Europe’s system operators’ profits are up – let’s break it down

In this week’s edition of Smart Energy’s Power Playbook, Yusuf Latief investigates different financial results and operational profits announced by European energy system operators in the Netherlands and Italy as 2024’s half-year mark rolls in.

Last week in the Power Playbook I looked at some significant revenue results from Adani Energy Solutions Limited (AESL) in India, which announced huge revenues on account of successful transmission projects and a burgeoning smart metering business.

And of course, Adani isn’t the only energy company releasing its revenues and strategic progress; indeed, Q2/H1 has rolled around the corner and investors are curious as to the performance of their prospective pitches.

And in the realm of energy, some big year-over-year (YoY) increases have been touted by power system operators, particularly those operating in the Netherlands and Italy. Let’s have a look:

Energy profits Netherlands: Alliander, Enexis, Stedin and TenneT

Alliander, Enexis, Stedin and TenneT announced significant increases in their operating profits in comparison to their 2023 results.

The most notable was Alliander, whose operating income came to €2.3 billion ($2.5 billion), a nearly €1 billion ($1.1 billion) increase from 2023.

According to the company, the significant increase comes courtesy of their sale of Kenter, a Dutch energy equipment and solutions provider for €757 million ($827.7 million), which was completed in January.

The company also cites higher regulated income of €210 million ($229.4 million) due to higher rates stemming from partial compensation for cost increases.

For Enexis Group, operating profit came to €122 million ($133.5 million), a €107 million ($117.1 million) increase from the same period last year.

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According to the company, high energy prices from the war in Ukraine in 2023 – that were not fully recouped by tariffs at the time – have now eased up with the tariffs more balanced with purchasing costs incurred by grid losses; a situation all too familiar for Dutch operators.

Further to this, the company states that ‘acceleration and expansion’ are the words characterising their first six months of the year, with 1,020MW of newly built transmission capacity and the first flex contracts concluded with large-volume business customers.

For Stedin Group, operating profit came to €147 million ($160.9 million), €32 million ($35 million) higher than last year as a result of higher tariffs. Stedin welcomed 21 new shareholders over the spring, including seven municipalities in the province of Utrecht and 12 in the province of Zeeland.

“With this, even more public parties are putting their weight behind a future-proof energy system,” states the company.

For TenneT, underlying EBIT increased by €72 million ($78.8 million) to €1 billion in the first half of 2024, while also increasing its investment activity, spending €4.6 billion ($5 billion) on growth compared to last year’s €3.5 billion ($3.8 billion) – a 30% increase.

The Dutch-German TSO says that the EBIT increase stems from a larger asset base, a result of the company’s growing investment portfolio, including higher investments in their 2GW offshore programme and continued efforts to drive grid expansion and maintenance.

Said TenneT CEO Manon van Beek: “The half-year figures show that we are well on our way.

“Not investing in the power grid is not an option as the social and economic cost of grid congestion, redispatch cost and not having access to electricity are much higher than the grid investments required.”

More from TenneT:
TenneT and Liander announce grid reliability package for Gelderland
TenneT forecasts doubled project portfolio to meet Dutch grid needs

Energy profits Italy: Enel, A2A and Terna

In Italy, electricity distributor Enel reported a staggering €11.7 billion ($12.8 billion) in ordinary EBITDA, up by 8.8% from 2023, citing the positive contributions of their integrated businesses, including from thermal generation and trading, Enel Green Power, Enel Grids, end-user markets and holding and services.

Specifically, the companys states excellent performance from renewable energy, which they state has more than offset the decrease in the margin recorded in end-user markets and thermal generation. Additionally, the contribution from distribution network management was also positive.

“In the first half of 2024, we achieved excellent results, driven by significant organic growth reached through the strict implementation of the pillars of our Strategic Plan,” said Enel CEO Flavio Cattaneo.

For A2A Group, another electricity distributor, EBITDA came to €1.3 billion ($1.4 billion), a 45% increase from 2023.

A2A explains the growth by pointing towards the very significant increase in the production of renewable energy, namely hydroelectric, greater stability of the energy scenario compared to the previous year and the evolution of the energy retail sector following market liberalisation of the markets.

Additionally, A2A says they were able to seize most of these opportunities by optimising their integrated electricity production portfolio and adopting effective hedging strategies and profitable commercial development actions.

For Italian transmission system operator Terna, Y-o-Y EBITDA increased by 18.1% to €1.3 billion, crediting the improved results from their regulated activities, namely that of the operation of the Italian transmission grid.

These are of course but a sample of the earnings being released by European operators but the picture it paints is somewhat hopeful. The amount of cash needed for a grid fit for purpose can often be intimidating. So seeing these positive results from investment into their expansion is always welcome.

What do you think? As an investor in the energy sector or even a grid/network operator considering their next upgrade, are network investments starting to pay off, or is it still too early to tell?

Reach out so that we can feature your insights in the Power Playbook.

Cheers,
Yusuf Latief
Content Producer
Smart Energy International