VELCAN HOLDINGS: ANNUAL RESULTS 2023
PRESS RELEASE
Luxembourg, 29th April 2024
VELCAN HOLDINGS: ANNUAL RESULTS
2023
DROP IN NET RESULT RESULTING FROM
STAGNANT FINANCIAL PORTFOLIO VALUE, DECREASED TURNOVER OF THE
RODEIO BONITO PLANT, ENHANCED EBITDA DUE TO THE DIVESTMENT OF
INDIAN PROJECTS
NON-AUDITED KEY CONSOLIDATED FIGURES |
2023 |
2022 |
Var % |
Revenues (EUR m) |
2.9 |
3.2 |
-8% |
EBITDA (EUR m) |
1.8 |
-2.7 |
NA |
Net Income (EUR m) |
0.5 |
8.2 |
-94% |
Cash and Financial assets and liabilities |
125 |
124 |
+0% |
Shareholders’ Equity (EUR m) |
128 |
127 |
+1% |
The financial portfolio value of the Group
stayed flat in 2023 (financial result of 65k euros). Despite
several Fed rates hikes and bank failures in the spring, the US
labor market and the US economy in general remained strong. The
rest of the world showed a more contrasted picture. China, mired in
its real estate development sector crisis and continuous political
scrutiny of its private sector, has witnessed low level of growth.
The year has also seen rising geopolitical tensions, namely a new
conflict in the Middle East, the ongoing war in Ukraine, increasing
tensions over Taiwan and continuing threats by North Korea. With
this current uncertain backdrop, the Group remained heavily
positioned in cash, cash equivalents and cash like commodities
(mostly gold mining stocks). In 2023, gains made in gold mining,
Japanese equities and European banks balanced the losses suffered
in the Japanese Yen and in Chinese equities. The Group net
financial instruments stayed at Eur 124.6 million, almost at same
level as at end of 2022 with a financial result of EUR 65k as of
31/12/2023.
The Rodeio Bonito plant power generation reached
50,757 MWh during 2023, against 56,159 MWh during 2022. An incident
prevented the turbine no.1 from generating power from the 15th of
October onwards. The turnover from sales of electricity amounted to
EUR 2.9m or BRL 15.6 m. It was down by 8% when expressed in Euros
and down by 9% when expressed in BRL relative to 2022 (EUR 3.2 m or
BRL 17.2 m for 2022). In terms of rainfall and water discharge,
2023 was similar to 2022 and below the historical values. The whole
country has experimented the same phenomenon for several years
now.
The Indian greenfield hydropower projects were
suspended in September 2021 due to long lasting administrative
impediments. Since then, the Group was looking for potential
investors to take over the projects, and, despite unfavorable
market conditions, could sold 2 out of the 3 projects of its
cascade to a major Government of India owned hydropower player in
August 2023. As the projects were fully impaired since the first
half 2021, this transaction generated a profit of Euros 4.3m in the
2023 accounts. The Group keeps looking for a solution for the Pauk
HEP.
The 2023 net result stands at EUR 0.5m, a 94%
decrease compared to the EUR 8.2m of 2022. Shareholder’s equity
increased by 1%.
FINANCIAL YEAR 2023 – MANAGEMENT COMMENTS
ON THE BUSINESS
Financial Assets
The Group has kept managing its portfolio of
financial assets to provide financial returns. The Group has
invested over the years in a diversified array of financial assets
including worldwide equity, gold related assets, commodities,
forex, direct lending and private equity investments.
The year 2023 has seen a high level of market
uncertainty and persistent rate hikes by the FED due to a sticky
inflation. The Group has mainly maintained its gold related
position in 2023. The Group then mainly reweighed its portfolio of
Japanese and Asian stocks. Financial result excluding Forex for the
year has been a gain of EUR 6.6 m and the Forex impact has been a
loss of EUR 6.5m.
The evolution of the portfolio allocation is
detailed below.
FINANCIAL INSTRUMENTS |
Value 31.12.2023 in mEUR |
Weight |
Value 31.12.2022 in mEUR |
Weight |
(% of net assets) |
(% of net assets) |
Cash and cash equivalent |
55.5 |
45% |
50.6 |
41% |
US Treasury Bill |
1.8 |
1% |
5.8 |
5% |
Money Market Funds in BRl and INR |
5.2 |
4% |
3.5 |
3% |
Unrealized Gains on open Forward Forex |
0.0 |
0% |
0.1 |
0% |
Bonds and interests receivable |
6.7 |
5% |
6.4 |
5% |
Gold and silver related stocks |
26.0 |
21% |
25.2 |
20% |
Equity Long positions (EM, EU, USA, Japan) |
26.8 |
22% |
35.4 |
28% |
Equity Short and dividens receivable |
3.1 |
2% |
3.9 |
3% |
Private Equity & Lending |
0.4 |
0% |
0.2 |
0% |
Total assets (A) |
125.5 |
101% |
131 |
105% |
|
|
|
|
|
Bank Overdraft and short-term loans |
-0.0 |
0% |
-1.3 |
-1% |
Unrealized losses on open forward forex |
-0.8 |
-1% |
-5.4 |
-4% |
Total in Financial liabilities (L) |
-0.9 |
-1% |
-6.6 |
5% |
|
|
|
|
|
Net Total (A+L) |
124.6 |
100% |
124.4 |
100% |
The equity portfolio, including gold and silver
related instruments, is deployed across a diversified array of 50
different issuers and ETFs. The gold position, which the Group
considers to be equivalent to a separate currency, was held through
4 positions. The investment in gold mining companies through the
VanEck Gold Miners ETF being the most significant, valued EUR 18.7m
as of 31.12.2023. In addition, the Group has smaller holdings in
specific gold mining companies.
In H1 of 2023, the Group divested its position
in two banking stocks namely BANCO BILBAO VIZCAYA ARGENTARIA SA and
BANCO SANTANDER SA to benefit from the rally, resulting in a
financial gain of EUR 1.56m. In H2 of the year, the Group increased
its exposure to Japan Hotel Reit Investment Corp.
As to non-gold related equities, 5 positions
stand above EUR 2.5m: iShares Silver Trust, Ping An, Tencent,
Citigroup and Japan Hotel Reit. The Group also holds a S&P
Short position of EUR 3.0m.
As of 31st December 2023, the Group’s equity
investment is mostly exposed to U.S, Chinese, European and Japanese
issuers. The Group capitalized on investments in the banking sector
selling its positions in 2023 as these assets had rebounded
strongly from their initial purchase price, mostly in 2020. The
performance of these shares was between +65% to +146% compared to
their initial cost.
The Gold and Silver investment are viewed as an
insurance against potential future inflation or monetary
debasement. This investment is viewed as if the Group had invested
in an additional currency. At the end of the year, this investment
is approximately even.
The Group bonds portfolio is exposed to issuers
in the BB and CCC ratings (as defined by Standard & Poor’s).
One of the bonds has a long maturity, whereas the other has a
maturity of less than 1 year. At period closing date the lines of
the Group are with the following issuers:
a) EUR
2.0 m exposure to the republic of Argentina.
b) above
EUR 4.5 m of exposure to NORDDEUTSCHE LANDESBANK
The performance of the bond investments is not
material compared to the one of the rest of the portfolio in 2023.
It is to note however that with the outcome of the Presidential
Election this year in Argentina, the rally on the bonds resulted in
a financial result of Eur 0.49m. The Group had already
significantly reduced the size of the bond portfolio as of the end
of the year 2021. In 2023, the Group has maintained its bond
holdings.
The Group continues to monitor potential rate
changes from the U.S Federal Reserve, the Bank of England, the
European Central Bank and the Bank of Japan. The ongoing
geopolitical tensions may result in further market uncertainty. The
FED has paused on its aggressive approach to monetary tightening
and the market sentiment is that rates should start to come down in
2024. That said, the timing of these decisions when it comes to
dealing with inflation creates a lot of unknowns on possible market
levels.
As of the end of 2023, the Group private
investments sit at EUR 0.4m, which represent only private equity /
venture capital. In 2023, the Group has kept prospecting private
investment opportunities to increase the share of this segment in
its portfolio, but without finding favorable valuations and
environment. As at 31/12/2023, the Group does not hold any secured
lending investments.
The Group has, with the settlement of Forward
Forex contracts, increased its financial exposure to the USD and
maintained its exposure to the Euro and the Japanese Yen. As of the
end of the year 2023, the Group net financial assets and
liabilities were mostly exposed to the following currencies:
- the Japanese
Yen: 34%,
- the Euro:
23%
- the U.S Dollar:
17%
- the Hong Kong
Dollar: 8%,
- the CNH:
8%
- the CHF 4%
- the Singapore
Dollar: 1 %
The Group also has EUR 5.2 m of investments in
Money Market funds in Brazil and India (proceeds from sale of
Indian projects have been placed in Money Market funds) and has
also invested in short term US treasury bill with a EUR 1.8 m
exposure at the end of 2023.
This year, the Group has significantly reduced
its leverage (bank overdraft) which is now at of EUR -41k. The net
cash position of the group as of 31/12/23 is EUR 55.5 m (cash and
cash equivalents of EUR 55 493k and a bank overdraft of EUR 41k
secured on the listed financial assets of the Group). Most of the
Forward Forex contracts held by the Group settled in 2023. The
Group remaining forward Forex contracts had a Mark-to-Market value
of EUR -0.8m as at 31.12.2023 (unrealized losses booked in
financial liabilities of the Group).
Rodeio Bonito Hydropower Plant
(Brazil)
On 15 October 2023, turbine #1 received a safety
stop command due to high levels of vibration but both the turbine
brake system and the floodgate closure failed. This resulted in the
unit being damaged by a foreign object. The full extent of the
damages is still being assessed, and maintenance and repairs are
still ongoing on this report’s date. The insurance policy has been
activated.
Despite the incident, the electricity generation
of 50,757 MWh during 2023 (against 56,159 MWh during 2022) was
decent, but was still below Rodeio Bonito’s level of ensured
energy1.
The operation and maintenance of Rodeio Bonito
were satisfactory till the damage on turbine #1, which caused a
technical availability of only 87.57% during 2023, compared to
98.7% for 2022.
The extensive rain deficit for several
consecutive years is still weighing on Brazil’s hydropower sector
and Brazil power sector in general and the Group remains cautious
on its Brazilian plant performance in the future despite a decent
2023 FY.
The MRE system (Energy Reallocation Mechanism)
was still in deficit in 2023, with a steady impact of consumed
purchased for the Rodeio Bonito plant (EUR -0.2m in 2023 compared
to EUR -0.2m in 2022).
The turnover from sales of electricity by the
Rodeio Bonito Hydro Power Plant (HPP) in Brazil amounted to EUR
2.9m or BRL 15.6 m. It was down by 8% when expressed in Euros and
down by 9% when expressed in BRL relative to 2022 (EUR 3.2 m or BRL
17.2 m for 2022). The EUR/BRL average rate was quite stable during
FY 2023 (appreciation of +1%) which explains the small difference
in terms of percentage between the 2023 and 2022 comparative
figures in BRL and EUR.
The EBITDA of the plant was therefore down to
BRL 11.1m in 2023 against BRL 13.0m in 2022 (-15%), mainly because
of a lower turnover and higher expenses. When expressed in EUR, it
was down by 14% (EUR 2.4m in 2023 VS EUR 2.1m in 2022) because of
the slightly better average EUR/BRL rate as seen above.
Indian Hydropower Projects
Velcan Holdings fully divested its Heo – Tato-1
tandem of hydropower projects (2 hydropower projects totaling 426
MW located in the state of Arunachal Pradesh, India), taken over by
a major utility owned by the Government of India.
These projects were the 2 largest projects of
the Group’s cascade of 3 hydropower projects. Following this sale,
the Group is left with the third project of the said cascade, the
Pauk HEP (145 MW), its last greenfield hydropower project.
The entire cascade development was suspended in
September 2021, since the Government of Arunachal Pradesh (GoAP)
had refused to consider vital amendments to the corresponding
concession agreements. This came on top of the numerous deadlocks
encountered by the projects during the past years regarding
essential development activities which mostly depended on the
Governments (central and local), such as the delays in the road
infrastructure, the inability of the GoAP to make significant
progress in the land acquisition and the inability of electricity
distribution companies to sign long term bankable power purchase
agreements.
The takeover by a public utility appears as a
logical outcome in the above-mentioned distressed context, where
the sector environment proved to be extremely unfavorable to
private developers. Given the very few large projects that were
taken over against a payment – and by the Government of India –
this transaction illustrated the quality of the projects.
The buyer of the projects refunded a significant
part of the project development expenses incurred by the Group in
India, although costs incurred out of India could not be recovered.
The projects were fully impaired since the first half 2021 and this
transaction therefore generated a profit of Euros 4.3m in the 2023
accounts.
The Group is working on the potential sale of
the Pauk HEP. It is a different scenario from Heo and Tato HEPs
which were slightly ahead of Pauk HEP in terms of permits obtained
at CEA level.
Foreseeable evolution of the
Group:
After the closing of the financial year 2023,
the group will pursue the diversification of its investment
portfolio in order to maximize possible return.
The full annual report 2023 is available
at:
http://www.velcan.lu/investors/reports-accounts/
-
Summarized accounts next page
SUMMARY CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Balance Sheet
ASSETS (EUR ’000) |
2023 |
2022 |
NON-CURRENT ASSETS |
6 374 |
6 356 |
Intangible Assets |
1 032 |
1 071 |
Tangible Assets2 |
4 919 |
5 073 |
Non-Current Financial Assets |
409 |
209 |
CURRENT ASSETS |
125 344 |
131 308 |
Current Financial Assets |
69 563 |
80 273 |
Cash and Cash Equivalents |
55 495 |
50 574 |
Other Current Assets |
286 |
461 |
TOTAL ASSETS |
131 718 |
137 664 |
LIABILITIES (EUR ’000) |
2023 |
2022 |
TOTAL EQUITY |
128 110 |
127 460 |
NON-CURRENT LIABILITIES |
1 604 |
1 663 |
CURRENT LIABILITIES |
2 004 |
8 541 |
Current financial liabilities |
875 |
6 622 |
Other payable |
1 130 |
1 919 |
TOTAL LIABILITIES |
131 718 |
137 664 |
Income Statement (EUR ’000) -
Unaudited
|
2023 |
2022 |
Revenues |
2 890 |
3 157 |
Operating expenses |
(5 368) |
(5 844) |
Amortizations, depreciations and Provisions |
(576) |
(562) |
Ordinary Operating Result |
(3 054) |
(3 249) |
Other operating Income/expense |
4 320 |
11 |
Operating Result |
1 266 |
(3 238) |
Net Financial Income (Loss) |
65 |
12 102 |
Tax Income (Expense) |
(798) |
(638) |
Net Income – Group Share |
533 |
8 226 |
EBITDA |
1 842 |
(2 677) |
- Audited statutory statements next page
SUMMARY AUDITED STATUTORY FINANCIAL
STATEMENTS (Lux GAAP)
Balance Sheet
ASSETS (EUR ’000) |
2023 |
2022 |
FIXED ASSETS |
126 449 |
153 299 |
CURRENT ASSETS |
6 361 |
6 061 |
Debtors |
353 |
55 |
Investments |
5 892 |
5 436 |
Cash at bank and in hands |
116 |
570 |
PREPAYMENTS |
61 |
57 |
TOTAL ASSETS |
132 871 |
159 418 |
LIABILITIES (EUR ’000) |
2023 |
2022 |
CAPITAL AND RESERVES |
132 465 |
131 679 |
CREDITORS |
406 |
27 738 |
TOTAL LIABILITIES |
132 871 |
159 418 |
Income Statement (EUR ’000)
|
2023 |
2022 |
Gross profit or loss |
(773) |
(608) |
Income from participating interests |
1 652 |
4 900 |
Income from other investments & loans forming part of the fixed
assets |
418 |
446 |
Other interest receivable and similar income |
18 |
1 258 |
Value adjustments in respect of financial assets and of investments
held as current assets |
527 |
7 258 |
Interest payable and other similar expenses |
(590) |
(5 453) |
Tax on profit or loss |
0 |
0 |
Other taxes |
(466) |
(10) |
Profit or Loss for the financial year |
785 |
7 791 |
* * *
Investor Relations
Contact investor@velcan.lu
About Velcan:
Velcan Holdings is an investment holding company
founded in 2005, managing a global portfolio of participations and
investments.
The company was launched more than 15 years ago
by its reference shareholder LHP SA, owned by Velcan Holdings’
management team.
Velcan Holdings is listed on the unregulated
Euro MTF Stock Market in Luxembourg (Ticker VLCN/ISIN
FR0010245803). Velcan Holdings never performed any Public Offer as
understood under Directive 2003/71/CE of the European Parliament
and Council.
Disclaimer
This press release contains prospective
information about the potential of the projects in progress and/or
of the projects of which the development has begun. This
information constitutes objectives attached to projects and shall
not be construed as direct or indirect net income forecast of the
concerned year. Reader’s attention is also drawn on the fact that
the performance of these objectives depends on future circumstances
and that it could be affected and/or delayed by risks, known or
unknown, uncertainties, and various factors of any nature, notably
related to economic, commercial or regulatory conjuncture, which
occurrence could be likely to have a negative impact on future
activity and performances of the Group.
This announcement does not constitute a public
offering (“offre au public”) nor an invitation to the public or to
any qualified investor in connection with any offering. This
announcement is not an offer of securities in the United States of
America or in any other jurisdiction/country.
1 In Brazil, « guaranteed energy » or
« ensured energy » means the annually marketable energy
as approved by MME – Ministério de Minas e Energia (Department of
Mines and Energy) and guaranteed through the Brazilian power system
for power plants opting for the MRE (Energy reallocation
Mechanism), mechanism functioning at national scale, even if the
production is impacted by a bad hydrology some years. This
mechanism covers the hydrological risk in case some Brazilian areas
are experiencing drought, whereas other areas are experiencing
heavy rains. The guaranteed energy is usually sold through mid-term
fixed inflation-linked contracts. However, this mechanism does not
cover the risk of a national drought across Brazil which results in
an overall MRE system in deficit. In this case, the Rodeio Bonito
plant EBITDA could collapse drastically as all participants of the
MRE system will have their guaranteed energy reduced proportionally
to the overall deficit. In this case the plant has to purchase
electricity in the spot market to compensate for its generation
deficit, called MRE payments as consumed purchases.2 Almost
exclusively constituted of the Rodeio Bonito Hydro Power Plant
asset
- Velcan Holdings Results 2023