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Energy

Villar Mir Energia

VM Energía
Torre Espacio
Ps de la Castellana 259-D
28046 Madrid. España
www.energyavm.es
T: +34 91 722 3900
F: +34 91 561 7606

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ENERGY DIVISION

VM Energía is the head of Grupo Villar Mir for the implementation of its energy sector activities.

Grupo Villar Mir has engaged in energy sector activities from the outset, although the relevance of this business for the Group as a whole has diminished to date.

VM Energía temporarily manages the production of Ferroatlántica S.A.’s seven hydroelectric plants and Hidro Nitro S.A.’s five plants, which have a total installed power of 210 MW and production of 600 million kWh in an average hydraulic year.

During 2010, VM Energía acquired 100% of Céntrica Energía, S.L. (currently named Enérgya VM, S.L.). This company engages in electricity and gas commercialisation activities, as well as representing special-regime producers and performing important tasks in relation to the interconnections existing between the main countries in Western Europe, and in particular, between Spain and France.

 

VM Energía

VM Energía manages all of Grupo Villar Mir’s activities in the energy sector. The Division achieved turnover of EUR 601 million in 2016, a decrease of 15% compared to the figure recorded in 2015.

In 2016, the Energy Division turnover accounted for 7% of the consolidated turnover of Grupo Villar Mir.


Energy Division

The main financial figures of the Energy Division are as follows:

Main Financial Figures of the Energy Division

 

Background

2016 ended with the lowest average electricity market price in Spain in recent history. A considerable contribution of renewable energy marked the first part of the year, leading to significant price decreases. In turn, oil prices reached record lows in January and February and the main European hubs recorded low prices, with sharp drops in August and September.

After the moratorium ended in 2015, the first auction of renewable power took place in January 2016, followed by two more auctions in 2017. From a regulatory perspective, no major changes were introduced in 2016, given the lack of an elected government for most of the year and the restrictions on the incumbent government.

On the other hand, in terms of the economy, business operations and investments continued, due to rising interest in the Spanish energy sector. Here, it is worth noting the merger between Siemens and Gamesa and the sale of Madrileña Red de Gas and of 20% of Gas Natural, to name a few. In addition, progress continued in cost reductions for solar and wind technologies and in meeting the renewable energy goals of the European Union.

Year Performance

Management of FerroAtlantica’s and Hidronitro’s hydropower plants

Grupo Villar Mir is the largest independent producer of hydroelectric power in Spain, with twelve hydroelectric plants managed by VM Energía, S.L.U.

  • Seven on the Jallas and Grande rivers (Galicia), owned by Ferroatlántica, S.A.U.
     
  • Five on the Cinca and Esera rivers (Aragon), owned by Hidro Nitro Española, S.A.

Furthermore, Grupo Ferroatlántica has two hydroelectric plants in France that are managed directly by FerroPem, S.A., the French subsidiary of the Group.

The Energy Division produced 551 GWh in 2016, of which 487 GWh were produced in Spain and the remaining 78 GWh in France.
 
The Group’s plants in Spain have continued to sell their production in the electricity market, concentrating their power generation on market ends and on ancillary services. In 2016, the power plants began to take part in the ancillary services for resolution of technical constraints and secondary control (thus increasing the plants’ remuneration) and continued to take part in the tertiary control and deviation management services. Additionally, the Novo Pindo and Fervenza plants, owned by Ferroatlántica, also receive a reduced premium in accordance with the remuneration for investment set forth under the economic framework created in RD 413/2014, applicable retroactively since July 2013.         

The retail price of the energy generated was € 38.2/MWh in 2016, lower than the daily market price (€ 39.7/MWh). The reason for this was the concentration of production in the early months of the year, featuring a strong contribution of renewable energy into the system at a lower market price. Revenue from energy sales is lower than in 2015, reaching EUR 18.6 million.

Work continued throughout 2017 for entry into operation of the Ponte Olveira II, Fervenza II and Novo Castrelo power plants on the Jallas River (Galicia). When the new production plants begin to operate, Ferroatlántica’s production will increase by approximately 40,000 MWh per year.

 

  • Energy Generated
  • Ferroatlántica's Sales
  • Hidro-Nitro's Sale

Commercialization of electricity and natural gas.

Villar Mir Energía supplies electricity and natural gas directly and also through its subsidiary Enérgya VM.

In 2016, approximately 35,000 points were supplied with electricity, for a total of 7.8 TWh, which is more than the figure supplied in 2015; furthermore, 3.5 TWh of natural gas were supplied, similar to the figure seen in 2015.

Enérgya VM will continue to cover about half of Fertiberia’s natural gas supply needs in 2017 and 2018, representing approximately 3,400 GWh supplied per year.

Representaion of special-regime producer

Enérgya VM represented a total of 3,000 MW of power from renewable energy producers in 2016.

Shares in wholesale markets and european electricity and natural gas interconnection systems

In 2016, Enérgya VM remained present in virtually every European electricity interconnection system and in the physical and financial electricity markets with the greatest liquidity on the continent.

Furthermore, participation in the natural gas and related product financial markets is increasing.

Wind farm projects

After receiving administrative authorisation in 2015 for the Valiente Wind Farm (20MW), located in the Region of Aragon, financing for the project was formalised in December 2016. The wind farm is currently under construction and commercial operations are expected to begin in the first half of 2018.

Grupo Villar Mir remains interested in developing wind farms with abundant resources in Spain, thus ensuring they are economically feasible in a setting in which there are no premiums.

Results for the year

VME obtained satisfactory results in 2016 despite the difficult economic situation that we are undergoing.

Thus, the Energy Division earned revenues of EUR 601 million, which represents a 15% decrease compared to the EUR 711 million reached in 2015.

In turn, EBITDA was EUR 4 million, against EUR 9 million recorded in 2014 (-54%), due to the drop in hydroelectric production and energy selling prices.

Finally, net attributable losses totalled EUR -2 million, a figure that is clearly lower than the EUR 17 million made in 2015.

At 31 December 2016, the Energy Division had a solid balance sheet structure, with a guarantee ratio (Total Assets/Total Liabilities) of 1.3 x and a solvency ratio (Current Assets/Short-term Liabilities) of 1.1 x.

Forecast for 2017

In 2017, the Energy Division is expected to achieve a turnover of EUR 760 million, which should lead to EBITDA of EUR 12 million and net attributable profit of EUR 7.8 million.