EVN AG

Hello and good morning, ladies and gentlemen, and welcome to EVN's call regarding the results for the first half of the 2024-25 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 Alexandra Wittmann.

Good morning everybody to EVN's conference call on the results for the first half of our current financial year. Our half-year results are solid and in line with expectations. Proof net profit came in at €250.6 million. That's an increase of 26% compared to last year. These results clearly show that EVN's diversified business model provides stability and resilience, especially when external factors deviate from long-term averages, as we have seen with wind conditions. As a result, our renewable generation volumes were lower, despite the continued expansion of our wind and photovoltaic parks. On top of that, market prices for our own electricity generation have declined year on year. In contrast to those factors, winter temperatures were in line with the long-term average. This led to stronger energy demand compared to the milder weather we experienced last year. As a result, we saw positive developments, particularly in our Austrian network and district heating businesses. Based on the overall sound performance in the first six months, I can confirm today that Our full year guidance. We expect group net results in a range between 400 and 440 million euros, subject to a stable regulatory and energy policy environment. I would like to remind you that only three to four years ago, a normal level for EEN's group net results were between 200 and 250 million euros. We now see such normal levels between 400 and 440 million euros, which means a substantial step up in the group earnings level. We are also on track in realizing our investment program. CapEx were up by 23% at 318 million euros during the reporting period. This is in line with our plan to invest annually about 900 million euros until 2030. The key investment areas remain unchanged, so about three-quarters of our capex will be made in Lower Austria in networks, renewable generation, e-charging infrastructure, and drinking water supplies. In our ambition to further position EVN as an attractive ESG stock, we have successfully taken the next important step. The internationally renowned science-based targets initiative has validated our new CO2 emission reduction targets and these are now fully aligned with the 1.5 degree goal of the Paris Agreement. This means our targets have once again been independently verified and they are now even more ambitious than our previous well below 2 degree goals. The cornerstone of our greenhouse gas reduction strategy is the expansion of our renewable generation feed. During the reporting period, we reached several important milestones. Our installed wind power capacity now stands at 500 megawatts, and our photovoltaic capacity has surpassed 100 megawatt peak. We are currently working on a number of new projects as we continue moving toward our 2030 expansion targets. Those are 770 megawatts for wind and 300 megawatts peak for photovoltaics. On the next slide, I will take you through the main financial development in the reporting period. Before I begin, I'd like to remind you that we are reporting the international project business which we plan to sell to Strabag in accordance with IFRS 5. Therefore, all P&L items for the previous half year have been restated to reflect the IFRS 5 disclosure. Revenue rose by 6.6% year-on-year to 1.7 billion euros. The main reasons were positive volume and price effects from all three network companies as well as from our supply companies in Bulgaria and North Macedonia. Colder temperatures during the winter months led to higher revenue at EDN Verne. In contrast, there was a drop in revenue from renewable generation and natural gas trading, mainly due to lower prices and volumes. On top of that, there were also negative impacts year on year from the valuation of hedges due to positive effects in the previous year. The increase in other operating income was due to insurance compensation we received to cover damages which were caused by the floods in Lower Austria during September 24. The cost of electricity purchases from third parties and primary energy expenses increased due to higher procurement costs in the regulated energy supply business in Southeast Europe. This increase was contrasted by lower procurement costs and reduced quantities of natural gas. The cost of materials and services were up due to the repair costs for the flood damages, which, as already mentioned, are largely covered by insurance. The rise in personnel expenses reflects the increase in workforce and adjustments according to the collective bargaining agreement as well. Other operating expenses declined. In the previous year, we had two one-offs, being the impairment 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. The share of results from ad-equity-accounted investees improved substantially. Higher earnings contributions from RAC and the movement in EVN's KG's results were contrasted by a slight decline at the FWB in Kastwerke power plants. In total, Group EBITDA rose by 20% year-on-year and amounted to 513 million euros. Schedule depreciation and amortization increased by 7%, reflecting our high investment program. Hence, Group EBIT was up by 28% and totaled 335 million euros. Financial results amounted to minus 29 million euros. In total, we generated a group net result of 250.6 million euros in the reporting period, which represents an increase by 26%. Now, let's move on to the next slide, which provides information regarding the group balance sheet structures. As of the end of March, 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 19.7%. Our indebtedness is increasing in line with our higher investment program. Our financial flexibility remains secure and solid. EVN holds contractually committed ungrown credit lines in the amount of 805 million euros. I can also inform you today that both credit ratings were confirmed recently. In April, Moody's reaffirmed its A1 rating with stable outlook and in May, Scope again awarded us an A-plus rating with stable outlook. Our declared goal is to maintain solid A category ratings in the future. To achieve such ratings, we are strictly monitoring the adjusted target wages of both of our rating agencies. Therefore, we use the net debt to SFO ratio as a KPI to manage our financial performance, investments, and capital structure. On the next slide, I will present the development of our segment in more detail. As always, after six months, I will also provide you with an update of our segment outlooks for the full year. I will start with the energy segment. Energy demand for natural gas and heat increased due to colder temperatures, whereas electricity sales volumes declined year on year. Such decline was due to declining electricity sales to industrial customers in Germany. In Austria, cooler weather, the increased use of heat pumps and the continuing trend towards e-mobility offset the effects from competition. 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 renewable power plants. In the first six months, revenue fell year on year to 372 million euros 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 hedges. In contrast, our heating business benefited from the colder temperatures. In line with declining market prices, operating expenses also decreased. For our equity accounts at supply company EDMKG, the expected operational turnaround continued as planned. However, during the report, the reversal of the cool from the previous year led to a one-off negative effect. As a result, EVNKG reported a loss of 11 million euros.

But that's still a significant improvement compared to the previous year.

In total, segment EBITDA amounted to 63 million euros and EBIT totaled 49 million euros. Due to the before-mentioned one-off in the full year EBIT in the energy segment might end up below the expected range of 50 to 60 million euros. However, I can confirm the planned operational normalization in EDMKT. In recent meetings with analysts and investors, we have highlighted the strong future potential we see in e-charging infrastructure. We are already the market leader in Austria, which underlines our position. That's why I am pleased to inform you that we have signed a new cooperation with Austria's leading furniture retailer, XXXLutz. According to the contract, we will install and operate 600 e-charging points at the parking areas of 92 of their stores across Austria. We see e-mobility as a key part of the renewable energy systems. It's a great example of how sector integration works. As a provider of e-charging infrastructure, we help to use surplus renewable electricity in the transport sector. This surplus often comes from wind and solar power, especially in summer. E-mobility helps to absorb this excellent energy, and with bidirectional charging, electric vehicles could even act as mobile batteries in the future. Let us now turn to our generation segment. Electricity generation volumes in the segment declined by 10% year-on-year due to lower wind and water flows in Austria. Our Thais power plant was called more frequently by the Austrian network, transmission operator for network stabilization. Revenue decreased due to declining market prices and lower generation volumes. The generation segment also contains the effects from lost revenue and repair costs at our thermal waste insulation plant due to the floodings in September 24. Our equity-accounted Investeeverbund Inkraftwerke delivered a lower earnings contribution as compared to the previous year. All in all, EBITDA amounted to 96 million euros. Based on higher schedule depreciation and amortization because of our investment program, segment EBIT stood at 69 million euros. I confirm the outlook we shared in December. Due to the decline in electricity spot and forward prices, revenue in the generation segment is expected to drop significantly. Assuming average wind and water conditions and an EBIT margin of 25%, Let's continue with the network segment. The colder weather, increased use of heat pumps and e-mobility, as well as the increased use of our tight power plant for network stabilization, led to higher network distribution volumes for electricity and natural gas. in view of the positive volume effects and higher network tariffs for electricity revenue in the segment increased. Operating expenses also increased due to rising upstream network costs for electricity. In total, EBITDA was up at €208 million. Taking into account higher depreciation and amortization due to the high investment levels, EBIT totalled 121 million euros. We are taking a more positive view on our guidance for our network segment. Higher investments will grow the RUB. In addition, both higher tariffs and positive volume developments in the first half will support EBIT and full-year results. However, please bear in mind that the volume effects will be offset in the coming in line with the Austrian regulation.

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 Bulgaria.

Revenue increased to 891 million euros 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 79 million euros and segment EBIT totaled 34 million euros. The decline in results is in line with our segment guidance and the expected regulatory adjustments of past positive effects. However, I can confirm that we expect EBIT of the Southeast Europe segment to reflect the lower end of the medium-term range of 60 to 90 million euros in this financial year. I would like to remind you that EBIT in Southeast Europe clearly exceeded our segment guidance in the past two financial years thanks to favorable regulatory parameters. Please keep in mind that this financial year reflects a reduced result based on a correction in line with the regulatory mechanism in Bulgaria. Overall results are well in line with our long-term average and future results ambitions for the region. And finally, the environment segment. The negotiations with Strabag are progressing. Due to the complexity of the transaction, we had to adjust the timeline, which is subject to a final agreement with Strabag and the receipt of approval from authorities and other third parties. Due to the IFRS 5 disclosure of the discontinued operations representing those parts of the international project business which we plan to sell to Starbucks, the finances of the environment segment look different. In other words, the P&L of the segment only covers the following activities which are excluded from the planned sales such as our drinking water business in Lower Austria, the equity-accounted companies for the projects in Zagreb and Prague, the deconsolidated company for the wastewater treatment plant project in Budva, Montenegro, and finally, the deconsolidation effects from the slush-fired combined heat and power plants in Moscow, whose sale was closed on 31 October 24th. For the activities to be sold, IFRS 5 disclosure requires us to report results from discontinued operations. These amount to 14 million euros in the first half. In comparison, the restated prior year value is 12 million euros. I can confirm the outlook for the segment. Because of a negative one-off effect in the previous year, we expect an improvement in the current financial year. The next slide shows the development of our group cash flows. Gross cash flow was lower year-on-year at 478 million euros. The main reason was the correction of non-cash earnings components, although this was partly offset by a higher result before income tax. Cash flow from operating activities totalled 232 million euros. Year-on-year, it was negatively influenced by an increase in trade receivables and a parallel decline in trade payables at balance sheet date, which was reduced by a lower capital commitment for our supply company, EVMKG. Cash flow from investing activities amounted to minus 217 million euros and reflected a substantial increase in investments. The cash outflows were partly offset by network subsidies and the sale of cash funds. The position cash flow from financing activities amounted to minus 91 million euros and included scheduled repayments, the dividend payments for the last financial year and a new full-time darling, a promissory note loan. The next change in cash and cash equivalents amounted to minus 0.7 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. When looking at today's results and our three-year guidance, it's important to bear in mind that energy demand isn't evenly distributed throughout the year. In other words, there is a clear seasonal bias with significantly higher energy demands during our winter half-year, Consequently, especially our fourth quarter results always differ from those of the rest of the year. Our dividend policy remains unchanged. The dividend will equal at least 82 cents per share. As demonstrated in the past, 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 investment 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. At a strategic level, we are continuing to explore the potential of large battery storage systems This will help us manage electricity loads more efficiently and will optimize the operation of our distribution networks. We are also evaluating the option of installing batteries near our wind and solar parks, allowing them to function as virtual power plants. You can expect more updates on these initiatives and plans later this year. That's the end of our presentation.

and we look forward to answering your questions.

So ladies and gentlemen, let's now proceed to the Q&A session. If you would like to ask a question at this point, please press 9 followed by the star key on your telephone keypad. In case you wish to cancel your question, please press 3 followed by the star key.

So just one moment for the first question, please. And the first question comes from Peter Crampton, Barclays.

Please go ahead. Your line is open.

Good morning. Peter Crampton here from Barclays. Maybe two questions on kind of the new Austrian government. We obviously as part of the budget have this kind of 200 million euro kind of targeted tax for the utility sector. Is it correct, though, that this is more kind of generation-related and the impact for EVN rather limited? And maybe if you can give us a little bit of a number that you kind of see this year. And then, obviously, we're talking a lot about kind of new initiatives. What do you kind of want from the new Austrian government? And do you believe we will get some kind of updated kind of utility-related strategy given all the decarbonization plans? Thank you.

Hi, Peter, and thanks for the question. I will take the first one, which is related to the energy crisis contribution for electricity. Maybe it's helpful to recap a little bit for everyone. I think just as a small reminder, The Federal Act on the Energy Crisis Contribution for Electricity was initially put in force for the period from 1st of December 22 to 31st of December 23 and was then extended for 24. Now in March 25, the new Austrian government re-elected the law for the period from April 1st 25 to 31st of March 2030. At the moment, the Ministry is still working on the regulations which define the parameters for the calculation of the levy. Therefore, the potential effects on EVN for the full year 2024-25 are not clear yet. Our estimate is a low single digit amount. According to preliminary information, the new parameters for the calculation of levy on earnings from electricity generation will be tightened. Remember, previously it was 120 euros per megawatt hours. This might be tightened to 90 euros per megawatt hours for existing plants and 100 euros per megawatt hours for new plants. Any excess earnings are taxed at 95%. Also, again, here tightened. Previously it was 90%. And maximum deductibles for renewable investments have not been determined yet. But

I repeat, we expect a low single digit amount.

And to tackle your second question, what do we want from the new government? I think we need to have clear circumstances for our industry. Therefore, it would be good to have the new electricity act in place, which

is expected for months already. Does that answer your question, Peter?

Yes, very good. Thank you very much and for the detail as well what to expect from the levy.

Thank you.

Great. The next question comes from Patrick Steiner, AutoBHF.

Please go ahead.

A couple of questions from my side, I will start with the first one. In Q2 we saw a decline in renewables generation by a bit more than 40%. My question is, is this only related to lower wind and water flows or are there any other effects included as well?

Hi, Patrick. No, it's really mainly related to less wind and less water.

Okay, very interesting. Thanks. Second question would be, in your April 2025 company presentation, you defined the annual network investment at roughly $450 million or about 50% of your total $900 million capex for 2024 to 2030. Is this from the current perspective realistic in your view or should you factor in a gradual increase in this number due to inflation?

No, I don't see a major increase to this number.

Okay, thank you very much. Thank you. Go ahead, it's the third one. tariff adjustments for household customers, they are pretty high over the last three years. I mean, we know where this is coming from, but do you expect the development in this network of tariffs to continue, or should you expect a more gradual increase over the next years, comparable to what we've seen before the outbreak of one Ukraine?

I would expect a gradual increase.

Okay, so less steep as we have seen over the last three years.

Yes.

Okay, perfect. Thank you very much.

The next question then comes from Tibor Dijardin, Bernstein Solicitation. Please go ahead.

Hello, thank you very much for taking my question. My first question would be regarding the disposal of WTE. If you have more details regarding the timeline and any changes in terms of economics regarding potentially the . And my second question would be regarding the investments you plan in batteries. Do you expect it to enter into the hub? Those would be my two questions.

Okay. Hi.

Thanks for the question. First question regarding the WTE. I think it's important that I confirm that both parties, EDN and Starbucks, are fully committed to the transaction, and we are working highly professionally and focused on the transaction. Of course, unfortunately, certain details of the transaction are very complex, and solving these details in the contract simply requires more time than originally expected. But we are really positive and hope that we can soon inform the public about the signing of the SPA with no major impact. And moving on to your next question, which was if batteries are included in the RAPs. No, that's not allowed in Austria, but we still will do the investment. We plan a 70 megawatt battery at our energy spot or location in Thais.

Thank you very much. And maybe a third question regarding the environment. Can you confirm it's for 10 to 20 million EBITs?

Can you repeat it? I did not get the question.

Regarding the guidance for the environment segment, you indicated that you concern the outlook. Can you concern that the outlook is between 10 and 20 million euros for a bit?

Yes.

The result outlook of the environment segment is above previous year. Last year, we had the receivable devaluation effect from Budva, which was 22 million. So that's why we see an increase to the previous year.

Okay. Thank you.

Awesome.

So at the moment, there are no further questions. If you would still like to raise a question at this point, please press nine, followed by the star key. All right, thanks for joining today. I'm sorry, yes.

Okay, thanks for joining today's content call. We will publish the results for the first three quarters of the 2024-25 financial year on the 28th of August. Goodbye and have a great day.