E.ON SE

Good morning, ladies and gentlemen. I would like to welcome you very warmly to our press conference for the first six months for Aeon SE. In addition to the participants to this press video conference, I would like to welcome all the guests who are following us live through the social media channels and the website. Leonard Bernbaum, the CEO, is here with us today, and Mark Speaker, the CFO. And as always, we will start by presenting the results of the past six months, and then afterwards you will have the opportunity to ask questions. I would like to pass the floor to our CEO, Leonard Bernbaum.

Good morning from me as well. Hello. Last thank you for the introductory words. Ladies and gentlemen, we are currently perceiving less headwind at E.ON in our market environment. We are seeing an increasing calming of the energy markets. We are seeing average gas prices of the first half this year that fell by about 30% on forward markets compared with 2022. And at the same time, we are perceiving more tailwind for the energy transition. In July 2023, the hottest month that has ever been recorded, the climate change is here and it's becoming more and more tangible. And in addition, the energy crisis has shown that we must move away from fossil fuels and design an independent, affordable and secure green energy supply. And that's why the demand for sustainable energy solutions is growing. And at the same time, there's a growing understanding that the energy transition will only work with sufficient infrastructure. So when, if not now, is the time to fulfill Europe's commitment to the energy transformation and accelerate that transformation? In spring 2022, we significantly extended the growth targets. The expanded installed capacity of solar and onshore is to increase to 330 gigawatts by 2030. So in the eight years ahead, we have to accomplish twice as much as we have in the previous 15 years. So that's the additional tailwind we're seeing. So less headwind, more tailwind. What does it mean for E.ON? In the German distribution systems alone, we will have to connect about six million new facilities. And for this task, which we are now facing, E.ON are important and well positioned, but it also requires an appropriate and legally secure investment environment. We are in an environment that brings a lot of work and challenges for us, but also social responsibility and great potential, particularly growth potential. And in this environment, which is characterized by calming of the energy markets as well as immense need for investment in the transformation of our society, particularly for infrastructure. In this environment, we're again able to present strong first-half results. The adjusted group EBITDA amounted to $5.7 billion. That's 40% higher than the prior year figure. And E.ON is following up on its good start to the year in the first quarter, which we communicated to you. And at this point, I can also emphasize that our growth prospects are better than ever. Why? Well, because in recent years, we have systematically shifted our customer business to decarbonization solutions for residential and business customers. And at the same time, the demand for sustainable energy solutions arriving at our networks. We received connection requests for around 240,000 renewable facilities in Germany last year, more than twice as in the prior year. And this trend is continuing in the first half of 2023. The numbers are increasing. Particularly for small PV systems, we are seeing a real connection boom for small solar systems, and this huge demand makes it increasingly clear that the network expansion has to take place on an industrial scale. We have to be able to expand, strengthen, and build networks as if on an assembly line, and that's exactly what we are gearing E.ON towards. With our investments, we are making an important contribution to the decarbonization of our society. And we have, despite all the crises of the past years, unabatedly moved forward with our plans. We invested a total of $2.4 billion in the first half of 2023 alone. That's 40% more than our investments in the prior year period. and we have hired additional employees, 2,000 of them to be able to do that because we are creating new jobs on the basis of this growth. We are and we want to be a driver of the energy transition and we need need bright minds and many strong hands for this. In a nutshell, our strategy with the three pillars, sustainability, digitalization, and growth is proving its worth. Eon Setup is paying off more and more and becoming more and more visible. I'd like to take this opportunity to thank our employees that made this possible through their great work. Ladies and gentlemen, the increase in procurement costs for gas and electricity last year was an extreme challenge for us. But our long-term procurement policy enabled us to keep costs down for our customers for a long time by passing on price increases with a delay. We stood and still stand by our customers as a reliable partner and shielded them from the extreme price hikes on wholesale markets. In addition, we optimized our procurement policy during this phase to enable to respond even better to volatility. And at the same time, we've always said that as soon as we see scope to lower our prices again, we will do so. And this is now the point in time where we will do so. In late summer, we'll lower prices for millions of our customers in Germany by an average of 18% for basic electricity and supply and 28% for basic gas supply. And in recent months, we've already made price adjustments in other European markets, some of them quite extensive. We need to say these were markets where the price increases were passed on much more quickly because of the hedging reasons. Mark will go into more detail here in a few minutes. We're thus keeping our promise to our customers. So we are investing in networks, we are supplying secure energy, and we provide price certainty both upwards and downwards towards our customers. The increasing calm in our market environment reduces the uncertainties for the months ahead. This is also reflected in our business expectations. Based on our cautious assumptions and our overall positive first-half performance in our markets, we are raising the forecast we communicated back in March, and Marc will comment on that as well in a minute. The International Energy Agency's latest assessment of market dynamics also shows that the gas markets have gradually calmed down since the beginning of the year. And the high levels of the gas storage facilities in the main Asian and European markets give us cause for cautious optimism regarding the winter period. And the poor economic development in China is also playing a role here. So we won't see a huge gas pull. So the likelihood of a crisis next winter is much lower. I mean, there are constellations under this is still conceivable, but they are becoming less likely. So the markets have relaxed. But nevertheless, we are warning that we shouldn't say the crisis is over. We're on the same level as before the crisis. We're not. We are well above. the last pre-COVID year in 2019. And I don't think that we can return to that in the medium term. And that's because we don't have the Russian gas volumes anymore. So we need to continue to work on energy conservation. That's the best way of making energy affordable for our customers and ensuring competition and giving the industry the competitive edge. In the last months, the discussions on the European Energy Parliaments have gained progress concerning the European market design. I believe that the gas is still half full, and we've communicated that. This relates to the original proposition of the EU Commission and also now after the first discussions with the parliaments it still are for. What's positive is that the liquidity in the EU Markets are also taken into account, and what's also positive is that the political and regulatory will to improve the regulatory conditions for network investments is slowly becoming apparent as well. After the experience of the energy crisis, we need, as we said, an even more extensive and faster expansion of our energy infrastructures, especially the electric distribution networks. Every euro investment in renewables must come with half a euro investment in the grids. For Europe and the energy transition, this represents an opportunity for economic driver and a sustainable path for our energy crisis. For E.ON, it offers enormous growth potential because we, as the largest distribution network operator, play a pivotal role in the transformation, and the energy transition needs players like E.ON that are willing to invest and lead the way. At E.ON, we are aware of the demands placed on us and take responsibility. That's why we plan to invest, as communicated back in March, a total of 33 billion in Europe's energy transition until 2027, provided, of course, that the economic and regulatory conditions are right. And that's why we are currently looking very closely at what the consequences of the even more ambitious targets of Germany's Easter package of legislation will mean for the network expansion. The indication we are seeing today in the German regulatory system are going in the right direction. So we need a return that takes account of the different market environment. The proposals currently on the table are not sufficient and will not be sufficient to increase investment. We are placing a burden on our balance sheet here. And if we need to invest more, we need to be able to earn more. So we need a higher return that takes account of the increased interest levels. And that's not the case at the moment. But we're also growing because we have the right solutions for an accelerated energy transition. Let me give you a few examples from the current financial year. The energy networks will soon connect the one millionth renewable energy system to E.ON's network in Germany. Statistically, a PV system close to Berlin. Our investments in network infrastructure lay the foundation for green growth. Another example, a 110 kV line, that's 110,000 volts of Schleswig-Holstein nets between its substations in Flensburg and Wedding, that's a good example. In future, it will be able to transmit up to five times more green electricity than before. Another example is a substation at Aedes, and this will allow us to increase the ability to accept locally generated green electricity in Berlin's outer suburbs, as well as great capacity. So we do not just need to connect new facilities, but also be able to transmit this electricity. And the same is true for large-scale commercial customers. We have similar examples in the Salzgitter region, Avacon, for example. In customer solutions, E.ON could use to invest in climate-friendly energy infrastructure. We have an energy recovery unit for immersives. The unit uses the synthesis gas produced in a production process as an energy source to supply the facility, as well as 40,000 private households in the region throughout the year. So these are all lighthouse projects at this stage, but we want to make them standard. They make an important contribution to the competitiveness and decarbonization of the economy and they are a substantial part of a heat transition as well. Finally, digitization. This is a key prerequisite for us being successful with our growth strategy. It requires more sustainability. We are moving forward at high pace. We have migrated more than 90% of the applications from the data centers in the cloud. This is a success because the cloud makes our landscape more stable and secure. It forms the basis for modernizing our business processes and simplifies the development of new digital services for the energy transition. We will surely provide more information on this in future. Ladies and gentlemen, modernization, expansion, digitalization of Europe's distribution grid will require investments of around 425 billion euros over the coming 10 years. That's one estimate. Your electric With the increase in expansion targets, which haven't been taken into account here, means that the sum can be higher. Germany's distribution network alone are expected to need about 80 billion of investments until 2030. In other words, the energy transition success now requires an effort on a historic scale. It will require expertise, commitment, and a lot of capital. And let me re-emphasize here, we need the right framework for investment. And the focus of the policymakers should be on achieving the targets that have been set. And for this to happen, obstacles will need to be systematically removed. In other words, bureaucracy will need to be reduced, reliable and appropriate investment conditions need to be established before the beginning of a regulatory period, and planning approval procedures must be streamlined and accelerated. And again, regulation in the network business must reflect the altered market environment, which is characterized. And we welcome the efforts of the German Federal Network Agency to increase the return on equity interest rate, EK1, as a sign that this is going in the right direction, but this is only a first step. And they don't go nearly far enough because the adjustment isn't supposed to take effect until two years after the interest rates have begun to increase. And it isn't supposed to apply to existing installations In view of the need to accelerate the energy transition, we now need forward-looking regulations that promote growth and ensure investment certainty. Legally secure decisions are now needed in a timely manner for appropriate return on equity and debt capital. And that is the same is also true for other parameters like ex-gen and the interest factor and... We are surprised to see that the decisions are being delayed. We hope that these decisions will be taken over the coming months. But it's not just a question of the regulatory agency, whether or not we can deliver. It has to do with all the other authorities, building departments, for example. I was in the Ahr Valley recently. In the two to three months after the floods, everything was possible. Afterwards, everyone forgot about what had happened and people just took care of their own silos. That way, if we cannot achieve things even in the R Valley and everyone only looks at their own responsibilities only, then that's not going to work. How is that then supposed to work in a region where there is no flooding catastrophe? So do we need always floods to be successful? We have many regulations and laws that are asking too much of the... consumers. People shouldn't be patronized but rather won over. People, companies and especially this small business must recognize that they have something to gain from the energy transition for their everyday lives, for the economic situation. So it's about fair burden shedding but also about the fair distribution of opportunities because when we At E.ON here, energy transition, we hear above all opportunities, but that must be true for others as well. That's why we're taking the lead by expanding network infrastructure in order to enable comprehensive cross-sectoral decarbonization. And we assume that we will be rewarded for that rather than penalized. And in our customers, we go far beyond the sale of electricity and gas, because here, too, it's about the energy infrastructure for and with our customers. And with that, I'd like to hand things over to you, Mark.

Thank you very much. Good morning for me as well. Leo, as you just mentioned, I would just like to stress what you said. We at E.ON have the answer to one of the most important challenges of Europe, because we will help deliver the energy transition if people let us do so. And that's why our growth strategy will be implemented. And in the second half, we continued the excellent development of our performance and the good environment had a positive impact on the results. So what does that mean? In view of our positive business performance and the greater transparency and better visibility of the market environment, we are raising our earnings forecast for the financial year of 2023. But I'll first turn to our six months results in detail. In the first half of 2023, we increased our adjusted EBITDA from €4.1 million to €5.7 billion. The adjusted net income amounted to €2.3 billion, which is significantly above the prior year figure of €1.4 billion. Both our segments, that is energy networks and customer solutions, laid the foundation for this increase by delivering a very good business performance. Our network business increased its adjusted EBITDA by almost 800 million euros to about 3.5 billion euros. We see a strong investment-driven growth in all regions, particularly in Germany. In line with the energy transition's needs, a large portion of our investments went into strengthening and expanding as well as modernizing and digitalizing our networks. In addition, the network business's earnings performance was positively impacted by temporary effects as well, and this refers specifically to the subsequent compensation of increased costs for the procurement of grid losses in our European business, as well as the so-called re-dispatch costs in our German grid business. These are ultimately pass-through items in our income statement, and that's why these higher earnings from lower dispatch costs will be fully credited to our customers in subsequent years by means of network tariffs completely. The earnings performance at our customer solution segment was positive as well. It recorded an adjusted EBITDA of around 2.2 billion euros in the first half of the year. The increase is primarily attributable to the increasing calm on the wholesale markets and to the associated positive catch-up effects relative to the first half of 2022, which was difficult. And as you know, we faced an extremely volatile and dynamic market environment, especially last year. We demonstrated that our employees have the necessary know-how and our business the necessary flexibility to deal with such developments. We successfully secured and efficiently optimized our procurement. As announced, we'll pass through lower wholesale prices by significantly lower prices for millions of our customers. And that's why we expect this to have an adverse financial impact on this segment's earnings in the second half of the year. In recent months, we've already been able to adjust prices in our markets. For example, we began to do so in the United Kingdom and in the Netherlands. In Germany, we have so far reduced prices mainly in our regional companies. In late summer, we'll extend the price reductions to our national brands as well. The energy transition offers our customer solutions business major growth potential. The demand for our sustainable energy solutions continues to increase. Let me just give you a few specific examples. In the first half, sales at our future energy home unit rose by almost 50%. For instance, sales in the Czech Republic, Hungary, and Sweden, for example, almost doubled. We plan to increase future energy home sales to €2 billion by 2027. Our e-mobility business is making further advances as well. For example, our public charging infrastructure in Europe grew significantly in the first half of 2023. We also want to grow by entering into strategic partnerships like our home charging partnership with BNW. By 2027, we plan to increase our sales tenfold compared to 2022. In addition to keeping our promise to reduce prices again as soon as the opportunity arises, we also stand by our announced investment plans. In the first half of 2023, we significantly expanded investments in our energy infrastructure and sustainable energy solutions. Compared to the previous period, investments were raised by almost 40% to 2.4 billion euros. And for the remaining financial year, we believe that we are fully on track and assume that 5.8 billion euros will be invested this year. This underscores our ambition to be a key driver of the energy transition in Europe and Germany. Our growth is not only visible in financial figures, which Leo Birnbaum referred to, we also were able to increase the number of employees by 2,000 employees. That means we're not only investing into the energy transition through investments, but also by creating attractive jobs. We also have the ambition to make these jobs more and more attractive. We are investing considerably in digital training of our employees. In the first half of 2023, we spent a two-digit million euro amount. Ladies and gentlemen, I'd now like to turn to our financial situation. Our economic net debt rose from 32.7 billion euros at the year end of 2022 to 37 billion. That was anticipated. The primary reason was our seasonally negative operating cash flow. This isn't surprising and instead reflects the usual seasonal pattern of our business model, which you've always seen in our cash flow accounts. Our dividend payment was also a factor, as well as higher investments. Now, based on our strong first-half earnings, we've raised our targets for full year 2023. Our forecast for the adjusted group EBITDA was in a range of 7.8 to 8 billion euros, and we now anticipate that the target range will be 8.6 billion euros. to 8.8 billion euros. We expect the adjusted net income to be in a range of 2.7 to 2.9 billion euros, which corresponds to earnings per share of 1.03 to 1.11 euros. What now prompts us to reset our targets? Our original forecast assumed significantly higher wholesale prices and more market volatility than we've experienced so far this year. Our market environment is increasingly calming, and we have better visibility on future developments. And this also reduces the risks for our business in the months ahead. These factors, along with our strong first-half operating performance, gives us the necessary confidence to raise our forecast for 2023. But it's very important to me to emphasize the following. In the second half of 2023, we won't be able to rest on these current positive developments. We do not want to do so. The good first half results are the foundation and an incentive for all of us at Aeon to move systematically forward towards our ambitious growth targets. But we continue to plan cautiously and and factor in a possible deterioration in the market environment, especially in the fourth quarter. Our adjusted forecast for customer solutions in particular shows you that we expect adverse impacts in this segment in the second half of this year. And in many markets, we do not anticipate hardly any more noteworthy earnings contributions because we are systematically passing on lower wholesale prices to our customers by reducing prices. Ladies and gentlemen, I'll conclude with a brief look at our medium-term plan. Our strong first half earnings and the accelerated pace of our investments keep us right on track. We stand by the growth path until 2027 and beyond that we've communicated. We want to invest a total of 33 billion euros in the energy transition until 2027. We want our energy infrastructure solutions and green products to continue to help our customers shape their personal energy transition. And we want to increase our dividend by up to 5% annually until 2027. And with that, I'll hand things back to Lars Rosenbeck and look forward to your questions.