HELLENiQ ENERGY Holdings SA
ATHEX:ELPE
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Earnings Call Analysis
Q2-2023 Analysis
HELLENiQ ENERGY Holdings SA
Despite a market drop in refining margins from $18 per barrel in Q2 2022 to $4.4 per barrel in the same quarter of 2023, and a decrease in crude oil prices, the quarter proved robust for the company, particularly in the Greek market. Demand spurred by economic growth and tourism, especially in aviation and bunkering, combined with normalized natural gas and electricity prices, contributed positively. The company successfully addressed maintenance works and refineries' operational challenges, leading to a quarter of strong performance with increased volumes and exports. Financially, adjusted EBITDA reached EUR 164 million for the quarter, while half-year figures were just under EUR 570 million, anticipating exceeding EUR 1 billion for full-year 2023 EBITDA, which would mark the second most successful year in the company’s history.
The management emphasized the strong performance seen during July and August, with improved refinery margins. They highlighted that the achieved margins in these two months were $10 per barrel higher than the averages in the period, despite the challenging petrochemical market environment. This uptick is indicative of a positive financial trajectory, where energy prices seem to have returned to a state of normalization.
For 2023 and 2024, the company plans a CapEx ranging from EUR 250 million to EUR 300 million, exclusive of any potential mergers and acquisitions, stemming from its commitment to achieve a 1 gigawatt target in renewables by 2025. Maintenance CapEx for the refineries is expected to be between EUR 150 million to EUR 200 million annually, with marketing CapEx around EUR 50 million to EUR 60 million. Additionally, a significant investment of EUR 120 million to EUR 125 million yearly is allocated for digitalization, optimizing operational capabilities, and improving efficiency.
The company acknowledged the ongoing regulatory constraints on retail margins due to government-imposed caps since the COVID pandemic. With the extension of this regulation until the year's end, there are challenges in daily pricing and administrative risks. The management anticipates market normalization as these government interventions fade, although high commodity prices persist. Furthermore, they disclosed plans to reevaluate their 2030 renewable energy target, which currently aims for 2 gigawatts of installed capacity. In terms of RESS and renewables, advancements and potential upward revisions to the target are being considered within their business planning process.
Concluding the earnings call, the leadership team expressed content with the quarter's solid results despite less favorable margins and is optimistic about the underlying company performance improvements. They highlighted their confidence in meeting the projected EUR 1 billion EBITDA, thanks to no major plant maintenance and good summer months' performance. The team stands ready to further their success in the renewables sector and is encouraged by slight easing in the acquisition costs of renewable energy capacity.
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Ladies and gentlemen, thank you for standing by. I am Gaily, your Chorus Call operator. Welcome, and thank you for joining the HELLENiQ Energy Holdings conference call and live webcast to present and discuss the second quarter and first half 2023 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions]
At this time, I would like to turn the conference over to Mr. Andreas Shiamishis, CEO; and Mr.Georgios Alexopoulos, Deputy CEO, General Manager, Group Strategic Planning and New Activities; Mr. Vasileios Tsaitas, Group CFO; Mr. Dinos Panas, General Manager, Oil Supply and Sales; and Mr. Nikos Katsenos, Head of Investor Relations. Gentlemen, you may now proceed.
Thank you very much for the introduction. Good afternoon. Thank you for attending our half year results call. Let me kick off this call by just going through the highlights for the quarter and the half year. We have effectively a positive quarter. It's a number, which, following a series of very, very high results, might appear to be a bit lower. But at the end of the day, it has been a very good quarter considering that, during this second quarter, we saw the average system margin going from [ 18 ] that was in 2022 second quarter to $4.4 per barrel. So it's a market drop compared to last year. None of the 2 are normal. And in fact, we have seen a rebound in the third quarter of 2023. And we also had a crude oil price, which has dropped as well. So there is also an impact on the reported results. On the other main factors which affect our industry, our market. We have a good quarter in terms of demand from the Greek market, both in terms of overall economic activity in terms of economic growth as well as the increased tourist with very particular impact on aviation and bunkering. And we have what we call a normalization of the natural gas prices, in fact, even a bit lower than what one would expect, and the electricity prices, which have reverted to precrisis levels.
Clearly, 1 cannot project how things will develop in the next 6 months as we move into the autumn and winter season. But at least for the last few months, we have seen a normalization. As a company, we have done very well in terms of sorting out scheduled or unscheduled maintenance works in the refineries. We have been affected over the -- in the last couple of years more by power shortages, which have caused problems in the refineries. We've put that behind us. For the quarter, most of the quarter, we had availability of the refineries, and it seems to be doing -- all of the 3 refineries seem to be doing very well with increased volumes and good netbacks.
Exports, even though there has been an increase in the domestic demand and higher volumes, production volumes means that we've increased our exports even further. And we have a very good performance on the commercial side as well, starting from the wholesale business, the ex-refinery sales to our retail businesses in Greece and international subsidiaries.
Now having said that, I need to remind everybody that the Greek retail market is still constrained by legislation, which was put in place since the COVID days. And effectively, what it does is, it limit the margin to a certain level for fuel sales. So our results in retail in Greece are constrained by that.
In terms of Financial, in terms of numbers, our adjusted EBITDA at EUR 164 million for the quarter and just under EUR 570 million for the half year, point to another very strong year. In fact, taking into account July and August performance, one would expect to see the EUR 1 billion thresholds exceeded for the full year adjusted EBITDA projection for 2023, making it the second most successful year in the history of the company. And that is also done with better operations and with a slightly different mix. Unfortunately, even though we're investing in green energy and investing heavily so the very good performance of the core business doesn't do justice to the contribution we have from the new businesses, which is gradually growing to a much more material level.
As I mentioned, the impact of prices on our inventory that we keep and finance on the balance sheet, it's quite material given that we have a significant swing in the reported results of EUR 700 million between last year and this year, given that we had a loss of roughly EUR 200 million this year and again of EUR 0.5 billion last year.
Now one would say that this is probably normal given the cyclicality of crude oil prices and product prices, and to some extent, it is maybe not such violent moves as we have seen in the past. But 1 thing which is important to note is that, last year, we had the extra cost of the solidarity contribution at [ 33% ] which was calculated on the inventory gains reported last year as well. So in effect, the EUR 200 million losses that we are reporting this year, unfortunately, we do not have the ability to recover some that solidarity contribution, which means that we paid taxes on profits that we did not have.
On the Gas & Power associates, we are seeing the escalation reversion to normality, if you will, with the exception of DEPA, where we have an abnormal -- abnormally low reported results as a result of safety stocks that were put in place and were delayed in bid and being released. It is something that we need to look into and see how the framework will support that. And of course, the renewables business, which is growing to a more material number.
On cash flows and net debts, a much better view a much better position in terms of net debt, a very strong cash flow performance last year and a very good capital adequacy or capacity, debt capacity for the group. Clearly, from next month onwards, we'll have cash outflows as the tax bill gets settled over the next 8 months, but still a very healthy cash flow generation for the business.
On the strategic front, we are progressing on the new energy or the renewables part of the business with scaling up our portfolio. We have a visible path to 1 gigawatt of operating assets in place within 2025, which is actually much faster than what we originally anticipated or committed to. We're doing that at a value-adding way. So we're not just going out on the shopping spree, buying assets left, right and center. So we are careful of where we use our shareholders' money. And we don't see the increased performance as a license to spend money. We do it because we have agreed that this is the right way to develop the company with a new leg in green energy. At the same time, being cautious about diversification and risk profiling. We are doing that with different markets as well. Some of them bigger than others, some of them smaller, and we have 2 new market entries, which were announced over the last couple of weeks.
An important part of this growth has been the success of our team in securing 100-megawatt capacity in the recent first national energy storage systems auction. 100-megawatt is the maximum we could have achieved because of the intention to fragment this market, at least at the beginning. And we are very pleased to be able to have a successful participation. Now all of these new technologies need some sort of support schemes, some more than others, in order to operate. And this is something which will help us in developing these new markets. We have no doubt that, in the next few years, they will be much more robust and able to operate and create value on a stand-alone basis.
Last but not least, after almost a year of work between ourselves and 2 organizing banks, we've managed to conclude on project finance framework agreement for about to almost EUR 800 million. Not all of it is committed. About EUR 200 million is an additional -- it's an accordion clause, if you will. So we have about EUR 566 million of committed facilities. This is very important because it allows us to have a much speedier response in terms of developing our renewables with the appropriate set up a fit-for-purpose facility with advantageous terms. And this is the first of a kind, definitely increased. And in terms of materiality, it's one of the most innovative transactions in Europe for this year.
So Overall, a good quarter in terms of numbers, in terms of operations, in terms of progressing our strategy. And without further ado, I will ask Dinos to work us through the industry framework and the environment. And then Vasilis and George to sort of continue the discussion on the business units.
Okay. Good afternoon to all. Thanks, Andreas. On Page 3, you can see the numbers for the crude oil in the ForEx. Crude oil at $78 a barrel [ average ] in the second quarter of the year. Now it's around a little bit higher than $86. While the USD to the euro remains at the same levels together for the quarter to [ 1.9% ].
Now coming to slide -- okay come to the slide about industry environment and the [ beta ] margins. You can see the spend that we had during the period, [indiscernible] for the gasoline now average July and August run of around plus to 27%, 17% for the ULSD, the average of the first month of the third quarter is 34.5% stronger as well during July and August, the crack of Aspropyrgos at minus 5.6% while the naphtha crack remains weak at minus 17.8% due to the weakness in the overall petrochemical complex. Very low base stock margins in the quarter. For all the 3 refineries. We are currently running at July and August that at least $10 per barrel higher than the average margins that we have during the period.
Now going down to Page 8, you can see that the energy prices have normalized and have come down normalized close to precrisis levels. And finally, on the next page, Page 9, we see a strong growth in the domestic demand, the [ aviation space ] demand and the banker sales demand and with 5% in the domestic market. Now we have reached pre-COVID levels for the period. But we see that 7% was the increase in the Aviation consumption and 3% in bunkering.
And with this, I will pass you to our CFO, to discuss the group performance.
Thank you, Dinos. Good afternoon to all of you attending our call today. So on Page 11, having a look on the main financials. As discussed, refining sales are higher, driven by availability and the utilization of our refineries. In terms of power generation, this is much higher, obviously, due to the capacity that was added over the last year, mostly in wind projects. And overall turnover is lower due to the prices as those have declined considerably versus the peak of the energy crisis in the second quarter of '22.
Our adjusted EBITDA at EUR 164 million is significantly lower than last year. But obviously, that does reflect the performance of [indiscernible] trading due to the weaker margins versus the record highs of last year. In terms of our sources contribution, again, the lower electricity demand and the normalization of the environment, and we'll discuss the numbers of Elpedison and DEPA, had the negative impact and a lower contribution -- negative contribution from our associates.
Finance costs are expectedly higher due to the benchmark rates, the [indiscernible] above 3% versus be almost 0 that were last year. However, this is, to a large extent, moderated by the much lower gross debt levels.
In terms of [indiscernible] contribution, we discussed about and the taxes. We discussed about the gradual payment that will start -- that has already started in July and will be paid in 8 installments until February and will affect the cash flows of the second half.
Capital employed is lower, driven mostly by working capital normalization on lower prices and better management, and this is also reflected in the net debt levels at just over EUR 1.5 billion, significantly lower than last year.
Now moving on, on Page 12 to discuss a little bit more in detail the drivers of the numbers. So the key variable that affected the numbers is the environment, mostly benchmark margins being $14 per barrel more or less lower than last year and a smaller contribution from -- not more negative contribution for [indiscernible] the FX. And important to note, the inventory impact on marketing. As a reminder, we do not -- we adjust our numbers for the inventory valuation for refining as this is the most material part, but it's important to highlight that marketing has been affected by around EUR 18 million comparing to last year as the prices took an inverse trend versus the second quarter of '22.
The degradation of the environment was, to an extent, at least offset by better performance from -- across our business, higher availability and output at our [indiscernible] business, and good performance in marketing and the additional capacity in renewables, doubling their contribution more or less to our EBITDA.
So looking a little bit at our balance sheet and debt profile. So comparing to last year, where we had the peak of the crisis, and the -- following the very strong cash flows for the last 12 months, we were able to deleverage our balance sheet significantly. So we're looking at the gross debt of EUR 1.1 billion lower than the same period last year, the lowest that we've seen for the last, I would say, 14 to 15 years and improved that mix. At the end of the quarter, we financed EUR 400 million RCF facility that was maturing for 5 years, and we are in the process of of refinancing, 1 more facility -- 1 more EUR 400 million facility in the next few weeks.
On the next page, on Page 14, as Andreas mentioned before, our innovative framework largely for project financing our renewable projects in Greece. So this EUR 566 million of available -- available capacity with another close of another EUR 200 million, if required. So it's sufficient capacity to support our growth in renewables at least for the next years. It covers all available commercial models, including stage to the system with a fixed value for -- or premium, commercial PPAs with third parties and merchant part for the new projects.
The project finance is the right venue for renewables with long tenures up to 20 years. And we have a standardized set of pre-agreed E&Ps in terms of debt sizing, covenants, ratios, structure, securities package, [ SPs ]. so that will enable a certainty of taking the project to financing as well as speed of execution. Overall, that will -- I mean a very competitive -- this including pricing that will help us proceed with our growth plan, improvement of our capital structure, extension of maturity of the group debt profile as a whole, and we will be able also to release resources that were temporarily committed to finance the last a couple of years our growth. So the first positive that we'll be utilizing this new capacity will be to recapitalize our existing projects with these project finance structure.
Now moving on to discussing the performance of our business target from Refining, Supply & Trading on Page 17. As I discussed before, it was significantly lower beta margins that have driven the results. Slightly weaker dollar, but still very strong comparing to what we would call a mid-cycle. And CapEx reflects the maintenance schedule at our refineries plus some growth projects.
Moving on to Page 18. Effectively, we're looking at higher output across our refineries, mainly driven by increased availability of Aspropyrgos and Elefsina as the maintenance was much lighter versus the same year of last year we had a full turnaround at Elefsina refinery. This is other than production would be the highest over the last couple of years. We have a very favorable product mix with [ mix business ] exceeding 50%.
In terms of our crude and feedstock sourcing, effectively, that reflects the market trend with the reduced supply of high sulfur crudes from OPEC and the Middle East mostly, and the flexibility of our refineries to take advantage of opportunities in the lighter grade spectrum.
Now on Page 19, the higher availability and utilization of our refineries resulted in significantly higher sales across our market channels in the domestic market and operational bunkering. The sales increase is in line or even a little bit better than the market, but it's mostly exports that are significantly higher, 28% versus the same period last year, corresponding to around 55% of our total sales.
In terms of -- moving on to Page 20, in terms of our realized margin versus the benchmark. A very good result, around [ $6.5 ] of over what we call the additional marginal overperformance, which is very good, especially considering the deterioration in the crude market. And certainly, if you compare it to the last few quarters, we're talking about the kind of normalization of our additional margin because we still have good export premium, but not as strong as you had at the peak of the crisis, a less favorable crude market. And we don't have the 1 off [indiscernible], for example, that supported us in the second half. But -- and this is, I guess, a trend that is closer to what we will see for the rest of the year.
In terms of petrochemicals, the quarterly result is consistent with the last 2 or 3 quarters, where we've seen a decline in the spread of polypropylene versus propylene, and overall, a weakening of the benchmark for chemicals margins to the lowest levels over the last few years, resulting to an adjusted EBITDA profitability of EUR 12 million versus 2022 last year.
In terms of our fuels marketing business, sales are higher in auto fuels as well as aviation and bunkers. This is driven, as described before, by a stronger grid market, both in terms of economic growth as well as the strong start of the touring season with higher aviation activity.
Now I think it's important to look at the numbers adjusting for the inventory valuation. So the replacement cost, the results are significantly better than last year. And this has also come at an environment where we still have a regulatory cap on the retail margin despite the fact that the OpEx base has increased over the last couple of years.
And the improved result is coming due due to improved profitability that aviation and banking as well as the increased penetration of differentiated products in our auto fuels case mix. In terms of the national marketing, the performance is in line with with last year despite a higher OpEx base and the normalization of the environment following the crisis post the investment in the brand. On that point, I will pass you on to George to discuss our renewables [indiscernible] policies.
Thank you, Vasile. Good afternoon, everybody. If we turn to Page 27, we can see very clearly the contribution of renewables increasing, essentially doubling year-on-year. We're at EUR 11 million EBITDA for the quarter, EUR 21 million for the half year. Generally, it was a quarter with worse-than-average climate conditions, a trend, which has been reversed so far. But particularly for wind, it has been a challenging quarter.
If we turn to Page 28, we have a few strategic developments, which we have recently announced, and we would like to discuss with you. The key point is that now we have a very clear secure path to achieving our goal of 1 gigawatt install capacity by 2025. And in addition to that, we have recently entered 2 new markets, Romania and Cyprus, and added to our portfolio considerable projects in these 2 countries.
If we go specifically and review the different markets, in Greece, we announced a couple of days ago, an acquisition of 11 parks under construction and at advanced stages, up to 180 megawatts of capacity in Kozani. These will enter in operation from the beginning of the year up to the third quarter of next year -- up to the third quarter of next year and over 50% of the capacity is contracted on a long-term basis. At the same time, we successfully participated in the recent [indiscernible] tender for storage, energy storage, where we secure the maximum allowable capacity under the tender rules of 100 megawatts. And of course, we are planning further projects in storage and, in all likelihood, we will be participating in the next round, which will happen in the next few months.
In Romania, 4 PV parks under construction or RTB status, 211 megawatts total to regulate and enter operation gradually from the end of this year to the third quarter of 2025. And these projects we include corporate PPAs and also a merchant portion for the power generated. At the same time, we put in place a framework agreement for portfolio development for about 600 megawatts. So we already have in place a material footprint in Romania. Romania is an attractive market for renewables for a number of reasons. It's less mature than Greece so there is still quite a bit of space for renewables, the prevailing prices tend to be higher. And also it is a market which has significant room to grow. To give you some information, it's a market of 23 million people, which currently has the consumption more or less of what Greece has or have the population. So it's also a growth and convergence play.
Last, but certainly not least, we have the Cyprus with 15 megawatts of capacity. These parks are currently in operations and are performing quite well. At the same time, we've established an energy marketing business to leverage our existing position in the country to sell power to our commercial customers. And this is a market where I believe we will see further projects in the next few months.
If we can turn to the next page, this gives you an outline of our current position. So in addition to our operating assets, we have another 330 megawatts, which are under construction or in ready-to-build status, and another 400 megawatts are at advanced stages. And the result of this is that we have a clear path to exceeding 1 gigawatt by 2025 well ahead of our previous target.
We are also shifting from the regime of feeding tariffs and feeding tariffs and [ premium ] to corporate PPAs combined with the merchant part. Of course, the merchant part is also hedged through our existing position in the market, given that we are a large consumer of power in Greece. And regarding the geographical breakdown of our portfolio, we are adding 2 more markets and Greece will remain our major market, but we expect Romania, and to a lesser extent, Cyprus to become important parts of our portfolio.
In addition to this mature part of our portfolio, we've grown our pipeline under development to almost 4 gigawatts of capacity.
If we can go to the next page, we talk a little bit about Elpedison. The second quarter is traditionally a challenging quarter for power generation. Weather is not particularly favorable because it's the swing season, not very high power demand. We also have scheduled maintenance in both of our plants. And the opportunities that presented themselves in the first quarter in the gas market were not present. So the result of that was a much lower profitability, both year-on-year and quarter-on-quarter for the company.
Moving on to DEPA. As you know, there, we have a 35% participation in DEPA Commercial and DEPA Infrastructure projects. Of course, the main participation is DEPA Commercial. A challenging quarter for DEPA with negative contribution as a result, of the lower demand in the Greek market, but also costs related to security of supply and specifically, capacity reservations at entry points, which were not utilized, and also a significant loss on inventory valuation of emergency stocks held by the company.
So all in all, we had a negative contribution at the net income level from our participation in DEPA.
And with this, I think we complete the presentation. And I think we are ready to take your questions.
[Operator Instructions] The first question is from the line of Grigoriou George with Pantelakis Securities.
I've got a couple of them, please. The first is, given the recent state of announcement in renewables, could you please provide us with the CapEx guidance for 2023 as a whole and 2024, not only in terms of renewables, but also genral as a group? But if you could provide this breakdown, that would be helpful.
Second, given the one-offs that hit DEPA Commercial in the second quarter, how should we think would be the second half? Would you be willing or able to provide us with any guidance of how to actually model our numbers for the -- in the second half?
I'm staying on DEPA because recent talk in the press that you might be willing to -- why the selling 25% stake back to the state or buy an IPO together with the state, combined lower your participation in the company, if you've got any comments?
And third and last one, regarding maintenance works at your refineries, are there any plans in the remainder of the year? I think not if -- please correct me if I'm wrong, but what is the outlook as well for 2024? And again, correct me if I'm wrong, but I was under the impression that several units of Elefsina were on a rolling basis ship for maintenance in the second quarter. I presume I was wrong.
George, a full set of questions covering a lot of important parts. Let me start from the bottom on the maintenance schedule and ask George Alexopoulos to give us a brief outlook of what we expect to see over the next few quarters.
Okay. Good afternoon, everybody. We have any plans for major maintenance in all 3 refineries. We just have a small maintenance scheduled for some units in [indiscernible] during September, which is about 1 week downtime in part of the units. Nothing else is in this plant for the rest of the year.
Okay. On CapEx, Vasileios, do you want to take that?
Yes. For '23 and '24, you should expect RS CapEx of anywhere between EUR 250 million to EUR 300 million to $300 million based on the process that we discussed earlier on. That does not include any potential M&A that could come on for given the fact that we have the 1 gigawatt target by the end of '25. In terms of maintenance, adjusting for the turnaround cycle of the refinery, you should expect anywhere between EUR 150 million to EUR 200 million each year for the refineries, including some long-term maintenance. And for marketing, I would say another EUR 50 million to EUR 60 million for this year and in the following year that includes some growth projects.
And of course, on a minor but reality, we do have our digitalization plan would account for EUR 120 million, EUR 125 million each year.
Okay. In terms of the DEPA, I know there are 2 questions. The first 1 was about the second half results for DEPA. Unfortunately, we don't have any visibility and natural gas markets have been extremely volatile. And also, DEPA is highly influenced by regulation and government policy on energy. It is a fact. So we might as well acknowledge and work on that basis. We do expect a better performance than the first year. There's no question about it, but it's very difficult to project something, George, to be honest.
Now on the DEPA news that have hit the market about a potential stock exchange transaction or something like that, our strategy, as you know, is that we want to have clean solutions and clean solutions start from the governance of our investments. In the case of DEPA, we do not have a clean solution. It is a significant minority with the capital investment in the company. And we have announced and committed that if DEPA is sold, we would either consider buying all of it or DEPA Commercialized this, or dispose off our 35%. That strategy hasn't changed. But clearly, the tender for the strategic investor has not yielded any results yet. So I would expect that given our stated strategy, if such plans are progressed, we would be supportive of this scenario. I think that's...
Okay. Understood.
Yes, those are the questions. I think I noted down. I don't think there was anything else.
Yes. Just a quick clarification on whether there were some maintenance in some units in Elefsina in the second quarter? That's all.
Yes, there was a smaller period, a couple of weeks in Elefsina that we had partial operation. So there was some impact. But still, it was a relatively good quarter.
It was indeed.
The next question is from the line of Nikolaos Koskoletos with EuroBank Equities.
I have 3 quite short questions, if I may. The first 1 is regarding refining in general. I think you mentioned something about EUR 1 billion adjusted EBITDA for the whole year. So that means that the outlook for Q4 as well is optimistic as it is for Q3. That's the first question. The second 1 is regarding marketing. What's your view on when this government imposed profitability cap will be sold? And the third question is, on RESS and renewables, whether you will upgrade your target for 2030?
Okay. Starting from the top, refinery, I will ask Dinos and George to cover that.
Well, we expect that we actually have no major plant maintenance for the refineries during this period. We had 2 very good months in July and August. And I think that based on that, the expectation for the EUR 1 billion EBITDA is...
[indiscernible] initiative.
Especially the [indiscernible] Support. That's about the refining about marketing.
Retail, yes, I'll take that. As you know, since COVID, the government has stepped in regulating the market on retail business and wholesale to some extent. The energy [ prices ] and the Ukrainian crisis led to a continuation of that. It was scheduled to end at the end of June this year. It seems that -- it doesn't seem -- it has been extended until the end of the year, which means that we have to be very careful in in terms of how we price our products on a daily basis, which is restricting the ability to price properly and create quite a lot of administrative and risk exposure issues.
We understand why the government is doing that. It doesn't necessarily mean that it is the right way to go about it going forward. So as the crisis gets a little bit out of the radar screen, mind you, commodity prices remain quite high, which leads to increased energy costs for consumers. We will see a normalization of this market. But the biggest issue that we have in marketing is not the margins container because we do understand that we need to be supportive to the society in certain times. The biggest issue is the lack of power control on the quality and the quantity of fuel sold through the retail networks. And that is actually our biggest problem as a group. And I'm sure that you will get exactly the same view from other serious players in the fuels business in Greece.
Now on renewables, George?
On renewables, I think it's a pertinent question, given the firming up of how we will achieve our short- to medium-term goal of 1 gigawatt. We are currently in the process of doing our business plan. So I think we'll come back to your question very soon regarding the possible revision of the 2030 target of 2 gigawatts of installed capacity.
The next question is from the line of Lamb Jonathan with Wood & Co.
I have just 1 question I want to ask. In the last few quarters, the differential between the benchmark -- your benchmark margin and your achieved margin has been -- was bigger than it was in this last quarter. Is there any particular reason for that?
Dinos, do you want to take that?
Yes, I will take it.
Give us a minute, Jonathan. We get our facts straight and up and come back to you.
I think that the main reason has to do with, let's say, what we get from the difference rate of crude compared to to our benchmark. I'm sure that you are well aware that the price of the crude, especially the ones from the OPEC countries and are always being related every month has significantly increased compared to Brent during -- from the beginning of the year. As prices go closer to Brent, for example, [ gasoil ] medium was Brent minus $9.90 per barrel in the beginning of the year, and now it's minus $3.5. So this gives us smaller opportunities to beat the benchmark compared to to the crude slate. The compared to what we did before. So I think that this is the main reason for this smaller overperformance.
If I can add to what Dinos said, Jonathan, 1 should consider this overperformance part as a function of 3 main buckets. I mean there may be more, but I'm just trying to give you the bulk of it. The first 1 has to do with the sales channel mix. So if we have a different sales channel, then there is a big delta on the actual overperformance. For example, if domestic market increases in a percentage, it's only natural to see an increase in what we classify as our performance. Likewise, -- it has to do with the product mix. So the sales mix is a bucket which is important for this overperformance -- the second bucket has to do with the crude sourcing, which is what Dinos described earlier. And it can be quite a material part of this overperformance. The third bucket has to do with the operational improvements and performance. And I would like to to highlight the fact that over the last few years, we have been doing quite a lot of performance improvement, operational excellence initiatives including, for example, the digital transformation initiative. All of these things, they may add $0.10 or $0.20 to the dollar -- to the barrel and may not be easily identifiable on their own, but put together, they do give you a structural improvement in overperformance.
So I think that's why you're seeing this overperformance growing over the last few quarters.
Ladies and gentlemen, I will now give the floor to Mr. Katsenos for written questions.
Thank you, operator. We have a written question from Peter Hitchens from [ Madison ], who asks whether we have seen any easing in the acquisition costs of renewable energy capacity?
Yes. Thank you, Peter, for the question. I mean the acquisition costs are certainly a function of a number of things. Cost of capital has certainly increased over the last year or so. We've seen some easing on the construction costs of PV not so much of wind. In fact, offshore wind, as you know, is going through a very challenging period. The short answer is, yes, we have seen a slight easing in the acquisition cost all in all and trying to control for all the variables.
[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Thank you very much for participating in this call. And for taking the time out of your busy schedules to understand a little bit better how our business is doing. What we have presented is what we see as a good quarter, even though margins were not supportive of an even better financial performance, but we do see the underlying performance of the company being improved. And that is not only in terms of the growth of renewables, which is remarkable. We are now the #1 [indiscernible] producer in Greece. And pretty soon, we will be even bigger in actually installed capacity -- new capacity in the market.
The performance is very good on the main business of the refineries. A lot of effort has done by our management team in the refineries to improve operations, to improve safety, to improve the utilization of our units of our investments. The Supply & Trading team has done exceptionally well. We've rolled out, improved LP planning and digital tools to help us get the extra cent from the barrel, from this process, which is, as Jonathan noted, evidence in better overperformance. I cannot comment positively on our retail businesses in Greece, even though we have this unfair competition and pressure by a number of the players, we have seen a big improvement in the quality of the network of the sales.
Just a statistical point to note is the fact that roughly 25% of our sales through our network is made up of premium products. And that is very important to note, especially in a high price environment such as the 1 that we are actually operating in and that is down to very good marketing, very good sales operations and ability to communicate to the consumers the benefit of a premium product. And likewise, we have our international business doing very well. It has been a significant contributor of value to the group on a number of fronts, not only from the profitability that we generate within the local market, but also from the synergistic benefits that we create with our Supply & Trading teams. And also lately with the support and the tenacity with which they deploy the existing resources into new markets. I think a very good example is Cyprus where with the same team for the last 50 years have been basically selling fuel to the petrol station. We have identified a number of renewable projects. We have acquired 2, and we are actually looking to acquire even more. We've set up an energy supply company utilizing our internal resources there and a very good market positioning on our core business. And I'm sure that they will be doing exactly the same in our other markets as well. So all in all, we have a group that has delivered very high within this environment. Clearly, it's a complex business. Not everything will be ideal every quarter. But this quarter, it has been a positive one.
On transformation, we have progressed on Vision 2025, which is an ambitious plan that we put together a couple of years ago and have delivered on every single front in terms of our transformation. And the new business contribution is going even better than what we anticipated with very high-paced growth and business development and value-adding approach to building our presence in this market, which clearly does not have the same returns as our core business. So 1 has to be even more careful in deploying capital in this market and also, at the same time, take into account the fact that over the last year or so, base rate have increased significantly. And this is a capital-intensive business, and it is very sensitive to funding costs.
So all in all, a good quarter and a good first part of the year. Projection for the remaining of the year is positive. We need to focus on operational excellence and continue what we have been doing over the last few years. And I have no doubt that we have another great year ahead of us. 2023 will also be a very good year, that is not just spoiled by the exceptionally high results of 2022. And that is going to give us the time to build even further the noncyclical part of the business, which will support a weaker year, which is bound to come. I don't know when. Hopefully, it's going to be some years before we see a weaker year, but it is bound to come. So having in place a much more stable cash flow from our new business and a greener portfolio is definitely going to be for the benefit of the group. So I take the opportunity to thank everybody in the management team who have worked very hard. And of course, every colleague of ours from the refinery, the petrol stations and our new businesses, which are being developed for their hard work. And I'm sure that we'll be able to have another good quarter in a few months' time. Thank you.
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.