In the first quarter of 2014, Petrom’s earnings before interest and tax (EBIT) from the gas and power unit went down 68% on the year to 37 million lei (EUR8.3 million). The group’s overall EBIT was down 7% to RON1.5 billion, while net profit fell 19% to RON1.07 billion.
“Further deterioration of spark spreads is expected, leading to a negative result of the power business in 2014; we aim to mitigate this by consolidating Brazi power plant’s position in the balancing and ancillary services markets, capitalizing on the plant’s flexibility,” Petrom said.
While Romania’s gross electricity production increased by almost 4% in the first quarter compared with the same period a year before, the estimated national electricity demand contracted by approximately 3%, the company said.
Petrom, a unit of Austria’s OMV, noted the lower domestic demand combined with a steep expansion of power production from renewable sources led to a decrease in power prices on the Romanian market.
With a net electrical output of 0.55 terawatts hour (29% lower compared to Q1/13), Petrom’s Brazi power plant covered more than 3% of Romania’s estimated electricity production. The company also has a wind park, which delivered 0.02 TWh in January to March, 32% lower than in the year-earlier period due to the milder winter.
In the first three months, Petrom’s natural gas sales volumes were down 18% year-on-year to 1.25 billion cubic meters (16.39 TWh) mainly due to weak demand from the industrial sector and milder winter.
The estimated gas consumption in Romania decreased by 9% compared to the first quarter of 2013, but Petrom’s steeper decrease also reflected the reduced withdrawals from storage, as the company sold additional quantities during the injection cycle in the summer of 2013, instead of storing them for the winter period.
“Gas demand in Romania is expected to further decrease which will lead to increased competition and margin pressure,” Petrom said.