EVN AG

Good morning, ladies and gentlemen, and welcome to the conference call on E4M's results for the first three quarters of the 2022-23 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 Siskowicz.

Welcome everybody to EVN's conference call on the results for the first three quarters of this financial year. This reporting period was still characterized by very mild weather conditions, especially to southeastern Europe, that affected the energy demand, and we also observed reduced energy consumption by our customers due to the energy saving activities. The energy production from renewable energy sources nearly reached last year's level, and the share of renewable generation increased to 76%. Overall, our group net results developed positively due to this segment's generation in Southeast Europe. Besides this significantly higher FABU dividend for their last financial year, it contributed 158 million euros to the group net results. Supply business is still under pressure. EVN KG shows a negative result of 268.7 million euros. I will go now in more detail later in the presentation. Two years ago, EVN developed its EVN Climate Initiative. In joining the science-based target, this initiative is since one of our cornerstones. Thereby, we committed to CO2 emission reduction targets. These goals are significantly supported by our ambitious investment program for the expansion and connection of renewables. Over the coming years, annual investment will be increased to over 600 million euros, with 3 fourths going to lower out there, mainly in the fields of network infrastructure, renewable generation and drinking water supplies. These capacities will be expanded by another 350 MW to 750 MW by 2030. Additionally, we will build up a photovoltaic portfolio of about 300 MW within this decade. In the reporting period we commissioned the wind park Japons as part of a repowering and a pre-large-scale photovoltaic plant. Three further wind parks and one additional photovoltaic project are under construction. Two more wind parks are already in the pipeline for 2024. All in all, we will additionally connect roughly 116 MW wind and photovoltaic capacities, therefore 94 MW fill within this calendar year. In July, EVN concluded a contract with the European Investment Bank for a green loan at the amount of 110 million euros to finance the construction of Rotterdam Impacts. Let me now continue with the key financials of this reporting period. In the first three quarters, the group's revenue is slightly decreased year-on-year to 1.9 billion euros. This development is mainly due to lower revenues in southeastern Europe due to the decreasing energy market prices and the international project business where the Kuwait project has already reached its peak. In contrast, revenue was positively affected by price effects of renewable electricity generation, valuation effects from hedging transactions, The cost of electricity purchases from third parties and primary energy expenses dropped year-on-year to 1.3 billion euros. This mirrors the development and revenue against the background of decreasing energy market prices. In contrast, higher costs for network losses and ups in net cost for net needless price as well as higher energy procurement costs for EV and Wärme were recorded. Other operating expenses increased mainly due to an energy crisis contribution for electricity, which has been payable in Austria since December last year. The share of which results from at equity-accounted indices sharply cropped to minus 157.7 million euros. As forecasted, the sales company EVNKG recognized a significant loss in the reporting period of 268.7 million euros. In total, Group EVDA amounted to €602.1 million. Scattered depreciation and upper amortization increased slightly according to the higher investment program. Please be aware that prior serious figures reflected €51.2 million from impairment testing. Hence, Group's EBIT rose to 359.2 million euros and financial results increased to 132.5 million euros, which reflects the dividend payment from Baboon at the amount of 158 million euros. In total, Group net results amounted to 419.1 million euros. Now, let's move on to the next slide, which provides information regarding Group's balance sheet structure. Balance sheet sum decreased due to a substantial decline in the carrying amount of equity-accounted investees, which resulted primarily from the operating loss of EFNKG and negative evaluation of hedges held by EFNKG and energy airlines at the end of the reporting period. Furthermore, the price development of the FAPUN share compared to the end of September 2022 caused a decline in other investments. As of the end of June, EV and net debt increased year-on-year to 1%. and temporary financing of working cattle needs. Correspondingly, billing ratio amounted to 23.1%. Nevertheless, our financial flexibility remained solid. EVEN AG had committed on-ground credit facilities in the amount of 701 million euros as of the end of June. As already mentioned, EVEN concluded a contract-free green loan at the amount of 110 million euros to finance the construction of rubber link parks. The first disbursement on that loan was late in July. Let me now present our segments in more detail. First, the energy segment. Mild temperatures characterized the first three quarters of the financial year, especially compared to prior years level. Hence, energy sales volumes to end customers declined. Energy savings by customers additionally decreased volumes. Additionally, with decreased market price levels, many supply companies came back to the market. We had to face an increased competition with the electricity and natural gas customer segment. Revenue in the energy segment is mainly influenced by energy trading also through optimization of the gas storage facilities. The marketing of electricity generated by EM. Besides, it concludes revenue from our domestic heating business. In this reporting period, revenue increased to ETH 2.6 million euros. This development was primarily due to valuation effects of hashes as of the balance sheet date as well as price effects in the marketing of our own electricity production and our own heating business. Operating expenses were higher year on year costs for biomass and natural gas. Furthermore, price-related higher expenses for electricity purchase from third parties from the marketing of our own renewable electricity generation and the prevailing inflation negatively affected operating expenses. As already mentioned at our previous results presentation this year, earnings contributions from our equity-accounted energy distribution company, EVNKG, remains under massive pressure. Its results sharply declined in the reporting period accounting to minus 268.7 million euros. Higher procurement costs can only be passed on to customers with a delay with negative effects operating results. Additionally, negative effects have to be recorded due to a lower valuation of patches of the balance sheet and increased provisions for impending losses from contractual obligations. Based on this, Development segment EBITDA amounted to minus 101.5 million euros and EBIT decreased to minus 126 million euros. On the next slide I will present the developments of our generation segment. Electricity generation volumes declined year on year by 18.9%. The main trigger for the decline was a decrease in the use of the TICE power plant by the Austrian network transmission operator for network stabilization. Production for manures resourced nearly reached our sales level, but significantly lower wind flows couldn't be offset by higher electricity production from hydropower. The share of renewable generation increased year-on-year to 76%. Revenue decreased to 368.2 million euros, mainly due to higher electricity prices, which all could offset a decline in the electricity production. the prevailing high inflation as well as the energy crisis contribution for electricity led to higher operating expenses. The Austrian law on energy crisis contribution became effective as the 1st of December last year and will apply for a limited period until the end of this year. The price cap for the tax is 140 euros per megawatt and can be increased up to 176 euros per megawatt hour subject to investment into renewable generation assets and energy efficiency measures. However, as of the beginning of June this year, the thresholds were reduced by a federal government resolution to 120 euros per megawatt hour, respectively 156 euros per megawatt hour. The effect in the first three quarters amounted to 21 million euros and is expected to increase to about 32 million euros in the full financial year. This is, of course, based on the resolutions currently in force. All in all, EBITDA of the generation segment increased to 221.8 million euros. The result was, in addition, positively affected by higher earnings contributions from an accurately accounted for bond income cycle. Segment EBIT amounted to 189 million euros. But please still bear in mind last year's re-evaluation of the Carvana wind park in Bulgaria that amounted to 6.4 million euros as of the 31st of March. Let's continue with the network segment. Our network segment was impacted by the mild temperatures within the first three quarters of this initial year. Network distribution volumes for both the business as well as the household customers decreased year-on-year because of the mild weather. Customers' energy saving efforts also negatively affected volumes. The decline in gas distribution volumes was additionally caused by the reduced use of our tight power plant. This capacity is contractually reserved for grid stabilization by the Transmission System Operator . Segment revenue slightly increased year-on-year to 494.3 million euros, mainly driven by the positive price effects on network tariffs for electricity. As of 1 January this year, system network tariffs for both electricity and natural gas were increased by the Austrian Energy Regulator. Additionally, a positive revenue contribution was also recognized by our subsidiary Cabri Plus. Let's move on to the South-East Europe segment. In the reporting period, temperatures in Southeast Europe were significantly below the previous year and also the long-term average. This led to a decline in network and energy sales volumes. In contrast, electricity generation volumes increased due to higher water flows as well as newly commissioned photovoltaic plants in North Macedonia. Segment revenue declined to 1.1 billion 185 million euros because of lower network and energy sales volumes as well as lower wholesale prices. This development couldn't be offset by higher network charts in Bulgaria and an unscattered increase in electricity prices for the regulated household customer segment in North Macedonia. Operating expenses decreased in the reporting period due to the following facts. Firstly, costs for the third-party electricity purchases and energy carriers dropped in line with the development of revenue. And secondly, costs for network loss coverage in North Macedonia were reduced due to the government's subsidized purchases. In total, segment EBITDA amounted to 178.8 million euros and EBIT was up to 118.9 million euros. And finally, the environment segment. In our international project business, we currently work on 15 projects in the field of wastewater treatment, drinking water treatment, and thermal sludge treatment. In the reporting period, we received the order for the construction of a wastewater treatment plant and sewage sludge utilization plant in Skopje at the start of a general contractor assignment. The contract value is around 184 million euros. Additionally, EVN recently awarded the contract for the construction of a sewage sludge incineration plant in Munich, with a contract value of roughly 255 million euros. The plant is designed to process thermal utilization of all sewage sludge produced in Munich and 22 connected surrounding municipalities. This plant will also take into account the issue of phosphorus recovery. The total order book, as at the end of June, amounted to 697.3 million euros. With the order in Munich, this amount increased to around 950 million euros. At our project in Kuwait, we are also making great progress, as at the end of June, completion has reached roughly 90% of the wastewater treatment plan and nearly 65% for the wastewater infrastructure. Revenues decreased year-on-year to 364.3 million euros, already reflecting the good progress made at the Kuwait project where the peak has already been reached, correspondingly operating expenses declined. The Kuwait project via the project holding company also positively affected earnings contributions from equity-accounted investors. In total, every day, increased to 44.3 million euros and EBIT amounted to 20.3 million euros. It should be noted again that the previous year was affected by an impairment loss at the amount of 57.6 million euros. Financial results in the reporting period declined due to the increased interest expenses, hence the South Bay 4 income tax rose to 0.6 million euros. The next slide shows the development of our group cash flow in this reporting period. The gross cash flow in the reporting period was highly compared to the previous year at 944.2 million euros. The main drivers for this development were higher earnings before income tax recorded in the reporting period and the correction of negative earnings at the equity account AFN KG. The dividend distribution of the Bruns for their financial year 2022 positively influenced the result, and with that, they caused cash flow. In contrast, the cash flow was weakened by lower dividend distributions from other equity-accounted Cash flow from operating activities amounted to €365.1 million, triggers for this development were the liquidity settlement for FIMKG and the related capital commitment for working capital. A negative effect was also the year-on-year increase in income tax payments. The cash flow from investing activities significantly increased in the reporting period to minus €374.8 million. This position reflects the high investment, which were contrasted by a year-on-year reduction in investments in cash funds. This position also contains a capital contribution to FIM-KG. Cash flow from financing activities amounted minus under 3.9 million euros and includes EVN's dividend payment for the last financial year as well as capital repayments of financial liabilities. Additionally, in the reporting period, EVN concluded three long-term bank loans totaling €150 million. The recently concluded contract with the European Investment Bank for a green loan at the amount of €110 million to prime and slim power projects has not yet been taken into account as the third disbursement under the loan took place after the end of the reporting period. The net change in cash and cash equivalents amounted to €913.6 million. Additionally, EVN has committed on-farm credit facilities of 701 million euros as of the end of June. I would like to conclude my presentation with the outlook for this financial year. In this financial year, the contribution of EVN's operating activities to the group net result will amount to approximately 250 million euros. and has already presented as additional earnings contribution of 158 million euros to Group Net Results for the current financial year has come from Verbund AG. To the next Ordinary Annual General Meeting in February 2024, we will propose a special dividend of 62 cents per share in addition to the ordinary dividend that is expected to amount to at least 52 cents per share. The dividend proposal already considers our ambitious investment program, which is considered to exceed 600 million euros. The focal points of investments are on network infrastructure, renewable generation and drinking water supplies. Now I have reached the end of this results presentation and I am looking forward to answer your questions.

Ladies and gentlemen, If you would like to ask a question now, please press 9 followed by the star key on your telephone keypad only once. If you wish to cancel that question, please press 9 followed by the star key a second time.