.A. - AKTOR S.A. - METKA S.A., in which the subsidiary TERNA S.A. participates with a percentage of 40%, signed a contract with the MUNICIPALITY OF ATHENS for the construction of the project "Construction of the New Football Stadium of Panathinaikos in Votanikos", amounting to 96.8 mn euros with a construction duration of 36 months.
On 24.05.2023, the Board of Directors of the subsidiary company TERNA ENERGY, decided the increase of the Share Capital of the subsidiary by the amount of Six Hundred Seventy Five thousand euros (675,000.00 euros) by issuing Two Million Two Hundred Fifty Thousand (2,250,000) new common registered shares with voting rights, with a nominal value of thirty euro cents (0.30 euros) per share, via the capitalization of share premium reserves and their free distribution to Executive Members of the Board of Directors and senior management of the subsidiary, in accordance with the approved Bonus Shares Distribution Scheme. Prior to that, on January 18, 2023 the Board of Directors of the subsidiary had decided the increase of the Share Capital by the amount of Three Hundred Sixty thousand euro (360,000.00 euros) by issuing One Million Two Hundred Thousand (1,200,000) new common registered shares with voting rights, with a nominal value of thirty euro cents (0.30 euros) per share, via the capitalization of share premium reserves. These decisions are related to the achievement of targets representing in total 90% of all the shares included in the Bonus Shares Distribution Scheme.
On 31.05.2023, the Joint Venture TERNA S.A. - FOTAGONLED S.A., in which the subsidiary TERNA S.A. participates with a 50% stake, signed a contract with the Municipality of Ioannina for the implementation of the project "Provision of Energy Efficiency Upgrade Services for the road and urban lighting system of the Municipality of Ioannina", with a budget of 15.3 mn euros and a construction duration of 12 months.
On 20.06.2023, the Ordinary General Meeting of Shareholders of GEK TERNA was held, in which 150 Shareholders, holders of 54,075,651 shares and voting rights, namely 56.08% of the Share Capital, were legally present.
The decisions of the Ordinary General Meeting for the financial year 01.01 31.12.2022 were the following:
1. Approval of the Financial Statements
2. Approval of the Annual Report of the Audit Committee
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
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3. Announcement of the election of the new executive member of the Board of Directors, Mr. Petros Souretis
4. Submission of the report of the independent members of the Board of Directors
5. Approval of the overall administration and management for the year 2022 by the members of the Board of Directors
6. Release of the Chartered Auditor Accountant from any responsibility for compensation from the exercise of the respective duties
7. Approval of the Remuneration Report of the members of the Board of Directors for the year 2022
8. Approval of the new Remuneration Policy for the period 2023 – 2027
9. Election of an auditing company for the audit of the Financial Statements for the year 2023
10. Election of a new four-member Audit Committee with a two-year term
11. Decision to increase the share capital of the Company by the amount of 20,684,658.20 euros by capitalizing part of the special share premium reserve, through an increase in the nominal value per share from 0.57 euros to 0.77 euros, and also with a simultaneous reduction of the share capital by the amount of 20,684,658.20 euro and a corresponding reduction of the nominal value per share from 0.77 euros to 0.57 euroS and the return of the amount of the reduction, 0.20 euros per share, to the Company’s Shareholders.
The Ordinary General Meeting of the Company's Shareholders on 20.06.2023 elected the following Audit Committee for a two-year term, automatically extended until the first Ordinary General Meeting after the end of its term:
- Spyridon Capralos, independent non-executive member of BoD,
- Apostolos Tamvakakis, non-executive member of BoD,
- Athanasios Skordas, independent non-executive member of BoD,
- Aggelos Tagmatarchis, third party, non-member of BoD who meets the independence conditions of article 9 of law 4706/2020.
The Audit Committee, during its meeting on June 20, 2023, was constituted into body with Mr. Spyridon Capralos, an independent non-executive member of the BoD, as Chairman.
On 30.06.2023, the joint venture TERNA S.A. P and C DEVELOPMENT S.A., in which the Subsidiary TERNA S.A. participates with a percentage of 50%, signed a contract with the company AMFIKTYONIES S.A. for the construction of the "Exploitation of the Panhellenic Exhibition area of Lamia" project, amounting to 38.2 mn euros with a construction duration of 32 months.
On 03.07.2023, the subsidiary TERNA S.A. signed a contract with FOIVI ENERGY S.P.E. S.A. for the construction of the project "Study, Civil Engineering Works, Procurement (except PV Panels), Transport, Installation, and Commissioning of one (1) Photovoltaic (PV) Station, with a total nominal power of 550 MW, within Lignitic Center of Western Macedonia, in the location "PPC Ptolemaida Mine" of the Municipalities of Eordaia and Kozani, of the Region of Western Macedonia and Projects of Connecting it to the System", amounting to 178.1 mn euros.
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On 04.07.2023, the Board of Directors of subsidiary GEK TERNA CONCESSIONS S.M.S.A. approved a Share Capital Increase of the company THERMOELECTRIC KOMOTINI S.A. in which it participates with 50%, for the amount of 24 mn euros, paying 12 mn euros. The remaining 50% was covered by MOTOR OIL S.A.
The share capital increase of THERMOELECTRIC KOMOTINI S.A., the granted Bond Loans by the Shareholders for the amount of 102.74 mn euros, as well as the already drawn-down amounts of the Syndicated Bond Loan of 183.8 mn euros, will be used for the construction project "Combined Cycle Gas Turbine Station fueled by natural gas, with an installed capacity of 877 MW in VI.PE. Komotini" , with a budget of 375 mn euros. The commercial operation of the plant is expected within 2024.
On 12.07.2023, the subsidiary TERNA S.A. signed a Preliminary Share Transfer Agreement for the acquisition of 49.99% of the societe anonyme company AIGISTOS S.A., which concerns its construction objective, subject to the fulfillment of specific terms and conditions, such as the approval by the Commission of Competition, without reservation, conditions or limitations. On 28.12.2023 the acquisition of 49.99% of the shares of AIGISTOS S.A. by the subsidiary TERNA S.A. was completed.
On 02.08.2023, GEK TERNA S.A. announced the decision of the Board of Directors concerning the election of the independent non-executive member of the Board of Directors Mr. Spyridon Kapralos, as Vice Chairman of the Board of Directors and the appointment of the executive member of the Board of Directors Mr. Petros Souretis, as Executive Director of the Company, while Mr. Dimitrios Antonakos became non-executive member of the Board of Directors, remaining at the same time Regulatory Compliance Officer and Risk Management Officer of the Company.
Following these changes, the new composition of the Board of Directors of GEK TERNA S.A. is as follows:
1) Peristeris George , Chairman and Chief Executive Officer, Executive Member
2) Capralos Spyridon, Vice Chairman, Independent Non-Executive member, Chief
Independent Director
3) Tamvakakis Apostolos , Vice Chairman, Non-Executive Member,
4) Gourzis Michail , Executive Member
5) Lazaridou Penelope, Executive Director, Executive Member
6) Benopoulos Aggelos, Executive Director, Executive Member
7) Souretis Petros, Executive Director, Executive Member
8) Lamprou Konstantinos, Executive Member
9) Moustakas Emmanuel, Executive Member
10) Antonakos Dimitrios, Non-Executive Member
11) Afentoulis Dimitrios, Non-Executive Member
12) Delikoura Aikaterini, Independent Non-Executive Member
13) Skordas Athanasios, Independent Non-Executive Member
14) Staikou Sophia, Independent Non-Executive Member
15) Apkarian Gagik Independent Non-Executive Member
Additionally, the Board of Directors decided to establish an Executive Committee, composed of the CEO of the Company, Mr. George Peristeris, the executive members of the Board of Directors,
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Mr. Emmanuel Moustakas, Aggelos Benopoulos, Petros Souretis, and Ms. Penelope Lazaridou, as well as Mr. George Perdikaris, Management Consultant, with administrative and strategic implementation responsibilities for the Company.
Subsequently, the Board of Directors decided to streamline the Company's operations by merging the Nominating Committee and the Compensation Committee into a single committee. Additionally, the optional Committees that assist the Board of Directors in its work were reconstituted with the following composition:
NOMINATIONS AND REMUNERATION COMMITTEE
1. Capralos Spyridon , Chairman of the Committee
2. Tamvakakis Apostolos
3. Staikou Sophia
4. Delikoura Aikaterini
5. Skordas Athanasios
INVESTMENT COMMITTEE
1. Perdikaris George, non-member of the BoD, Chairman of the Committee
2. Lazaridou Penelope
3. Moustakas Emmanuel
4. Souretis Petros
5. Tamvakakis Apostolos
STRATEGIC PLANNING COMMITTEE
1. Peristeris Georgios, Chairman of the Committee
2. Perdikaris Georgios, (non-member of the BoD)
3. Capralos Spyridon
4. Moustakas Emmanuel
5. Tamvakakis Apostolos
6. Afentoulis Dimitrios
ESG COMMITTEE (ENVIRONMENT, SOCIETY, GOVERNANCE)
1. Staikou Sophia , Chairman of the Committee
2. Delikoura Aikaterini
3. Lamprou Konstantinos
4. Lazaridou Penelope
5. Chatziarseniou Dimitra, ( non-member of the BoD)
REGULATORY COMPLIANCE COMMITTEE
1. Skordas Athanasios, Chairman of the Committee
2. Delikoura Aikaterini
3. Antonakos Dimitrios
4. Chatziarseniou Dimitra, (non- member of the BoD)
Also, the Board of Directors decided to create the General Directorate of Corporate Activities, which will be headed by the new Executive Director Mr. Petros Souretis and which will govern the
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Real Estate Projects Development Division and the Division of Supervision / Operation of subsidiaries / holdings (except for subsidiaries with independent organizational structure such as TERNA ENERGY, TERNA, HERON, etc.), where the Digital Technology / IoT Segment, the Services Segment and the Mining Activities Segment will be included.
Also, due to the ever-expanding scope and importance of corporate social responsibility and sustainable development (ESG) issues as well as of strategic communication and public relations, the relevant Directorate was upgraded to a General Directorate of Corporate Relations and Sustainable Development, which be headed by the executive member of the Board of Directors Mr. Konstantinos Lambrou, and which include the Press Office, the Communication and Public Relations Department, which also include the Strategic Communication and Public Relations Department, which include the Digital and Social Media Department and the Department of Internal Communication, as well as the Corporate Social Responsibility and Sustainable Development Department.
On 07.08.2023, the subsidiary TERNA S.A. signed a Contract with ELEKTRA NORTHERN GREECE HOTELS S.A., for the construction of the project "Construction of a Hotel Unit of "ELEKTRA NORTHERN GREECE HOTELS S.A." at the junction of Tsimiski and Ethnikis Amynis streets", amounting to 20 mn euros.
On 07.08.2023, the subsidiary TERNA S.A. signed a Contract with EGNATIA ODOS S.A., for the construction of the project "Egnatia Odos: Operation and Maintenance of the Motorway in the Western Sector and on the Vertical Axis A29, year 2023 (no. 6073)" , amounting to 10 mn euros.
On 07.08.2023, the subsidiary TERNA S.A. signed a Contract with EGNATIA ODOS S.A., for the construction of the project "Egnatia Odos: Operation and Maintenance of the Motorway in the Western Sector and on the Vertical Axes A1, A25 and A23, year 2023 (no. 6074)", amounting to 7.5 mn euros.
On 09.08.2023, the subsidiary TERNA S.A. signed a Contract with the TECHNICAL CHAMBER OF GREECE, for the construction of the "Property Utilization through Consideration, TCoGE Ownership" project, amounting to 43.5 mn euros.
Subsequently, the company DI TERNA S.M.S.A.S.P. was established, to which the subsidiary TERNA S.A. assigned the Contract with the TECHNICAL CHAMBER OF GREECE, and on 16.11.2023 signed the construction contract with DI TERNA S.M.S.A.S.P. for the construction of the project “Construction of a new office building complex with two underground levels, green roof, and surrounding area” , amounting to 38.9 mn euros. The parent company GEK TERNA SA holds a 19% stake in this company.
On 29.08.2023, the payment of the capital return of 0.20 euro/share to the Company's shareholders commenced. The aforementioned capital return was approved by the Ordinary General Meeting of the Company's Shareholders on June 20, 2023.
At the end of August 2023, the installation of all Wind Turbines of the Group's Wind Park Complex in the area of Karystos and Kafirea with a total capacity of 327 MW was completed. This project is the largest project of TERNA ENERGY sub-Group in the field of renewable energy and Wind Energy in particular.
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On 12.09.2023, the subsidiary TERNA S.A. signed a Contract with ADMIE S.A., for the construction of the project “Study, Supply of Equipment and Installation for section A: “Y/S GIS 150kv/MT Folegandros and Milos” within the framework of the 4th Fase of interconnection of the Cyclades”, amounting to 40.9 mn euros.
On 14.09.2023, the Board of Directors of Hellenic Republic Asset Development Fund (HRADF) declared the GEK TERNA Group as Preferred Investor for the award of a service concession contract for the financing, operation, maintenance, and exploitation of the 70-km long Attica Motorway for a period of 25 years. The total price, based on the financial offer submitted by GEK TERNA in the relevant tender, amounts to 3.270 bn euros.
On 27.10.2023, the subsidiary TERNA S.A. signed a contract with TRANS ADRIATIC PIPELINE A.G. for the construction of the "TAPX1 Expansion - Construction Works (Greece)" project, amounting to 20 mn euros with a construction duration of 19 months. This is an expansion of the existing compression station in Kipoi, Evros.
On 21.12.2023, the merger through absorption of HERON II VOIOTIAS S.A. by HERON ENERGY S.A. was implemented, with GEK TERNA Group continuing to be the exclusive 100% shareholder.
On 21.12.2023, the subsidiary TERNA S.A. signed a contract with the Ministry of Culture for the construction of the "Conversion of the "SILO" building into a Museum of Marine Antiquities" project, amounting to 66.8 mn euros with a construction duration of 24 months.
On 22.12.2023, the subsidiary TERNA S.A. signed a contract with AMYNTEO SOLAR PARK NINE S.M.S.A. for the construction of the "Engineering, Procurement and Construction of the 449.98 MWp Oricheio Amyntaio Solar PV Plant" project, amounting to 133 mn euros with a construction duration of 22 months.
On 28.12.2023, the subsidiary TERNA S.A. signed a contract with THE GRID S.A. for the construction of the "Construction of a five-story complex of office buildings with three underground parking spaces on Heimaras 10-12, Amarousiou-Chalandriou and Gravia streets" project, amounting to 96.5 mn euros with and construction duration of 17 months.
Within 2023, the subsidiary TERNA S.A. signed new contracts of small value, as well as extensions of existing project execution contracts, amounting to 290 mn euros.
Key Financial Performance of the Operating Segments for the Year 2023
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
TERNA S.A., the construction arm and fully owned by 100% subsidiary of GEK TERNA, is one of the strongest Greek construction companies, specializing in complex and demanding infrastructure projects, by also being a partner that international groups select to work with, possessing at the same
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time experience inside and outside Greece. TERNA also generates significant synergies with the other segments of the Group, and particularly in concessions and energy.
Revenues from construction activities increased significantly, while the construction backlog has been maintained at high levels, reaching approximately 2.8 bn euros on 31.12.2023. It should be noted that the outstanding balance as of 31.12.2023 towards third parties does not include the cross-segmental outstanding item of 0.6 bn euros, which concerns the construction works for the implementation of Amfilochia Pumped Storage project. Furthermore, the Group is awaiting the signing of contracts for new projects for which it has been qualified, amounting to 1.9 bn euros, of which 0.2 bn euros concern the execution of public constructions, 0.1 bn euros concern the execution of private constructions and 1.6 bn euros concern the Group investments (Egnatia, IRC HELLINIKON S.A. etc.).
Turnover of the Construction Operating Segment settled at 1,413.3 mn euros compared to 1,024.2 mn euros in the corresponding period of 2022 enhanced by 38.0%. The increase in turnover was mainly due to the increase in construction activity in public and private infrastructure projects and the implementation of the Group's investment plan, such as the construction of the new natural gas-fired electric energy production unit at the new Heraklion International Airport in Crete, the construction of wind farms, as well as waste management projects and other facilities.
Adjusted EBITDA (EBITDA plus non-cash results included therein) amounted to 136.6 mn euros compared to 80.6 mn euros in the respective period of 2022 higher by 69.5%, due to the increase in construction revenue and the improvement in the profit margin of ongoing projects.
Operating Results before interest and taxes (EBIT) amounted to 118.4 mn euros compared to 62.8 mn euros in the respective period of 2022 significantly increased by 88.5% due to the aforementioned reasons.
Earnings before taxes in 2023 amounted to 108.8 mn euros compared to 66.4 mn euros in the corresponding period of 2022.
Earnings after taxes in 2023, stood at 78.3 mn euros compared to 47.9 mn euros in the respective period of 2022.
Revenues of the Construction segment towards third parties arise from the operations: a) in Greece and Cyprus at percentage of 96% and b) in Balkan countries at percentage of 4%.
The Net Debt of the Construction Operating Segment stood at minus -86.9 mn euros approximately, compared to minus -120.7 mn euros on 31.12.2022.
The high backlog of 5.3 bn euros of construction works, the experience possessed in the execution and construction of major road, building and large-scale energy projects, as well as the established presence of the subsidiary TERNA S.A. in the markets in which it operates, combined with the positive growth prospects of the Greek economy, support the further improvement of the financial performance and the broader course of this operating segment within the Group.
Energy Production Operating Segment from RES
GEK TERNA Group, operating in the energy segment through the sub-Group TERNA ENERGY S.A. since the mid-1990s, is one of the leading players in the Renewable Energy Segment (RES).
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The shift to Renewable Energy Sources (RES) is confirmed worldwide, with the segment 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 sustainable development of the company, 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, is intensifying its efforts in order to further expand its presence in Poland and Bulgaria.
TERNA ENERGY Sub-Group, during 2023, continued the implementation of its investment plan with the construction of mature projects and the strengthening of its portfolio with additional mature projects from the existing portfolio and the addition of new ones at various stages. As part of this plan, the connection to the network of the wind park complex in Kafirea with a total power of 327 MW was completed during the year, with the project now being fully operational at the date of publication of the financial statements.
Furthermore, with regard to the long-term storage project with pumped storage technology in the area of Amfilochia (680 MW) which had already started by the end of 2022, it is noted that its construction work continues and is expected to be completed in about three years.
As of 31.12.2023, the sub-group TERNA ENERGY has almost 2,500 MW of capacity from RES electric energy production units, which are in operation, under construction or ready for construction in Greece, Central and Eastern Europe, including projects in various stages of maturity, the Group's portfolio approaches 12 GW.
Specifically, the sub-group's total installed capacity in Greece and abroad amounts to 1,223.8 MW.
Specifically in the energy segment, the installed capacity settled as follows:
TOTAL
GREECE
POLAND
BULGARIA
WIND PARKS
1,193.4
1,061.4
102
30
HYDROELECTRIC
17.8
17.8
PHOTOVOLTAIC
8.5
8.5
BIOMASS
4.1
4.1
TOTAL
1,223.8
1,091.8
102
30
Revenues from continuing operations during the year 2023 in the segment of Electricity Production from Renewable Energy Sources, amounted to 249.9 mn euros compared to 236.2 mn euros in the respective period of 2022, recording an increase of 5.8%. %. This increase is mainly due to the commissioning of the new wind farms in the area of Kafireas in Evia. The limited increase in sales was significantly impacted by the reduced wind power recorded during the first half of 2023.
Adjusted EBITDA (EBITDA from continuing operations plus non-cash results included therein) settled at 171.4 mn euros compared to 161.1 mn euros in the respective period of 2022, posting an increase of 6.4%.
Operating Results before interest and taxes (EBIT) from continuing operations amounted to 120.8 mn euros compared to 71.7 mn euros in the corresponding period of 2022 and are increased of 68.5%, mainly due to the reduced expense from the program distribution of free shares in the amount of 0.6 mn euros, against 48.8 mn euros of the previous year.
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Earnings before taxes amounted to 72.5 mn euros compared to 34.1 mn euros in the corresponding period of 2022 , 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 55.2 mn euros compared to 18.0 mn euros in the corresponding period of 2022 , positively impacted by the above reasons.
The investments of TERNA ENERGY sub-Group amounted to 218.4 mn euros in 2023, which includes the cross-segmental payment for the execution of works in the project "Amfilochia Pumped Storage Electric Energy Storage Station" amounting to 66.5 mn euros.
The continuing investment activity of TERNA ENERGY sub-Group in the field of Renewable Energy Sources (RES), an area of great investment interest on global scale as it aims to reduce air pollution, creates the conditions for an even stronger revenue flow and profitability on a stable long-term basis.
The Net Debt in the segment of Electricity Production from Renewable Energy Sources settled at approximately 855.8 mn euros compared to 668.3 mn euros on 31.12.2022.
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.A. and HERON II VOIOTIAS S.A.
The Group, in the context of its decision to increase its participation in the area of Thermal Energy Sources and Electricity Trading, completed within 2022 the implementation of the agreement dated on 12.07.2021 for the acquisition of the additional equity stakes of 50% and 75% in the companies HERON ENERGY S.A. and HERON II VOIOTIAS S.A., which operate two power plants with a total capacity of 588 MW, fueled by natural gas.
At the same time, for the rational management of the two companies, their merger was implemented on 21.12.2023, which was done by the absorption method of HERON II VOIOTIAS S.A. from HERON ENERGY S.A., with GEK TERNA Group continuing to be the exclusive 100% Shareholder.
In the Electric Energy Production segment, the Group managed to ensure the uninterrupted, competitive and flexible supply of its generation stations, successfully addressing the challenges arising from new market conditions. Those conditions included the volatility of international natural gas prices, the 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.
The total participation of the energy production units of the companies HERON ENERGY S.A. and HERON II VOIOTIAS S.A., with a total capacity of 588 MW, settled during 2023 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 1,719 GWh during year 2023.
In the Segment of Electricity Distribution to final consumers, the gradual normalization of energy prices helped to stabilize the market. The company HERON ENERGY S.A. managed to increase its market share
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to 10.8%. The company, within 2023, achieved its ranking among the top independent energy suppliers in terms of market share.
Revenues from continuing operations in the Electricity Production from Thermal Energy Sources Electric Energy Sales settled at 1,711.0 mn euros compared to 2,661.1 mn euros in 2022, posting a significant decrease of 35.7% that was mainly due to the following:
a) in the price decalcification of electricity sale prices following the reduction in the wholesale price of electricity (DAM), due to the significant reduction in Natural Gas prices in Europe and
b) the reduction in electricity demand during 2023, due to milder weather conditions, but also by measures to limit consumption by households and businesses.
Adjusted EBITDA (EBITDA plus non-cash results included therein) amounted to 131.8 mn euros compared to 335.5 mn euros in the corresponding period of 2022 and is significantly reduced for the aforementioned reasons.
Operating Results before interest and taxes (EBIT) from continuing operations amounted to 88.9 mn euros compared to 276.0 in the corresponding period of 2022 and is significant decreased for the aforementioned reasons.
Earnings before taxes amounted to 106.3 mn euros compared to 260.3 mn euros in the corresponding period of 2022.
Earnings after taxes amounted to 77.2 mn euros compared to 198.4 mn euros in the period of 2022.
The Group's investments in the segment of Electric Energy Production from Thermal Energy Sources amounted to 2.8 mn euros in 2023.
The Net Debt of the segment of Electricity Production from Thermal Energy Sources Electric Energy Sales amounted to approximately 50.4 mn euros compared to minus -6.2 mn euros on 31.12. 2022.
Concessions – Self or Jointly Financed Projects Operating Segment
In the Operating Segment of Concessions, the Group participates:
with a percentage of 100% in the Motorway Concession companies NEA ODOS SOCIETE ANONYME CONCESSION and CENTRAL GREECE MOTORWAY SOCIETE ANONYME CONCESSION,
with a percentage of 32.46% in the Concession Company of Kasteli Airport INTERNATIONAL AIRPORT HERAKLION CRETE SOCIETE ANONYME CONCESSION,
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,
with a percentage of 55% through the company PASIFAI ODOS S.A. in the construction of the project "Northern Road Axis of Crete (BOAK): Study, Construction, Financing, Operation and Maintenance of the Section Hersonissos - Neapoli, with PPP" . The duration of the concession is 30 years, of which 4 years refer to the construction period and 26 years to the operation period,
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with a percentage of 17% in the Motorway Concession Company OLYMPIA ODOS SOCIETE ANONYME CONCESSION,
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,
with a percentage of 35% through the company SARISA SUB-CONCESSION S.A. for the right to use, maintain, operate and exploit a multi-purpose station, in a part of the Philip II port of ORGANISATION KAVALA PORT S.A,
with a percentage of 100% in PERIVALLONTIKI OF PELOPONNESE S.M.S.A, which has undertaken in the Peloponnese Region the construction of PPP project "Integrated Waste Management of Peloponnese" , where in 2023 the Integrated Management Unit of Arcadia, the Waste Transfer Stations of Argolida and Corinthia and the Transitional Management Units of Messinia and Laconia were put into commercial operation,
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 and
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)".
Finally, the Group's business activity in the Car Parking Station Management and Operation Segment continued for 2023, and the number of car parking spaces attributed to the Group as a whole amounts to 2,171.
Revenues of the Concessions Operating Segment amounted to 227.5 mn euros compared to 202.0 mn euros in the corresponding period of 2022. The increase was mainly due to improved vehicle traffic at NEA ODOS and CENTRAL GREECE highways by 9.1%, compared to the corresponding period of 2022, as well as the increase in return on investment in the waste management of the Epirus and Peloponnese regions.
Adjusted EBITDA (EBITDA plus non-cash results included therein) settled at 164.8 mn euros compared to 111.7 mn euros in the corresponding period of 2022 recording an increase by 47.5%. This increase stems from the improved Turnover of the Segment and, as well as from increased compensation from loss of revenues of the concession companies, due to Public Liability Events, which are reported in Other Income.
Operating Results before interest and taxes (EBIT) amounted to 79.0 mn euros compared to 41.1 mn euros in corresponding period of 2022, posting an increase of 92.2% for the reasons mentioned above.
Earnings before taxes amounted to 16.2 mn euros compared to minus -80.8 mn euros in the corresponding period of 2022. The positive difference of 97 mn euros is mainly due to: a) the increased
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operating results of the period (before the effect of the results from derivative valuations), as above and b) in the change in fair value which comes mainly from subsidiary Concession company CENTRAL GREECE MOTORWAY S.A., both the embedded derivative and the Interest Rate Swaps, which amounted to minus -5.5 mn euros, compared to minus -74.7 mn euros in the corresponding period of 2022.
The fluctuations in the loan rates of the Greek State and the six-month Euribor, which respectively affect the valuations of derivatives, are mainly due to the volatility of interest rates at the European level, due to geopolitical developments, the energy crisis, and inflationary pressures. It should be noted that the changes in valuations do not have any substantial impact on the Operating results, Cash Flows and Equity of the Group respectively, since the amounts compensated have been calculated at constant prices for the entire duration of the concessions.
Earnings after taxes settled at 21.9 mn euros compared to minus -51.1 mn euros in the corresponding period of 2022. The change in the result from a loss to a profit is due to the improvement in the results from the segment's business on the one hand and to the improvement in the valuations of both the embedded derivative and the Interest Rate Swaps on the other hand.
The Net Debt of the Concessions Operating Segment amounted to approximately 603.7 mn euros compared to 618.8 mn euros on 31.12.2022.
Real Estate Operating Segment
GEK TERNA Group is active in the management and sale of real estate assets holding a broad portfolio of value of 127.2 mn euros in Greece, Bulgaria and Romania that includes shopping centers, industrial parks, 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 4.7 mn euros compared to 3.9 mn euros in the corresponding period of 2022.
Adjusted EBITDA (EBITDA plus non-cash results included therein) settled at 0.2 mn euros compared to negative -0.2 mn euros in the corresponding period of 2022.
Operating Results before interest and taxes (EBIT) settled at 7.3 mn euros compared to negative -0.9 mn euros in the corresponding period 2022. The significant increase in earnings was positively impacted by the Revaluation of fair value of investment properties, whose value increased significantly as a result of the demand for the development of upgraded tourist accommodation facilities.
Earnings before taxes stood at 3.2 mn euros compared to 2.9 mn euros in the corresponding period of 2022, affected by the positive valuation of the aforementioned increase in the value of investment properties and the negative valuation of a specific fixed asset of the segment.
Earnings after taxes settled at 1.4 mn euros compared to 2.6 mn euros in the corresponding period of 2022, due to the non-recurrence of profits from related companies in the segment, which existed in 2022.
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The Net Debt of the Real Estate Operating Segment amounted to approximately 84.4 mn euros compared to 83.3 mn euros on 31.12.2022 .
Industry/Quarry Operating Segment
The Group, via the fully owned by 100% subsidiary TERNA MAG S.A. (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, settled at 20.6 mn euros in 2023, compared to 18.7 mn euros in the corresponding period of 2022, posting an increase of 10.2%.
Adjusted EBITDA (EBITDA plus non-cash results included therein) settled at 1.2 mn euros during the year 2023, compared to 0.4 mn euros in the corresponding period of 2022. The above increase was mainly due to the increase in the selling price of products due to the quality upgrade of the sales mix, as well as due to the higher number of customers.
Operating Results before interest and taxes (EBIT) settled at minus -2.9 mn euros compared to minus -3.3 mn euros in the corresponding period of 2022. The positive difference was due to the reasons mentioned above.
Earnings before taxes settled at minus -13.6 mn euros compared to minus -17.2 mn euros in the corresponding period of 2022. The above results are significantly impacted by additional impairments of the value of the exploitation of the production factors (inventories, etc.), as a result of valuations for the future value of the segment, which are performed on a regular basis.
Earnings after taxes settled at minus -12.7 mn euros compared to minus -16.3 mn euros in the corresponding period of 2022.
The Net Debt of the Industry / Quarry Operating Segment amounted to approximately 115.1 mn euros compared to 106.1 mn euros on 31.12.2022.
Holding Operating Segment
Adjusted EBITDA (EBITDA plus the non-cash results) settled in 2023 at minus -13.1 mn euros compared to minus -12.4 mn euros in the corresponding period of 2022.
Operating Results before interest and taxes (EBIT) settled in 2023 at minus -14.7 mn euros compared to minus -15.7 mn euros in the corresponding period of 2022.
Earnings before taxes in 2023 settled at minus -21.5 mn euros compared to minus -6.6 mn euros in the corresponding period of 2022. This significant difference is due to the existence of reduced income of 4 mn euros from valuations of participations and other investments in 2023, compared to 21.7 mn in the corresponding period of 2022.
Earnings after taxes in 2023 settled at minus -30.5 mn euros compared to minus -6.3 mn euros in the corresponding period of 2022. The difference is due to the above-mentioned reasons, as well as to the significant increase in income tax, on the one hand, due to the existence of an intragroup tax gain which is eliminated in the Group's results and, on the other hand, to the write-off of tax advance claims for dividends distributed before 2013, as a result of the tax clarifications issued by the IAPR.
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The Net Debt of the Holding Operating Segment amounted to approximately 129.1 mn euros compared to 151.8 mn euros on 31.12.2022.
Intersegmental Transactions
During year 2023, Revenues of Intersegmental Transactions amounted to 131.6 mn euros compared to 210.6 mn euros in the corresponding period of 2022. The decrease in Revenues was mainly due to the lower intersegmental transactions in the segment of Electricity Production from Renewable Energy Sources and in the Concessions Self or Jointly Financed Projects Operating Segment for the construction of the Waste Management Units of the Peloponnese region.
Adjusted EBITDA (EBITDA plus non-cash results included therein) settled in 2023 at minus -7.6 mn euros compared to minus -15.0 mn euros in the corresponding period of 2022.
Operating Results before interest and taxes (EBIT) stood at minus -3.5 mn euros compared to minus -15.9 mn euros in the corresponding period of 2022.
Earnings before taxes settled at minus -3.3 mn euros compared to minus -15.8 mn euros in the corresponding period of 2022.
Earnings after taxes settled at minus -3.3 mn euros compared to minus -15.8 mn euros in the corresponding period of 2022.
C. Significant Events after the end of the period 01.01 – 31.12. 2023
From 01.01.2024 until the date of approval of the attached financial statements, the following important events took place:
On 12.01.2024, the Joint Venture TERNA S.A. INTRAKAT S.A., in which the subsidiary TERNA S.A. participates with a percentage of 50%, signed a contract with EGNATIA ODOS S.A., for the construction of the project "Egnatia Odos: Operation and Maintenance of the Motorway in the Western Sector and on the Vertical Axis A29, year 2023-2025 (code 6060)", amounting to 68.7 mn euros.
On 12.01.2024, the Joint Venture INTRAKAT S.A. TERNA S.A., in which the subsidiary TERNA S.A. participates with a percentage of 50%, signed a contract with EGNATIA ODOS S.A., for the construction of the project "Egnatia Odos: Operation and Maintenance of the Motorway in the Eastern Sector and on the Vertical Axes A1, A25 and A23, year 2023-2025 (code 6061)", amounting to 57.1 mn euros.
On 18.01.2024, the Company announced the successful completion of the private placement to selected institutional investors of 6,000,000 shares of the Company (i.e. 5.80% of the share capital) at a price of 13.20 euro per share.
On 25.01.2024 the subsidiary TERNA S.A. signed a Preliminary Share Transfer Agreement for the acquisition of 100% of the shares of the anonymous company P and C DEVELOPMENT, concerning its construction part, subject to the approval of the relevant acquisition from Competition Commission .
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On 13.02.2024, the Extraordinary General Meeting of Shareholders of GEK TERNA was held, in which 178 Shareholders, holders of 56,098,842 shares and voting rights, i.e. 58.78% of the Share Capital, legally attended .
The Extraordinary General Meeting of Shareholders adopted the following decisions:
1.
Approved the decision of the Board of Directors of 18.01.2024 regarding the definitive cessation of purchases of treasury shares under the treasury share purchase plan that was approved by the resolution of the Extraordinary General Meeting of the Company of 20.10.2022.
2.
Approved the increase of the Company's share capital, by the amount of 3,420,000 euros, by cash payment, through the issue of 6,000,000 common shares, with a nominal value of 0.57 euros each and with an offer price of 13.20 euros per share , and the exclusion of the preference right of the existing shareholders of the Company, in accordance with article 27 par.1 of Law 4548/2018, with the amount of 75,780,000 euros to be transferred to the special reserve of the Company from the issue of premium shares.
3.
Approved the cancellation of 6,000,000 treasury shares held by the Company, corresponding to 5.8% of the Company's share capital, and, consequently, the reduction of the Company's share capital by the amount of 3,420,000 euros.
4.
Approved the amendment of Article 5 par. 1 of the Company's Articles of Association as a consequence of the subjects 2 and 3.
5.
Approved the program for the purchase of treasury shares up to the completion of 10% of the Company's total shares, with a minimum purchase price of 0.57 euros and a maximum price of 40.00 euros per share, which will take place within a period of 24 months, i.e. no later than February 12, 2026, and authorized the Board of Directors of the Company to comply with all legal formalities related to the above approval.
6.
Approved the change of the name and the distinctive title of the Company and the amendment of article 1 of the Company's Articles of Association.
On 15.02.2024, with the decision of RAAEY, the subsidiary company TERNA ENERGY S.A. was selected as one of the shortlisted bidders of the second (b) Competitive Bidding Procedure for the granting of investment and operational support to Electricity Storage Stations in accordance with the provisions of article 143F of Law No. 4001/2011, of a capacity of 40 MW and a capacity of 80 MWh.
On 01.03.2024, following the decisions of the Extraordinary General Meeting of the Company's Shareholders held on 13.02.2024, the Decision of the Ministry of Development and - General Secretariat of Commerce No. 3230817/01.03.2024, by which the amendment of Article 5 of the Company's Articles of Association was approved following the increase and decrease of the share capital, as well as the Decision of the Ministry of Development - General Secretariat of Commerce No. 3230817/01.03.2024, by which the amendment of Article 1 of the Company's Articles of Association was approved regarding the change of the Company's name and distinctive title were registered in the General Commercial Registry (G.E.MI.) .
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On 07.03.2024, the subsidiary company TERNA ENERGY S.A. signed the first ever PPA agreement in Greece, for a period of 8 years with an option for 4 additional years, under which it will supply EYATH with 100% green energy of up to 100 GWh/year. The energy will come from wind and photovoltaic parks.
On 11.03.2024, 6,000,000 new common registered shares of the Company, with a nominal value of 0.57 euros each, were admitted for trading on the Main Market of the Athens Stock Exchange. The shares were issued as part of the increase of the Company's Share Capital by the amount of 3,420,000 euros, with the exclusion of the preference right of the existing shareholders, with cash payment and with an offering price of 13.20 euros, in accordance with the decision of the Extraordinary General Meeting of the Company's Shareholders of 13.02.2024. Also, on the same date, the trading of 6,000,000 treasury shares of the Company with a nominal value of 0.57 euros each ceased as they were delisted from the Athens Stock Exchange, with a consequent reduction of the Company's share capital by the amount of 3,420,000 euros, in implementation of the resolution of the Extraordinary General Meeting of Shareholders of the Company of 13.02.2024. The said admission of 6,000,000 new shares and the cancellation of 6,000,000 treasury shares were approved by the Listing and Market Operations Committee of the Athens Stock Exchange at its meeting on 06.03.2024. The total funds raised through the Increase, amounting to 79,200,000 euros, will be used to implement its investment program as reflected in its latest published financial statements and corporate presentation, as well as to undertake new projects within a period of 36 months. As a result of the above increase and decrease, the Company's share capital remained unchanged and amounts to a total of 58,951,275.87 euros and is divided into 103,423,291 common shares with voting rights, with a nominal value of 0.57 euros each.
Also, in implementation of the relevant decision of the Extraordinary General Meeting of the Company's Shareholders held on 13.02.2024, the Company's name on the Athens Stock Exchange was changed to "GEK TERNA S.A." and its distinctive title to "GEK TERNA" as of 11.03.2024. For international transactions, the above name is attributed to "GEK TERNA S.A." and its distinctive title to "GEK TERNA".
On 15.03.2024, following relevant publications and a relevant query of the Capital Market Commission and with the aim of officially informing the investing public, GEK TERNA S.A. and TERNA ENERGY S.A. announced that, as has been repeatedly mentioned by the Management of both companies in a series of official statements, TERNA ENERGY S.A. has been the recipient of significant interest from major international investors over the years. This interest is assessed on a case-by-case basis and if there is any development to be announced, GEK TERNA S.A. and TERNA ENERGY S.A., in the context of their consistent policy of transparent and responsible communication with the entire investment community, will proceed in a timely manner to inform the investment community.
On 19.03.2024, the RENCO - TERNA Joint Venture was established, in which the subsidiary TERNA S.A. participates with a percentage of 50% and is expected to sign a contract for the construction of the first Microsoft Data Center in Greece and specifically in Spata, Attica.
It is an industrial-type facility, consisting mainly of mechanical and electrical equipment for data storage and processing in the Cloud and is structured as an Equipment Building (ATH04 Building) and an Administration Building (Admin Block) accompanied by a number of supporting facilities
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and infrastructure in the surrounding area, while its design follows the LEED (Gold Grade) certification requirements. The project budget amounts to 79.6 mn and foresees the completion of the design, the construction and commissioning of Microsoft's first Data Center, with a total installed capacity of 19.2MW.
On 26.03.2024, GEK TERNA announced that it was declared as the temporary Contractor in the concession project "Study, Construction, Financing, Operation and Maintenance of the Northern Road Axis of Crete (BOAK) in the Chania - Heraklion section" .
The concession period is 35 years, of which up to five (5) years is the design-construction period. The total length of the Chania-Heraklion section is 187 km (including 30 km for the optional Kissamos-Chania section).
On 29.03.2024, GEK TERNA signed as the original shareholder and member of the company NEA EGNATIA ODOS SOCIETE ANONYME CONCESSION, the concession agreement regarding the right to finance, operate, maintain and exploit the Egnatia Odos motorway, as well as the three (3) roads perpendicular to it, for a period of 35 years, with the Greek State and the Hellenic Republic Asset Development Fund (HRADF) as contracting parties. The company named NEA EGNATIA ODOS SOCIETE ANONYME CONCESSION, which was established for the purposes of the concession contract, is owned by GEK TERNA S.A. with a 75% stake and EGIS PROJECTS S.A.S. with a 25% stake.
On 16.04.2024 the subsidiary TERNA S.A. signed a contract with PPC S.A for the lease of three (3) GE Gas Turbine Units, with a total delivered net power of 130MW to cover the additional power needs of the AES Linoperamaton of Crete, for a period of time until 31.12.2025.
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 which may have a prolonged and unforeseen term.
1) Financial Risks
The Group's activities expose it to various financial risks, including market risk (including foreign exchange risk, interest rate risk, and price fluctuation risk), credit risk and liquidity risk.
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.
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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 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 electric energy 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, with the exception of those for which necessary impairment is calculated, are of high credit quality.
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 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 the 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 the 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.
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Market risk analysis
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 sources 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 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 largest 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 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. 2023, 36.68% of the Group’s total debt bares fixed interest rate, 35.20% 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 28.12% of the Group’s loans bare floating rate based on the Euribor or wibor on a per case basis.
These loans are repaid either during the collection of the relevant state grants or through the operating cash flows from the Group's operations.
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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% ( 2022: +/-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.
2023
2022
20%
-20%
20%
-20%
Net earnings after income tax (from interest bearing liabilities)
(4,425)
4,425
(1,227)
1,227
Net earnings after income tax (from interest earning assets)
3,096
(3,096)
617
(617)
The Group is not exposed to other interest rate risks.
2) Risks arising from existing financial conditions prevailing in Greece and from the global economy
The performance of the Greek economy for the year 2023 was positive since the achieved GDP growth rate settled at 2% following another positive growth in 2022 (5.9%) and according to estimates of the Bank of Greece GDP growth is expected to settle at 2.3% in 2024 and at 2.5% in 2025.
To date, with the existing expectations for continuation of the energy crisis, given the duration and intensity of hostilities in Ukraine, no potential favorable outcome appears to be in sight for the near future. Therefore, the lower supply of natural gas from Russia to the countries of the European Union and, to a significant extent, the substitution of natural gas by liquefied natural gas (LNG), will continue to affect the prices of the generated electricity, and the prices of all products affected by the use of electricity. This is the case despite the efforts that have already been made by government authorities to normalize prices and minimize these problems. As a result of the above, inflation continues to affect the economic climate.
As a result of the above, inflation, based on the harmonized Consumer Price Index, settled for the entire European Union at 4.2% in 2023, in relation to 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 in the Eurozone for the period 2024-2025, is expected to settle at 2.3% and 2% 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’s efforts to control inflationary pressures with consecutive interest rate hikes, which in September 2023 set the interest rate level at 4% to reduce increased demand, which is seen as the cause of inflationary pressures, have not has yet produced the desired results in reducing the inflation rate. On the contrary, however, the increase in financial costs results in a significant reduction in the growth of certain European countries.
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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:
Failure to enhance competitiveness, so that the economy becomes export-oriented and addresses the current account deficit.
Delay in reducing the public debt level.
The maintenance of high borrowing rates, which leads borrowers to face difficulties in repaying installments of their mortgage loans for the first residence and the agricultural land.
The continued increase in the prices of consumer goods, which reduces the real disposable income and household purchasing power and deprives the ability to create savings for future investment.
The weakening of disposable income of citizens, mainly in the European Union, will result in a reduction of revenues from tourism.
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 for solving significant problems that require immediate actions and long-term planning (e.g., natural disasters, fires, climate change).
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) The upgrading of the investment grade regarding the creditworthiness of the Greek economy, which entails more inflows of investment capital with favorable lending terms required for investments, b) Investments with long-term yields in the form of Concessions and PPPs, c) Significant signed and pending construction contracts for execution, d) The increase in the share of electricity generated in the Greek economy using natural gas as fuel, as well as the market share in electricity trading, e) the increase of investments for the production of clean energy through RES and f) the increase in energy storage capacity.
3) Risks related to the impact of pandemic (COVID-19)
The experience gained in protecting the population from virus transmission, the mass vaccination programs initiated since 2021 and the provision of new medicines to the patients have reduced the severity of the risk as well as the percentage of cases, resulting that a possible appearance of a new virus within the same category is no longer considered a significant threat.
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4) Other Risks and Uncertainties
Consequences of the war in 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 in the immediate future 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, including the reduction of natural gas’ sold quantities.
It should be noted that the embargo against Russia did not provide the expected solution, resulting in the continuation of the war two years after its inception, with no estimation for an immediate resolution of the issues. At the same time, the generated electricity continues to be very expensive for the end consumer, fueling the existing inflation, in which the price of energy is one of the main factors in the cost of producing products.
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 not significant.
In the operational segment of Electric Energy 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.
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.
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.
Uncertainty due to hostilities in the Middle East
After the unprovoked attack by the Palestinian Islamist movement Hamas on October 7, 2023, in Israel, a counterattack by the Israeli army on the Gaza Strip was triggered, resulting in the loss of thousands of lives causing a humanitarian catastrophe for Gaza residents. In these hostilities, neighboring countries Lebanon and Yemen have also participated with the support of Iran, with the result that, among other things, problems have been created navigation and consequently in the transportation
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of goods. A possible direct involvement in the hostilities by Iran could further exacerbate the overall problems in the region and by extension in the global economy, indirectly affecting the Greek economy as well.
Despite this, the Group's prospects remain positive and not directly dependent on hostilities in the Middle East. However, due to the dynamics of hostilities, new risks may potentially arise. The Group's management, taking into account the existing uncertainty in the broader economic climate, seeks to assess any indirect consequences on the Group in a timely manner, in order to take necessary measures to minimize the consequences.
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.
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.
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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 .
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 3,499.2 mn euros is active in the following segments:
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 to third parties, which on 31.12.2023 amounted to 2.8 bn euros proximately, in which it does not include the sectoral outstanding item of 0.6 bn euros, related to construction works for the implementation of the Amfilochia Pumping Project. Furthermore, the Group expects to sign contracts for new projects for which it has been prequalified, amounting to 1.9 bn euros, of which 0.2 bn euros concern the execution of public projects, 0.1 bn euros concern the execution of private projects, and 1.6 bn euros concern projects related to Group investments (such as Egnatia, IRC Hellinikon, etc.).
The total installed capacity of the Group's RES projects in operation has settled at 1.223,8 ΜW on 31.12.2023.
The investment in the construction of the long-term storage project with pumped storage technology in the area of Amfilochia (680 MW) is expected to be completed in approximately three years.
As of December 31, 2023, the TERNA ENERGY sub-group owns almost 2,500 MW of capacity from renewable energy sources (RES) electric energy production units, which are either operational, under construction or ready for construction in Greece, Central and Eastern Europe including projects in various stages of development. The portfolio of the Group approaches 12 GW.
In the field of energy production using natural gas as fuel, the Group owns and operates two (2) units with a total installed capacity of 588 MW, while it participates in the construction and is expected to operate one (1) unit of 877 MW, with a 50% stake, scheduled for operation within 2024. In the electricity supply sector, the Group holds a market share of 10.8% in the Greek market, while at the same time, it engages in electricity trading both domestically and internationally.
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, 100% in AEIFORIKI EPIRUS S.M.S.A.S.P., which has undertaken the project of operating the Waste Treatment Plant of Epirus, 100% in PERIVALLONTIIKI OF PELOPONNESE S.M.S.A., which has undertaken the PPP project "Integrated Waste Management of Peloponnese" , 32.46% in the Concession Company of Kasteli Airport INTERNATIONAL AIRPORT HERAKLION CRETE SOCIETE ANONYME CONCESSION, 49% to
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
37
the IRC HELLINIKON S.A. company for the construction, development and operation of: (a) a five (5) star hotel, (b) a conference and exhibition center, (c) a public gathering place for sports and/or cultural events and (d) a casino area, 55% to the company PASIFAI ODOS S.A. for the construction of the project "North Road Axis of Crete (BOAK)" , 70% to the Electronic Ticket Services Company - HELLAS SMARTICKET S.A., 70% to the Joint Venture TERNA ENERGY - INDIGITAL - AMCO for the project "Digital Transformation, Telematics, and the Unified Automated Collection System for Thessaloniki (ACST)", 17% to the Motorway Concession Company OLYMPIA ODOS SOCIETE ANONYME CONCESSION, and 35% to the company SARISA SUB-CONCESSION S.A for the right to use, maintain, operate and exploit a multi-purpose station in part of the port of Philip II of KAVALAS PORT ORGANIZATION S.A.
Finally, the Group is active in the management and sale of real estate assets, owning commercial properties with a total estimated value of approximately 127.2 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 2023 employed more than 5,053 employees (directly 4,932 and in its proportion through joint ventures 121) on international level.
Total investments during the year amounted to 194.8 mn euros, with the energy segment being the main contributor. In recent years, investments have exceeded 2.7 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.
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 the last years its ability to expand and further solidify its market position.
It is worth noting, however, that the boost of investment activity in the segments 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. Infrastructure projects, through their higher multiplier effect, contribute significantly to the increase in GDP and to the strengthening of employment.
In 2024 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 natural gas, production of electricity from RES, Concessions in general and in the Construction segment. 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
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
38
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 2024 and beyond are positive given that:
In the Construction Operating Segment:
TERNA S.A., the construction arm and fully owned by 100% subsidiary of GEK TERNA, is the strongest Greek construction company specializing in the execution of large and complex public and private projects of a wide range, large budget and complex expertise , such as including road and railway networks, buildings, hospitals, museums, industrial facilities, hydroelectric projects, dams, 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 2.8 bn euros on 3 1.12.2023 with the contrasts to third parties. The above backlog does not include the sectoral backlog of approximately 0.6 bn euros, which concerns construction works for the implementation of the Amfilochia Pumped Storage Project, as well as the backlog approximately 1.9 bn euros for new contracts awaiting signature, for projects for which the Group has already been declared the contractor or preferred investor and the signing of construction contracts is expected.
In addition, the prospects of the construction segment 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 20 bn euros, of which a significant part is estimated to be executed by the Group .
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 segment and will seek to increase the financial size of the particular market segment, while generating satisfactory earnings to the benefit of its shareholders.
In the Energy Operating Segment:
Production and trading of electricity from RES
GEK TERNA Group, operating through the sub-Group TERNA ENERGY in the field of energy since the mid-1990s is one of the leading players in the field of Renewable Energy Sources (RES).
The shift to Renewable Energy Sources (RES) is confirmed worldwide, with the segment 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
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
39
planning for the next 10 years and at the same time, by capitalizing on its experience it 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 Repower EU policy package as a reference.
In the electricity segment, 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 during 2023, continued the implementation of its investment plan with the construction of mature projects and the strengthening of its portfolio with additional mature projects from the existing portfolio and the addition of new ones at various stages. In the context of this plan on behalf of the Group, the connection to the network of the wind park complex in Kafirea with a total power of 327 MW was completed within the year, with the project now fully operational as of the date of publication of the financial statements. Specifically, the total installed capacity of the subgroup in Greece and abroad amounts to 1,223.8 MW, increased by 318.5 MW compared to 2022.
Furthermore, with regard to the long-term storage project with pumped storage technology in the area of Amfilochia (680 MW), which had already started with preliminary work since the end of 2022, its construction work continues and is expected to be completed within approximately three years.
Furthermore, gradually within the current year, the construction of new parks (mainly photovoltaic) has begun in Greece, while projects abroad are also being considered on a case-by-case basis. Additionally, the sub-group is advancing procedures for the maturation of projects involving various technologies (e.g., hydroelectric, storage, hybrid, etc.) in Greece, which are expected to gradually commence construction starting from the following year.
As of December 31, 2023, the TERNA ENERGY subgroup possesses nearly 2,500 MW of capacity from renewable energy sources (RES) electric energy production units, which are either operational, under construction, or ready for construction in Greece, Central and Eastern Europe. This includes projects at various stages of maturity, bringing the Group's portfolio close to 12 GW.
Given the above and despite the constant challenges and the ever-changing conditions in the energy markets in Greece and abroad as the recent past has shown, TERNA ENERGY sub-Group is expected to continue to play a leading role in the market. It is recalled that the Group's long-term goal is to reach a project portfolio of more than 6.0 GW in operation before the end of the current decade.
The Group, through its subsidiary TERNA ENERGY, leveraging upon its dominant position and expertise in RES and evaluating the favorable environment in the area, continues its investment plan.
Electricity production from thermal energy sources – Electric Energy Sales
GEK TERNA Group is active in the field of Production, Distribution and Trading of Electricity and Natural Gas mainly through the subsidiary companies HERON ENERGY S.A. and HERON II VOIOTIAS S.A. A t the same time, for the rational management of the two companies, within 2023 the decision of the Parent Company GEK TERNA to merge the two companies through the absorption of HERON II VOIOTIAS S.A. by HERON ENERGY S.A. was implemented, with GEK TERNA Group continuing to be the exclusive 100%
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
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shareholder. Following the above merger, HERON ENERGY S.A. owns two gas-fired power plants with a total capacity of 588 MW.
At the same time, GEK TERNA Group and MOTOR OIL Group, through their participation in the company KOMOTINI THERMOELECTRIC S.A. (with a percentage 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 amount of the investment is estimated at approximately 375 mn euros and it is expected to create about 500 jobs during the construction period and about 80 jobs during the operating period. Construction of the new unit started in 2021 and it is estimated that it will enter commercial operation in the second half of 2024.
The Group, through its subsidiary HERON ENERGY S.A., utilizing its know-how in energy production from the operation of factories via the use of natural gas, continues to operate the production units, based on the principle of cost benefit from this activity. At the same time, it seeks new opportunities to increase its production capacity in Greece or abroad.
The total participation of the energy production units of the company HERON ENERGY SA. with a total Incapacity of 588 MW, amounted to 11.3% of the production from natural gas plants in Greece in 2023, constituting a strong pillar of ensuring the energy sufficiency of our country. The Group's production comes to a very large extent from the operation of the combined cycle unit, which produced a total of 1,719 GWh during 2023.
In the area of Electricity Distribution to final consumers, the volatility of electricity and natural gas prices has resulted in strong customer mobility among electricity providers. Despite this trend, the company HERON ENERGY S.A. managed to fully cope with the difficult market conditions and even increase its market share to 10.8%. As a result, the company is among the top two leading independent suppliers in the domestic energy market, aiming through 2024 to maintain and expand its position in terms of market share.
It should be noted that the risk of large sales contracts with a time horizon of more than one month is ensured through future contracts for the purchase and sale of electricity and natural gas, in order to minimize the risk of changes in the cost of buying and selling energy. The existing experience in handling electricity and gas trading ensures the Group's positive outlook for the operating segment of Electricity Production from Thermal Energy Sources and Energy Sales.
In the Concession Operating Segment - Self/Co-financed projects:
The Group has a dominant presence in the financing, construction, maintenance and 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.
The Group participates in the Concessions operating segment:
with a percentage of 100% in the Motorway Concessions NEA ODOS SOCIETE ANONYME CONCESSION and CENTRAL GREECE MOTORWAY SOCIETE ANONYME CONCESSION,
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
41
with a percentage of 32.46% in the Concession Company of Kasteli Airport INTERNATIONAL AIRPORT HERAKLION CRETE SOCIETE ANONYME CONCESSION,
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,
with a percentage of 55% through the company PASIFAI ODOS S.A. in the construction of the project "Northern Road Axis of Crete (BOAK): Study, Construction, Financing, Operation and Maintenance of the Section Hersonissos - Neapoli, with PPP". The duration of the concession is 30 years, of which 4 years refer to the construction period and 26 years to the operation period,
with a percentage of 17% in the Motorway Concession Company OLYMPIA ODOS SOCIETE ANONYME CONCESSION,
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,
with a percentage of 35% through the company SARISA SUB-CONCESSION S.A. For the right to use, maintain, operate and exploit a multi-purpose station, in a part of the Philip II port of ORGANISATION KAVALA PORT S.A,
with a percentage of 100% in PERIVALLONTIKI OF PELOPONNESE S.M.S.A, which has undertaken in the Peloponnese Region the construction of PPP project "Integrated Waste Management of Peloponnese" , where in 2023 the Integrated Management Unit of Arcadia, the Waste Transfer Stations of Argolida and Corinthia and the Transitional Management Units of Messinia and Laconia were put into commercial operation,
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 and
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)".
Within 2024, the Group:
signed as the original shareholder and member of the company NEA EGNATIA ODOS SOCIETE ANONYME CONCESSION, the concession agreement regarding the right to finance, operate, maintain and exploit the Egnatia Odos motorway, as well as the three (3) roads perpendicular to it, for a period of 35 years, with the Hellenic State and the Hellenic Republic Asset Development Fund (HRADF) as contracting parties, while at the same time, as a member of the company NEA
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
42
EGNATIA ODOS SOCIETE ANONYME CONCESSION, it signed the operation and maintenance contract of the project with the aforementioned concession company for a period of also 35 years.
The company named NEA EGNATIA ODOS SOCIETE ANONYME CONCESSION, which was established for the purposes of the concession contract, is owned by GEK TERNA S.A. with a 75% stake and EGIS PROJECTS S.A.S. with a 25% stake.
was declared as the temporary Contractor in the tender for the concession project "Study, Construction, Financing, Operation and Maintenance of the Northern Road Axis of Crete (BOAK) in the Chania - Heraklion section" where it is awaiting the signing of the Contract.
It should be noted that, in the fourth quarter of 2023, the Board of Directors of the Hellenic Republic Asset Development Fund (HRADF) declared GEK TERNA as the Preferred Investor for the award of a service concession for the financing, operation and maintenance of the 70 km long Attica Road for a period of 25 years. The signing of the contract is expected within 2024.
The total portfolio of motorway projects of GEK TERNA Group after the start of the operation of Egnatia Odos, including the concessions of the B.O.A.K. and Attiki Odos, now exceeds 1,600 km. This is the largest motorway portfolio in the country and one of the largest in Europe, further enhancing the Group's ability to generate significant, stable and recurring returns over time.
Finally, the Group's business activity in the Car Parking Station Management and Operation Segment will continue in the following years, and the number of car parking spaces attributed to the Group as a whole amounts to 2,171.
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 fields 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 2024 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 and examines alternative scenarios for the exploitation of a part of the existing investments and wherever it deems appropriate, it will proceed into new investments.
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 MAG 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
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
43
restructured its operational activities in order to reduce production cost, estimates that the industrial segment 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 segment:
A. ‘’Net Debt/(Surplus)’’
It is a ratio, through which the Group’s Management assesses the cash position of an operating segment at any given time. The ratio is defined as total loan liabilities and bank leases less cash and cash equivalents. If restricted deposits are excluded from the aforementioned ratio, (note 20) and grants to be repaid (note 30), are added, then the item of "Adjusted Net Debt/(Surplus)" will arise.
The ratio for the financial years 2023 and 2022 is as follows:
GROUP
31.12.2023
31.12.2022
Long-term loans (Note24)
2,737,058
2,672,299
Liabilities from bank leases (Note25)
44,680
16,907
Short-term loans (Note24)
107,699
143,869
Long-term liabilities payable during the next financial year (Note24)
172,900
160,224
Total bank debt
3,062,337
2,993,299
Less: Cash and cash equivalents (Note23)
(1,310,649)
(1,491,703)
Net Debt / (Surplus) (Note6)
1,751,688
1,501,596
Less: Blocked bank deposit accounts (Note20)
(146,133)
(139,055)
Add: Approved and collected grants to be returned (Note30)
0
3,260
Adjusted Net Debt / (Surplus)
1,605,555
1,365,801
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
44
B. “Bank Debt to Total Capital Employed”
It is a ratio, based on which the Management assesses the Group's financial leverage. “Total bank debt” is defined as the sum of Short-Term Loans, Long Term Loans, Bank lease liabilities and Long term liabilities payable during the next financial year. The “Total Capital Employed” is defined as the sum of Total Equity, Total bank debt and Equity investments, the state grants minus the amount of cash and cash equivalents which are not subject to any limitation in use or to any commitment.
The ratio for the financial years 2023 and 2022 is as follows:
GROUP
31.12.2023
31.12.2022
Total bank debt (Note6) (a)
3,062,337
2,993,299
Total equity
1,276,622
1,190,698
Grants
171,648
176,232
Sub total (b)
4,510,607
4,360,229
Less:
Cash and cash equivalents (Note23)
(1,310,649)
(1,491,703)
Blocked bank deposit accounts (Note20)
(146,133)
(139,055)
Approved and collected grants to be returned (Note30)
0
3,260
Sub total (c)
(1,456,782)
(1,627,498)
Total Capital Employed (b+c)=(d)
3,053,825
2,732,731
Total Bank Debt / Total Capital Employed (a)/(d)
100.28%
109.54%
C. EBITDA (Earnings before Interest Taxes Depreciation and Amortization)
It is a ratio based on which the Management of the Group assesses the operational performance of an operating segment. "EBITDA" is defined as Earnings before Interest and Taxes (EBIT), plus depreciation and amortization, less any equity‐based grants as presented in the accompanying financial statements.
D. Adjusted EBITDA (Adjusted Earnings before Interest Tax Depreciation and Amortization)
"Adjusted EBITDA" is defined as EBITDA, plus any non‐cash items (see note below the table of Business Segments).
E. EBIT (Earnings before Interest and Taxes)
Earnings before Interest and Taxes (EBIT) is defined as the Gross Profit less Administrative and Distribution Expenses, less Research and Development Expenses, plus/less Other Revenues/(Expenses) EBIT determinants. Other Revenues/ (expenses) EBIT determinants are defined as Other Revenues/(Expenses) apart from the items of Foreign Currency Valuation Differences and Impairments/ (Reversals of Impairments) of fixed, intangible assets, right of use assets and goodwill as presented in Note 38.
EBITDA and Adjusted EBITDA ratios in the years 2023 and 2022, per operating segment and as a total are presented below as follows:
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
45
Business segments 31.12.2023
Constructions
Electricity from RES
Electricity from thermal energy and EP/NG trading
Real Estate
Mining / Industry
Concessions
Holdings
Eliminations on consolidation
Consolidated Total
Gross profit
147,460
148,306
129,230
129
3,231
69,532
(901)
(10,139)
486,848
Administrative and distribution expenses
(21,364)
(32,117)
(28,052)
(616)
(5,017)
(8,978)
(10,381)
(144)
(106,669)
Research and development expenses
(1,826)
(6,180)
0
0
(276)
(1)
(3,516)
8
(11,791)
Other income/(expenses) attributable to EΒΙΤ
(5,874)
10,834
(12,270)
7,748
(885)
18,419
120
6,746
24,838
Results (EBIT)
118,396
120,843
88,908
7,261
(2,947)
78,972
(14,678)
(3,529)
393,226
Net depreciation
17,083
49,760
28,813
698
4,101
44,752
134
(4,024)
141,317
EBITDA
135,479
170,603
117,721
7,959
1,154
123,724
(14,544)
(7,553)
534,543
Non cash results
1,105
806
14,083
(7,728)
95
41,062
1,490
0
50,913
Adjusted EBITDA
136,584
171,409
131,804
231
1,249
164,786
(13,054)
(7,553)
585,456
Adjustments to non-cash results for the year 2023 relate to provisions for staff compensation of 1,275, an expense recognized from the valuation of stock options 2,334, valuation gain of investment properties 7,646, provisions for heavy maintenance 40,585, provisions for impairment of receivables 14,617 and income from reversal of provisions for impairment of inventories, other provisions, and gains from cancellation of obligations amounting to minus 252 .
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
46
Business segments 31.12.2022
Constructions
Electricity from RES
Electricity from thermal energy and EP/NG trading
Real Estate
Mining / Industry
Concessions
Holdings
Eliminations on consolidation
Consolidated Total
Gross profit
94,807
142,365
326,841
(428)
2,521
55,683
340
(16,440)
605,689
Administrative and distribution expenses
(27,261)
(76,252)
(23,493)
(633)
(5,772)
(9,233)
(14,183)
3,503
(153,324)
Research and development expenses
(2,146)
(6,982)
0
0
(257)
0
(534)
38
(9,881)
Other income/(expenses) attributable to EΒΙΤ
(2,592)
12,571
(27,367)
185
222
(5,359)
(1,291)
(3,046)
(26,677)
Results (EBIT)
62,808
71,702
275,981
(876)
(3,286)
41,091
(15,668)
(15,945)
415,807
Net depreciation
11,599
40,561
27,125
614
3,461
44,194
161
960
128,675
EBITDA
74,407
112,263
303,106
(262)
175
85,285
(15,507)
(14,985)
544,482
Non cash results
6,212
48,860
32,424
20
270
26,434
3,116
0
117,336
Adjusted EBITDA
80,619
161,123
335,530
(242)
445
111,719
(12,391)
(14,985)
661,818
Adjustments to non-cash results for the year 2022 relate to provisions for staff compensation of 1,294, an expense recognized from the valuation of stock options 50,724, valuation loss of investment properties 378, provisions for heavy maintenance 25,923, provisions for impairment of receivables 39,634 and income from reversal of provisions for impairment of inventories, other provisions, and gains from cancellation of obligations amounting to minus 617 .
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Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
47
G. Report of Payments to Governments
In accordance with the provisions of article 6 of Law 3556/2007 as effective, the Group, due to the mining activity of quarry products of its subsidiaries TERNA and TERNA MAG S.A., paid to the Greek Government during the year ended 31.12.2023, an amount of 127.0 thousand euros.
H. Non-Financial Information Report 2023
1. Introduction
The current Non-Financial report covers the fiscal year ended on the 31 st of December 2023 . Having taken into account the provisions of section 7 "Report (Statement) of Non-Financial Information" of the circular 62784/2017 of the Ministry of Economy and Development, in accordance with the provisions of the Law 4548/2018 (articles 151 and 154), the report contains information on all GEK TERNA Group’s activities with respect to the following areas :
Supply chain issues
Anti-corruption and anti-bribery
Respect for human rights
Labour issues
Social issues
Environmental issues
The statement presents relevant information on the required disclosures of Article 8 of the Taxonomy Regulation, as specified in Article 10 of the Delegated Regulation (EU) 2021/2178. The content of the report has been prepared taking into account the Global Reporting Initiative (GRI) international standards, the standards introduced by the Sustainability Accounting Standards Board (SASB) and the Athens Stock Exchange ESG Reporting Guide (ATHEX ESG Reporting Guide 2022 ). The statement presents information on the main risks related to the Group's activities, the due diligence policies as well as other relevant policies applied. In addition, for a better understanding of the Group's performance, the qualitative and quantitative results of these policies are presented, while relevant financial and non-financial performance indicators are listed.
The structure of this report is as follows:
The Group's approach to Sustainable Development
Corporate Governance and the Group's Basic Operating Principles
Environmental issues
Sustainable Supply Chain
Social and labour issues
Taxonomy Report
GEK TERNA GROUP
Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
48
GEK TERNA Group
GEK TERNA Group is one of the largest Greek business groups, with a presence also in Central and Southeastern Europe and the Middle East. The Group has a leading position in the fields of infrastructure, production, supply, and trade of electricity from thermal and renewable energy sources (RES), concessions, waste management, real estate development and management and mining. GEK TERNA is listed on the Athens Stock Exchange (FTSE/Athex Large Cap) with a turnover of 3,499 million euros.
GEK TERNA has the expertise and commitment to continue playing a leading role in the areas of Sustainable Development and the Green Economy, in line with the aspirations of the UN Sustainable Development Goals, with activities that contribute both to the Group’s economic development and to the mitigation of the negative effects of climate change.
GEK TERNA Group's construction backlog at the date of preparation of the Financial Statements amounts to almost 3.4 billion euros and with the contracts to be signed to 5.3 billion euros.
As of 31.12.2023, the Group has almost 2,500 MW of power from RES power plants that are in operation, under construction or ready for construction in Greece, Central and Eastern Europe. Including projects in various stages of maturity, the Group's portfolio exceeds 12 GW.
Sustainable development and corporate responsibility are fundamental components of the Group's strategy and business activities. Ensuring a fair, safe and healthy work environment, making significant contributions to economic growth, supporting local communities, building long-term trust relationships with customers, and reducing its environmental footprint, are core principles of the Group. These commitments serve as the guiding principles for fulfilling the Group's mission and are expressed through modern sustainable, green and secure infrastructure projects for people and the environment, as well as initiatives related to alternative energy sources and innovative waste management solutions, creating long-term added value for all stakeholders.
More information on the Group's presence and activities will be published in the GEK TERNA Group’s Sustainable Development Report, in June 2024.
Identification of financial/non-financial risks and management
The risk management policy followed by the Group aims to limit the effects that may negatively affect its business activity, its financial performance as well as the achievement of its strategic goals. The main sources of associated risks consist of the difficulty in predicting the performance of financial markets, the cost variations and sales trends as well as the ambiguity linked to the prediction of meteorological data.
Regarding the financial risks for the Group, the most important factors are related to the persistence of macroeconomic uncertainty, market risks (fluctuations in exchange rates, interest rates, market prices, etc.), credit risk, and the risk liquidity. Regarding non-financial risks, these are categorized into risks related to Governance, Environment and Society issues. To deal with non-financial risks, the Group takes the necessary measures to identify them in time and implement mitigation policies.
GEK TERNA GROUP
Annual Financial Report of the fiscal year 1 January 2023 - 31 December 2023
(Amounts in thousands Euro, unless otherwise stated)
49
2. The Group’s approach to Sustainable Development
ATHEX C-G4: Sustainability Policy
The Group's Sustainable Development Policy summarizes the way the Group approaches Sustainable Development issues. The Group's Sustainable Development Policy is inextricably linked to the needs of stakeholders (internal and external) considering both the current socio-economic trends and the scope of the Global Sustainable Development Goals. The main aim of implementing it is to strengthen the positive effects and limit the negative ones, through best practices, sustainable initiatives, and reliable partnerships by enhancing dialogue and consultation processes among its stakeholders.
In the context of the Group's Sustainable Development Policy, corporate responsibility is aligned with ESG (Environmental-Social-Governance) criteria/principles and focuses on four (4) axes:
Human Value Promotion
Environmental Protection
Strengthening our Social Footprint
Shaping a Responsible Market
The Policy is monitored by the Corporate Social Responsibility and Sustainable Development Division and the ESG Committee and is subject to updates with final approval by the Board of Directors if required. In this context, the Corporate Social Responsibility and Sustainable Development Division serves as the center for strategic planning and proposal submission to the ESG Committee and the Group’s Management regarding matters related to the environment, society, and governance. It is responsible for the Group’s Annual Sustainable Development Report and monitors specific sustainable development