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The Decrease in Energy Revenues; Decrease in Water Sales Revenues – GCAP Report

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BM.GE
16.11.20 21:30
687
Our Water Utility is a regulated monopoly in Tbilisi and the surrounding area, where it provides water and wastewater services to 1.4 million residents representing more than one-third of Georgia’s population and c. 36,000 legal entities. Water Utility also operates hydropower plants with a total installed capacity of 149 MW. GCAP owns 100% in Water Utility as of 30-Sep-20 – reads GCAP’s recent report on Georgia Capital PLC Q20 and 9M20 results.
 
According to the report, the 14.9% y-o-y decrease in 3Q20 revenues (down 17.1% y-o-y in 9M20) was primarily driven by a 63.4% decrease in energy revenues (down 67.9% y-o-y in 9M20) and a 6.8% decrease in water sales revenues (down 10.0% y-o-y in 9M20). “Extraordinarily low precipitation related water inflows to Zhinvali HPP led to a 34.4% y-o-y decrease in electricity generation in 3Q20 (down 32.4% in 9M20), while self-produced electricity consumption remained largely flat. As a result, 3Q20 electricity sales in kWh decreased by 70.6% y-o-y (down 66.2% y-o-y in 9M20). Revenue from water supply to legal entities was down 9.3% y-o-y to GEL 23.7 million in 3Q20 reflecting the effects of COVID-19, however, growing by 46.2% q-o-q following the gradual recovery from COVID-19 lockdown during Mar-May. Overall, 9M20 revenue from water supply to legal entities was down 14.7% y-o-y to GEL 59.2 million in 9M20” – reads the report.
 
As for the revenue side, the tendency is that revenues from water supply to individuals remained broadly stable at GEL 9.9 million in 3Q20 (down 4.6% y-o-y) and at GEL 29.2 million in 9M20 (down 2.2% y-o-y). “According to the tariff setting methodology, volume risk does not stay with the company and unearned revenues in the current regulatory period (2018-2020) will be reimbursed through tariff setting in the upcoming regulatory period, effective from 1-Jan-21. Continued Opex optimisation initiatives were reflected in decreased operating expenses y-o-y in 3Q20 (down 1.8%) and 9M20 (down 3.6%). As a result, EBITDA amounted to GEL 20.8 million in 3Q20 and GEL 50.4 million in 9M20, down y-o-y by 24.2% in 3Q20 and by 25.7% in 9M20” – such are the main numbers.
 
As for net interest, GCAP reports its expense was up 78.6% y-o-y to GEL 8.6 million in 3Q20 and up 56.4% y-o-y to GEL 24.4 million in 9M20. “The increase partially reflects local currency depreciation. Further, in 2020, Water Utility increased its leverage on the back of funds attracted from IFIs and local banks to finance capital expenditures, fully refinanced by the proceeds from US$ 250 million green bond issuance in Jul-20. The 7.75% 5-year green notes were issued by Georgia Global Utilities JSC, the holding company of GCAP’s water utility business and operational renewable assets and were listed on the Irish Stock Exchange – reads the report - The refinancing activities resulted in GEL 10.0 million non-recurring expenses in 3Q20 and 9M20, comprising primarily prepayment fees. Foreign exchange losses amounted to GEL 24.4 million in 3Q20 and GEL 34.4 million in 9M20, as GEL depreciated against USD and EUR by 11.3% and 19.0%, respectively, over the last 12-month period. As a result, net loss was GEL 31.2 million in 3Q20 (GEL 18.2 million net profit in 3Q19) and GEL 45.3 million in 9M20 (GEL 18.9 million net profit in 9M19)”.