E.ON SE

Dear analysts and investors, welcome to our first half results presentation. Many thanks for taking the time today to listen to us in such a still dynamic market environment. I'm here with Leo and Mark today who will guide you through our most recent developments. As always, we leave enough time for questions after the call. Many thanks and over to Leo.

Thank you, Verena. Warm welcome also from me as well. Now, the first half of 2022 was obviously strongly impacted in every respect by the Russian war against Ukraine. And the energy industry has been in the spotlight since the end of February. But even though it was less visible to the public, the current energy crisis has really actually started during Q4 last year. So what are my messages for today, which then Marc will elaborate in detail. First, despite the massive challenges we are facing, I would start with a positive sentiment. Today we are in Europe much better prepared as a society than we were a few months ago. Second, we at E.ON, we have done our part to get there. We have taken responsibility. We are helping our customers across Europe. We are also helping regulators and politicians to master the extraordinary challenges in the short term. Third, we are also helping to find a remedy in the long term by further accelerating the energy transition. E.ON has pushed ahead with its growth strategy in parallel to outstanding crisis management, and we can show you today tangible progress. This is, however, and I'll just mention it here, an extraordinary achievement by our employees. And last. We have delivered a successful second quarter due to our resilient operations and we can reiterate our group guidance for 22 and our promise for dividend growth of up to 5% annually until 2026 and further growth beyond. But now in more detail. We are better prepared because in the past few months politicians and the energy industry have been lining up to an extraordinary extent. and we have lived up to our responsibility. We have worked intensely together and under high pressure to overcome the current energy crisis. The short-term crisis is not solved, however, We are in a better position. Gas storage facilities have continued to get filled. Strategies for crisis management have been worked out on a national and on a European level. Critical decisions have been made very fast and efficiently. Legislative changes have been delivered. Diversification of supply has been tackled. And we at E.ON, we have made our contribution to be part of the solutions. Now, governments have shown an unprecedented pace in introducing and adapting energy policies to respond to the current challenges. And it is reassuring that while being fast, politicians have resisted the temptation to fundamentally challenge the functioning of market mechanisms. The key to create an incentive to save gas is to set a clear and, unfortunately, higher price signal. This is the template for most of our markets. On the flip side, governments have also understood how important it is to support customers and to protect suppliers to stabilize the retail markets. And this means that a higher energy price signal needs to go hand in hand with relief somewhere else. Being now the country with the highest absolute exposure to Russian gas volumes, Germany has implemented a solution that ensures direct financial support for the importers of Russian gas while offering an instrument to pass through the prices without a long delay. This has prevented a collapse of the market. In particular, the new surcharge to allocate the additional cost upon consumers is important. This surcharge allows that the increased replacement cost of Russian gas deliveries can be distributed evenly and predictably to all customers nationwide. And with that instrument, the government is preventing that only those customers whose suppliers happen to be affected by the lack of supplies from Russia get the full burden of the additional cost. Mark will explain to you the financial impact from this new regulation in a minute. I consider this to be a really constructive solution that we can actually manage quite well. Additionally, we have seen upgraded support schemes helping vulnerable customer groups, such as in the UK and in the Netherlands, as well as tax reductions as instruments to ensure affordability. Finally, we also appreciate the EU member states have committed to reduce gas demand by 15 percent over the coming winter, and the combination of all of these measures makes us confident that we can master the short-term challenges. We at E.ON have been taking responsibility, and we have been strongly involved in the legislative conversations with the governments throughout these periods. And we have had the opportunity to support with our expertise. We are also helping our customers where needed. And for stressed customers, we have payment assistance programs, and we work together with agencies, counseling centers, welfare offices to advise customers and work together to find fair solutions where this is still needed. So much for the short term. And many people seem to be overwhelmed by these short-term challenges. Yet, we must also assure that the energy transition, now more than ever, moves forward. The energy world of the future consists of sustainable and decentral energy solutions, physically and digitally connected. Otherwise, it will not work. And with our growth strategy, based on sustainability and digitization, E.ON is part of exactly this future. We have therefore continued to work consistently on the implementation of our new growth strategy during the crisis. And clearly the major growth delivery for the group will come from our network business where we are growing our power wrap by at least 6% annually until 2026 and further growth beyond. But I would also like to give you a few examples from our other business segments. Demand has never been higher in our retail solutions business, which is driving the decarbonization of private households and mobility. We see people striving to become more independent. Increasing energy prices are a natural driver of that. Payback periods for investments in solar panels or heat pumps have shortened from more than ten years to only eight or even six years, respectively. And in the first half, we have been able to increase our revenues in this area by 40% year-on-year, backed by a strong demand development with a clear target to achieve more than a billion euro revenues over the full year. Already, In the first half of this year, we sold roughly 22,000 new residential solar and battery storage solutions and 40,000 modern heating systems, and that makes us the largest supplier of energy solutions to decarbonize private households in Europe. And this achievement has clearly also exceeded our expectations. Next to our solutions for residential customers, we see also more and more industrial clients and cities asking for sustainable energy solutions. Via our energy infrastructure solutions portfolio, we offer a variety of products from heating and cooling to waste heat recovery and energy efficiency management. That makes us the best partner in offering integrated solutions and is resulting in EBITDA growth of 23% year on year, coming actually from a high starting base, not based on a low starting base. Again, an outstanding and great achievement. We are also progressing on the digital front. We are significantly expanding our broadband business. As announced in July, we are establishing a joint venture with IGNEO Infrastructure Partners for the rollout of high-speed broadband infrastructure in Germany and a new 50-50 joint venture plans to provide high-speed broadband connections to more than 1.5 million households and wholesale customers. We are looking forward to a great partnership with IGNEO. At the same time, we have also not forgotten about our housekeeping topics. We have finalized the migration of all UK retail customers to our new IT platform. And whilst that is no news to you, we obviously have also shut down respective IT systems. This is a remarkable success, and it was again delivered during the pandemic and during the energy crisis, a huge compliment to the UK team. So before now handing over to Mark for more detail, let me summarize the positive messages for you as investors. The visibility on short-term market interventions by politics and regulators has increased significantly. The growth opportunities from the energy transition for E.ON materializes faster than anticipated. And we are consistently implementing our growth strategy, which we presented last November. And last. The resilience of our business model and the professional attitude of our whole organization once again becomes evident. We are confident to deliver our results despite the turmoil in the market. We keep our guidance for the full year. And finally, we are absolutely committed to delivering year-over-year up to 5% dividend increases for our shareholders. And with that, over to you, Mark, for more detail.

Thank you, Leo, and a warm welcome from my side as well. Despite the challenging market environment, Leo said we are delivering what we promised operationally and financially. And on that basis, I can reconfirm our confidence to the successful delivery of our financial targets going forward. Why do I continue to be so confident? Well, we've made significant progress year to date in our core business, so that I'm very confident in our 2022 delivery. On top, our financial position is improving with increased financial leeway for long-term growth. Finally, German legislation to encounter the crisis of specifically German gas importers is now visible and clear. And for us, it will result in a very limited temporary cash effect. So very well manageable for us. Let's start with our year-to-date operational performance. As usual, with a group EBITDA of €4.1 billion in the first six months, we are fully on track to deliver the expected recovery pattern that we announced as of Q1. The main drivers, to remind you, are the realization of synergies, as well as additional efficiencies, investment-driven business growth, and tariff increases in our energy retail business. Turning to our network business, it has been performing particularly stable during times of energy crisis. Here, we were able to achieve an EBITDA of 2.7 billion euro, Price-driven effects from network losses continue to play a role in the second quarter. Nevertheless, we have also seen how the recovery for network losses from last year are already starting to kick in, and this underscores that any short-term earnings impact from that end will be economically neutral for us at the end. Synergies in the networks business are on track, just as the expected recovery of network results in Germany. The milder weather during the first half led to a temporary high double-digit million euro burden due to lower wheeling volumes. Also, this effect will nevertheless be recovered over the next years according to the established regulatory mechanisms in our markets. Let me move to our customer solutions business, which performed equally solid and provided about €1 billion of EBITDA to our first half results. Key to this achievement was our ability to successfully adjust end customer prices, reflecting the massive increase in wholesale energy prices. It is worth highlighting that as of today, we are not seeing any material worsening in payment behavior. Of course, we are carefully monitoring our customers' payment behavior, And we are constantly checking lead indicators, such as increases in receivables and overdue receivables, changes to installment plans, insolvency rates, credit scorings, amongst other things. And as Leo already underlined, Aon is doing its utmost to support customers in these difficult times who struggle with affordability issues. Our solutions businesses benefited from increasing demand and another strong financial quarter. Leo laid it out. EBITDA for our energy infrastructure solutions business grew year-on-year 23%. Now stands at a half-year EBITDA contribution of €330 million. Our retail B2C solutions revenue grew by 40%. Revenues are now already close to €600 million, and we are fully intrigued to achieve our full-year target of more than €1 billion in revenues. Finally, our non-core business is, as expected, significantly below last year. Key reasons are the omission of the positive one-off from the nuclear production rights settlement and the phase-out of the two nuclear reactors as of last year. This was partly compensated by rising wholesale prices. Moving on to our financial position, and with that to my second point. Our financial position is strong. On top, the seasonal recovery in operating cash flow is unfolding as we promised. Economic net debt has been reduced in the second quarter by 1.4 billion euro. The strong operational cash flow compensated net investments as well as dividend payments. Furthermore, strong increase in interest rates results in a significantly lower pension provision, which includes a negative performance of our plan assets and particularly a value adjustment of our Nord Stream 1 participation, which, as you know, is being held as part of our pension plan assets. Note that the asset value of Nord Stream 1 shareholding now stands at 0.5 billion euros. On that basis, we expect our debt factor to sit comfortably within the target range of 4.8 to 5.2 times net debt to EBITDA by the end of this year. In terms of long-term funding, we are in an equally strong position. We are already well covered for this year. We may look to start pre-funding 2023, depending on market circumstances, and we will also start to look at additional markets beyond Euro benchmark bonds to further broaden our investor base. Now to my third message. The visibility on our largest market, Germany, has increased considerably. The surcharge stipulated in Section 26 of the Energy Security Act has been detailed out now in an ordinance, which became effective on August 9th. For E.ON, its implementation will have fairly limited financial impact. How will this exactly unfold? Let me put it into context first. Out of our 14.2 million energy sales customers in Germany, only 2.3 million, or around 15%, are gas customers. Operationally, we will continue to receive our gas from our wholesale suppliers as contracted. The extra costs incurred by them for replacing Russian gas will be temporarily aggregated by a well-established intermediary, Trading Hub Europe. This intermediary will ask all German retail suppliers, like us, to collect a specific surcharge per kilowatt hour from its guest customers, covering the additional costs. The surcharge is currently estimated to be between 1.5 and 5 cents per kilowatt hour for every guest customer, and that amount is going to be detailed during the course of the next one or two weeks. We expect Trading Hub Europe to publish the exact level of the surcharge actually during next week. We will implement the surcharge towards our customers within Q4 by way of a regular price adjustment. So payment and payment to Trading Hub Europe is expected to start in December. Financially, this is hence just a pass-through item for Aon. We expect a very limited and temporary impact on our working capital. and actually no material impact on our earnings. So, to sum it up, E.ON continues to be in an operationally and financially strong position to manage the impacts of this energy crisis. Let me close my part with our 2022 guidance. We fully reconfirm our confidence to achieve our guidance for 2022. For our energy networks business, I already mentioned during our full year presentation that depending on energy prices and their impact on network losses, we may end the year at the lower end of our segment guidance range. Based on how prices have developed during the first half of this year, we now confirm that our energy networks earnings will in fact turn out at the low end of the 5.5 to 5.7 billion euro range. Be reminded in this context that this is of temporary nature and will be fully recovered in subsequent years, just as we are already this year recovering network losses from last year. Our customer solutions business is well on track. Price increases have been implemented as planned. Our guidance in that business includes higher than average risk buffers for a potential volatile second half of the year, And all in all, this backs up our high confidence level on guidance achievement also for that sake. Rising energy prices finally have a positive effect on our non-core business with the remaining open position of roughly one terawatt hour. We hence upgrade our non-core guidance by 200 million to 0.8 to 1 billion euro, reflecting the mark-to-market of this open position. We have delivered an excellent operational performance during the first half of this year. Thanks to that, we can again comfortably reconfirm our group guidance for the full year. The single biggest risk for the delivery of our group guidance remains an unusually cold winter in combination with tight gas supply. As said, for this reason, our guidance includes higher than normal risk provisions for the remainder of the year. Therefore, rest assured that we will deliver what we promise even during these challenging times. With that, I hand back to Leo. Thank you, Mark.