ELPE and Motor Oil: Where the real windfall profits in energy are

Much has been said about the windfall profits booked by electricity producers due to the surge in the price of natural gas and their taxation in order for the state to finance power subsidies for consumers. Producers argue that electricity is subject to trading losses and that overall profits are limited.

However, the real surplus profits lie - according to earnings results - with the country's two refineries: Hellenic Petroleum (ELPE) and Motor Oil.

The timing is unique for the two companies: Refining margins have reached as high as 26 dollars a barrel, the price of crude has been consistently above 100 dollars a barrel, and only recently is it showing signs of fatigue, falling to 95 dollars. Domestic demand increased due to tourism, and the strengthening of the dollar against the euro favors the units since they collect in dollars and their expenses are in euros.

Refining margins are at historic highs. The profit from the purchase of the raw material that is crude oil in relation to the price of manufactured products such as gasoline, LPG and diesel has been consistently close to 20 dollars per barrel and reached as high as 26 dollars.

The increased demand for fuel after Covid 19 led to a rise in oil, but with the armed conflict in Ukraine, its price took off, subsequently dragging along with it all derivatives.

According to the updates of the two companies, July went very well. The whole year will not display the first half’s growth rates, but it will show historical highs. The numbers speak for themselves: Hellenic Petroleum announced for the six months comparable EBITDA (without the favorable valuation of the reserves they hold) at 633 million euros from 139 million euros and comparable net profit of 371 million from 12 million last year first semester. In the published figures in which profits from stocks are included, EBITDA amounted to 1.23 billion euros from 391 million euros, and net profits to 872 million euros from 206 million euros last year. In addition to refining margins, the increase in exports, which came to represent almost 60% of total sales, contributed to the strengthening of profits.

The increased profitability will be used on the one hand to accelerate investments in green energy, and on the other hand to reward shareholders. The targets set for RES (power of 1 gigawatt in 2025-2026 and 2 gigawatts in 2030, from 340 megawatts today) are estimated to be reached sooner with the development of new units by the group and acquisitions both in Greece and abroad, but also with investments in offshore wind farms. The proceeds from the sale of 35% of DEPA Infrastructure amounted to 256 million euros and will be used 50% for investments in green energy and 50% for the distribution of an extraordinary dividend calculated at 0.40 euros per share.

Motor Oil's reported EBITDA came in at 932 million euros versus 251 million euros in the first half of 2021, while adjusted EBITDA came in at 698 million euros from 173 million euros in 2021. Profit after tax came to 686 million euros from 121 million euros last year, while adjusted profit after tax came in at 503 million euros from 60 million euros last year. Half-year investments came in at 261 million euros, while net debt fell to 1.407 billion euros from 1.450 billion euros at the end of 2021. According to the group's management, by the end of the year the new naphtha processing unit will be put into operation which will increase the production of high added value products, while by then the acquisition of 75% of Anemos by Ellactor will have been completed.