EVN AG

Good morning ladies and gentlemen and welcome to EVN's conference call for the results of the 2022-23 financial year. At this time all participants have been traced on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to Stefan Šeškovic. Please go ahead.

Welcome everybody to EVN's conference call on the results for the financial year of 2022-23. The financial year 2022-2023 was remarked by very mild weather conditions in all our three core markets. We also observed a change in customer behavior towards a reduction in energy consumption through energy saving measures or even by generating their own energy from photovoltaics. These developments once again underpin the transition of the energy system. Let's come now to the eventful year's result of 2022-2023. In the reporting period, we achieved a strong financial performance. This comes as no surprise that we already communicated a new outlook at the beginning of November. Group Net Result amounted to 529.7 million euros, mainly due to earnings improvement at the Southeast European segment. Besides, that the significantly higher per-point dividend for their last financial year contributed 158 million euros to the Group Net Result. And in the previous year, negative effects from impairment tests were included in results. Unfortunately, our supply business was under pressure and showed a negative result of 240.3 million euros. However, we expect a recovery for the 2023-2024 financial year. We are proud that roughly 88% of all our investments in this reporting period are officially classified as green under the new taxonomy. And we are also in line with the target production path of CO2 emissions set in accordance with the science-based targets initiative. Based on these strong results, we will propose the payment of a dividend of 52 cents per share plus a special dividend of 62 cents per share to the next annual general meeting in February 24. It is our declared aim to give our shareholders an appropriate share in profit growth. In this reporting year, we also have reached the new record levels of investment. Total investments in the reporting period increased by 23.1% to 694.1 million euros. Over the coming years, annual investment will remain with this very high level of 700 million euros to 900 million euros. Around 75% of the investment will go to the lower offshore and almost half is budgeted for the network infrastructure. In 2022-23, we have already made considerable progress in expanding our renewable energy capacities. As at the end of September, we have an installed wind power capacity of 247 MW, and we will commission two further projects and add a total output of roughly 30 MW to the grid by the end of the calendar year. We also made great efforts to expand our photovoltaic capacities. Here we had a roughly 42 MW peak at the end of this past September, and this volume will double by the end of 2023 with the commissioning of large scale plants in Villanova and North Macedonia. Let me now continue with the key financials of this year. Group's revenue in the reporting period decreased to 3.8 billion euros. This development is mainly due to lower revenues in Southeastern Europe due to decreased energy market prices and the international broadsheet business that the Kuwait broadsheet has already reached its peak. In contrast, revenue was positively affected by price and volume effects in renewable general electricity generation, valuation effects from hedges, higher revenue from natural gas trading, increased oil prices at EV and Wärme, and higher network tariffs. The cost of electricity purchases from third parties and primary energy expenses dropped compared to the prior year. This nearly reflects declining wholesale prices in Southeast Europe, which relates to the regulatory compensation for additional costs for covering network losses. Please be aware that such surplus in the compensation will be offset in the following years. This decline was contrasted by higher costs for network losses and upstream network costs in lower auspair, as well as higher electricity procurement costs from verbund Inkraftwerke and higher energy procurement costs for Epoch and Werne. The share of results from an equity-accounted-investees decreased to minus 67.6 million euros. As already said, the sales company IWNKG recognized a significant total loss in the reporting field of 240.3 million euros. In contrast, higher earnings contributions were received from RAC, Verbund Inkraftwerke and Burgenland Energien. And for the Ashtar Power Plant in Albania, we had to consider a re-evaluation of €11.1 million based on impairment testing. All in all, Group EWDR amounted to €869 million. The high level of investments led to an increase in scheduled depreciation and unmonetization. Please consider the significant reduction of impairment losses, which amounted to €114.8 million in 2021-22. In total, group's EBIT rose to 528.5 million euros and financial results increased to 127.6 million euros, mainly reflecting the dividend payment from FABUM at the amount of 158 million euros. All this development resulted in an increase in group net results to 529.7 million euros. Now, let's move on to the next slide, which provides information regarding group's financial structure. Their balance sheet sum decreased due to the substantial decline in the current amount of equity-accounted investees, which resulted primarily from the operating loss of EVNKG and negative valuation of hedges held by EVNKG and Energy Alliance. Furthermore, the price development of a bond share on year-to-year led to a decline in other investments. As of the end of September, EVN's net debt increased year-on-year only by 120 million euros at 2.1 billion euros despite our high investment level and due to our strong operating cash flow. Correspondingly, QE ratio increased to 21.1%. Nevertheless, our financial inflexibility remains solid. Even AG has committed undrawn credit facilities in the amount of 686 million euros as of the end of September. Moreover, our declared goal is to maintain solid A category ratings in the future. To achieve such ratings, we are strictly monitoring the adjusted target ratios of both of our rating agencies. This in line with the net debt FFO range which was communicated in October. Let me now present our segments in more detail. First, the energy segments. The past financial year was characterized by extremely mild temperatures in all of our core markets, not only compared to the cooperative period, but also compared to the long-term average. Hence, energy sales volumes to end customers dropped. Additionally, energy savings by customers and an increase in customers' own energy generation from portable diodes decreased volumes. On top, we had to face an increased competition within the electricity and natural gas customer segment. REVENUE IN THE ENERGY SEGMENT IS MAINLY INFLUENCED BY THE ENERGY TRADING, AUTO TRUECOM OPTIMIZATION OF THE EVM GAS GROCE FACILITIES AND THE MARKETING OF ELECTRICITY GENERATED BY EVM. BESIDES IT INCLUDES REVENUE FROM OUR DOMESTIC HEATING BUSINESS. IN THIS PERIOD Revenue increased to 1 billion euros. This positive development was primarily due to valuation effects of hedges as of the balance sheet date, higher revenue from natural gas trading, price effects in the marketing of our own renewable energy electricity production, and higher sales prices at our heating business. Operating expenses were higher year-on-year and reflected increased costs of energy purchases from third parties. Furthermore, rising procurement costs for biomass and the prevailing inflation negatively affected operating expenses. This development was contrasted by valuation effects from hedges. As already mentioned in the past financial year, earnings contribution from our equity-accounted energy distribution company, EFINKG, was under massive pressure. As a result, Sharpe declined an important payment amounting to minus 240.3 million euros. Based on lease development, segment EBITDA amounted to minus 63.6 million euros, and EBIT decreased to minus 90.1 million euros. The outlook of our energy segment for this financial year is mainly determined by the marketing of our own electricity production, by the heat sales from our subsidiary, and by the equity account and energy supply business of FNKG. We expect segment A based on 2023-24 to be at the lower end of the range of 45 million to 70 million euros as we could have seen as a gradual decline in sports and forest prices during recent months. Hence, the energy supply company E-Line KG is expected to again generate positive earnings. I will present the development of our generation segment. Electricity generation volumes declined year-on-year by 14.4%. The main trigger for the decline was a drop in the use of the attached power plant by the Austin Network Transmission Operator for network stabilization. Production from renewable sources were slightly above throughout the year's level because of higher volumes from hydropower. Positive volume effects were also related to the fabled infrastructure because of the recommissioning of the plant. At the same time, wind flows were unfortunately clearly below average. The share of renewable generation increased year on year to around 77%. Revenue increased to 481.9 million euros, mainly due to higher electricity prices, which could offset the decline in electricity production. Operating expenses also increased because of higher costs for electricity purchases that also relate to the volume increase of a boomed income bracket. It is important to note that this development also has a corresponding impact on revenue. Besides inflationary effects, the often low on energy crisis contribution that had already become effective for a year now also negatively impacted operating results and amounted to 25.1 billion euros in the reporting period. All in all, EBITDA of the generation segment increased to 300.4 million euros. The result was, in addition, positively affected by a higher earnings contribution from the Equity Accounted Verbund Inkraftwerke. Our investment in this segment reached a new historical high. Hence, depreciation and amortization increased in the reporting period. But please still be in mind the absence of last year's evaluation of the Carvana Windpark in Bulgaria that amounted to 9.6 million euros. Segment EBIT amounted to 255 million euros. Segment outlook for generation segment is based on wind and water flows, reflecting the long-term average. Therefore, we expect segment EBIT to be slightly below the prior year level in 2023-2024 due to the declining electricity prices.

Let's continue with the network segment.