EVN AG

Good morning, ladies and gentlemen, and welcome to the EVN's conference call for the first quarter of 2024-2025 financial year. At this time, our participation has 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 Alexandra Wittmann.

Good morning, everybody, to EVN's conference call on the results for the first quarter of our current financial year. Today's results define EVN's new normal level of results together with our full year guidance, which we confirmed today. I would like to remind you that two years ago, a normal level for EVN's group net results were between 200 and 250 million euros. We now see such normal levels between 400 and 440 million euros, which is our out for this financial year, which means a substantial step up in the group's earnings levels. The past two financial years were extraordinary due to the unusually high electricity prices, which pushed results from generation to levels which are not sustainable at current, much lower electricity prices. We are well on track to reach our renewable expansion targets by 2030. In December, our installed wind capacity reached a historic milestone of 500 megawatts, which corresponds to an average annual wind generation of 1.3 terawatt hours. We are currently working on further new wind and photovoltaic projects. I can therefore confirm our targets. We aim to expand wind power capacity from 500 to 770 megawatts. and PV from about 100 to 300 MW peak till 2030. The ongoing evolvement of a renewable energy system offers new business opportunities for ALN. We strongly believe in the growing importance of sector coupling for renewable energy, especially in the transportation sector. Therefore, we will invest up to 100 million euros into e-charging infrastructure until 2030. With over 3,200 charging points, we are currently the market leader in Austria. Our strategy is to establish e-charging stations which can easily be incorporated into daily routines. For example... We are building e-charging stations on the parking lots of two large supermarket chains in Austria, as well as in Bulgaria. Last week, we published a new corporation. Over the next four years, EDN will install 600 fast charging points at 92 locations for Austria's leading furniture chain XXXLutz. In mobility and the expansion of renewable generation form, together with our network infrastructure and the Austrian drinking water business, our key investment areas. As already announced last autumn, our annual investments will amount to 900 million euros until 2030. This is already visible in Q1. Year on year, our investments are up by more than 30%. and amounted to 170 million euros in the reporting period. We are still in negotiations with Strabag regarding the sale of the international project business as agreed in a term sheet in December. All available for sale parts of the business are now being reported according to IFRS 5. Therefore, in today's financials, all P&L items for the previous Q1 had to be restated to already reflect the IFRS 5 disclosure. So whenever talking about P&L effects today, please be in mind that they refer to restated comparative Q1 figures. Today, in about an hour, the annual general meeting for the previous financial year will take place. As you know, we will propose to the AGM the payment of a dividend of 90 cents per share. Such dividend is almost 10% higher than the minimum dividend of 82 cents per share according to our dividend policy. Now, on the next slide, I will take you through the main financial developments in the reporting period. Revenue was slightly down by 1%. Thank you very much. also recorded a volume and price-based increase in revenue. The increase in other operating income was due to insurance compensation for damages which resulted from the floodings in Lower Austria during September 24. The cost of electricity purchases from third parties and primary energy expenses increased increased due to higher procurement costs in the regulated energy supply business in Southeast Europe. This increase was contrasted by lower procurement costs for natural gas due to lower gas volumes traded and at EDN damage. The costs of materials and services were up due to the repair costs for the flood damages, which, as already mentioned, are largely covered by insurances. The rise in personnel expenses reflects the increase in workforce and adjustments according to the collective bargaining agreements as well. Other operating expenses declined. In the previous year, we had two one-offs, being the employment loss on receivables in the international project business and the energy crisis contribution for electricity, which was still due in the previous year's Q1. share of results from equity-accounted investees slightly improved to 47.1 million euros. Higher earnings contributions from RAC and Energiealliant were contrasted by price-related decline of results at the Verbrugge Inkraftwerke power plants. In total, Group EBITDA amounted to 253.1 million euros, which is 6% decline year-on-year. Scheduled depreciation and amortization increased by 7%, reflecting our high investment program. Hence, Groups EBIT totaled 166.2 million euros, which means a decline by 11.4%. Financial results amounted to minus 16.9 million euros. In total, we generated a group net result of 115.5 million euros in the first three months, which is 19.7% below the previous year's period. Now, let's move on to the next slide, which provides information regarding the group's balance sheet structure. As of the end of December, EVN's net debt amounted to 1.3 billion euros and was above the level as of end of September 24. Correspondingly, gearing ratios stood at 19.3%. Our indebtedness is increasing in line with our higher investment program. Our financial flexibility remains secured and solid. EVN holds contractually committed ungrown credit lines in the amount of 815 million euros. On the next slide, I will present the development of our segments in more detail. First, the energy segment. Energy demand for natural gas and heat increased due to colder temperatures, whereas electricity sales volumes declined year on year. The drivers for this development include strong competition and increasing electricity generation from customers' own photovoltaic systems. Our equity-consolidated supply company, EVN KG, is in charge of the electricity and natural gas sales, whereas the heating business is fully consolidated. Therefore, heating is one of the main drivers for the revenue of the energy segment. The other main factor for the development of revenue is the marketing of the electricity generated in our mainly renewable power plants. In the first three months, revenue fell year-on-year to €180 million due to lower realizable prices in the marketing of our own generation, volume and price effects in natural gas trading, as well as reduced earnings effects from the valuation of hatchets. In line with the declining market prices, operating expenses also decreased. The earnings contribution from equity-accounted investees amounted to 12 million euros. Both supply companies, EDNKT and Energy Alliance, contributed positively. In total, segment EBITDA amounted to 51 million euros and EBIT totaled 44 million euros. Let us now turn to our generation segment. Electricity generation volumes in the segment increased by 5% year-on-year. Water flows equal the above average high prior year level. The ongoing expansion of our wind generation fleet compensated for weaker wind conditions. Our tight power plant was called more frequently by the Austrian network transmission operator for network stabilization. Revenue decreased due to declining market prices and despite higher generation volumes. The generation segment also contains the effect from lost revenue and repair cost at our thermal waste incineration plant due to the floodings in September 24. Operating expenses were year on year lower due to the absence of the energy crisis contribution for electricity. At the level of the equity-accounted indices, we had lower earnings contributions from Verbundinkraftwerke due to lower market prices. All in all, EBITDA amounted to 58 million euros. Based on higher schedule depreciation and amortization because of our investment program, segment EBIT stood at 46 million euros. Let's continue with the network segment. The colder weather and the increased use of our TICE power plant for network stabilization led to an increase in network distribution volume for electricity and natural gas. In view of the positive volume effects and higher network coverage for electricity, revenue in the segment increased. Operating expenses also increased due to higher costs for materials as well as personal expenses. In total, EBITDA declined to 86 million euros. Taking into account higher depreciation and amortization due to the high investment levels, EBITDA totaled 43 million euros. Let's move on to the Southeast Europe segment. In Bulgaria and North Macedonia, we are reporting today higher electricity network and energy sales volumes. The volume growth was, among others, driven by low temperatures in breed area. Revenue increased to €406 million due to positive volume and price effects. This was contrasted by the offset of positive earnings effects from recent years in Southeast Europe in accordance with the regulatory methodology. Operating expenses increased in line with higher procurement costs in the regulated energy supply business in Southeast Europe. All in all, EBITDA amounted to 31 million euros and segment EBITs totaled 9 million euros. The decline is in line with our segment guidance and the expected regulatory adjustments of past positive effects. And finally, the environment segment. Thank you very much. the equity-accounted companies for the projects in Tarkov and Prague. Thirdly, the deconsolidated company for the wastewater treatment plant project in Budva, Montenegro. And finally, the deconsolidation effects from the sludge-fired combined heat and power plants in Moscow, whose sale was closed on 31 October 24. For the activities to be sold, I've read five disclosure requires us to report results from discontinued operations. These amount to 5 million euros in Q1. In comparison, the restated prior year value is 12 million euros. The reduction reflects the progress on the international projects, especially in Kuwait. I kindly ask for your understanding that I can't disclose any further details of the divestment other than those already public. The timeline for the transaction is unchanged. We expect that the signing of the agreement will take place soon. The next slide shows the development of our group cash flows. Gross cash flow was lower year-on-year at 165 million euros. The main drivers were the lower results before income tax and the correction of non-cash earnings components. Cash flow from operating activities totalled minus 32 million euros. The increase in trade receivables was contracted by a lower capital commitment for our supply company, Indian KC. Cash flow from investing activities amounted to 13 million euros. Despite a substantial increase in investments, the sale of cash funds led to a positive value. The position cash flow from financing activities amounted to minus 18 million euros and included scheduled repayments. The net change in cash and cash equivalents amounted to minus 37 million euros. Let's come now to the outlook for this current financial year. I confirm our guidance for this financial year. We expect group net results to be within a range of 400 million to 440 million euros. This is under the assumption of a stable regulatory and energy policy environment. We don't expect a significant impact from the possible WTE transaction on the results. Our dividend policy remains unchanged. The dividend will equal at least 82 cents per share. As demonstrated with today's dividend proposal to the AGM, we want our shareholders to appropriately participate in any additional earnings growth. In the medium term, a payout ratio equaling 40% of group net results adjusted for extraordinary effects is targeted. Our annual investments will amount to 900 million euros until 2030. The core areas are investments in network infrastructure, renewable generation, e-charging infrastructure, and drinking water supplies. That's the end of our presentation, and we look forward to answering your questions.

Ladies and gentlemen, if you would like to ask a question, please press 9 and the star key on your telephone keypad. If you would like to cancel your question, please press 9 and the star key again. Please press 9 and the star key to ask your question.

And the third question is from Duryadin. The floor is yours. Hello, Duryadin speaking.

Can you hear me? Yes? Yes, yes, thank you very much. First question, again, is the supply activity. I see that EVN KG was roughly stable at 8 million euros contribution in Q1. May I ask if you have a view on Q2? I see that last year it was where the contribution was most negative. If you have any view on the full year and on the evolution of the supply activity, it would be helpful.

Yeah, I can confirm the outlook for KG will be really positive for the full year 24-25.

Okay, and issue under issue 2, if it would be also positive in issue 2?

Full year, and I want to confirm the full year guidance.

Understood, understood that, yeah. And a second question regarding the disposal of WTE. I see in the report that you are referring to a signing in Q2. Do you have any, and initially the press release was mentioning a deal by end of February. May I ask if you have any additional information?

I just can confirm that we foresee the signing

understood understood thank you very much so if you want to ask a question please press 9 and the start key on your telephone keypad and I have one more question from Richard Alderman the floor is yours hello can you hear me yeah loud and clear

Good morning. Thanks for the presentation. I was going to also ask about the supply business. You mentioned then you're talking about full year as a really positive turnaround. But in the conversation on the slide, obviously, you were still talking about a quite demanding, strong, competitive environment. What's driving your thoughts, therefore, around that comment about really positive full year? Is it just the hedging effect rolling into that process, or are you winning customers? What's driving that thought process around that? around the four-year thoughts. And is that potentially the largest driver if you were to upgrade four-year guidance later in the year? Would that be probably where we're getting the turnaround and the growth?

Let me answer that multifold. We expect EVNKG will generate this positive earnings, as we also don't expect additional negatives on one-off as we had them in the past. ECN KC basically offers two contract types with two different procurement and hedging strategies. Number one, floating prices with monthly index price amendments, back-to-back hedgings, and contracts with fixed prices for 12 months. So that's a pre-rolling portfolio hedging strategy. And Yeah, we still confirm that this will guarantee a positive outlook. And with the new price strategy, this is also a backup strategy to this outlook.

Okay, thank you very much.

Thank you. And we have one more question from Peter Cranston. The floor is yours.

Yes, Peter Crampton here from Gwarkley's and two questions kind of all relating to the ongoing Austrian kind of government kind of talks. We, since the election in September, obviously haven't had that new government. I was just wondering, firstly, what you kind of hope this new government delivers on energy policy and anything that maybe allows you to invest in. And then secondly, there's been some press speculations of additional taxes for the energy sector and whether you see a risk here for active taxation, something that might hurt EVN. Thank you.

Thanks, Peter.

First of all, I take up on your special windfall tax or special dividend question or similar. Unfortunately, at the moment, we don't have visibility on possible new laws or measures which the government may plan. Therefore, I really can't be more specific on this question. And on the energy policy, we also have no information yet. So I think we still have to give it some time, but I think not very long anymore.

Yeah, exactly. Okay, thank you very much.

Thank you.

So at the moment, Dan, no further questions. Okay, Dan, no further questions.

Thanks for joining today's conference call. We will publish the results for the first half of the 2024-25 financial year on Monday, 26th of May. Thanks again and goodbye.