EVN AG

Good morning, ladies and gentlemen, and welcome to the conference call on Easy Answer Golf for the 2020-2021 financial year. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Mr. Stefan Čižković.

Good morning and welcome to the conference call on EVN's results for the 2021 financial year. EVN showed a sound performance in the reporting period. EBITDA, EBIT and GroupNet results are above the previous year. The Corona crisis only had selective negative impacts on our operating results. Our integrated business model and a widely diversified customer base continue to be stabilizing factors. I would like to remind you that our outlook for CoupsNet results was in the range of about 20, 200, 230 million euros. We raised the outlook in an ad hoc release on the 2nd of November and today's CoupsNet result of 325.3 million euros is in line with the increased guidance. The main drivers for our higher results are non-cash, non-recurring effects. In particular, we had re-evaluations to previously impaired equity accounted in the fees. Last year, our 30% stake in Verbund Inkaufswerke suffered from an impairment loss of 20.7 million euros. This year, this was compressed by a regulation of 25.3 million euros, which was based on an increase in electricity forward prices. Also last year, we recognized impairment losses of 4.9 million euros to the 50% stake in the Astor hydropower plant in Albania. Again, this year, this was offset by a re-evaluation of 23.8 million euros, which was due to a decline in the country's risk premium after a COVID-19-related increase. Finally, our supply company, EAMCG, benefited from improved operating results as well as a valuation effect from hedgers. And Energy Alliance returned to a normalized level after the negative effects of the corona crisis in the previous year. Based on these developments, results from an adequately consolidated Investees with an operational nature were upped by 145.5 million euros and stood at 239.6 million euros. I just wanted to give you this initial overview for a better understanding of our results and reasons why we were well above our initial guidance. I will provide further details on our financials and segments in course of the call But let me now continue with some future further highlights. A key message which I would like to put at the beginning of the call is that we will propose a higher dividend to the HUM. We intend to pay out 52 cents per share, which corresponds to an increase by 3 cents per share. We also try to further specify our dividend policy, which states that we aim to hold the annual dividend at least constant. We now add to the policy that we are also committed to appropriate participation of our shareholders in future earnings goals. I do hope that today's increase in the dividend supports such commitment, especially as the interest comes in line with an earnings growth which was mostly non-cash. To conclude on dividend policy, my intention is to reconfirm the message that EVN is a highly stable dividend stock. However, in this running float, we will let shareholders participate. Please note that our HEM has been rescheduled to the 3rd of February. The new dividend payment date will be the 11th of February. A year ago, I informed you about our strategy update, as we had previously developed our strategy 2030, which has the motto, more sustainable, more digital, more efficient. In this strategy process, we developed a very clear view that climate change and how it impacts the transition of the energy system, political goals, legal and regulatory frameworks, wholesale prices, demand patterns, etc. will be a key factor of the EVM strategy and future business models. Let me confirm that we share the understanding and views of ACG's investors. Therefore, The next logical step was to develop, based on this strategy 2030, what we call the EVN Climate Initiative. It consists of three pillars. The main pillar, and this is also a key achievement of the past month, is that we agreed decarbonization targets for EVN with the Science-Based Targets Initiative. Today, the Science-Based Targets Initiative will publish that EVN has joined this internationally known initiative and has committed to actually five targets. When committing to making a contribution to the Paris climate goal and defining CO2 reduction goals for the group, it was always important for me that we aim for an alignment with internationally accepted standards, external validation, transparency, and comparability. Therefore, I am proud that we received a sign-off on the Science-Based Targets initiative. I also believe that this will make us even more attractive for SDGs investors. For further details on our targets, please take a look into our full report. It goes without saying that the decision to disinvest from Waltham 10 power plant is also well in line with our strategy 2030 and our climate initiative. End of September, we completely stepped out from this project as we transferred our 49% stake for our partner Steers and terminated all power purchase agreements from Waltham 10. so I can confirm that EVN is not engaged in any coal-fired electricity generation activities anymore. This is also the important message to many stakeholders above all to SEG's investors. I would also like to use the opportunity and update you on our expansion targets for renewable generation. According to our strategy, we plan to increase our installed wind capacity from currently 400 MW to 750 MW by 2030. In order to achieve such targets, we will pursue projects in Lower Austria, but also in Bulgaria. In Austria, we still struggle with delays in realizing projects. At the moment, we actually face two issues. The first issue is with the new Austrian Renewable Energy Extension Act. Although it has been ratified by the Austrian Parliament, we are still waiting for a specific regulation on roughly 30 topics, which must be declared by different ministries and are essential for our industry. And the official notification by the European Commission regarding compliance of the new subsidy mechanisms is still outstanding. Amendments are likely and will inspire a new resolution by the Austrian Parliament. So we are still on hold with the development of new projects when it comes to the new legal framework and subsidies. The second issue is the backup of already developed approved projects. This backup was caused in the past years as the annual budget for subsidies was all used creating a waiting list. While being on waiting lists, technology developed further and next generation of turbines became more efficient. Clearly, we would like and have to switch to such improved technology. This, however, requires a management procedures of previously approved wind projects. Meanwhile, public acceptance of wind projects deteriorated, such as each project, and those previously approved had to deal with some sort of appeal which delays the project. As part of our strategy, we also aim to expand our photovoltaic portfolio. Here we are still at an early stage, but we aim for installed capacity of about 300 MW by 2030. Our plan is to realize projects in Lower Austria, Bulgaria, and North Macedonia. Overall, we plan to raise our annual investment up to €500 million over the coming years. The key investment focus remains on network infrastructure. These investments fulfill three strategic objectives. A secure supply security, enable carbon-free energy future, and provide for further growth of our regulated business. Further investment areas are renewable generation, including biomass heating, that may now continue with key financials of the reporting peers. The group's revenue was up by 13.6% year-on-year. The main reason for this development is the start of construction of the wastewater project in Kuwait. Other positive factors included an increase in energy sales in Bulgaria and higher network sales due to the cooler weather in all three core markets as well as the higher network tariffs by e-Control in Austria as of the 1st of January 2021. Primary growth was also supported by an increase in electricity generation and by higher electricity prices. Contrary factors were lower effects from the evaluation of hedges for electricity generation. The cost of electricity purchases from third parties and primary energy expenses rose up by 19.9% to 1 billion 46.7 million. Reasons were higher energy procurement costs in South East Europe and for our heating business. Other factors are the increased use of primary energy through the higher thermal generation volume as well as rising wholesale prices. Effects from devaluation of hedges had a contrasting effect. The main reasons for the rise in EBITDA were higher earnings contributions from equity accounts and indices which are already explained earlier. Higher investments led to rise of scheduled depreciation and amortization. In connection with the takeover of an additional electricity procurement right, an inferment lot of 113.1 million was recognized to the Waltham 10 power plant already in the third quarter. Based on brief developments, the group's EBIT was up by 41.5% and amounted to 386.4 million euros. Financial results declined to minus 20 million euros due to the premature termination of an interest rate hedge in connection with Waltham Power. and determination of the related bank financing. In total, we generated a group net result of 325.3 million euros, which represents an increase of 62.9% over the previous year. Now I would like to move to the next slide, which provides some information regarding the group's balance sheet structure. EVN's net debt amounted to 813.8 million euros. Hearing ratio was down and amounted to 12.4%. Our financial flexibility is solid, we benefit from low net debt and sufficient committed unborn credit facilities which amounted to 552 million euros as of the end of September 2021. Our strong financial structure forms the basis of pursuing organic growth opportunities in our regulated and stable awesome activities. Before I will go through each of these segments in detail, I would like to give you a general overview on the 80 day development of our business segments. The VDA development per segment illustrates the key drivers of our performance during the previous reporting period. All segments showed improvements in comparison with the previous year, which however is partly due to one-off effects. Let's move on to the next slide which covers the generation segment in more detail. Electricity generation volumes in this segment were up by 7.5% year-on-year. Renewable generation benefited from good water flows and thermal generation exceeds the low prior year level. Good water flows and higher market prices for electricity led to an increase in revenue from renewable generation despite the decline in wind power. If the day was up at 262.5 million euros, this increase was mainly due to a positive one-off effect related to the takeover of an electricity procurement right which took place in the first quarter. In addition, EVDA's growth was supported by the re-evaluation of our ad-equity consolidated stakes in Verbundinfraserke and the Astra hydropower plant. Scheduled appreciation and amortization increased as a result of higher investments. In total, the generation segment generated a higher EBIT of 182.2 million euros. I would also like to give you an outlook for each of the segments. For generation, please keep in mind that today's segment results are significantly influenced by positive one-off effects. Therefore, under the assumption of average wind and water flows and lack of positive one-off results in this segment, I expect it to decline. However, higher electricity prices could moderate this decline. On the next slide, I will continue with the energy segment. The development of revenue in the energy segment depends primarily on the marketing of electricity generated in event power plants. Besides, it includes the revenue from our domestic heating business. Higher revenue from the marketing of our own thermal electricity generation and from our district heating company only partially offset the year-on-year decline in the valuation of the effects of hashes. Therefore, revenue was down by 18.8%. Operating expenses were lower in total, but were influenced by contrary effects. The increased use of primary energy due to higher thermal generation volumes and the higher procurement costs for our heating business were contrasted by the lower valuation of hedges for primary energy carriers and CO2 certificates, as well as the use of positions to own earth contracts. The energy sales volumes were above the priority level due to colder temperatures and the return of demand to pre-COVID levels. The share of results from equity accounted indices with operational nature improved by This increase was supported by a sound operating performance and the positive effects from the variation of hedges in EV and KG. Based on these developments, the energy segment reports EBITDA of 188.6 million euros and EBITDA of 166.6 million euros. Now for the outlook of the energy segment. Price increases on the wholesale market are a challenge for all our energy supply activities For electricity, there will be a pricing case on customer contracts as of the beginning of January in order to cope with increased purchase prices. In addition, please bear in mind that future earnings will not consider any effects from the Waltham 10 power plant anymore due to our exit from the project and termination of our electricity procurement. Excluding the positive non-recurring effects from the termination of the on-race contract, which we had at the segment level only before 2021-22 for the energy segment are expected to be substantially lower than in the previous year. On the next slide, I will present the developments in our network segment. Network sales volume increase reported by stronger demand for electricity and natural gas in the household customer segment due to lower temperature At the beginning of the new year calendar, the Austrian regulator determined new network tariffs. Tariffs for electricity were increased by 6.3% on average, and those for natural gas were increased by 6.4% on average. Based on this balance and price development, the segment revenue increased by 6.9%. EBITDA in the network segment was up by 18.7% and EBIT by 36.3%. The development of earnings in the network segment is determined by the Austrian agricultural methodology. Earnings in the segment are therefore reported to remain stable at the prior year level. However, network challenge volumes and, in turn, earnings could be influenced by various factors such as temperature-related demand, usage of gas-fired power plants, or the overall economic development. On the next slide, I will continue with the Southeast Europe segment. Temperatures in Southeast Europe were well below the previous year, which had a positive volume effect. Also here we saw a recovery from corona-related weaker demand. In Bulgaria, we are facing strong competition following the market liberalization for commercial customers as of October 2020. Based on this development, we are reporting today an increase in network sales and energy sales volume, which had a positive impact on revenue development. Operating expenses increased due to a higher energy procurement cost, but were reduced by a decline in impairment losses to receivables in northern Macedonia. Segment EBITDA was up by 1.7%, where segment EBIT remained nearly unchanged to 65 million euros. For Southeast Europe, the segment outbound is impacted by the distortions on the energy markets, as they may have a substantial negative influence on segment earnings. Higher energy prices lead to increased procurement costs for network losses. Based on the regulatory framework, this negative effect should be offset to higher tariffs, but this compensation will only take place with a time lag in future years. This is in line with the existing regulatory methodology. I would like to conclude my presentation of this segment with the environment segment. In our international project business, we can rely on a solid order book of about one as end of September. In total, WTE Wasser Technik is currently working on 14 projects in Germany, Lithuania, Poland, Romania, Bahrain and Kuwait. Included are a huge sludge treatment project in Germany, which was done by our joint venture company Sludge2Energy. The financial performance of the segment is in line with the development in international project business. There was a corresponding rise of both revenue and operating expenses in the segment. However, I would also like to note that national lockdowns, travel restrictions, and interruptions in the international supply chain caused delays in the international project business. All in all, the segment benefited from the start of the construction of the Kuwait wastewater project, which is accounted for according to the percentage of completion method. In addition, there was a positive one-off effect at our lower Austrian water supply company. In total, this embarrassment led to an increase in APTR to 64 million euros and in AP to 26.5 million euros. Our outlook in the environment segment is always subject to the further realization of assignments in the international project business, above all the large scale crew-wide project. Assuming decline in impact from the corona pandemic, catch-up effects and focus on project according to the schedule should support an increase in segment results of 21-22. A renewed intensification of the Corona crisis could, however, lead to further project delays through lockdowns, travel restrictions and disruptions in the international supply chain, with the resulting decline in earnings. With this, I conclude the presentation of this segment. On the next slide, I will continue with the development of Groups Cash Flows. 762.3 million euros. This was mainly due to the receipt of the compensation payment for the takeover of the electricity procurement right. A further factor was the higher balance of dividends from equity-accounted investees. The increase in cash flows from the operating activities was even higher in comparison due to the developments in the working capital. Cash flow from investing activities was influenced chiefly by year-on-year increase in investments in property plant and equipment, a compensation payment from the exit from the Bison 10 power plant and a change in investments in cash funds. The cash performance financing activities reflected a scattered repayment of loans and a dividend payment to our shareholders and non-controlling interest. A contrary factor was the issuance of a green private placement. The net change in cash and cash agreements amounts to minus 17.7 million euros. I would like to conclude my presentation with the output of the group and the key messages of our equity story. In view of the macroeconomic catch-up effects, the related inflationary tendencies and the strong distortion on the international energy markets, which were responsible for massive rights and wholesale prices for natural gas and electricity in autumn 2021. Our diversified, integrated business model leads us to expect offsetting effects between individual segments. Short-term forecasts are, however, difficult due to the current volatility on the energy market. Therefore, we are currently facing additional uncertainties on top of the usual ones like temperature-related energy demand, wind and water flows. Therefore, we use our initial guidance at the last dimension here as the starting point and expect that the group net result in 2021-2022 will be in the range of approximately 200-240 million euros. Finally, let me reiterate the key messages of our equity story. E.ON has transformed into a highly aggressive stock for SEG's investors. We are no longer active in any coal-related energy activity, and our gas biogeneration plant in Thais is solely active for network stabilization measures. On top of these already finished decarbonization measures, we are committed to reach new CO2 reduction targets, which we have just agreed with the internationally known Science-Based Targets Initiative. There is a clear strategy ongoing on wind and photovoltaic biogeneration capabilities in our core markets until 2030. And with our operations and rapid distribution efforts, we see ourselves as an enabler of the climate-neutral energy future. We are strongly positioned in regulated and stable activities in our core market, above all as the leading supplier of energy, cable TV and telecommunication services, waste incineration and drinking water in our home province, Lower Austria. Based on these predictable activities, we developed a reputation of being a highly reliable dividend stock. This year, we will increase our dividend by another 3 cents to 52 cents per share. According to our dividend policy, this defines the floor for future dividends. We are also committed to appropriate participation for our shareholders in future earnings growth. In the current period of highly volatile energy markets, the group gains stability from a diversified business model. Finally, since last March, EVN is again a member of ATX, the benchmark unit of the Vienna Stock Exchange. With a default of a bit more than 20%, liquidity in shares showed a sound development in the last 12 months, as it is also reflected in the share price. With this, I have reached the end of my presentation. I am looking forward to answering your questions.

Ladies and gentlemen, we will now begin the question and answer round. If you would like to ask a question, please press 9 followed by the star key on your telephone. After pressing 9 and the star key once on your telephone keypad, you will hear an automatic confirmation. To explore your question, please press 9 and star key again. Now, please give the key combination 9 and star key once to raise a question. Our first question is from Patrick Steiner from Kepler Schiphol. Please, your line is now open.

Good morning from Vienna. It's Patrick Steiner from Kepler Schiphol. The first question would be, you increase the analytics program to $50 million and the proposed increase dividend of $0.52 per share. Okay, so this is a mid-term to long-term perspective. As we mentioned before we need some

decisions by the Parliament to be restated also that we can do this kind of investment but as we know with all these investments our regulatory asset base will grow over the next year even stronger than it was in the recent past so we expect more than 4% growth over the next year so this is one base and of course with and performance which will help to grow our good net results. And with other financial guidance we are always giving that around one billion is the net debt which we are monitoring quite closely on the return.

Okay, thank you very much. We have one quick follow-up question. Are the additional 50 million of capex mostly dedicated to the electricity networks? And if yes, do you see even higher required capex dedicated to the networks in the future?

That's a very good question because this is showing how serious society will be regarding this transition period. In which kind of term timing frame a project can be realized and are supported. Therefore, I would say that around half of the investment over the materials will go into the grids and the remaining part will go into renewable energy and the further development of the drinking water network in Lower Austria. So, in the best case, we could see around a potential quarter-sized billion over the next 10 years as investments.

Okay, thanks very much.

Our next question is from Theresa Schimwald from Rife ISA Bank International. Please, the floor is yours.

Thank you. I have some questions and also a clarification for the delay. As this year was heavily impacted by 1S and in all directions, I wonder what would be a kind of a normalized energy segment results. to where you plan to return to once the rollercoaster ride of energy crisis has calmed down and also as a bookkeeping question could you give us an idea about the signs of the revaluation effect for the HECS that was still in the books and you already said it was lower then one question on the guidance at which level was the verbund dividend included in this guidance as the increase for next year is quite substantial and the range is higher than usual and the last one on the dreaded situation that the renewables expansion you mentioned before that under the initial plans that projects could be presented in kind of 2023 would start in 2024 as far as I remember is this schedule still achievable or what's about the time you think that could be the delay so far I think there is quite a couple of questions the first one

Regarding a normalized energy segment result, it's really hard to do this for the ongoing year, but if you take a kind of normalization based also on historic figures, just to give you a kind of guidance also, the average contribution is around 40 million from the supply KG business, and regarding the The heating business is around 45 million, but this is a rough estimate to give you here. Regarding the renewable energy directive, as you mentioned, there is a delay, we are also

AG. Ladies and gentlemen, please hold the line. We will continue in a moment. Thank you. I'm sorry, we lost you.

Everyone back?

Hello?

Ladies and gentlemen, thank you for patience. Let me now turn back the floor to host, Mr. Shishkovic.

I'm sorry, I think there was an interruption. I hope we have not lost everyone. Teresa, are you still there?

Teresa's line is no longer here. I'm sorry.

Okay.

And as of the moment, there are no questions. Ladies and gentlemen, please give the key combination 9 and start to 1 to raise a question.

Our question is from Patrick Steiner from Kepler Schivel.

Please, your line is now again open.

Hello again, Mr. Schivel. I'll take the opportunity to ask another question. The equity contribution in the energy segment rose from $39 million last year to around $101 million this year. How much of this increase is associated with an improvement in the operating business and how much is resulting from the valuation of hedges at EVM Cajun? And maybe further on, how can we How can we look at the variation of hedges at EVM teaching going forward?

I think as a rough estimate, two-thirds is coming from the hedges from Caltech. One-third is available.

We have a question again from Ms. Theresa Schinwald from Reich Alte Bank International. Please, your line is now open.

Yeah, great. Thank you. Yes, I'm back, and I think we were interrupted at the delays for the Renewable Energy Extension Act.

Yes, absolutely. So just to try to help you on that, we have around 90 projects with around 90 megawatt, which are on the old charge systems. which we are waiting to get permits to build them, even in the refurbished technology. And the remaining, from 500 up to 750, will be new projects which are now developed and pursued, but they will already be under the new Renewal Convention Act. Therefore, there are two different kinds of quality in this mid-term perspective. And also on the timing side there, this kind of 500 megawatts, we should be with some kind of disclaimer around 2024 should be ready. And then many six years will be spent to develop the 250 additional ones. We are aiming to develop all projects primarily. This is what we target.

A follow-up, actually, on the renewables extension. The PPA market has grown substantially elsewhere, first, of course, in Southern Europe, but now also in Central Europe and even up north. Are you looking into that as an alternative to the subsidy schemes, other projects? that might be interesting for you, maybe not in Austria, but Bulgaria, and what about looking at, if you're looking at the PTA market?

Well, I can confirm that this market is developing and growing, but you need a partner for that, and a partner who is also having an estimation regarding the long-term development of prices, and therefore this market is really growing and developing and we will try to take some part of the risk in certain projects if we find a partner who is valuing the energy in a way that is attractive for us. So I'm cautious here because it's not depending on us alone, it's also depending on markets, volatilities and the willingness of industrial partners to take and risk in energy prices, which they have not been so interested in in the past, but now with the climate and CO2 relevance, this market is developing and transforming.

Thank you. It's clearly a steep learning curve for everyone. Thank you very much.

Mr. Shishkovic, there are no further questions from the audience.

Okay, then thank you for joining today's conference call. I'm sorry for the interruption. We will publish the results for the first quarter of 2021-2022 financially on Friday, 25th of February. Please join us then and again. Stay healthy and happy holidays.