EVN AG

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to EDN's conference call for the first three quarters of 2024-2025 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 Rittman.

Good morning, everybody, to EVN's conference call on the results for the first three quarters of our current financial year.

In a nutshell, today's results can be summarized as follows. The energy sector environment for power generation has been challenging, especially due to weak wind and water conditions, as well as lower market prices. The normalization of operational results in our energy supply business is Proceeding as planned. Financial performance during the first nine months of the financial year has been solid. While EBIT increased by 18%, group net results is down by 9%, primarily due to lower financial results resulting from Verbund's reduced dividend payout for 2024. Full-year financial performance is on track and we therefore confirm our full-year guidance. We expect good net results in a range between 400 and 440 million euros, subject to a stable regulatory and energy policy environment. We are also on track in realizing our investment program. CapEx were up by 22% at 535 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 capital will be made in Lower Austria in networks, renewable generation, detergent infrastructure and drinking water supplies. I would also like to highlight that that our CAPEX plan is supported by a solid project pipeline. We are therefore very confident that we will successfully deliver on our plan, which will further support organic growth, especially in the areas of renewable generation and regulated networks business. We are currently working on several new wind and solar projects, which will bring us another step closer to achieving our 2030 expansion targets. 770 MW for wind and 300 MW peak for photovoltaics. In June, we also achieved the next important milestone in our plan to divest the international project business. Together with Strabag, we finalized the transaction contract for the sale of WTE Group and signed the share purchase agreement. This was based on the key terms for the transactions which were agreed upon already in last December. We are now working on the fulfillment of the conditions precedent required for the closing of the transaction. Closing is expected within the next six months.

On the next slide, I will take you through the main financial developments 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 IELTS 5. Therefore, all P&L items for the previous half year has been recated to reflect the IELTS 5 disclosure. Revenue rose by 5% year-on-year to 2.4 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. Holder temperatures during the winter months led to higher revenue at EDN Werner. 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 2024. 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 costs of materials and services were up due to the repair costs for the sludge damages, which, as already mentioned, are largely covered by insurance. The rise in personnel expenses reflects the increase in workforce and adjustment 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. The share of results from equity-accounted investees improved substantially. This resulted particularly from the normalizations of results at EVN KC. In addition, the contributions from RAG and Grundland Energie were up, too, however, contrasted by a slight decline at the Verbund in Kraftwerke Powerplatz. In total, Group Invita rose by 14% year-on-year and amounted to 714 million euros. Scheduled depreciation and amortization increased by 7%, reflecting our high investment program. Hence, Group's EBIT was up by 18% and totaled €447 million. Financial results fell substantially from €165 million to €94 million. This decline resulted from the lower dividend paid out by Verboen for their 2024 financial year. In total, we generated a group net result of 435 million euros in the reporting period, which represents a decline by 9%.

Now, let's move on to the next slide, which provides information regarding the group's balance sheet structure.

As of the end of June, EEN's net debt amounted to 1.1 billion euros and was slightly below the level as of end of September 24th. Correspondingly, viewing ratio stood at 16.6%. 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 770 million euros. On the next slide, I will present the development of our segment in more detail. 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 ongoing strong competition and the trend towards growing own photovoltaic generation. Our ad equity consolidated supply company EVNKT 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 nine months, revenue fell year-on-year to 512 million euros due to volume and price effects in the marketing of our own generation and in natural gas trading as well as reduced earnings effects from the valuation of hatchets. In contrast, our heating business benefited from the colder temperatures. In line with the declining market prices, operating expenses also decreased. For our equity-accounted supply company, EVMKG, the expected operational turnaround continued as planned and it contributed with a slight positive number of €1.5 million. In total, Segment EBITDA amounted to 84 million euros and EBIT totals 63 million euros.

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. Thermal generation volumes increased due to higher demands 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 incineration plant due to the sluddings in September 24th. Our equity-accounted Investiver Bund Inkraftwerke delivered a lower earnings contribution as compared to the previous year due to weaker water flows. All in all, EBITDA amounted to 130 million euros. Based on higher scheduled depreciation and amortization because of our investment program, segment EBIT stood at 90 million euros. Today, we would also like to further increase our transparency for the generation segment by starting to disclose the hedging ratios for our own generation. According to our hedging policy, we apply a 12 to 18-month rolling forward hedging strategy for our own electricity generation. At the moment, about two-thirds of the electricity generation volume for the next financial year

Let's continue with the network segment.

The colder weather and higher consumption for heat pumps and e-mobility as well as the increased use of thermal power plants 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 277 million euros. Taking into account higher depreciation and amortization due to the high investment level, EBITS totaled 145 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 Bulgaria. Revenue increased to 1.2 billion 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 129 million euros and segment EBIT totaled 61 million euros. And finally, the environment segment. As already mentioned in the beginning of today's calls, we signed the share purchase agreement with Starbucks in June. Right now, we are working on the fulfillment of the various conditions precedent. The closing is expected within the next six months. Due to the IFRS 5 disclosure of the discounted discontinuous operations representing those parts of the international project business which we will sell to Strabas, 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 success. Our drinking water business in Lower Austria, the equity-accounted companies for the projects in Zagreb and Prague, the deconsolidated companies 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 2024. For the activities to be sold, ISO R5 disclosure requires us to report results from discontinued operations which amounted to minus 10 million euros in the first three quarters. The next slide shows the development of our group cash flows. Gross cash flow was lower year on year at 762 million euros. The main reason was the correction of non-cash earnings confirmation. Test flow from operating activities totaled 627 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 EVNKG. Test flow from investing activities amounted to minus 499 million euros, and reflected a substantial increase in investments. In addition, investments were again made in cash funds. The positive cash flow from financing activities amounted to minus 110 million euros and included scheduled repayments, the dividend payment for the last financial year and new non-current financial liabilities. The net change in cash and cash equivalents amounted to Now, let's come 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. This is under the assumption of a stable regulatory and energy policy environment. When looking at today's results and our full 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 demand 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 GroupNet 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. Ladies and gentlemen, that's the end of our presentation, and we look forward to answering your questions.

Thank you very much. So, dear ladies and gentlemen, please press 9 and the star key if you would like to state a question. I repeat, the combination is 9 star. If you wish to cancel your question again, please press 3 and the star key, but for now, please press 9 star. We have a couple of questions incoming already. The first question is from Patrick Steiner of Audidio VHS. Please, over to you.

Thank you very much for answering my questions. First of all, I would be very interested in what were the main drivers of the weaker EBITDA in the renewable generation segment in the third quarter compared to last year's period. I mean, how big were the effects of pricing versus volume generation of the existing asset and how large was the effect of new generation assets put into operations?

Okay.

I think the question to that is the segment E was a drop from 35 to 21 million euros due to lower trading results, especially the gap trading. If I may point to segment D, generation, the drop from 47 to 34 million was due to lower volumes and electricity market prices. In the segment networks, the increase from 49 to 69 million was due to higher network volumes, especially gas and also grid carriage increases. If I look at segment O, so there is a slight increase from 47 to 50 million, mainly volume effect, I would say. And last but not least, our segment for the international project business that's almost stable at 4 million. Previous year was 5 million, and this is according to realization of our projects.

Okay, thank you very much. That's actually very helpful. Second question would be, given your forward strategy when it comes to renewable electricity sales, how should you think about the prices, which you have locked in already, basically, but materialize in the P&L over the next few quarters? Should you expect prices to come down further over the next quarters?

Okay. I think I want you to emphasize that our hedging policy is to achieve a hedging ratio of about 80%. And I outlined that at the moment we have already hedged approximately two-thirds of the plant generation in the next financial year. The reason for not hedging up to 100% is that renewable production, especially wind, is very volatile. Therefore, actual production on a particular day could even be zero in case of no weight.

So with stable energy power prices, we expect also revenues to stay stable.

Okay, thank you. This is from my listening journalist.

Thank you. Moving on to the next question. The next question is from Thibault Dujardin of Bernstein Société Générale. Please, go ahead.

Hello, good morning. Thank you very much for taking my question. My first question will be regarding the potential of the windfall tax in Australia. Do you have more visibility on the potential impact? And two, do you have more insight on the potential impact? on the energy crisis contribution for electricity was initially put in force for the period from December 1st, 2022 to December 31st to 2023.

and was then extended for 2024. This is just as a reminder for all of us. Now, in March 2025, the new Austrian government re-enacted the law for the period from April 1st, 2025 to March 31st, 2030. The new parameters for the calculation of levy on earnings from electricity generation have been tightened as follows. Also as a reminder for us, previously they were €120 per MWh. Now, they are €90 per MWh for existing plants and €100 per MWh for new plants. Any excess earnings are taxed at 95%. Also for us to remember, previously it was 90%. Deductibles for renewable investments 75% of capex with a maximum cut of €72 per megawatt hour. Now, the conclusion for us, given the parameters, is that the potential effects on EVN for the full year 2024 to 2025 are not clear yet.

But our estimate is a low single digit amount.

Thank you very much. It's already included in the guidance?

Yes. Thank you very much. And just to go back to the new renewables, considering the addition of new capacity, what is your expectation in terms of EBITDA generation for next financial year due to the addition of new renewable capacities?

I think there... The guidance is for the next financial year is a stable EBIT and it depends on the prices.

Okay, thank you very much.

Thank you very much, also from my side. Just a little reminder to ask a question, please post mine in Bendis Parking. All right. The next question is from Emanuele Ogioni of Capaceval.

Please, everybody. Good morning, everyone, and thank you for taking my question as well.

The first one is on the energy business unit. I wonder if you can disclose the share of fixed price contracts versus floating price contracts and also the duration of your commercial offer on average for fixed price. In the past, it declined from one year to six months, if I remember well. and also the outlook for the energy profitability in next year after the strong recovery expected for this year. And the second question is on Southern Europe. Also in this case, what is the outlook for 2026 considering the ongoing regulatory framework? Thank you.

Okay. Thanks for the question, Emmanuel. To tackle your first one, it's 5% to 60% fixed contract. It's called our Garant. Okay. And in terms of the midterm expectation for the supply business, let me start and let me confirm again that we plan to achieve the turnaround for EVN KT in the current financial year. I can confirm that from an operational point of view, EVNKG is well on track after nine months. We therefore expect that EVNKG will again generate positive operating results in the current 24-25 financial year. We expect a black zero, so similar than after Q3. In the midterms, Our ambition is that the option supply business should return to generating EBIT margins of 3% to 5%. At last year's investor webcast, we communicated a midterm EBIT range for the energy segment of 50 to 60 million euros. The energy segment includes the equity-consolidated EV and KG, the heating business, and the marketing of own generations. Now I take your questions to the outlook of Southeast Europe. The EBIT range is between 60 to 90 million euros.

And according to the Capital Markets Day info from October, this is still valid.

The current year was particularly strong and even better than expected compared to this mid-term guidance. So what are the moving parts in next year for this year-on-year decline compared to 2024-25?

Are you now referring to South Eastern Europe or to India overall?

Yes, yes.

I think we have as outlined the guidance for South Eastern Europe is between 60 and 90 million euros and the EBIT is at 61 million.

Thank you.

For the first three quarters, does that answer your question?

Yes, yes, thank you. All right, thank you very much.

Next question is from Richard Alderman of BTID.

Hello, can I just follow up on the... process of the windfall tax or the generation price cap offset you kindly said that you expect the full year contribution to that to be no single digit given your capex outlooks for next year would you assuming all things being equal in the policy continuing as it is would you assume therefore that next year you're only paying a modest contribution to that to that tax

Yeah, same expectation for next year. It's very modest and it's in the area of a low single digit amount.

Right, okay, thank you very much. And then just looking at the comments you made around the changes in operating cash flow, could you just go through the mechanics of that again? You spoke about it quite quickly on the call and I just wanted to understand the moving parts of what was happening. You talk about the increase in trade receivables was contrasted by the lower working capital needs at the end. I just wondered if you could just put some color on that.

Yeah. I think just to recap a little bit. So the gross cash flow was lower year and year with 762 million euros. And the main reason was the correction of non-cash earnings components.

Right?

So now, to understand the non-cash earnings components, which are the correction to the cross-cash flow, is that we need to correct for the earnings contribution of equity accounted in the SEED and need to add back the dividend payments. Other adjustments refer to, for example, the correction of non-cash versus cash items, such as interest expenses, versus interest payment or interest income versus interest relief. And at the same time, we also have working capital changes, which we recognize. We have inflows from international projects and we have the improved supply business. I think these are the main colors to the cash flow.

Okay, thanks so much. And then can I just, obviously without wishing to draw you down the line of guiding exactly for the full year net result, you're clearly towards the top end of that range at the nine-month level. So I'm just trying to understand how that equates your messaging around at least eight to two cents a share of dividend based on a 40% payout ratio. If I look at the moving parts, you've identified the final windfall tax numbers being very low. Q4 obviously is a summer month, so it will probably, I guess, only contribute a low single-digit number, zero to sort of low single-digit number to the final out-turn. We know the quantity of the Vermont dividend in this current year for you. So what else? is the driving sort of distance between where we are now and where we might out turn in terms of any one-offs are you expecting any one-offs that are not yet visible to us because obviously the current consensus has a dividend which is above the 82 well I think it's around 86 and a half 87 cents and if you come towards the top end of the range clearly you're your EPS would imply a dividend higher than that. So I'm just trying to understand in my mind what are the moving parts that we are yet to receive with about a month to go.

Thanks for the question Richard. Well, look, it's too early to say. We are in the middle of Q4 and you described our seasonal or traditional Q4 very well there might be impacts of derivatives accruals and what not nothing unusual to our regular Q4 actions and in that sense I confirm that the minimum dividend according to our dividend policy is 82 cents Okay.

That's all from me. Thank you.

Thank you.

Thank you very much also from my side. At the moment, there are no questions in the case, so dear ladies and gentlemen in the last call, please press 9 and start now if you have a question.

There seem no questions to be incoming. So with that, I'm closing the Q&A session and handing the floor back over to the host.

Ladies and gentlemen, thanks for joining today's conference call.

We will publish the results for the 24-25 financial year on the 18th of December. Hope you're having all some good late summer days, and I wish you a nice day.

Goodbye.