E.ON SE

Hello, everyone. Dear analysts and investors, welcome to our full year 2022 financial results presentation. I hope everyone is healthy and doing well. Thank you for taking the time to join us. Today, I'm here together with Leo and Mark. Leo will give you the strategic update, followed by Mark walking you through the financials. As before, we will leave enough room for your questions after the presentation. With that, over to you, Leo.

Thank you, Iris. Warm welcome also from my side to all of you. Really, a lot has happened since the last year, and I can honestly say that even with my 25 years in the sector, I have not ever experienced such a year. So where do we stand now? Well, the winter season has turned out, luckily, to be mild. But let me be clear, we are not through the crisis yet. However, especially we at E.ON are much better off than we have been previous year at the same time. And we continue to work hard to mitigate the risks which are still existing and to serve our customers through the hardship that they are partially suffering through. We are staying focused on the opportunities ahead and we will continue to deliver as we have delivered. We are the energy transition company. So let me kick it off with my four messages for you today. First, we have performed during the crisis. We have delivered a strong operational and financial year 2022. And this despite severe macroeconomic challenges. We have proven to have a really resilient business model with an excellent portfolio. And you as investors will benefit from our strength as well. We'll increase our dividend payout for the eighth consecutive year. And Mark will later show you that at the same time we have strengthened our balance sheet as well. Second. In times of unprecedented uncertainty, we have gained increased relevance for our customers, for our societies in which we operate. We are the largest operator of critical infrastructure for the energy transition in Europe. We take care of security of supply and affordability of energy for one of the largest customer portfolios in Europe. We actively support shaping the energy market and contribute to keeping Europe a strong economic player. We are a part of the solution for a climate-neutral energy future. And this increased relevance and this part of being a solution can also turn into tangible upside for you. Third, with our growth strategy based on sustainability and digitization, we will capture the even stronger tailwinds for a faster decarbonization, which we are right now observing. And we did not only manage the crisis in the last year, we also became more sustainable and more digital. And fourth and final, all this means that we face massive opportunities and we have the financial capacity and resources to ramp up the investments for profitable growth. Provided that the remuneration framework is right, I'm confident that this will be the case. And now let me just talk you through these points in a little bit more detail. First message, strong delivery. Across the segments, we have finished earnings at the top end of the guided ranges. We have delivered what we have promised to you 12 months ago. And I'm really proud of our teams who have done a great job in a challenging market environment that has been really characterized by unprecedented and immense volatility. Both our core businesses have proved to be highly resilient. When it comes to networks, the earnings delivery has been mainly impacted by temporary effects during the year related to higher costs for network losses. And as we have pointed out previously, those impacts have started to reverse already. The price volatility has likewise also affected our energy sales business. Nevertheless, our digitally integrated business model proved to be rock solid, and it helped us to mitigate the risks that we have seen in the last year rapidly and successfully. A clear example of that is the speed at which we have reduced the time to market in the German sales business. Now able to bring new tariffs into the markets within a couple of days and before the crisis. This took us weeks and that would have been a severe challenge in the crisis. Earnings in the division have also been backed by continuous strong demand for our decarbonization solutions for industrial customers and cities as well as for retail solutions for our residential customers. On a group level, also the non-core business has contributed, again at the top end of the guided range. We have mainly benefited here from higher achieved market prices, but only because we also had world-class operators being able to exploit the opportunity. Altogether, this means we have been able to achieve an EBITDA of more than 8 billion euros for the group. Also, in net adjusted income, we have seen above 2.7 billion. So for both KPIs, we have delivered above our guided range. And this success will be translated into a continued strong dividend payout proposal for 51 cents for fiscal year 2022. So strong delivery. And this brings me now to my second message, increased relevance. E.ON is operating 1.6 million kilometers of energy networks. And this makes us the largest operator of critical energy infrastructure in Europe. E.ON reaches 20% of all citizens in continental Europe and in the UK. And this makes us the owner of one of the largest customer portfolios in Europe. And both facts, networks and customer solutions, have made us the natural partner for governments to solve problems the current crisis. Our relevance increased with the understanding that we are an essential part of the solution. Because we at E.ON, we assume responsibility when it matters. And we have actively contributed to mitigate an unprecedented crisis which you see on this chart in Europe. I've been personally a dedicated member of one of the gas crisis teams of the German government. Across all our regions, our local managers have been in similar situations. I'm also the president of Euroelectric, actively contributing to the market design discussions on the European levels. We really try to make our part happen that the energy crisis can be solved. And all of these activities have led to good outcomes in the interest of both our customers and also our shareholders. The support schemes that have been developed in all our markets are now in full swing, including special measures for our most vulnerable customers. We are convinced that these efforts such as price caps and our direct support, including offering of payment schemes, cannot be the solution in the long term. We have to invest ourselves out of the crisis in the long term. Nevertheless, they have helped the customers in the short term. This brings me to my third message. We have the right growth strategy. We will capture the stronger tailwind for faster decarbonization. We will continue to successfully operate in 2023. And why am I so convinced? Because we have managed not only to deliver performance, financial performance, which you have already seen. We have also delivered growth. And on top, we became more digital and more sustainable. So let me just give you some proof points of that. Last year alone, requests for renewable connections grew by 40% in our German network business versus prior year. So already 22% versus 21% plus 40%, and the trend is unbroken going up. Outside of Germany, the number of requests for new grid connections is strongly growing as well. For example, in Sweden, in the Czech Republic, we see triple-digit growth rates year over year for connecting residential solar. Additionally, we see immobility picking up at extremely high speed. We also see demand for sustainable infrastructure solutions, our so-called ICE business, with an increase of investment of almost 30%. And we expect a similar trend for 2023. And finally, in residential customers, we've seen more and more requests for independent energy solutions on the journey to get to net zero. and revenues of our retail solution business grew by around 25% year over year, and it exceeded €1 billion in 2022, and I might say profitably, not just in whatever it takes. So next, digitization. We are also becoming more digital. and all digital company in all our operations. And this will be the driver of efficiency and productivity, and this will ensure that we are also in the future competitive in the energy market. Again, some proof points. In energy networks, we have increased the number of smart secondary substations to digitally steer and monitor our assets in low voltage. We have reduced operational costs for connection of renewables and accelerated our planning processes. In customer solutions, we achieved a much faster time to market. I just gave the example of Germany. And this has happened via digital sales platforms. And as prices will remain high and volatile, this will become a real differentiator also going forward. Last, sustainability. We have fully implemented sustainability in all our steering processes in the company. It's also now fully integrated in our annual report going forward, and you can actually look at it yourself. It has been a real effort to come to this integrated perspective on business and on reporting. We keep on also progressing with our customers, reducing more than 100 million tons for the last year. And I just want to emphasize that obviously it's now also part of our targets, part of our steering, taxonomy targets, larger 95%, SBTI obviously approved, 1.5 degree compliance, et cetera. Be assured, however, in 23, we will not rest on all these developments. Our strategic pillars, growth, digitization, sustainability, will continue to be our compass. And we will work hard to make further progress day by day. And this brings me now to my last message, growth. The crisis has brought forward the need for an even faster decarbonization. We are now seeing increased targets for renewable build-outs all over Europe. This is great for our networks. Every windmill needs a connection. Every connection more and more needs a reinforcement in the backbone. But it's not only our networks. With our energy infrastructure solution business, we benefit from the heat transition that we see in cities, municipalities, local communities. And 2022 has also left a clear mark in end customer behavior. Demand for heat pumps, for PV panels and electric vehicles is promising. significant additional growth opportunities. So basically growth above what we observed in 21, in 22, and further accelerating in all our core businesses. Now this is clearly the time in which we want to accelerate our investments to capture these green growth opportunities and within our CAPEX plan we have reserved 33 billion euros until 2027 to participate in that growth momentum. Obviously subject to an adequate regulatory return. Adequate means attractive for capital owners that have to consider the increased cost of capital, the interest environment, which has changed significantly, 22 versus 21. With this investment plan, we will be in the position to increase our RAP growth from 6% on average to at least 8% on average until 2027. But again, we will invest in a reasonable way. We have the financial capacity and the resources to invest, provided that the remuneration framework is right. We are confident that this will be the case, as we have just seen the German regulator making a first proposal for an improved cost of debt calculation last week. However, to be clear here, this can only be the starting point. And this brings me to my final message for today. The market is ready to accelerate on all fronts. We are ready to cope with debt speed and to do our utmost to deliver our contributions for Europe's targets. to become carbon neutral, and I'm convinced that we will do that while still growing both earnings and dividends. And with that, over to you, Mark.

Thank you very much, Leo, and a warm welcome from my side to everyone as well. We want to make it super simple for you today. Strong strategic momentum translates into strong operational and financial delivery. What should you take away? First, the year 2022 has been successful despite the challenging macro environment. We did not only deliver bang in line with our initial guidance, we were also on top of our group guidance and we also kept a close eye, a very close eye on cash. Second, we see boosted growth prospects for all our businesses. This means significant investment opportunity and earnings growth potential for E.ON over the next five coming years and beyond. Third, increased investments stand on very solid financial footing. Our upgraded green growth program will be delivered together with a debt sector target of up to five times. With that... we will comfortably ensure our capital structure target of a strong BBB, BAA rating. This sound financial position also allows us to pay a dividend of 51 cents per share for the fiscal year 2022 and to also reaffirm our long-term dividend growth policy of growing our dividend per share every year by up to 5%. Let's start with the details of our full year operational performance. Our group EBITDA came in at 1.8 billion euro, around 250 million euro above the upper end of our group guidance. Core EBITDA came in at 6.9 billion at the upper end of the forecasted range, which we updated in November. In our energy networks business, we were able to achieve an EBITDA of 5.5 billion euros. Key positive drivers were additional efficiencies and investment-driven growth. These were partly offset by high energy prices leading to additional costs for network losses and milder weather and energy savings having an impact on our wheeling volumes. Each of those two negative effects, which I just mentioned, led to a low triple-digit million-euro burden year over year. Both effects reduce earnings in 2022, but will be recovered over the next years according to the established regulatory mechanisms. Our customer solutions business performance was strong and provided €1.7 billion of EBITDA. The main driver for this was our capability to actively and dynamically adjust our procurement strategy in line with amended weather forecasts and consumption patterns. we were also able to sensibly pass on increased wholesale prices to our customers. Our energy infrastructure solutions business continued to grow very robustly by 19% or around 90 million euros year over year to around 570 million euros. All in all, our group and core adjusted net income came in at roughly 2.7 billion euro following our EBITDA earnings development. Now moving on to an update on our debt development. First key message. Year over year, we still do not see any material change in our actual customers' payment behavior in any of our markets. Second important message, we have increased our earnings-effective additions to bed-debt provisions in a year-over-year comparison by about €300 million. With that, we also stay prepared for an adverse outcome during this year or the future. Let me now turn to the development of our economic net debt. Compared to our nine-month figures, economic net debt has been reduced by another €1 billion, down to now €32.7 billion. This is largely due to an exceptionally strong operating cash flow, resulting in a cash conversion rate for the full year of 151%. Our strong financial position at year-end led to a debt factor of 4.1%. What does that mean for our capital structure going forward? E.ON remains fully committed to its capital structure target of a strong BBBAA rating. This remains unchanged. However, rising interest rates will set respirables and over time, increasingly burden rating ratios. With our new debt sector target of up to five times, we fully anticipate this effect already today. Even more important is that we will stay comfortably in line with this new target, also including our upgraded CapEx program. And why are we so confident? Because we will continue to keep a close eye on cash. Our working capital in 2022 strongly improved by around 4 billion euros. This improvement is of course to a certain extent rooted in temporary effects that will reverse in 2023. However, to a considerable degree, it also stems from working capital excellence measures. From today's point of view, we see a cash conversion of 80% for 2023, which will thereafter swing back to our average of 100% in subsequent years. And with that, you should take away that about half, that is 2 billion euros, of the cash improvement which we have seen in 2022 will stay with us for good. The portfolio optimization program with disposal proceeds of 2 to 4 billion euro by 2026 is also unchanged. In 2022, we already made substantial contribution to this with the partnership around our German broadband business in the Western German area with ICNEO infrastructure partners. I also want to reiterate that we will pursue a series of minor transactions. So no big bang, a series of minor transactions over time. Let me now turn to our guidance on investments. As elaborated by Leo, the growth opportunities for all our businesses are shooting up. We will capture these prospects and will gradually but significantly ramp up our capex over the next years. We have the financial capacity to invest, and we will deploy these resources, provided that the remuneration framework for our energy networks business is right. We upgrade our five-year CAPEX delivery plan by more than 20% to €33 billion. The bulk of the CAPEX upgrade will be invested in energy networks, where we see accelerating investment opportunities from the clean energy transition. We additionally intend to invest more within our energy infrastructure solutions business, where we are particularly excited about the future prospects. We also increase our capex budget within energy retail, with future energy home and charging infrastructure exhibiting significant growth potential. All our investments are required to meet strict internal hurdle rates, broadly made up of project-specific WEGs plus risk-adjusted spreads. We will continue to strictly adhere to these benchmarks. Turning now to our 2027 outlook as we roll forward our five-year guidance. The CapEx opportunities allow Aon to be fully committed to its growth promises. We are committed to generating €9 billion EBITDA. This will translate to around €0.97 per share in 2027. With that, the negative impact from higher interest rates will be more than offset. Our Poison Electra operations are classified as non-operational as of January 2023, will hence no longer impact our adjusted earnings. Our Turkish generation joint venture is now reported under corporate functions other. Our outlook demonstrates the value-creating potential of our green investment plan. It also shows the sustainability of the diverse growth drivers across our segments. For 2023 specifically, we forecast EBITDA of 7.8 to 8.0 billion euros and adjusted net income of 2.3 to 2.5 billion euros, already taking a big leap towards our around 9 billion euro EBITDA and 97 cents EPS target for 2027. As Leo pointed out, we do not view the European energy crisis as being over yet. In our assumptions for the 2023 guidance, we prudently assume that a cold winter 23-24 and or a re-acceleration of global LNG demand in the coming months could reignite an energy scarcity in Europe. For investors, this means that our businesses will continue delivering their financial targets even in tough times. The flip side of this is, should commodity prices stay where they are today, and demand should come back faster to pre-crisis levels, then this would translate into significant upside for us. As mentioned before, our earnings outlook is well supported by our three business pillars. For energy networks, we expect to generate an additional €1.1 billion EBITDA over the next five years, reaching an outcome of 6.5 to 6.7 billion in 2027. This increase will be reliably driven by continuous regulated asset-based growth while closely managing the productivity of our cost base. For 2023, we will see a jump in profitability beyond what the mentioned drivers should make you actually expect. And I will add more colour to this dynamic on the next slide. Energy infrastructure solutions are expected to generate an extra EBITDA of 300 million euro by 2027. This demonstrates the segment's ability to translate organic growth capex into sustainable earnings. For 2023, the segment is expected to generate 500 to 600 million in EBITDA. We envisage our energy retail segment to grow from 1.1 billion euro EBITDA in 2022 to 1.5 to 1.7 billion in 2027, with growth coming from additional efficiencies on our way towards the long-term margin level of 2 to 4% across the portfolio. We will also continue to grow our future energy home and e-mobility solutions activities, together adding €2 billion of revenues and €200 million of EBITDA by 2027. The underlying earnings growth trajectory in our network segment is straightforward, as you should expect it. Based on our growth capex plan, we will be growing our asset base year over year by about €3 to €3.5 billion on average during the next five years. At current allowed returns, this will translate into more than 200 million Euro additional EBITDA every year. In addition, we expect growth from investments into adjacent, largely quasi-regulated activities, such as smart meters, in the amount of 40 to 50 million EBITDA per year. And on top of that, a bit like the icing on the cake, we will continue to ruthlessly focus on efficiency to ensure both that returns from additional growth investments will flow one to one into our bottom line, but also that our regulatory outperformance will at least be maintained. So far, so simple. Another positive feature of our network's activities is that revenues are shielded against variations in demand, and commodity prices, and even largely against changes in inflation. As we have outlined in the past, the financial recovery of some of these variations caused temporary shifts in earnings. And this is particularly true for the recent variations in wheeling volumes and network losses, where we do expect recovery of past losses, specifically during 2023 and 2024. But it also applies to certain effects relating to pension liabilities, specifically in our German network businesses. Because inflation rates moved sharply, our pension liabilities under German regulatory gap were significantly inflated during 2022. And this inflation-driven increase in liability will cause a positive one-off compensation by the regulator in T plus 2, and that is in 2024. So, what should we take away? First, economically, all these effects are a wash over the midterm. Cash-effective upside in 2023 and 2024 offsets cash-effective downside of prior years. Second, what really matters in terms of value creation is our underlying performance built on growing our power rep and managing tightly for efficiency. Third, our guidance is cautious as it reflects no adjustment to current regulatory returns. Lastly, We are confident that regulators will recognize our commitment to increase CAPEX and accelerate the energy transition in Europe by adjusting allowed returns more responsibly to the massive shifts in macroeconomic variables that we have seen during the last 12 to 18 months. And this should provide for further upside potential also at the long end of our guidance. Let me now summarize the updated financial framework for E.ON. As you have heard before, we are accelerating our CapEx plan to 33 billion euro. That translates into 9 billion euro of EBITDA. That translates into 97 cents earnings per share by 2027. We remain fully committed to our strict internal investment hurdle rates, which will translate into an average return on capital employed of 7 to 8%. And we are also fully committed to our dividend policy of growing the dividend every year by up to 5%. And we adjusted debt factor leverage guidance to up to five times, underpinning our commitment to the unchanged rating target of a strong BBBAA rating. And with that, back to Iris.