Good afternoon, welcome to our conference call for discussing the results recorded by ROMGAZ Group in the first half of 2023. After introducing the speakers, Mr. Răzvan Popescu, Chief Executive Officer, will make an opening speech. Thereafter, the Q&A session will take place. Please be advised that this conference is being recorded for internal purposes. On behalf of the company, the following speakers attend this conference: Mr. Răzvan Popescu, Chief Executive Officer, Ms. Gabriela Trâmbițaș, Chief Financial Officer, Mr. Marius Veza, Accounting Director, Mr. Ion Foidaș, Production Department Director, Mr. Dan Palimaru, Head of Gas Contracting, Transmission, and Quantities Management, and our Investor Relations Department. Now, I would like to give the floor over to Mr. Răzvan Popescu, who will open the conference call with an opening speech. Good afternoon, ladies and gentlemen. Thank you for joining our conference call to discuss the results recorded by ROMGAZ Group in the first half of 2023. We published the Board of Directors report last Friday, which includes a detailed presentation of our economic and operational performance, the consolidated interim and standalone financial statements. An overall presentation of the group is available on our website in the investor section. I will start by highlighting some aspects of the gas market environment in the first half of 2023 compared to the same period of the previous year. We estimate that natural gas consumption in Romania dropped by 12% year-on-year, with imported gas volumes decreasing their way to 14% compared to 28% a year before. The Romanian Commodities Exchange recorded a weak liquidity as a result of the current regulation in force, and the wholesale average price was lower by 19% year-on-year. These prices are considered of the month of delivery for transaction concluded on this market segment. The average reference price on the Central European Gas Hub in the first six months recorded a decline of around 40% year-on-year, according to data provided by the National Agency for Mineral Resources. Regarding the gas and energy sector legislation in Romania, ROMGAZ activities continue to be influenced mainly by Government Emergency Ordinance No. 27, effective as of April 1st, 2022, subject to various subsequent amendments. The ordinance addresses the high gas and energy prices and includes the following main provision applicable to gas producers: regulated gas sales prices of RON 150 per MWh for the gas sold to suppliers of households starting 1st of April, 2022, and the heat producers and their suppliers for the production of thermal energy for households starting September 1st, 2022. The price of gas sold to the latter category was RON 250 per MWh, only during the second quarter of 2022. The ordinance also states that gas suppliers have capped sale price for some categories of end consumers. Maximum RON 310 per MWh, VAT included, for households, and maximum RON 370 per MWh, VAT included, for heat producers and for industrial clients with a consumption below 50,000 MWh in the previous year. For gas sold at regulated prices, starting April 1st, 2022, producers' revenues are exempt from the windfall profit tax. Also, gas royalties are computed based on these regulated prices instead of CEGH reference prices. As of September 1st, 2022, energy producers which started operation before this date are required to contribute to the Energy Transition Fund, the full amount exceeding RON 450 per MWh, certain deductions apply. In addition, gas and energy traders owe contribution to this fund for the profit in excess of 2% over the acquisition price. Gas storage is also mandatory for gas suppliers and heat producers to secure part of the estimated consumption of the final clients during November 2023, March 2024. In addition, Government Ordinance No. 186, issued in December 2022, imposed for the 2022, 2023 fiscal year, a 60% solidarity contribution applied to the amount of the annual taxable profit that exceeds by 20% the average value of taxable profits recording during the period 2018, 2021. Regarding the operational and financial performance reported by the ROMGAZ Group in the first semester of 2023, we highlight the following results: Natural gas production amounted to 2.38 BCM, lower by 5% compared to last year, but more importantly, approximately at the budgeted level and well below the national consumption drop of 12%. This was possible due to the following: output consolidation by streaming new wells into production as a result of successful exploration programs, rehabilitation projects in the main mature reservoirs, workover and recompletion operations to reactivate high, high flow wells, and also the optimization of the wells operation by using modern techniques. As regards to investments performed in our portfolio of facilities in the first half of 2023, I would like to point out that we finalized one production well, one well is in execution, and five wells in drilling works procurement. We completed five surface facilities, 14 facilities are now in construction, and other 25 in different preparation stages. We performed recompletion, reactivation, and capitalizable repairs for a number of 81 wells. We hold a very strong position on the Romanian gas market. In the first six months of this year, our market share reached almost 48% of total deliveries in Romania and 56% in consumption covered from domestically produced gas, according to our assessments. Regarding gas sales to third parties, volume adjusted by 5.3% year-on-year, based on lower gas consumption in Romania and also lower volumes available for sale. Total revenues from gas sold amounted to RON 4.28 billion, with a decline of 36% year-on-year from the historical high value re-recorded last year. The drop came as a result of ROMGAZ's obligation to sell over 86% of volumes at a regulated price of RON 150 per MWh in the first half of 2023, compared to only 4% in the first half of 2022. Revenues from storage services added RON 287 million, up 60% year-on-year, mainly due to high revenues from capacity booking services. Revenues from electricity reached over RON 200 million, compared to almost RON 500 million in the first half of last year, impacted by the requirement to sell almost the entire production at the capped 450 MWh, according to the Government Ordinance No. 27. Overall, we recorded total revenues of RON 4.9 billion, 35% below the historical high value reported in the first semester of last year. On the expenses side, we underline that the two main taxes included in other expenses line and the P&L recorded a significant decline with a positive effect on our profitability. Windfall tax decreased 5.6x year-on-year to RON 645 million due to the exemption for households and their significantly higher weight in sales. Gas and UGS royalties dropped almost 3.2x to RON 290 million due to lower gas prices on the CEGH, but more importantly, due to higher sales at regulated prices than in first half of 2022. As previously mentioned, 86% of volumes sold were at regulated prices, as opposed to only 4% in the first half of 2022. The solidarity contribution introduced in Q4, 2022, which is recorded as an income tax expense, amounted to RON 971 million. Together, these three taxes represented a substantial expense of RON 1.91 billion and accounted for 39% of total revenues in the first half of 2023, compared to 61% weight in the same period of 2022. Gross profit reached the historical high value of RON 3.01 billion, at a significant increase of 46% compared to last year. Bottom line, net profit amounted to RON 1.69 billion, at a marginal decrease of 2% year-on-year, impacted evidently by the solidarity contribution. All profitability rates recorded a substantial performance in the first half of 2023. EBITDA margin advanced 64.5% and EBIT margin at 59.2%, both rates being more than double year-on-year. Net profit margin rose to the elevated level of 34.4%. For the second quarter alone, we highlight the following main results: Gross profit at a historically quarterly high of RON 1.22 billion. Net profit of RON 716 million. Profitability rates at very strong level, with EBITDA margin exceeding 64%. We further highlight several achievements that are in line with the development strategy of our group. On August 1st, Iernut Power branch submitted a handover report to the contractor, Duro Felguera, in order to start the remaining works to complete the new combined cycle gas turbine power plant. With this, the completion of the strategic project is on the right path to putting the new plant into operation in the shortest possible time. Regarding the Neptun Deep project, on June 21st, ROMGAZ Black Sea Limited and OMV Petrom submitted to the NAMR the development plan for the Domino and Pelican South commercial gas reservoirs. This submission represents the final investment decision. The development plan was endorsed by the agency as the competent authority on 3rd of August, meaning that the project entered into the effective development phase, which consists of drilling and construction of the required infrastructure for exploiting and marketing the natural gas. OMV Petrom and ROMGAZ will invest up to EUR 4 billion for the development phase, which will enable around 100 BCM of natural gas to be brought on stream. First production is planned for 2027. Developing the commercial reservoirs involved an infrastructure which include 10 wells, three underwater production system and the relating collecting pipelines, an offshore platform, the main pipeline towards Tuzla, and a gas measurement station. The platform generates its own electricity, operating at the highest safety and environmental protection standards. The entire infrastructure shall be remotely operated through a digital twin. This allows optimizing the processes, and it shall add to environment performance enhanced by making energy consumption more efficient and reducing emissions. Neptun Deep project represents, in our view, the most important investments in the Romanian energy sector in the past 30 years and will make Romania the largest natural gas producers in the European Union. For ROMGAZ, the project represents a historical milestone in its corporate transformation and development. I would like to state that in line with the national and European legal requirements for non-financial reporting, at the end of June, we released the 2022 sustainability report, which addresses relevant issues regarding corporate governance, ethics, and anti-corruption, as well as our economic, social, and environmental performance. In the end of the presentation, I would like to mention that in July, we distribute total gross dividends of RON 1.32 billion. Total gross dividend per share amounted to RON 3.42, resulting in total payout ratio of 52% for the last year. With this, I would like to close our presentation, and thank you for your attention. Thank you. The line is now open to take the questions. I would like to remind you that you have two options to address questions: either raise your hand and turn on your microphone or write a question. Ms. Iuliana Ciopraga, please turn on your microphone, and you may address your question. Two questions at this stage. First, how much was sold at regulated prices in the second quarter? Also, if you would, give us an outlook on production for this year. The outlook for production, we, we are trying to keep production in check with a 2.5% decline that we assumed also in our strategy. Regarding the, the gas being sold, as we have stated before, 86% of the gas was sold at capped prices. Ms. Iuliana Ciopraga, please, turn on your microphone to address the question. Hi. Regarding the 86%, that's 86% in the second quarter or in the first half of the year? Can you give us a guidance what to expect for the full year? I remember it was 88%. Do you still keep that? Yes, we still keep that. The 86% is for the first semester. It's close in the first quarter to, to the first quarter as well. It's around 86%, 87% at capped prices, and we do keep it for the entire year at around between 86% and 88%. Can you, can you give us some guidance regarding sales? Regarding sales, excluding, excluding the regulated market, what was the price for those sales? Is it close to what you're seeing on the stock exchange, on the exchange, on BRM, I mean, or can you give us any guidance here? Yes, of course. The price is close to, to the market, to where the market is right now. The extra gas has been sold with bilateral contracts and also on the gas exchanges. Yes, of course, being sold like that is very close to the market prices. When you refer to market prices, I guess you, you refer as well to BRM, right? Yes, to the BRM market. We only sell on the local BRM market. Thank you. One more, if I may. Regarding the power plant and regarding your current power production, I see that it's loss-making in the second quarter as well, actually. I mean, right now, the gas is transferred at RON 100 per MW. CO2 costs are somewhat covered by the windfall tax. What's generating the losses there, and what should we expect, actually, within the end of the year? No, we will expect, probably will be in line with what we've budgeted within the sale of energy. Being an old power plant, of course, it encounters a lot of problems along the way, and we're trying to keep it open until the end of next year, when we'll have the new power plant put into production. And also, the loss is being generated by the high prices of the CO2 certificates, that we are also trying to find a way to recoup the, this, amounts from the authorities. Ms. Daniela Mandru, please, open your microphone and, address the question. Hi. Hello. Thank you for the presentation. I have several questions. The first one regards the base EBIT for computing the solidarity tax in the second quarter, and if you, if you have the data available, to give us the base EBIT for the next two quarters in order for us to be able to compute, because the tax is quite high, especially comparative to the budget. Maybe you can explain a little bit why the tax is so high compared with the budget? Because in the budget, we have RON 1.2 billion, RON 1.3 billion, I think, and here, at the half of the year, we are much above the budget for the full year. Now then, I have another question regarding the outlook for the power production for year-end. I don't know if in the budget you presented the figure. Then, the third questions I would like, but after you answer to these two questions, I would like some explanation for other operating income, other operating expenses, because there are large movements there, and I don't know how to look at them. Maybe as regarding the power production and the power plant, can you give us what is the amount or number of certificates bought by power producers, some ratios? Thank you. Hello. Regarding your first question, I would like to mention that we prepared a budget, taking into consideration the information available at that time. We prepared the budget in late December, early January. At that time, we assumed that around 75% of the gas would be sold at regulated prices. However, later during the year, when the national transmission operator informed us on the quantities that would be sold, according to the ordinance, this weight increased to 86%. This means lower windfall tax and lower royalty, which translate to higher taxable profit. Mm-hmm. Higher taxable profit means higher solidarity contribution. For Q3, the average of income, taxable income, is RON 330 million, and for Q4, is RON 495 million lei. Sorry, RON 340 for Q3? RON 330. 30. For Q4? RON 495. RON 480- 95. 95. Okay. For the second quarter, just to have there in my model. Sure. RON 335. RON 345. 35. 35. Okay, good. Okay. Thank you. Sure. Now, probably to remember you. Please. The questions. Let's go to the power, the outlook for this year, power production. And here, within the power unit business, maybe. I would like to know how many certificates you need to buy, by volume of power produced? And explain some. Also, because I've seen there, you release provisions, then buy certificates. Yes, it's also because we have budgeted the certificates at a certain price. Ah. The market is moving, and we try to cover the energy produced by buying the certificates in real time, so we cannot give. Ah ... exact forward number, at this point for the entire year, because it would impact the way that we will buy certificates on the market. This disclosure is a bit, a bit too much, but you can extrapolate from the half-year results. Okay, by, by power prod- because I think these certificates, you need to buy the number of certificates in function of the power that you produce. Exactly. So- On the CO2 emitted by one ton of CO2. That's the idea. Exactly. If you produce at 140 or 150 MWh, that of course translates into a higher CO2 consumption. Okay, the, the number of certificates, for example, if you produce, produce, 1 MW, how much, how many certificates you need to buy for 1 MW, for example, if you have this ratio? No, I don't have the ratio at this point in time, but if we can share this information- Yeah, okay. We'll share it after the. We'll share it after the con call. Maybe, and for sure, yes, for sure. For the new plant, this certificate- Much lower. Much lower, yes, because it's much, much efficient. Exactly. Okay, good. Now, in other income, for example... Yes, I've read what you wrote in your report, but can you explain in other income, other operating income, that stood at RON 129 million in the first half of the year? From where this amount? Yes, I've read in your report, but for me, it wasn't, it isn't clear. If you can explain me again. In other income, we recorded an income also around RON 97 million regarding the CO2 that we would have to recover from the Romanian state, according to Ordinance 97, 27, sorry. This ordinance? ... Yeah. Yes, first, really, I'm not aware of the provision of this ordinance, but probably the next the most important question is for the next half of the year, do we have more provisions here to add? Are there more operating income here to add? Yes, we will probably add to the RON 97 million, the amount of certificates that will be recovered for the second half of the year. Another RON 1 million, RON 100 million. We will see. Yeah. From what I'm reading here, this is a provision, so there are no money. No, this is a provision. This is not, it's not provision. This is something that you accrue, practically, because you actually, you don't cash in this money. We, so Ordinance 27 says that we should collect this amount from the Romanian state. However, the Ordinance doesn't mention the mechanism and the procedure to recover this amount. We are discussing with the authorities to hear everything, so that we can submit a claim for this amount. Yeah. Okay. Going forward, probably for this year, you'll have other operating income, around the double compared with the first half. It's correct? It depends on the cost of the CO2. Depends on the cost of the CO2. Okay, good. Now, I think, I think, I don't remember if I have other questions. No, it's okay. Thank you very much for the answers. Thank you. Miss Iuliana Ciopraga, if you raised your hand, you may address the question. Hi, Mirian. Just a clarification regarding profit tax, for, for, for this quarter, it's quite low. I mean, as percentage of earnings before tax, before solidarity tax, it's, it's quite low. W-what should we expect for the coming quarters? Could you please repeat why it is low? Profit tax. The tax on profit, basically. 16%, but normally 16% tax on profit. I mean, yeah, in my understanding, solidarity tax is not deductible, that right? For profit tax purposes. Correct. Profit tax, I mean, what you report as profit tax in the second quarter was quite low, as% of earnings before tax and before solidarity tax, of course. I was wondering, what, if we, if we will see something similar in the coming quarters or not? The current profit tax is RON 420 million, which is almost double compared to last to last year. We determine the tax according to the provisions of the Fiscal C ode. Yes, and to be honest, I was more referring to the percentage, right? I mean, we usually look at 16% of earnings before tax as profit tax, but in this case, in the second quarter, the percentage was much lower. I was wondering if this is something that we should take into account in the following quarters as well, or if that is not the case? We will get back to you with an answer on this. Thank you. Mr. Tamas Pletser, you may now address your question. Just to follow up on this certificate issue, can you tell us how much you spent on CO2 certificates during the first half of this year? In the first half of 2023, we bought certificates of RON 258 million. At the same time, we have a provision of. A clarification, sorry, RON 258 million, RON 228 million relate to the provision to the CO2 certificates related to 2022. You spent also money, and you also made a provision for this CO2 certificates, which you would recoup from the, from the government. Do I understand this correctly? There are two separate things. The mechanism for the provision for CO2 is, if we don't buy the certificates by the end of the period, then we estimate how much would these CO2 certificate, certificates cost, and we record a provision. When we buy the certificates, we record the actual expense with how much we paid for the certificates, and we release the previous provision to income. Oh, I see, I see. This means that RON 228 million was provisioned, so that's still the CO2 certificates you have to buy throughout the year? RON 228 was provisioned in December 2022. This year, when we bought the certificates, worth RON 258 million, we released the income, RON 228 million, which was recorded in December. Mm-hmm. Oh, I see. I see, I understand now. It's a net effect. It's a net effect of, around RON 30 million, an extra expense. Mm-hmm. Okay, it doesn't tell anything what you have to do during the second half of the year? No, because, as I said, it depends on, on the cost of the CO2 certificates. Mm-hmm. How much% of the CO2 certificates you are receiving free from the government, and how much do you have to buy on the market? Can you tell any estimates on that? At the moment, we are not receiving any free certificates. It was a mechanism in place, valid until 2019, if I'm not mistaken. Now we have to buy all the certificates. The income that I was talking about earlier, that we need to collect from the Romanian state, Ordinance 27 introduced a mechanism that if we sell electricity at RON 450 MWh, the difference, if the costs are not covered by this, by this price, if the production cost is not covered by this price, then we would recover the value of the CO2 certificates for the power sold under this mechanism. Mm-hmm. The government gives you back if you cannot sell at a certain price? Exactly. Okay. Okay, yeah. You, you cannot say how much percentage of your production... I mean, how much percentage of the CO2 need is covered by the government or not. Is, is this a public information? no. Okay. All right. Okay, thank you very much. Sure. Miss Iuliana Ciopraga, if you have any further questions, you may address them now. Yeah, actually, coming back to, to the same, to the same CO2 question. How does it work in practice? You, you have CO2 emissions by this in power, power, I guess, in each quarter, you account for those emissions, right? This, this is what we see in the P&L. When you buy them, effectively, you release the provision as well. That's why. Yeah. -that's what we're talking about. expense- Exactly. When you mention expense, you mention impact on cash flow, and that's. Yeah, you basically, basically release the provision. When do you buy them? You buy them in, you buy them in 2023. You buy the whole amount needed for 2022, in 2023, or how, how does this process work? When do you buy them, effectively? For the emissions of this year, when would you buy the certificates? Until now, we usually bought the certificates in the following year. This year, we took the decision to buy the certificates during the year. Okay, you're buying right now during the year. You're buying right now for 2023? Yeah. Okay. Regarding what, regarding what you mentioned about money, the money to be recovered from the state, is that related only to the sales at RON 450, or is it related to the windfall tax? See, if I remember correctly, there is a provision there in the windfall tax saying windfall tax related to power, saying that you would recover somehow the CO2. What I'm asking is, what's your estimate, estimating in other income, is that related only to the sales on centralized market, at RON 450, or not? It relates, it relates to the electricity sold at RON 450. Not the, not to the tax, not to the contribution to energy transition. Okay, thank you. Sure. Miss Daniela Mandru, if you have any other questions? Yeah. I remember that I didn't get the answer for power production outlook for for this year. Total power production. Hello? Yeah, just a second, please. Ah! Sorry. We will come back with that information on email, if you can. Oh, okay. Now, regarding the production, are you- gas production, of course. You are reiterating 2.5% decline, but the actuals contradicts you each quarter. I understand this is in your strategy, but are you confident that the production will decline by just by 2.5% by year-end? On our production outlook, at this point in time, we can say 2.5%, that we'll keep it in check. We've had a lot of workovers operation this summer and in the 1st quarter as well, so that was the impact on production and also the revisions that happened in the year in power plant. We expect to catch up on the production till the end of the year. Okay, thank you very much. Miss Ioana Andrei, you are online. Please address your question. Please tell us, what are your plans for financing the project? What to expect over the next year? Yes, over the next year, we are planning to finance at least half of the sums that ROMGAZ will have to invest. We'll probably go to issue bonds, as we stated before. We are looking right now at an MTN bond issuance. It will depend on the final budgeting to see the exact cash flow that we'll have over the three years. We'll... It's a work in progress. We do not have, let's say, something very set up regarding the timeline, but probably, in the first half or quite a maybe a bit later, in the second half of 2024, we'll have to tap the market for the first bond issuance. Okay, thank you. If there are any other questions, please feel free to address them or write them. If there are no further questions, we will conclude this conference call. Thank you very much for your questions. If you need further information, please contact our Investor Relations team. The conference call is now concluded. On behalf of ROMGAZ team, thank you for attending today's conference call. Goodbye.