TradeVille: Our energy exports increased by 42%, in 2023

The energy system in Romania showed high dynamics during the past year, with an increase in net national energy production of 3%, mainly due to increased hydraulics. This increase, along with the decrease in energy consumption by 4.9%, as a result of higher average annual temperatures and the increase in the power installed by prosumers (from 630 MW to 1,388 MW), turned Romania into a net exporter of energy in 2023, with exports higher by 42% and imports reduced by 27%, according to a report by the Analysis Department of TradeVille. The report reviews the latest information about the energy sector in Romania and the international one, highlighting the macro trends from 2024, compared to 2023, the financial results, but also the returns of the largest energy companies on the stock market.

Romania manages to maintain its position as a net energy exporter in 2024, having, until now, a net export level of 0.8 TWh - better than Bulgaria, Hungary or Poland, which imported more energy .

Domestic production covered 91.4% of energy consumption, while imports represented only 8.6%. The production mix of the year favored hydro energy and renewable sources, with a decrease in dependence on thermal energy sources and a contribution from battery storage of 4.2%.

On the other hand, at the level of the European bloc, the production mix has a more pronounced dynamic towards green energy resources, a transition that was significantly impacted by the war in Ukraine and the abandonment of direct supply from Russia with fossil fuels. Thus, the use of fossil fuels in 2023 fell by a record level of 19%, representing less than a third of electricity production in the EU, while renewable resources increased to a share of more than 40%.

Electricity prices have also calmed down, suffering a significant drop compared to the beginning of 2023, with the average spot energy price in the EU being 37.1% lower in the first quarter of 2024 compared to the same period in 2023.

In March, Romania ranks at the top of the ranking regarding the spot price of electricity, being 8.3% above the EU average. The highest electricity prices are recorded in Italy (+31.4% compared to the average), while Portugal benefits from the lowest prices (-61.3% compared to the average).

On the electricity demand side, the situation in Europe is similar to that of Romania, which is 3.4% lower in 2023. The downward trend is expected to reverse in the future, as the direction of increasingly accentuated electrification will puts more and more pressure.

• Oil - again on the rise

In the Oil and Gas sector in Europe, there was a notable decrease in imports of energy products compared to the same period in 2022, which affected both the value and the quantity of these imports. This trend was highlighted by Europe's tendency to cut off supplies from Russia, with imports of petroleum products from this country decreasing significantly in 2022 and continuing to decrease during the first three quarters of 2023.

Specifically, in the third quarter of 2023, the EU recorded a 3% decrease in the volume of oil imports, while natural gas imports decreased by 17%.

The price of oil at the international level evolved on an increasing trend in 2024, after in the second half of 2023 it recorded a loss of over 22%, reaching a minimum of 73.3 dollars/barrel.

Last week, crude oil managed to hit a four-month high, supported by declines in crude exports from Saudi Arabia and Iraq, as well as signs of stronger demand and economic growth in China and the US. Thus, Brent crude oil approaches the threshold of 90 dollars/barrel.

• Energy companies have good performances on the BSE

The energy sector in Romania recorded good performances, in the context of the macro conditions of 2023, but also taking into account the fact that the companies come after the year 2022, which was marked by unsustainable records.

In the electricity segment, companies managed to increase revenues or, in some cases, maintain the turnover level, in an environment of decreasing electricity consumption at the national level, both due to temperatures well above the averages of the past years , as well as because of an increasing number of prosumers.

Cumulatively, the electricity segment obtained revenues of over 31.8 billion lei in 2023, an increase of 12.8% compared to 2022, one of the main causes being the stabilization of energy prices and the decrease in expenses with additional taxes. Net profit, at sector level, increased in 2023 to over 9.6 billion lei (+16.2% compared to 2022), reflecting an average increase in profitability. Hidroelectrica remains at the top of the ranking, both in terms of turnover and net profit, adding up the largest increases among energy companies in 2023. The company's performance was due to a favorable year from the point of view of hydraulics, but also from the rapid growth of market share in recent years.

In the Oil and Gas segment, the year 2023 brought weaker dynamics compared to electricity, the sector accumulating revenues of 69.8 billion lei, 31.5% lower than in 2022, while the net profit decreased to 5.9 billion lei (-57.3%). The declines were largely caused by a lower price per barrel of oil, reduced refining margins and government surcharges.

The top of the ranking is dominated by OMV Petrom, in terms of profit, even if the company recorded significant decreases in its financial statements, presenting a turnover of 38.8 billion lei (-36.7% compared to 2022) and a profit net of just over 4 billion lei (-60.9%).

The evolution of BVB companies during 2023 was a favorable one for Bursade in Bucharest, most of them registering increases of over 10%, while the main index of the energy sector, BET-NG, rose by over 30%.

On average, energy companies on the BSE outperformed international ones, while the ETF tracking the MSCI World Energy - an index dedicated to the energy sector of developed markets around the world, remained almost unchanged.

The year 2024 brought a 5.8% increase in the BSE energy index, while the worldwide energy sector represented by the iShares S&P 500 Energy Sector ETF posted a 9.6% increase.

• Energy from BVB on the chart - support and resistance

From the point of view of the price evolution in the last year, the performances of companies in the energy segment oscillated from +8.24% (SNN) to +50.17% (EL).

The top performer of the segment is Electrica (EL) with an annual increase of 50% in the share price, exceeding the performance of the energy sector index, BET-NG (+26.98%). The company's shares were included in the composition of the FTSE Global All Cap and FTSE Global Mid Cap indices starting from the meeting on March 19, 2024, which could bring increased liquidity, but also greater visibility of the company's shares among investors. Currently, the EL price is trading above the 8- and 21-day EMA moving averages, the level of 13.1 lei representing an important level of resistance in the coming period. Breaking through this level could bring the price to around 14 lei, a possible resistance level in the medium term.

From the listing on the BVB on July 12, 2023 until now, Hidroelectrica (H2O) shares have brought investors a return of 16.27%. The beginning of the year 2024 came with a historical maximum for H2O shares (135.4 lei), the current evolution being a lateral one in the price range 125 - 129 lei, the values acting as support and resistance levels in the following period.

As for TEL shares, they show an annual appreciation of approximately 18%. After reaching the maximum of the last year (32 lei) in January 2024, the price is trading around the support level of 28.4 lei, but below the exponential moving averages of 8 and 21 days, respectively.

Nuclearelectrica (SNN) shares recorded the lowest annual growth in the segment (+8.24%). At the beginning of 2024, the SNN price reached a new historical high (52.2 lei) close to the high of 2023 (51.8 lei). Currently, the price evolves around 48 lei, an important level of support. If this support level will be pierced, for the next period a support level could be established at the price of 45 lei, notes TradeVille.

• Oil&Gas from BVB on the chart - support and resistance

From the Oil&Gas segment, only two companies recorded annual performances above that of the sector index, BET-NG. It is about OMV Petrom (SNP) (+35.52%) and S.N.G.N. Romgaz Mediaş (SNG) (+31.39%), while at the opposite pole two other issuers posted annual decreases of -5.55% (RRC) and -3.12% (OIL).

After breaking through the resistance level of 0.6 lei in the meeting of February 21, 2024, the price of SNP shares is trading at the maximum of recent years (0.65 lei), above the exponential moving averages of 8 and 21 days, respectively. Thus, the level of 0.6 lei can become an important support in the coming period.

As for SNG shares, the price exceeded the resistance level of 51.7 lei, rising to a historical maximum of 53.5 lei. The price trades above the exponential moving averages of 8 and 21 days respectively, and in the next period the previous resistance level of 51.7 lei can become a support level.

The COTE price has been testing the resistance level of 86 lei since the beginning of this year. If it manages to break through this level, we could witness an increase to around 90 lei in the next period. The annual appreciation of COTE shares is 16.62%.

In January 2024, the price of PTR shares rose above the resistance value of 0.642 lei, a level that could turn into support in the next period. If this support is confirmed, the next resistance level tested could be around 0.7 lei.

OIL Terminal shares have registered a decrease of 3.12% in the last year, currently the price is evolving below the exponential moving averages of 8 and 21 days respectively. A first level of support can be found around the value of 0.118 lei.

After a lateral evolution for almost the entire period of 2023, the price of RRC shares fell starting from February 2024 below the minimum level recorded last year 0.790 lei, evolving below the exponential moving averages of 8 and 21 days, respectively. The mentioned support level could become a resistance threshold in the next period, and a more important first support level can be established around the value of 0.071 lei.

• Opportunities and risks of investment in the energy sector

timely

- Economy: The energy sector is one of the main engines of the global economy, being in continuous development from a technological point of view and always up-to-date.

- Size: Most of the energy companies listed on the BSE are large companies of national interest, with operational processes and a well-established sales market.

- EU: Romanian companies are trying to align with the European standards of decarbonization of the industry, which can increase their visibility on the international market.

- Opportunity: Volatile energy prices continue to create opportunities to increase profits for most companies in the energy sector.

risks

- Macro: The energy crisis and the war in Ukraine create macroeconomic premises that can be against energy companies.

- Taxes: The Romanian taxation system is not a stable and secure one, having undergone many changes in the last two years - which puts pressure on the cash flows of companies.

- Eco-friendly: The tendency to aggressively introduce environmental regulations from the EU creates difficulties for oil companies.