Notes on the financial Statements
MYTILINEOS Group is active in four main operating business segments: a) Metallurgy, b) Sustainable Engineering Solutions, c) International Renewables and Storage Development and d) Power & Gas. In accordance with the requirements of IFRS 8, management generally follows the Group's service lines, which represent the main products and services provided by the Group, in identifying its operating segments. Each of these operating segments is managed separately as each of these service lines requires different technologies and other resources as well as marketing approaches.
The Group’s service lines that do not fulfil the quantitative and qualitative thresholds of IFRS 8, in order to be considered as separate segments, are presented cumulatively under the category “Others”. The Group has applied IFRS 5 “Non-Current Assets Available for Sale & Discontinued Operations” and present separately the results of the discontinued operations of the subsidiary company SOMETRA S.A.
The totals that are presented in the following tables, reconcile to the related accounts of the consolidated financial statements.
Income and results per operating segment are presented as follows:
Assets and liabilities per operating segment are presented as follows:
Geographical Information
The Group’s Sales and its Non-current assets ('Tangible Assets, Goodwill and Intangible Assets) are divided into the following geographical areas:
Group’s sales per activity:
It should be noted that the backlog of projects already undertaken for the group (Sectors SES & RSD) amounts to € 1,750 mio.
Leases are recognized in the statement of financial position as a right to use an asset and a lease obligation, the date on which the leased fixed asset becomes available for use.
The recognized rights to use assets are related to the following categories of assets and are presented in the “Right-of-use-Assets”:
The group reflects the lease liabilities on the "long term lease liabilities" and "current portion of lease liabilities" in the statement of financial position.
The Group recognized in 31/12/2022 € 59.2 mio Rights of use and €63.2 mio Lease obligations, while the Company € 38.2 mio and €41.2 mio respectively.
Additionally, the Group recognized (for the twelve-month period ended on 31/12/2022) €8.4 mio depreciation and € 2.6 mio financial expenses, while the company recognized € 6.9 mio and € 1.7 mio respectively, in relation to the above leases.
The following tables show the aging of lease liabilities for the following years, as well as the recognized rights of use of assets by asset category:
Tangible assets presented in the financial statements are analyzed as follows:
During 2022, the Group recognized an impairment loss of €7.8 million (2021: €2.8 million) for Renewable Energy Assets and Thermal Energy Assets due to the fact that Regulatory Authority for Energy rejected the production license.
In every reporting period, the Group tests the carrying amounts of non-financial assets for indications of impairment. If such indications are identified, the recoverable amount of the assets is determined.
For the impairment test purposes, the Group categorizes the assets into separate CGUs. The recoverable amount for the separate CGU is determined based on the value in use, calculated applying the discounted cash flows method. In determining the value in use, the Management uses assumptions it considers appropriate that are based on the consensus of the assessments carried out by international rating agencies and analysts, as well as the best possible information available to it and valid on the financial statements reporting date. As at 31.12.2022, the impairment test disclosed no indications of impairments of property, plant and equipment other than the above-mentioned RES units
Depreciation charged in profit and loss is analyzed in notes 3.20 and 3.21.
4.1 Changes in goodwill
Goodwill is allocated to the group’s cash-generating units identified according to business segment for 2022 and 2021.
4.2 Impairment test on goodwill
Goodwill arising from acquisition, has been allocated in the following Cash Generating Units (CGU) per business operating sector:
For the annual impairment test on goodwill, the recoverable amount of each segment is as follows:
The Group performs annually impairment tests for goodwill.
The recoverable amount of the recognized goodwill, related with the separate CGU’s, was assessed using value in use and calculated using the DCF method. The “value in use” was determined based on management’s assumptions, which management deems reasonable and are based on estimates from international rating agencies on Financial Statement’s issue date. No need for impairment arose from impairment tests.
4.3 Assumptions used in calculation of Value in Use
The recoverable amount of each CGU is determined according to the calculation of the value in use. The calculations for the CGU’s recoverable amount were based on the present value of the expected future cash flows. The basic estimates the Group uses to determine the value in use divide in:
Market prices estimations:
i. Metal/Mineral prices at LME for the metallurgy sector
ii. Exchange rate between $/€ for the metallurgy/constructions/energy sectors
iii. CO2 prices for the metallurgy and energy sector
iv. Gas and BRENT prices for the metallurgy/energy sectors
Operating estimations:
v. Raw material prices and equipment for the metallurgy/constructions sectors
vi. Technical KPI’s for the production plants of metallurgy and energy sectors
vii. Project milestones and completion percentage of construction sector
viii. Cost and time of major inspections for the metallurgy/energy sectors
ix. Capacity rate and total demand of energy system for the energy sector
Business plan per CGU:
x. Business plans are drawn up over a maximum of 5 years. Cash flows over 5 years are deduced using the estimates of growth rates of 1% (31.12.2021 1%) listed below.
xi. Business plans are based on recently prepared budgets and estimates.
xii. Business plans use operating profit margins and EBITDA, as well as future estimates using reasonable assumptions.
xiii. Concerning projects in the electricity and natural gas sector, these projects extend over a period equal to the duration of the relevant licences.
xiv. Concerning projects in the field of integrated projects and infrastructures, these projects extend over a period of 9-10 years. The reasons are related to the characteristics of EPC thermal constructions, which (together with metal constructions) are the core business of the business sector. In particular, future projects are mainly located in African countries, regional countries of the former Soviet Union and Middle East countries. Management estimates that the market for EPC projects in these countries is changing, boosting interest in projects where the manufacturer takes a Partner role by participating in financing the construction and recovering the liquidity provided through the project's future operational cash flows. The total completion and repayment cycle of the projects has been set at 9-10 years.
xv. Finally, for projects executed in the form of BOT (build operate transfer) the provisions are based on the portfolio of projects under consideration that have already passed or are expected to pass by the Group's investment evaluation committee (Capital Allocation Committee).
Calculations to determine the recoverable amount of operating segments were based on business plans approved by the Management, which included the necessary revisions to capture the current economic situation and reflect past experience, sectoral projections and other available information from external sources.
The Group analyzed the sensitivity of the recoverable amounts per CGU through change in a percentage point of 0.5% in the growth rate. From the relevant analysis there is no amount of impairment.
Weighted Average Cost of Capital (WACC):
The WACC method reflects the discount rate of future cash flows for each CGU, according to which the cost of equity and the cost of long-term debt and any grants are weighted, in order to calculate the cost of capital of the company. Since all cash flows of the business plans are denominated in euro, the yield of ten-year German government bond was used as the risk-free rate. Assumptions of independent sources were taken into account for the calculation of the risk premium. Betas are evaluated annually based on published market data. The Company’s WACC was estimated at 8.77%.
The Group analyzed the sensitivity of the recoverable amounts per CGU through change in a percentage point of 0.5% in the discount rate. From the relevant analysis there is no amount of impairment
Apart from the above considerations concerning the determination of the value in use of CGUs, no other changes that may affect the rest of the assumptions have come to the Management’s attention.
Intangible assets presented in the financial statements are analyzed as follows:
During 2022, the Group recognized an impairment loss of € 2,2 million (2021: € 0 million) for Renewable Energy Assets and Thermal Energy Assets due to the fact that Regulatory Authority for Energy rejected the production license.
In every reporting period, the Group tests the carrying amounts of non-financial assets for indications of impairment. If such indications are identified, the recoverable amount of the assets is determined.
For the impairment test purposes, the Group categorizes the assets into separate CGUs. The recoverable amount for the separate CGU is determined based on the value in use, calculated applying the discounted cash flows method. In determining the value in use, the Management uses assumptions it considers appropriate that are based on the consensus of the assessments carried out by international rating agencies and analysts, as well as the best possible information available to it and valid on the financial statements reporting date. As at 31.12.2022, the impairment test disclosed no indications of impairments of intangible assets other than the above-mentioned RES units.
Amortization charged in profit and loss is analyzed in notes 3.20 and 3.21.
Other changes in Equity concern the reduction and return of the share capital of the subsidiary company Protergia Thermoelectric SA. in accordance with the decision of the extraordinary General Meeting of shareholders of 9 November 2022.
Below the investments of MYTILINEOS S.A. per subsidiary as at 31/12/2022 and 31/12/2021:
6.1 Important non-controlling interests
On the table below, the analysis of the non-controlling interests in Group’s Subsidiaries:
The summarized financial statements of the Group’s subsidiary companies before intragroup eliminations:
The Group participates in associate companies, which due to significant influence are classified as associates and consolidated by equity method in the consolidated financial statements (the activity and percentage of participation are presented in note 3.7.1). These associate companies are not listed in any Stock Exchange market and therefore there are no market values.
Current year additions refer to the investment in associate company named KEDRINOS LOFOS S.A. which is consolidated under equity method since 14/12/2022 with 50% percent.
7.1 Interests in Associates
Group’s Financial Statements include, with the equity method, the following companies incorporated: FTHIOTIKI ENERGY S.A. 35% (31.12.2021: 35%), ELEMKA SAUDI 34% (31.12.2021: 34%), , IPS S.A. 10% (31.12.2021: 10%), J/V MITILINEOS-XANTHAKIS 50% (2021: 50%), J/V AVAX-INTRAKAT-MYTILINEOS-TERNA 25% (2021: 25%) and J/V MITILINEOS-ELEMKA 50% (2020: 50%). The Group based on the immaterial contribution of the above mentioned associate companies at earnings before taxes notifies below a summarized Income Statement:
During 2022 Group proceeded with the sale of the total shares of THERMOREMA S.A. held on 31/12/2021 of percentage 40%. THERMOREMA S.A was incorporated with equity method. From the above transaction a loss of € 4,338 thousands was recognized.
Deferred tax assets / liabilities arising from the relevant temporary tax differences are as follows:
Deferred tax assets from tax losses amounting to € 10.1 m., are computed on tax losses of the current as well as on those of previous year’s carried forward. The major contribution on the calculated deferred tax asset derives from the following subsidiaries and branch: METKA-EGN CHILE SPA (€ 3.1 m.), METKA EGN GREECE S.A. (€ 2.8 m.), Mytilineos S.A. Algeria Branch (€ 0.83 m.), METKA EGN ITALY S.R.L. (€ 0.7 m.), METKA EGN KZ LLP (€ 0.57 m.), MYTILINEOS FINANCIAL PARTNERS S.A. (€ 0.3 m.), MAKRYNOROS S.A. (€ 0.26 m.), PROTERGIA THERMOHLEKTRIKI S.A. (€ 0.25 m.).
In the companies where a deferred claim for tax losses has been calculated, based on the future planning and development prospects of the Group, there is a significant possibility that taxable profits will arise which will be realized until the period in which the possibility of offsetting the tax losses exists.
As of 31.12.2022, there are unused tax losses for which no deferred tax asset has been recognized. The amount of the deferred tax asset which could be recognized amounts to € 2.06 m. and is mostly related to subsidiaries in Australia.
Inventories that are presented in the financial statements are analyzed as follows:
The increase in inventories is due to METKA’s EGN (note 2.5) portfolio acquisition (METKA EGN is a 100% subsidiary company of the Group) as well as and the gas inventory in Revithousa station.
The increase in Other Debtors is mainly due to the amount of €177.4 million that concerns the reclass of the receivables regarding the construction project of a power plant in Ghana with a total capacity of 200 MW on behalf of Early Power Limited (EPL) from Power Projects Limited. According to the commercial agreement of Mytilineos Group, EPL and GE Industrial West Africa, the Company took over the contractual obligation of financing the above amount referring to the receivables of Power Projects Limited of the project.
The "Escrow Deposits" category mainly includes amounts related to guarantees for the issuance of letters of guarantee as well as in the Group's bank accounts which are used in the context of the transactions carried out by the Group in the electricity market (Spot Market), based on the market model (Target Model ), which came into effect in November 2020. The increase in receivables is due to sales of electricity and natural gas which will be billed within January 2023.
The movement of the provision of doubtful other receivables is shown in the following table:
The Group’s financial instruments consist mainly of deposits with banks, bank overdrafts, FX spot and forwards, trade accounts receivable and payable, loans to and from subsidiaries, associates, joint ventures, investments in bonds, dividends payable and lease obligations.
The financial instruments presented in the financial statements are categorized in the tables below:
A description of the Group’s financial instruments risks, is given in Note 3.31.
11.1 Other Financial Assets
Regarding highly liquid assets, namely shares, bank bonds and mutual funds with long-term investment horizon that are traded in an active market.
11.2 Financial assets at fair value through profit or loss
11.3 Derivatives financial instruments
The actual values of financial derivative products are based on observable market data. For all exchange contracts, actual values are confirmed by the credit institutions with which the Group has entered into agreements.
The Group hedge its exposure to exchange rate risk by using forward contracts and options, "locking in" exchange rates that ensure liquidity and profit margins.
Subsequently, the Group hedge its exposure to commodity risk by using future contracts to hedge fluctuations in the price of metal and electricity, and future contracts for metal prices, which hedge changes in fair value of commodities, as well as commodity swap contracts to hedge changes in the price of metal, natural gas, and oil, which hedge the risk of changes in cash flows.
The maximum exposure to credit risk on 31/12/2022 and 31/12/2021 for the Group and the Parent is the fair value of the derivatives items, as illustrated in the table above.
All hedges are classified as cash flow hedges which are estimated to be effective with the overall change in fair value recognized in the statement of comprehensive income.
Profit/ (Losses) from the valuation of derivatives shown in the statement of total income are presented below:
The maturity of the open positions of derivatives on 31/12/2022 and 31/12/2021 is presented in the table below
The results of the settled derivative transactions recorded in the income statement for the year 2022 for the Group and the Company from the hedging of the exchange rate risk amount to a loss of € 135,116 thousand and € 151,748 thousand respectively and from the hedging of commodity prices to a profit € 255,818 thousand and € 233,736 thousand respectively. The corresponding amounts for the year 2021 had risen for the group and the company from the hedging of the exchange rate risk in a loss of € 1,048 thousand and € 1,080 thousand respectively and from the hedging of commodity prices in loss € 54,921 thousand and € 55,629 thousand respectively.
11.4 Other long-term receivables
Other long-term receivables of the Group and the Company are analyzed in the table below:
The increase in the Given Guarantees fund is due to the coverage of positions regarding the capacity commitment and balancing in the Natural Gas market in accordance with the provisions of the respective code.
11.5 Loan liabilities
The effective weighted average borrowing rate for the group, as at the balance sheet date is 3.14%.
The financial covenants for the compliance with certain ratios applicable to the Group's loan obligations are referred to note 3.33.
11.6 Loan liabilities movement
11.7 Other long-term liabilities
There is analysis of Net trade Receivables below.
The below table shows the Group exposure in credit risk.
The increase in advances to suppliers is mainly due to advances in the Sustainable Engineering Solutions’ Business Unit.
Group receivables and liabilities from construction contracts are analyzed below:
The movement in the provision for doubtful receivables related to Customers and Other Trade Receivables is analyzed below:
Cash and cash equivalent do not include escrow deposits which are included in paragraph 3.10.
Time deposits & REPOS on 31.12.2022 refer to time deposits of the Group with a maturity less than 3 months.
Suppliers and other liabilities Group and the Company are analyzed in the table below
The increase in Customers’ Advances is mainly due to advances for Gas sales of Power & Gas Business Unit will be realized in January 2023.
The increase in accrued expenses is due to purchases of electricity and gas which will be invoiced in January 2023.
16.1 Share capital
Mytilineos S.A., following the 27.03.2020 decision of the Extraordinary General Meeting of its shareholders and the relevant decision of the Board of Directors dated 01.06.2020, announced its intention to start implementing the Own Share Buyback Program. The purchases of the own shares will be made through the members of the Athens Stock Exchange, EUROBANK EQUITIES INVESTMENT FIRM S.A., PIRAEUS SECURITIES S.A. and EUROXX SECURITIES S.A.
It is reminded that the purpose of the program is to reduce the share capital and / or the disposal of the same shares, which will be acquired, to the staff and / or members of the management of the Company and / or affiliated company, while the maximum number of shares to be acquired is expected to be 14,289,116 (up to 10% of the share capital), with a minimum purchase price of €0.97 per share and a maximum purchase price of €25 per share, The program had initial duration till 26.03.2022 and following the Extraordinary General Meeting of 23.03.2022 the program extended for extra 24 months. The final amount that will be allocated for the program and the number of shares that will eventually be purchased, will depend on the current conditions of the company and the market.
In the current financial year, a total of 4,124,150 shares with a nominal value of €0.97 each, which represent 2.8862% of the Company's share capital, were acquired under the Own Share Acquisition Program. Furthermore, in 2022 MYTILINEOS proceeded with the sale of € 4.5 mio. own shares, which correspond to 3.1493% of its share capital.
The final amount that will be allocated for the program and the number of shares that will eventually be purchased, will depend on the current conditions of the company and the market. The share capital of Mytilineos S.A at 31.12.2022 amounts to one hundred thirty-eight millions six hundred four thousand four hundred twenty-six euros and seventeen cents (€ 138,604,426.17), divided into one hundred forty-two millions eight hundred ninety-one thousand one hundred sixty-one (142,891,161) registered shares with a nominal value of (€0.97) each.
The Shares of Mytilineos S.A. are freely traded on the Securities Market of the Athens Exchange. Until 31.12.2022 7,057,644 Company’s shares have been bought back at an average price of €13.5669 and total cost of €64,371,249.
16.2 Reserves
Reserves in the financial statements are analysed as follows:
The majority of the above reserves relates to Parent Company and Greek subsidiaries. Under Greek corporate law, corporations are required to transfer a minimum of 5% of their annual net profit as reflected in their statutory books to a legal reserve, until such reserve equals one-third of the outstanding share capital. The above reserve cannot be distributed throughout the life of the company.
Tax free reserves represent non distributed profits that are exempt from income tax based on special provisions of development laws (under the condition that adequate profits exist for their allowance). These reserves mainly relate to investments and are not distributed.
Specially taxed reserves represent interest income and income from disposal of listed in the Stock Exchange and non listed companies and are tax free or tax has been withheld at source. Except for any tax prepayments, these reserves are exempted from taxes, provided they are not distributed to shareholders.
This reserve is used to record the exchange differences arising from the translation of foreign subsidiaries’ financial statements. The balance of this reserve for the Group at 31.12.2022 was €4.2 million (31.12.2021: €-13.4 million). The Group had a total net gain € 18.6 million which was reported in the statement of comprehensive income.
The above total net gain for 2022 is mainly due to the positive movement of the USD against the EUR, which was partially offset by the negative movement of the AUD and GBP against the EUR.
The main exchange rates for converting the financial statements of foreign subsidiaries were:
Reserves for allocation of free shares to directors
As of December 31, 2021, the Group has in place two share-based payment plans, approved by the GMS on 15.06.2021.
A) The first plan is of three-year maturity and involves free distribution of up to 700,000 treasury shares and will be settled in equity. The terms of the plan, defined by the Board of Directors on 22.12.2021 relate to meeting corporate and personal goals of the executive members of the Board of Directors (excluding the Chairman and CEO) of the Company and/or members of the Executive Committee – the Company’s senior executives. The beneficiaries should retain the aforementioned capacity as at 01.01.2021 while a change of status and/or retirement of a beneficiary does not affect the distribution.
B) The second plan is of five-year maturity and involves distribution of up to 2,750,000 treasury shares and will be settled in equity. The terms of the plan, defined by the Board of Directors on 21.12.2021, as well appointed the beneficiaries and determined the terms of exercise and maturity, and the shares to be distributed to the beneficiaries of the plan.
The plan is rolling and consists of 5 phases:
i. The first phase has a vesting period from 2021 to 2023 and a period of exercise from 2024 to 2026.
ii. The second phase has a vesting period from 2022 to 2024 and a period of exercise from 2025 to 2027.
iii. The third phase has a vesting period from 2023 to 2025 and a period of exercise from 2026 to 2028.
iv. The fourth phase has a vesting period from 2024 to 2026 and a period of exercise from 2027 to 2029.
v. The fifth phase has a vesting period from 2025 to 2027 and a period of exercise from 2028 to 2030.
The vesting conditions defined by the 21.12.2021 decision of the Board of Directors concern Market conditions and Non-market conditions. In particular:
Upon establishing that the objectives have been achieved, the procedure for providing or not providing the shares per Beneficiary is activated. This is determined according to the individual performance criteria over time, during the 3 years of the vesting period, the achievement of which should be equal to or greater than 85%. The individual performance criteria are determined through the performance management process and take into account the overall achievement over a three-year period.
For each phase, the performance is defined during the 3rd year. Based on this, the shares are allocated to the executives in parts during the exercise period of each phase (3rd year of the program 30%, 4th year of the program 30%, 5th year of the program 40%), provided that on December 31, when the vesting period of each phase ends, the Beneficiary is still working or providing services to the Company, or to any of its subsidiaries, or is still acting as an Executive Member of the Board of Directors of Mytilineos S.A..
The fair values of the rights granted for the long-term free share distribution program were determined using the Monte Carlo simulation, taking into account the vesting conditions set in accordance with the 21.12.2021 decision of the Board of Directors. Specifically, the plan includes vesting conditions related to market conditions and non-market conditions. In light of this, the future movement of the share price on a monthly basis until the end of the program was simulated, taking into account the current value per share, the standard deviation, the dividend yield and the risk-free rate. The market condition associated with the plan is incorporated into the measurement through stochastic modeling of the movement of the values of the underlying securities. More specifically, the following input data are used in the model:
i. The price of the share which on the date of acceptance of the free shares plan amounted to 20.30 euros.
ii. The exercise price (0.00 euro/ free disposal).
iii. The discount rate or risk-free yield (2.19%).
iv. The average dividend yield of the stock (3.68%).
v. The average monthly performance of the share price which amounted to 0.98% and The average monthly performance of the share price which amounted to 0.98% and the monthly volatility of the share price which amounted to 11.70%.
vi. The price of the FTSE/ATHEX Large Capitalization Index, excluding banks, which on the date of acceptance of the free shares plan amounted to 333.25 euros (Source: Bloomberg).
vii. The average monthly return and monthly volatility of the FTSE/ATHEX Large Capitalization Index, excluding banks, was 0.65% and 9.60% respectively (Source: Bloomberg).
viii. The Correlation between the share price and the price of the Athens Stock Exchange Large Capitalization Index (excluding banks) which was calculated at 0.74.
Based on the above, the fair value of the rights was determined in a price range from € 16.71 to € 31.09, with a weighted average price of € 23.30.
The plan’s stock options and the weighted average exercise prices are for the reporting periods are presented below as follows:
The Group’s present value of the liability at year end 2021 is € 8,023 thousands and accordingly for 2021 is € 9,474 thousands
The Entity’s present value of the liability at year end 2022 is € 5,927 thousands and accordingly for 2021 is € 7,673 thousands.
The assumptions used, are presented in the following table:
Provisions referring to Group and Company are recognized if the following are met: (a) legal or implied liabilities exist as a consequence of past events, (b) there is a possibility of settlement that will require the outflow if economic benefits and (c) the amount of the liability can be measured reliably. All provisions are reviewed at each balance-sheet date and are adjusted accordingly so that they reflect the present value of expenses that will be required for the restoration of the environment. Contingent receivables are not recognized in the financial statements but are disclosed if there is a possibility of an inflow of economic benefits.
Tax Liabilities. This provision relates to future obligations that may result from tax audits.
Other provisions. Comprise other provisions relating to other risks none of which are individually material to the Group and to contingent liabilities arising from current commitments.
Other employees benefits of 31/12/2022 have been significantly differentiated in relation to the previous year as, within the year 2022. An amount of € 140,906 thousand was accounted for, concerning the completion of the implementation of the purpose of the contract between the Company and the CEO, according to the service contract approved by the General Assembly from 7 June 2018. It is noted that the payment of € 98,665 thousand was made in February 2023 and the corresponding tax of € 42,241 thousand was also paid.
Also, in the other benefits to employees, an amount of € 25,308 thousand has been accounted for regarding payment agreements based on equity securities for employees and executives of the Company as detailed in point 16.2 Reserves
For 2022, the figure for Administrative expenses includes amount of € 153 thousands, regarding auditor fees for the provision of services other than statutory audits.
Regarding the changes in the exchange rates in the years 2022 and 2021 and their effects on the results, detailed explanations are provided in the Report of the Board of Directors.In October 2010, the association of companies Ansaldo Energia S.P.A. and Mytilineos SA, entered into a contract with the Public Establishments of Electricity of Generation for the construction of a power plant (C.C.P.S.) in the Deir Azzur region of Syria. For this specific project, works had stopped due to the state of emergency in the country and political uncertainty. In 2022, a settlement was signed, with the owner of the project and its new contractor, according to which the association of companies is released from the continued execution of the project and from the already existing or any future obligations that may arise from the continued execution of the project.In May 2020 the association of companies (Consortium) consisting of the companies "General Electric International Inc." and "Mytilineos SA", appealed to international arbitration against the company "Société Algérienne de Production de l’Electricité" (SΑPE) for the project "HASSI R’MEL I" in Algeria. In October 2022 settlements were signed between Mytilineos SA, SAPE and GE, according to which the former is released from the Contract with SAPE for the "HASSI R’MEL I" project and transfers all claims/ obligations of Mytilineos SA to GE, while for the "HASSI R’MEL II" project, Mytilineos SA is released from most of the work to be performed in the framework of the "HASSI R’MEL II" project. The Company, following the above arrangements for the year 2022, recognized in its income statement and specifically in the other income fund € 67.3 million which related to recognized performance obligations, which no longer exist.
During the financial year 2022, the Group proceeded with an impairment of the assets of the Power Gas Business Unit a total amount of €10 million (2021: €2.8 million) for RES units, which is analyzed in Note 3. Tangible assets and 5. Intangible Assets. In addition, Mytilineos Financial Partners S.A., a subsidiary of Mytilineos S.A. based in Luxembourg, has issued with the guarantee of Mytilineos S.A. first-class bond with a nominal value of €500 million, with an interest rate of 2.50% and maturity in 2024. The Bond have been listed and traded on the multilateral trading facility (Euro MTF) of the Luxembourg Stock Exchange. Mytileneos S.A. owns bonds with a nominal value of €7,000,000 and recognized in the income statement the difference between the accounting value of the debt that has been written off and the price it paid, as fair value profit, amounting to €443 thousand.
Income tax for the Group and Company differs from the theoretical amount that would result using the nominal tax rate prevailing at year end over the accounting profits. The reconciliation of this difference is analysed as follows:
Based on paragraph 120 of Law 4799/2021, the profits from business activity obtained by legal persons and legal entities that keep double-entry books, excluding credit institutions, are taxed at a rate of 22% for the incomes of the tax year 2021 and thereafter.
See comments on income tax in Note 37.1 Unaudited tax years
Earnings per share
Basic earnings per share are calculated by the weighted average number of ordinary shares.
Dividends
During 2022, the Group paid dividends of € 58 million to its equity shareholders.
Also during 2022, the directors proposed the payment of a dividend of € 1.2000 per share. As the distribution of dividends requires approval at the shareholders’ meeting, no liability in this respect is recognised in the 2022 consolidated financial statements. No income tax consequences are expected to arise as a result of this transaction at the level of Illustrative Corporation.
The Group, since 2009, applies IFRS 5 "Non-current assets held for sale & discontinued operations", and presents separately the assets and liabilities of the subsidiary company SOMETRA S.A., following the suspension of the production activity of the Zinc-Lead production plant in Romania, and presents also the amounts recognized in the income statement separately from continuing operations. Given the global economic recession, there were no feasible scenarios for the alternative utilization of the aforementioned financial assets.
From 2011 and on, by applying par. 13 of IFRS 5 "Non-current assets Held for Sale", the Zinc-Lead production ceases to be an asset held for sale and is considered as an asset to be abandoned. The assets of the disposal group to be abandoned are presented within the continuing operations while the results as discontinued operations.
In December 2015, SOMETRA S.A., contributed the Zinc-Lead activity, through a spin — off process, to its newly established subsidiary Reycom Recycling S.A. (REYCOM). The said spin — off is part of the "Mytilineos Group" restructuring process, regarding the Zinc-Lead discontinued operation, targeting on the production of Zn & Pb oxides through the development of a recycling operation of metallurgical residues.
Following the analysis of the profit and loss of the discontinued operations:
Group’s assets pledges and other encumbrances amount to € 215.95 mio. for 31.12.2022.
Group’s commitments due to construction contracts are as follows:
The above table includes an amount of € 33 million. which are relates to metal construction projects in the Metallurgy sector.
Risk Management purpose and policies
MYTILINEOS international activities are affected by multiple risks, which the Company monitors and manages through its Risk Management Framework. The purpose of the Risk Management Framework is to reduce any uncertainty to achieving the Company's strategy, to limit the impact of threats to objectives and to maximize benefits from the opportunities that may arise.
The Company has designed and implements a Risk Management Framework, which is based on international best practices and is tailored to the needs of MYTILINEOS. It also promotes a unified culture that integrates risk management into processes, activities, and decision-making at all levels of the organization.
The Enterprise Risk Management Department provides independent oversight in the implementation and effectiveness of the Risk Management Framework and applies an integrated approach to the analysis of current and emerging risks in order to draw conclusions and information that will contribute to the effective management of risks.
The Company’s Management is responsible for the implementation of the Risk Management Framework in the day to day operations of the organization. Specifically, the Management is responsible for the systematic identification and evaluation of the risks that affect the business operations and in addition, supervises the development and timely implementation of the risk management plans. It regularly evaluates the effectiveness of the management plans and the need to adjust them in order to achieve optimal risk management.
Credit
Credit Risk entails the potential failure to effectively manage credit incidents.
MYTILINEOS is exposed to Credit Risk through the possibility of a counterparty default, a credit rating downgrade and/or an adverse credit environment in general. Such an event could lead to increased spreads, unfavorable prepayment obligations and borrowing terms for MYTILINEOS.
Furthermore, Credit Risk could be realized through an inability to efficiently collect receivables that would cause significant bad debt expense and/or excessive days receivables outstanding.
If any factors of Credit Risk were to materialize, MYTILINEOS’ financial condition, revenues and cashflows could be negatively impacted.
Root Causes/Factors
i. The organization may not comply with agreed funding agreement terms, like financial covenants, representations, undertakings, cross-default clauses, limitations in disposals, M&As, distributions, etc.
ii. Lack or improper aging process.
iii. Lack of effective credit management and collections policies and procedures.
iv. Lack of certain limits and criteria (e.g., credit rating) regarding the exposure of the organization on each counterparty.
v. Inadequate monitoring of client balances (accounts receivables).
vi. High volume/amount and/or long due of outstanding clients' balances.
Appetite
We are subject to events such as default of customer, credit rating downgrade and adverse credit market conditions. We are willing to accept medium levels of Credit Risk, engaging with customers and counterparties established in various countries, in pursuit of our strategic objectives, in light of our policies and procedures.
Mitigation
MYTILINEOS secures its access to sufficient debt funding sources and builds strong relationships with lending institutions to meet future obligations and manages effectively assets, liabilities and capital requirements.
Furthermore, MYTILINEOS has Credit Risk policies and processes in place that guarantee transactions only with clients that are characterized by appropriate creditworthiness. These policies are accompanied by strict client selection criteria and by constant monitoring of the credit granted to them.
Moreover, Credit Risk is also managed/mitigated through credit insurance policies with global insurance companies, receivables in advance to a considerable degree, safeguarding claims by collateral loans on customer reserves, receiving letters of guarantee and quantitative and qualitative limits on cash reserves and cash equivalents, derivatives, as well as other short term financial products.
The tables below summarize the maturity profile of the Group’s financial assets as at 31.12.2022 and 31.12.2021 respectively:
The below table shows the Group exposure in credit risk.
The below analysis of the balance of the Group’s trade receivables on 31/12/2022 (per nature of trade receivable item) as well as the simple average collection days (DSO, based on the annual Turnover) is shown in the following table:
Foreign Exchange
Through its business activities that expand in various countries, MYTILINEOS is exposed to Foreign Exchange Risk.
Failure to manage foreign exchange exposures, such as contracts in which the cash inflow and the cash outflow are in different currencies or unfavorable fluctuations in the currency of another market, could lead to financial loss.
More specifically, MYTILINEOS’ foreign exchange exposure arises mainly from the US dollar and originates from commercial transactions in foreign currency and from net investments in foreign financial entities, therefore changes in foreign exchange rates could adversely impact cash flows, costs, project profitability and eventually shareholder returns
Root Causes/Factors
i. Potential collapse of the currency in countries where business is conducted will expose the organization to loss.
ii. Lack of technical knowledge and expertise to manage Foreign Exchange Risk.
iii. Lack of monitoring activities to capture and manage unfavorable market, regulation, and country changes/events that may affect the volatility of foreign exchange rates.
iv. Inability to identify foreign exchange exposures derived from contracts where Cash inflow and Cash outflow are in different currencies.
Appetite
We are exposed to fluctuations in exchange rates (mainly USD) during business operations, including sales/purchases of aluminum and alumina, EPC contracts, natural gas. Our appetite for Foreign Exchange Risk is medium and where possible foreign exchange exposure is hedged.
Mitigation
MYTILINEOS aims to manage the effects foreign exchange exposures could have on its revenues and costs through hedging activities, using various financial instruments. More specifically, the Treasury Division performs foreign exchange hedging for specific assets, liabilities or future commercial transactions based on annual forecasts and management’s directions and targets. MYTILINEOS ensures that hedging activities are conducted properly through Financial Risk Management processes that outline appropriate approval flows, communication lines, open position monitoring activities, reconciliation activities and transaction counterparty management. The Treasury Division presents monthly any new developments, that impact the organization’s foreign exchange exposure, new hedging strategies and a summary of current positions to MYTILINEOS’ Financial Committee.
Liquidity Risk
Liquidity risk is related with the Group’s need for the sufficient financing of its operations and development. The relevant liquidity requirements are the subject of management through the meticulous monitoring of debts of long term financial liabilities and also of payments made on a daily basis.
Mitigation
The Group ensures that there is sufficient available credit facilities to be able to cover its short-term business needs, after the calculation of cash flows arising from the operation as well as cash and cash equivalents which are held. The funds for long-term liquidity needs ensured by a sufficient amount of loanable funds and the ability to sell long-term financial assets.
The tables below summarize the maturity profile of the Group’s liabilities as at 31.12.2022 and 31.12.2021 respectively:
It must be noted that the above table does not include liabilities to clients from the performance of construction projects, as the maturity of such values cannot be assessed. Moreover, cash-advances from customers, construction contacts liabilities as well as the provisions and accrued expenses are not included.
Price Risk
Goods prices that are mainly determined by international markets and global offer and demand result in the Group’s exposure to the relevant prices fluctuation risk.
Goods’ prices are connected both to variables that determine revenues (e.g. metal prices at LME) and to the cost (e.g. natural gas prices) of the Group’s companies. Due to its activity, the Group is exposed to price fluctuation of aluminium (AL) as well as to price fluctuation of natural gas and electricity, as production cost.
Mitigation
As regards price fluctuations, the Group’s policy is to minimize risk by using financial derivative instruments.
Interest rate risk
The Group’s assets that are exposed to interest rate fluctuation primarily concern cash and cash equivalents.
Mitigation
The Group’s policy as regards financial assets is to invest its cash in floated interest rates so as to maintain the necessary liquidity while achieving satisfactory return for its shareholders
In addition, for the totality of its bank borrowing, the Group uses floating interest rate instruments. Depending on the level of liabilities in floating interest rate, the Group proceeds to the assessment of interest rate risk and when necessary examines the necessity to use interest bearing financial derivative instruments. The Group’s policy consists in minimizing its exposure to interest bearing cash flow risk as regards long term funding.
Effect from risk factors and sensitivities analysis
The effect from the above mentioned factors to Group’s operating results, equity and net results as at 31.12.2022 and 31.12.2021 presented in the following table:
The following table presents financial assets and liabilities measured at fair value in the statement of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:
— Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
— Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
— Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement.
The Group’s financial assets and liabilities measured at fair value in the statement of financial position are grouped into the fair value hierarchy for 31/12/2022 and 31/12/2021 as follows:
Bonds and Other financial assets of Level 1 include bonds and stock shares valued at quoted price in active market at the end of the period. Derivatives of Level 2 include commodity futures that hedge the risk from the change at fair value of LME, commodity swaps that hedge fluctuations in cash flows from the volatility in LME prices and electricity, in exchange rates, in gas prices and in petroleum prices, currency forwards and options in LME prices and in exchange rates. The Group uses various methods and makes assumptions that are based on market conditions existing at the end of each reporting period. The aforementioned contracts are measured at fair value using: a) forward exchange rates of active market, b) mark-to-market values of contracts LME, gas and petroleum prices. Other financial assets of Level 3 include mainly not significant investments. Fair value measurement of them is based on their financial statements where the fair value of their assets is determined.
In the financial year 2022 no transfer existed between levels 1 and 2.
The primary objective of the Group’s capital management is to ensure the continuous smooth operation of its business activities and the achievement of its growth plans combined with an acceptable credit rating. For the purpose of capital management, the Group monitors the ratios “Net Debt to EBITDA”, “Net Debt to Equity” and “Net Interest Expenses”. As net debt, the Group defines interest bearing borrowings minus cash and cash equivalents and as Net Interest expenses define the sum of interest and related charges less the sum of credit interest and related income. The ratios are managed in such a way in order to ensure the Group a credit rating compatible with its strategic growth.
The table below presents ratio results for the years December 31, 2022 and 2021 respectively:
Ratios’ calculation excluding lease liabilities would be as follows:
Net Debt / EBITDA
0.79
Net Debt / Equity
0.29
The Company manage its funds on a Group level and not on a Company level.
Due to bank financing, the Group holds an obligation and restriction to maintain the ratio of “Net Debt to Equity” below one.
The BOD will propose to the General Assembly of the Shareholders (GA) the distribution of dividend of gross amount €1.2000/share. In 2021 the BOD had proposed the distribution of dividend of gross amount €0.4200/share. The aforementioned proposed amount should be approved by the General Assembly of the Shareholders (GA).
The number of employees at 31/12/2022 amounts to 3,216 for the Group and to 2,084 for the Entity. Accordingly, at 31/12/2020, the number of employees amounted to 2,895 and 1,965.
The above mentioned related party transactions are on a pure commercial basis. The Group or any of its related parties has not entered in any transactions that were not in an arm’s length basis, and do not intent to participate in such transactions in the future. No transaction from the above mentioned had any special terms and there were no guarantees given or received.
Out of the above mentioned parent company guarantees:
— € 642.0 mio are parent company guarantees for bank loans of the Group and
— € 2,269.7 mio are parent company guarantees on behalf of customers and suppliers of the Group.
It is noted that the above amount of guarantees issued by the parent on behalf of customers and suppliers of its subsidiaries, refers to the maximum amount of the guarantee and the respective risk undertaken by the parent regardless of the probability of realization of said risk.
The above mentioned related party transactions are on a pure commercial basis. The Group or any of its related parties has not entered in any transactions that were not in an arm’s length basis, and do not intent to participate in such transactions in the future. No transaction from the above mentioned was under any special terms.
The employee and pension benefits are analyzed as follows:
Other employees benefits of 31/12/2022 have been significantly differentiated in relation to the previous year as, within the year 2022. An amount of € 140,906 thousand was accounted for, concerning the completion of the implementation of the purpose of the contract between the Company and the CEO, according to the service contract approved by the General Assembly from 7 June 2018. It is noted that the payment of € 98,665 thousand was made in February 2023 and the corresponding tax of € 42,241 thousand was also paid.
The Company has implemented share-based payments for its employees and executives. In particular, under the effective agreements, the Company’s employees and executives are granted the option to receive equity securities (shares) of the parent company, given that certain conditions of vesting have been met.
None of the existing equity-based payment agreement plans are settled in cash.
Services received in return for equity-based payments are measured at fair value. The fair value of the services of executives and employees, at the date when the stock option is granted, is recognized in accordance with IFRS 2 as an expense in the income statement, with a corresponding increase in equity, during the period in which the services, for which the options are granted, are received.
Total expenses of the options during the vesting period are calculated based on the fair value of the options provided at the granting date. The expenses are allocated over the vesting period, based on the best available estimate of the number of stock options expected to be vested. The fair value of the options is measured by adopting an appropriate valuation model to reflect the number of options for which the performance conditions of the plan are expected to be met.
Estimates of the number of option’s expected to be exercised are revised if there is an indication that the number of stock options, expected to be vested, differs from previous estimates. Any adjustment to the cumulative share-based compensation arising from the revision is recognized within the current period.
The number of vested options, finally exercised by the company’s employees and executives does not affect the expenses recorded within the period.
No loans have been given to members of the Board of Directors or other management members of the Group (and their families).
37.1 Unaudited tax years
During 2021 audit orders received for the subsidiaries AIOLIKI EVOIAS PIRGOS S.A. for fiscal years 2018 and 2019, AIOLIKI ANDROU TSIROVLIDI S.A. for fiscal years 2016 and 2017 and AIOLIKI EVOIAS POUNTA S.A. for fiscal years 2019 and 2020. The above audit orders are still ongoing.
The audit for METKA INDUSTRIAL-CONSTRUCTION S.A. for the year 2016 was concluded within 2022 with the charging of taxes and penalties amounting to € 574 k., while the audit for the period 01/01-06/07/2017 was completed without charging taxes. The audit of ALUMINIUM of GREECE COMMERCIAL SOCIETE ANONYME for the period 01/01-06/07/2017 as well as the audit of PROTERGIA THERMOELEKTRIKI AGIOS NIKOLAOS SOCIETE ANONYME for years 2016 and 01/01-06/07/2017 were completed without tax charges.
For the fiscal years 2011 to 2021, the companies of Group operating in Greece fulfilling relevant criteria be subject to tax audit by the statutory auditors, have received Tax Compliance Report, according to article 65A par. 1 of law 4174/2013 and to article 82 par.5 of Law 2238/1994, having no significant differentiations. According to the circular CL. 1006/2016, companies that have been subject to foresaid tax audit, are not exempt from the regular tax audit held by the competent tax authorities.
For the fiscal year 2022, the tax Compliance audit is already being performed by the Statutory auditors and is not expected to bring any significant differentiation on the tax liabilities incorporated in the Financial Statements. Taking into consideration the above regarding the Tax Compliance Report (where applicable), the following table presents the fiscal years for which the tax obligations of the Company and its domestic subsidiaries have not become final:
Taking into consideration the above regarding the Tax Compliance Report (where applicable), the following table shows the Company’s and resident (Greek) subsidiaries’ financial years whose tax liabilities are not definitive:
These companies received a Tax Compliance Report for the fiscal years 2011-2013 for those years that were active, while from the fiscal year 2014 onwards and based on the amendment of the provisions of Law 4174/2013 article 65A par.1, those who met the relevant audit criteria to an optional extent, chose to receive a tax certificate.
The companies that for the first time will receive a tax certificate for 2022 are ST. NIKOLAOS SINGLE MEMBER P.C, AENAOS SYSSOREUTES ENERGEIAKI MONOPROSOPI S.A., EGNATIA WIND S..A., METKA EGN Single Member S.A. which has not received a tax compliance report for 2021.
Unaudited tax years — Group’s foreign subsidiaries
The table below shows the years for which the tax liabilities of the Group's foreign subsidiaries have not become final.
37.2 Other Contingent Assets & Liabilities
Extraordinary contribution of 6% for High Efficiency Cogeneration of Heat and Power plant
According to the informatory notes sent by the societe anonyme named Renewable Energy Sources Operator and Guarantees of Origin (DAPEEP SA) on 01.02.2019 to the Company, an extraordinary contribution was imposed upon the total income of electricity quantities injected to the transmission system from the High-Efficiency Cogeneration of Heat and Power (CHP) plant of the of Metallurgy Business Unit.
From the interpretation of the relevant law provision (article 157 of law 4579/2020), taking also into consideration the parliament’s explanatory memorandum, results, that legally, regulatory and economically- technically, it is correct and reasonable to calculate this extraordinary contribution exclusively on the part of the income (turnover) of the dispatched electricity quantities from the CHP plant which is paid by DAPEEP and concerns the special account for renewable energy sources (ELAPE), and not for the part of the generated electricity, which relates to the wholesale electricity market and is invoiced to the societe anonyme Hellenic Energy Exchange SA (HEnEx). The amount disputed by the Company amounts to €2,3 million.
The Company filed an appeal before the administrative courts against the Greek State and DAPEEP for the annulment of the informatory note for the extraordinary contribution of article 157 of law 4759/2020. In addition, the Company intends refer also to Greek civil courts in order to obtain a judiciary acknowledgement that DAPEEP, contrary to contract and the law, charged the Company with the said contribution on the total income from the production of the CHP plant. The positive outcome of the above cases is contemplated by the Company.
Dispute with the company IMERIS Bauxites (former ELMIN Bauxites)
Since 2017, the Company has been in dispute with IMERIS Bauxites (hereinafter IB) before the Hellenic Competition Commission (HCC), following a Company’s complaint for abuse of a dominant position. The procedure before the Commission was completed in June 2021, the final memoranda were submitted on 11.08.2021 and the decision is expected to be issued within 2023. At the same time, a new complaint was filed by the Company in April 2021, the examination of which is pending.
The commercial relationship between the two companies had been regulated since 2017 until the end of 2019, by temporary agreements dictated by interventions and a decision on precautionary measures of the HCC. For the years 2020 and 2021 IB had been invoicing the Company without an agreement with the latter, and the Company disputed the above invoicing, as it considered that it did not correspond to a reasonable and worthy price for the supply of such metallurgical bauxite. Consequently, the Company registered in its books and paid for the delivered quantities at the price agreed under the latest contract, which coincided with that of a decision of precautionary measures issued in the past by the HCC.
In May 2021, the Company filed a claim and application for interim measures before the civil courts, accompanied by a request for an interim injunction ordering IB to monthly supply of the Company as a priority with a monthly quantity and at a reasonable and fair price in the opinion of the Company. IB filed an application for revocation of the interim injunction issued in favor of the Company, which was rejected. IB also filed a counterclaim in which it requested to be awarded the amount of €5.1 million, which corresponds to the difference in the final prices for the supply of bauxite during the period from 1.1.2020 to 28.2.2021, compared to the price paid by the Company to IB. A ruling on the application for injunctive measures was never issued, as the Court of First Instance issued a ruling on the above claim and counterclaim, which partially accepted the Company's claim and obliged IB to supply the Company, from the time of filing the claim and for a period of one (1) year, with bauxite of specific quantity and at specific price. Accordingly, it accepted IB's claim and obliged the Company to pay to IB the amount of €5,1 million, as per above. The Company paid the aforementioned amount with reservation and, same as IB, filed an appeal against the ruling. The hearing of the appeals is set for 22/02/2024.
Following, and after the expiry of the one-year term stipulated in the aforementioned decision of the Court of First Instance, IB once again interrupted the supply and the Company filed on 30/01/2023 application for injunctive measures, accompanied with a request for a temporary injunction. The latter was heard and on 02/02/2023 the Court of First Instance of Athens ordered IB temporarily to supply Mytilineos SA with bauxite. The hearing on the application for injunctive relief was set for 09/05/2023.
Petitions for annulment of Regulatory Authority for Energy (RAE) decisions — CHP plant
The Company filed before the Council of State: (a) petition for annulment of RAE’s decision no. 80/2016 entitled "Management of condensate heat during the calculation of cogeneration efficiency for the Approval of Special Operating Conditions of CHP plant" and (b) petition for annulment of RAE’s decision no 410/2016 entitled "Amendment of RAE’s decision no. 1599/201, with which it was approved the Issue "Cash Specifications and Size Measurements at the request of the ministerial decision no Δ6 / Φ1 / οικ.8786 / 06.05.2010 for the implementation of the System of Guarantees of Origin of the Electricity from RES and High Efficiency CHP and its Ensuring Mechanism".
The Company also filed before the Athens Administrative Court of Appeal a petition for annulment of RAE’s decision no. 334/2017 entitled "On the application of the societe anonyme ALUMINUM OF GREECE BEAE and the distinctive title "ATE" for the revision of RAE’s decision no. 569/2016" (b) of RAE’s decision no. 569/2016 entitled "Efficiency Control and Determination of Special Operating Conditions of the Distributed HE-CHP unit of the societe anonyme ALUMINUM OF GREECE BEAE (SA)".
From the combination of the above decisions, the cogeneration efficiency of the CHP plant of the Metallurgy Business Unit is negatively affected, as they change the calculation method for the amount of high efficiency electricity, including by subtracting the thermal energy contained in returnable concentrate, when calculating the total efficiency of the unit, resulting in a reduction in unit revenue.
The decisions of the Council of State were issued, according to which the Company’s petitions for annulment have been rejected. On the contrary to the decision no. 1652/2022 of the Supreme Court of Justice, the Company’s application before the Administrative Court of Appeal of Athens for the annulment of no. 334/2017 of the RAE decision was accepted and the above decisions were deemed illegal and annulled. It is also noted that, on the one hand, the annulment decision has retroactive effect, resulting in the administrative act being annulled to be considered as if it never existed, while on the other hand, even an appeal against the decision has no effect of suspension.
In view of the above, the decision RAE 569/2016 is considered as if it never existed and the duty to comply with the decision No. 1652/2022 of the Administrative Court of Appeal of Athens mandates that the pricing of electricity for the period from 12.1.2017 onwards be corrected immediately, based on the decisions RAE 700/2012 and 341/2013 and according to the specific provisions in the Appendix attached thereto. RAE filed an appeal against the above decision, the discussion of which has not yet been set.
Arbitration regarding the HASSI R-MEL I project
In May 2020 the Consortium consisting of the companies "General Electric International Inc." and "Mytilineos S.A." (formerly METKA SA), in its capacity as EPC Contractor of the project "HASSI R'MEL I — Construction and commissioning of a power plant with a total capacity of 368.152 MW in Algeria", (hereinafter "the Project") referred to the International Chamber of Commerce (ICC) against the company and the owner of the project under the name "Société Algérienne de Production de l'Electricité" (SAPE), for claims due to delays of the Project, which fall within the sphere of responsibility of the project owner. Respectively, the project owner raised, in the context of proceedings, counterclaims. Following a settlement between the consortium-contractor and the client, the client agreed to the release of the Company from any liability, the exit of Mytilineos SA from the consortium and to continue the contract with General Electric International Inc. as exclusive contractor, while the latter company undertook to pay the Company €45,1 million in total.
Litigation between METKA-EGN LIMITED and Canadian Solar EMEA GmbH
As of November 2021, the 100% subsidiary of the Company, named METKA-EGN LIMITED, based in Cyprus, has been in dispute with the company named Canadian Solar EMEA GmbH. Specifically, in December 2020, METKA-EGN LIMITED and Canadian Solar EMEA GmbH entered into a framework agreement for the supply of equipment for photovoltaic plants, in which METKA-EGN LIMITED has interests in. The contracting parties disagree as to the interpretation of some contractual terms and the fulfilment of specific contractual obligations on both sides. METKA-EGN LIMITED has resorted to arbitration before the London Court of International Arbitration raising claims in the region of 76,5 million USA dollars. In connection with these claims, METKA-EGN LIMITED requested the forfeiture of the letter of guarantee that the counterparty had delivered to it for the amount of 11,8 million USA dollars and the issuance of ruling on this request is pending before the Chinese courts. Accordingly, Canadian Solar EMEA GmbH requested forfeiture of the balance under letter of guarantee that METKA-EGN LIMITED had delivered and the issuance of ruling on this request is pending before the Greek courts. The hearing of the first phase of the arbitration proceedings regarding allocation of liability to Canadian Solar EMEA GmbH has been set for June 2023.
Company’s other Contingent Assets & Liabilities
There are other potential third party claims of € 2,49 Mio against the Company for which no provision has been made. According to IAS 37.14: A provision shall be recognised when: (a) an entity has a present obligation (legal or constructive) as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision shall be recognised. No provision has been made for this matter, since according to the relevant opinions of the Company's legal advisers and the management of the Company: (a) the existence of a commitment has not yet been finalized; and (b) there is no probability that there will be an outflow of financial resources. Moreover, there are claims of the Company against third parties, which totally amount to €0,31 mio.
37.3 Guarantees
Out of the above mentioned parent company guarantees in note 3.30 and 3.36, there are guarantees amount of 301,1 mio Group guarantees and 268,6 mio parent company guarantees on behalf of customers and suppliers.
On 10 January 2023 MYTILINEOS S.A. and Statkraft have signed a Power Purchase Agreement (PPA) relating to the energy generated from four solar farms in Italy. Specifically, the solar farms located in Emilia Romagna, Lazio and Campania, have an overall capacity of 63 MW. All projects were developed and are currently under construction by MYTILINEOS and Commercial Operation Date (COD) is expected in stages across 2023 and Q1 2024. MYTILINEOS is already established in Italy as it is considered of strategic importance for the Company in both solar and storage business. Specifically, the Company is currently building 156 MW in Italy, of which 127 MW are solar pojects and 31 MW are storage projects under the Fast Reserve Auction. 62 MW of the solar projects have secured a 20-year Contract for Difference (CFD) with the Italian State-Owned Agency — GSE, for a price of 65.17€/MWh, while the remaining solar assets will have a PPA with Statkraft. The Company currently has in the country a portfolio of 2 GW in development and is planning to add additionally 1 GW during 2023.
On 16 January 2023 MYTILINEOS has been awarded a Contract for the "Supply and installation of a Synchronous Condenser", by RWE Generation UK PLC, one of the UK’s leading electricity generators. Synchronous Condensers are widely considered as essential for the growth of renewable projects (RES). MYTILINEOS M Power Projects, with its high levels of expertise, will undertake the execution of this turnkey project, which will comprise the Design, Procurement, Installation and Commissioning of a Synchronous Condenser facility, with its associated auxiliary systems, as well as a high voltage (HV) banking compound for connection of the Synchronous Condenser to the National Grid’s HV Grid. This is the first contract for a Synchronous Condenser for MYTILINEOS and also a first for RWE in the UK. The asset is part of RWE’s decarbonisation plan within the Pembroke Net Zero Centre (PNZC). The Facility will be located at RWE’s existing Pembroke Power Station site in Southwest Wales. Construction is expected to start in 2023, and completion is scheduled for the second half of 2025. The contract value for MYTILINEOS amounts to €62m.
On 2 February 2023 — MYTILINEOS — Energy & Metals and Compagnie de Saint-Gobain (EPA: SGO), worldwide leader in light and sustainable construction, have signed a private wire Power Purchase Agreement (PPA) relating to the energy generated from a 4.9 MW solar farm in Italy.
The solar power plant will reach commercial operation in mid-2023 and it will be built on the premises of Saint-Gobain’s historical factory in Vidalengo, near Bergamo. With this solar asset, more than 7.5 GWh of renewable electricity per year will be produced, displacing more than 3,900 tonnes of CO2 emissions every year — the equivalent of the yearly carbon footprint of ca. 700 people living in Italy.
This 10-year PPA secures a significant portion of Saint-Gobain’s electricity consumption in Vidalengo factory. In addition, locking into a favorable electricity price ensure business competitiveness, as it reduces operational costs in part due to significant savings on grid fees. The project falls under the Italian regulation for self-consumption, known as SEU.
At the same time, MYTILINEOS RES portfolio, which consists of projects in several countries and various stages of development with a total capacity of 9.1 GW, is accelerating. More specifically:
i. 539 MW in operation
ii. 1.0 GW under construction
iii. 2.2 GW in mature stage of development, i.e. projects either on a RTB or soon RTB stage
iv. >5 GW in less mature stage of development
On 9 February 2023 — MYTILINEOS Energy & Metals is hereby announcing the completion of the acquisition of all outstanding shares of WATT+VOLT — "Watt and Volt Exploitation Of Alternative Forms Of Energy Societe Anonyme" in 06.02.2023. The total consideration for the Transaction amounts to €36 million, of which €20 million will be paid in cash and €16 million in MYTILINEOS’ shares. These shares will be provided from MYTILINEOS' treasury stock at a price of €17 per share.
On 13 February 2023 "MYTILINEOS S.A.", pursuant to the provisions of articles 9, 10, 11, 14 and 21 of Law 3556/2007, as currently in force, and based on the relevant information received on 13.02.2023 by Fairfax Financial Holdings Limited ("FFH"), announces that on 10.02.2023, the companies NORTHBRIDGE GENERAL INSURANCE CORPORATION, ODYSSEY REINSURANCE COMPANY and ZENITH INSURANCE COMPANY (CANADA) (hereinafter jointly referred to as the "Bondholders"), subscribed for the total bonds issued by MYTILINEOS under an exchangeable bond loan dated 07.02.2023, bonds which incorporate the right of the Bondholders to acquire, at any time up to the maturity of the bond loan (i.e. until 10.02.2025), at their discretion, a total of 2,500,000 common registered voting shares of MYTILINEOS, therefore they made an indirect, in the sense of article 11 par. 1 of Law 3556/2007, acquisition of the aforementioned shares of MYTILINEOS, which represent 1.75% of its total voting rights. These shares, added to MYTILINEOS shares already held on the above date by other legal entities belonging to the FFH group (hereinafter referred to as the "Other Shareholders"), i.e. 6,688,047 common registered voting shares of MYTILINEOS, which represent 4.68% of its total voting rights, lead to a cumulative participation percentage of 6.43% (i.e. 9,188,047 shares) which results in FFH at parent level exceeding on 10.02.2023 the 5% limit, pursuant to article 9 par. 1 of Law 3556/2007.
The Other Shareholders are: (a) Northbridge General Insurance Corporation, (b) Zenith Insurance Company (Canada), (c) Allied World Specialty Insurance Company, (d) Allied World Insurance Company, (e) Allied World Assurance Company (Europe) dac, (f) HWIC Value Opportunities Fund, (g) Eurolife FFH General Insurance Single Member SA and (h) Eurolife FFH Life Insurance Single Member SA.
The ultimate parent company of the Bondholders and of the Other Shareholders, i.e. FFH, controls through a chain of controlled entities, the Bondholders and the Other Shareholders, and therefore, according to article 10 (e) of Law 3556/2007, indirectly owns the said shares. None of the FFH controlled entities owns independently more than 5% of MYTILINEOS’ voting rights.
Finally, according to the aforementioned notification, FFH is not a controlled entity, within the meaning of article 3 par. 1 (c) of Law 3556/2007, by any natural person or legal entity.
On 14 February 2023 — MYTILINEOS — Energy & Metals and EDP Renewables ("EDPR") signed a long-term Power Purchase Agreement (PPA) for the green energy produced from a 78 MW wind portfolio.
This is EDPR’s first PPA in Greece and a first for MYTILINEOS, concerning energy generated from a wind portfolio. The deal allows EDP Renewables to fasten the development of this 78 MW portfolio which consists of 3 wind projects developed by EDPR:
23 MW located in Voiotia, Greece
21 MW located in Achaia, Greece
35 MW located in Voiotia, Greece
All wind farms are expected to enter operation between the end of 2024 and 2025 and under this PPA they are expected to produce annually more than 232 GWh, the equivalent of the consumption of 60 thousand households in Greece by displacing around 100 thousand tonnes of CO2 emissions annually.
MYTILINEOS fully supports Greece’s strategic plan for decarbonization and seeks opportunities to secure green PPAs, for its own portfolio aiming to reduce energy costs both for its own assets and those of its business partners.
MYTILINEOS with this transaction makes its first step towards the development of its green supply basket, aiming to unfold a wider strategy targeting more than 2GW, coming from 3rd party PPAs and own assets across the region.
On 21 February 2023 — MYTILINEOS — Energy & Metals and Centrica have signed a power purchase agreement (PPA) with Vodafone UK relating to the energy generated from 5 solar farms in the United Kingdom.
This is the second major solar PPA for MYTILINEOS, Vodafone and Centrica, following the announcement last year for the supply of 109 GWh of renewable electricity, and is one of the largest deals to date in Europe. The solar farms located in Norfolk, Nottinghamshire, Staffordshire, Buckinghamshire and Dorset, have an overall capacity of 232 MW. All projects were developed and are currently under construction by MYTILINEOS and Commercial Operation Date (COD) is expected in stages across 2023 and Q1 2024.
These solar assets will generate 216 gigawatt hours of electricity, and displace more than 53,000 tonnes of CO2e emissions, every year, the equivalent of taking c.31,400 cars off the road, supporting U.K.’s commitments on clean energy, aiding also the country’s energy independence and security.
The deal, between Vodafone, Centrica as the power supplier and MYTILINEOS as the generator, supports the UK government’s ambition to focus on home-grown, clean and more affordable energy and so boost long-term energy independence and security.
Once the solar plants are energised, 50% of the total electricity output -equal to 108 gigawatt hours of renewable electricity- will be delivered through a sleeving agreement arranged by Centrica to Vodafone.
MYTILINEOS is already established in the U.K. as it is considered a strategic domain for the Company in both solar and storage business. The Company currently has in the country a portfolio of 268 MW in development and is planning to add additionaly 400 MW during 2023.
The total capacity of MYTILINEOS’ international RES portfolio, which consists of projects in several countries and various stages of development of 9.1 GW, is accelerating. More specifically:
i. 539 MW in operation
ii. 1.0 GW under construction
iii. 2.2 GW in mature stage of development, i.e. projects either on a RTB or soon RTB stage
iv. >5 GW in less mature stage of development