WOOD Flash – Electrica: 3Q17 results conference call summary

Electrica held a conference call this morning to discuss its 3Q17 results. Management reiterated its belief that the amounts that were lost during the first three quarters of the year in the supply segment should be recovered going forward. Also, the new tariffs approved for supply currently cover the costs for the acquisition of electricity, so the supply results should improve in 4Q17E. While the distribution should show normalised profit in 4Q17E, management warned that hikes in tariffs are unlikely (a decision is to be made at the beginning of December), following the recent increases in electricity prices for the population. Therefore, the risk remains as to whether electricity prices will start increasing again.
Thus, we believe that Electrica is likely to return gradually to normalised profit, and that the transaction through which the company acquired the minority stakes from Fondul Proprietatea should improve the bottom-line returns for shareholders, and open the way for the acceleration of the cash deployment into the Regulated Asset Base (RAB). However, we are still cautious regarding the pace of the return to a normalisation of the results, and the potential negatives if the winter does bring high electricity prices again.