E.ON SE

Hello, everyone. Dear analysts and investors, welcome to our nine-month results call. Thank you for taking the time to join us. Today, I'm here together with our CFO, Marc Spieker, who will give an update on our financials. As always, we will leave enough room for your questions after the presentation. With that, over to you, Marc.

Thank you, Iris, and a warm welcome to everyone from my side as well. With our nine-month results, we continue to deliver strong earnings in both our businesses, energy networks, and customer solutions. On top, we have progressed very well on the execution of our CapEx acceleration plan. Let me take you through the highlights of the third quarter step-by-step. First, we are successfully ramping up our delivery capacity in our energy networks business. In the first nine months of this year, we invested 40% more year over year. And with that, we are ahead of our own delivery targets for the first three quarters. This outperformance enables us to increase our target for the full year. We now expect to invest €300 million more in our energy networks business compared to our originally communicated target. More importantly, This achievement sends a very strong signal. We are ready to scale up our CAPEX program even further and meaningfully in the coming years if regulatory conditions set the right economic incentives. Second, organic growth and operational excellence have been the cornerstones of our strong earnings delivery also this year. The solid execution substantially de-risks the delivery also of our mid-term targets. Third, we grow based on an increasingly healthy balance sheet. As promised in our H1 call, we managed to lower our economic net debt to around €34 billion in the third quarter, based on seasonally strong quarterly operating cash flow. Our strong balance sheet provides one of the preconditions for further organic investment acceleration in the future. Finally, we confirm our 2023 earnings outlook while increasing our capex guidance. We keep a cautious stance on our assumptions for the remaining winter month, or maybe I should say weeks, maintaining a sizable earnings buffer. For our investors, this means we will deliver financially whatever comes. And if nothing comes, we will deliver more. Let us now look at the details of our nine-month earnings on page three. Our adjusted EBITDA came in at 7.8 billion euros, roughly 2.5 billion euros above the prior year's nine-month core EBITDA. In our energy networks business, growth came mainly from capex-driven RAP expansion in all countries. Additionally, in Germany, we're still seeing temporary upside from lower than expected redispatch costs and other timing effects. As explained in the past, all of these effects, economically neutral, will turn back over the future years, as explained. In Europe, we observe the continued recovery of network losses, which has been only partly offset by lower than expected volumes in some of our Central Eastern European markets. In the customer solutions business, we achieved an adjusted EBITDA growth of around 1.6 billion euros. This significant year-over-year increase contains both recurring and non-recurring elements. When it comes to the recurring effects, we observe an improved market environment throughout Europe. Our fast adaptation to volatile commodity markets, including our energy procurement optimization activities, is changing the way we operate in retail. Supported by churn rates that remain well below pre-crisis levels in most of our markets and a slower market reopening, our nine-month EBITDA looks distinctly strong. From a non-reoccurring perspective, we also see certain positive one-off effects that we do not deem sustainable. Back in March, when we shared with you our midterm ambition to gradually expand our earnings in our energy retail business in an environment of higher and more volatile commodity prices, We guided for a mid-term EBITDA level of 1.5 to 1.7 billion euro. We are seeing now that a material part of this expected earnings expansion is happening much earlier. Our energy infrastructure solutions business is slightly ahead on a year-over-year basis despite unfavorable foreign exchange developments. We remain excited about the underlying growth path of this business. Especially the current momentum in the heating transition will lift energy infrastructure solution to the next level. This is a sleeping giant that will now gradually wake up. We are ready to deliver on the promised growth rates with a fully packed project pipeline. Consequently, we aim to further improve the transparency of this business activity. From 2024 onwards, energy infrastructure solutions will become a standalone reporting segment and will represent our third strategic business pillar next to energy networks and energy retail. Adjusted net income is essentially driven by the positive EBITDA development, resulting in a year-on-year core adjusted net income increase of more than 88.0%. Below EBITDA, there are no special items. For the full year, we expect interest expenses slightly above €1 billion. Bottom line, we achieved an adjusted net income of around €2.9 billion in the first three quarters, which is already at the upper end of our full year guidance. Turning over to economic net debt. First, the strong Q3 operating cash flow should not come as a surprise. It reflects the usual seasonal pattern in our business model. Overall, we still expect a cash conversion rate of close to 80% for 2023 before we will go back to around 100% in future years. Second, we accelerated our investments into the energy transition. Our group is ahead of plan by having invested roughly 40% more after the third quarter on a year-over-year basis. Due to seasonally high investments in Q4, we still expect economic net debt to slightly increase until year-end. Yet, given the strong outturn in nine months, we now narrow our full-year economic net debt expectation to around €36 billion. In that guidance, we keep an ample buffer for margining effects, and we continue to manage our working capital tightly. And in that sense, it should not surprise you that all of our businesses are extremely eager to even beat the €36 billion END by year-end. To summarize, we have sufficient debt capacity and market access to fund our growth plans. Our solid balance sheet can be translated into an expected debt factor of around 4.1 times at year-end. Additionally, Over the years, our debt capacity will further increase in absolute terms due to our growing EBITDA. These are some of the reasons why Standard & Poor's speaks about, quote, ample rating headroom in their rating report from July. This makes us confident. If regulatory conditions do set the right economic incentives, we will be able to further scale up investments well within our current credit metrics for a strong BBB BAA rating. Finally, let's turn to our outlook. Three messages. First, we are expecting to be at the upper end of our already upgraded guidance, but we are explicitly not upgrading our earnings guidance at this stage. Second, We maintain a sizeable buffer for the start of the winter, which, as you may have noticed, has not yet arrived. This buffer relates mainly to our customer solution segment and now stands at around 300 million euros to cater for a potential reoccurrence of the energy crisis. Third, fundamentally, we are turning more and more positive on the mid-term performance capacity of our energy retail business. We are confident that at least half of the 500 million euro guidance uplift from first half can be regarded as sustainable from this year onwards. With this, we will be operating in an earnings range of 1.5 to 1.7 billion euros in energy retail from next year onwards. In my view, this is one of the most important and comforting messages for today. Moving on to our capex forecast for this year, we have been very successful in ramping up our capex in networks. We now expect a total capex spending of 6.1 billion euro for the full year 23. And finally, we are ready to further scale up our capex program in the coming years if regulatory conditions are set at the right level and set the right economic incentives. I know that all of you are waiting for concrete updates on the regulatory development, specifically in our main markets, Germany and Sweden. We promise to give a comprehensive update on the regulatory packages with our full year update in March next year. This timing is unchanged. Thank you very much for listening, and over to you, Iris.

Thank you very much, Mark. And with that, we will start our Q&A session. Please let me remind you briefly as every time to please stick to two questions each so that everyone or most of you have a chance to ask questions here. Let us start. The first question comes from Michael Becker from HSBC. Michael, please go ahead.