E.ON SE

Good morning, everyone. Dear analysts, dear investors, a warm welcome from my side to our full year 2023 results call. I'm here with Leo and Mark, who will present our results to you. As always, we will leave enough room for your questions afterwards. And also, as always, please stick to the two questions rule each. With that, I hand over to you, Leo.

Yeah, thanks, Iris. Good morning also from my side. I'm here with Mark today. He's still my CFO and he will remain that until the 1st of June. But I'm very proud before I get to the 2023 numbers and our revised outlook that also we have been able to very smoothly figure out a great succession for Patrick Lammers with Mark, who happily will take over. the new challenges which a new job will offer to him. But as I said, he will stay around for a few more months to come. So where are we today? Maybe two words. Today we are actually talking to you from our brand new testing lab in Essen. So for once, we have actually decided not to broadcast from a conference room, but rather from a real life facility in which you see where all the investments are going to, which we are going to announce today and explain to you today. This is one of the examples how E.ON is driving the energy transition forward. So, let me now turn to my four key messages. First, 2023, we have seen a strong delivery, the strongest company performance since I took over as CEO, actually three years ago. And it makes me proud that we have not only delivered great financials, but also that we are able, shown that we are able to grow. Second, we will emphasize today that this is the right time to step up to the next big investment cycle, and we will continue to deliver on a unique once-in-a-lifetime, once-in-a-generation growth opportunity. And for E.ON, this means that we are upping our investment plan to $42 billion by 2022. aid, as you have seen. Third, I want to emphasize that we are not only delivering against financials, not only growing, but we are also delivering against our aspirational sustainability targets, as well as against our claim to pioneer the digitization in the energy sector. And fourth, we will actually fund this growth from a strong balance sheet and create significant shareholder value. I'll touch on all these points a little bit, but Mark will then detail some of them more later. On my first message, 2023 was again a year full of challenges. War in Ukraine, interest rate turnaround, economic downward trend in Europe, a continuous rise of geopolitical risks. Nothing of that has changed the continued delivery, the continued performance of E.ON. With an adjusted group EBITDA of 9.4 billion, we delivered results that have significantly exceeded our expectations for the 2023 financial year. And actually, in both our segments, energy networks and customer solutions grew in most of our markets year on year. Finally, our investment rose by around 1.7 billion to 6.4 billion from a starting base of 4.7. And this accelerated growth momentum underpins the validity of our strategy. This growth momentum I just mentioned stems from a supportive political environment for E.ON. And this environment becomes evident in the grid action plan of the European Commission. This grid action plan has put grid expansion at the top of the energy transition agenda, something that was unthinkable just a few years ago. The growth momentum also becomes evident in the constructive reform of the European electricity market design. All calls for more government interventions were met with a pretty clear signal. The key to a new energy future is actually more private investments. And all of that has translated into even more aspirational targets. And all of that, again, strongly supports E.ON's investment case. And we see the impact already in our day-to-day operations, not only in stated ambitions. For instance, customer connections requests from customers in Germany have increased by 75% within one year to more than 400,000 following the increasing renewable trend. But I want to emphasize that we are seeing growth momentum not only in Germany, but in all our markets. Likewise, updated decarbonization targets in the industrial and housing sectors drive the need for further energy efficiency. they created an increased customer demand for tailored infrastructure solutions to decarbonize. And we are tackling this within our energy infrastructure solutions business. Investments in this area have increased by 30% year over year. And this growing relevance of the now standalone segment leads to our new three-segment structure. Energy networks, energy infrastructure solutions, and energy retail. That's all that is just as simple. Energy networks contains our regulated business for the energy transition, which makes E.ON the leading DSO in Europe. Energy infrastructure solution includes our long-term contracted activities, such as district heating and cooling networks in urban areas, integrated energy infrastructure for industrial and for commercial customers. And in energy retail, we have proved to be the best owner when it comes to operating our customer portfolio for the commodity activities and for the solutions part of the B2C business. And we do not only manage this business as a strong cash contributor, we also size the opportunity of leveraging our commodity portfolio to accelerate the growth of our solutions portfolio. And now let me just briefly flip through these segments and our growth plan for all of them. In energy networks, it's now all about delivery. The majority of the investments we are announcing today will be allocated here. And as a CEO, in many discussions I've been asked whether we have the preconditions in place to deliver. And the clear answer is yes. And to highlight that, let me just... touch on some critical aspects and how we manage them that are always mentioned in the discussions. First, operations. Proof of evidence, we are successful in attracting a skilled workforce. In 2023, we have hired more than 5,000 new colleagues on a gross basis in networks only, 11,000 in total, 5,000 in networks only, and that despite tight labor markets. And we are fully confident that we can attract more than 13,000 additional talents there by 2028. So we have the people. Second, supply chain. We are working on this topic already since years. Despite 1.7 billion higher investments, we have not encountered a single bottleneck in the supply chain in the last year. So much for us having this under control. How have we done that? Well, we have worked on standardization, on better demand forecasting, on process improvements in our energy asset management. We have worked with our suppliers to increase their resilience and increase their capacity. Third, And we see real improvements in several areas, and so we are confident that this will not be the crucial bottleneck. Because of that and many other improvements which we have done in many other areas, we can assure you we can deliver and we will deliver our accelerated investment program. As responsible corporate citizens, we are also putting, however, significant efforts on affordability when it comes to the energy transition. It's not just any investment is good for us. We want only efficient investments. While we are seeing extended grid-free increases in Germany in 2024, we would, however, want you to keep in mind that those are not a proxy for future developments as they are driven by the reintroduction of redispatch costs to the network fees. Going forward, we expect more moderate raises for households, ensuring that the network tariffs and fees remain a manageable part of the total bill. So therefore, for all of these reasons, I'm confident to share with you one of the most important numbers today. We will ramp up our energy networks capex to a new target of 34 billion euros out of the 42 billion in the investment plan. And with that, we have now increased our network CapEx plan for the third time in a row. It now is twice as high compared to when I took over three years ago, and actually also the total investment volume of 42 is more or less twice as high as when I took over three years ago. You see me really comfortable with this run rate for three reasons. One, we have started to ramp up our spending already from 21 to 23, and we have over-delivered the initial targets last year. Second, our annual investment plan is backed up with 110% of operational projects. So if something goes wrong somewhere, we will still hit the target because we are overshooting when it comes to investment. And then over the year, you know, managing it towards the target picture which we want to achieve. And finally, our long-term planning has further improved. We have a much better visibility until 2028 and beyond, and we will be able to keep this run rate into the mid-30s. And overall, all of this will actually boost our power wrap growth to an outstanding CAGR of 10%. However, we have deliberately not gone to the limit of what could be possible. We have kept a sense of proportion regarding the network investments, and let me explain to you why. While on one hand the importance of networks for the clean energy transition has finally been widely appreciated across Europe, we have on the other hand seen constructive regulators and various improvements in regulatory parameters in different markets. And here are some examples. The needed return step-ups on new invest in Germany, the increase in regulatory WEC in Sweden, the WEC uplift in Poland. And on the other hand, we are also benefiting from existing inflation protection mechanisms in various markets. And especially in CEE countries with real WREP regimes, we have seen double-digit WREP indexation. All those uplifts and the various inflation protections in all our major markets allow us to ensure an attractive return on capital of 150 to 200 basis points in average over all markets above our capital cost. And we deem this value spread as necessary to successfully compete for investors in an international context. The regulatory achievements that we have seen enable us to step up our investment plan, but to make the clean energy transition a success, more investment would be needed, particularly in Germany. And let me emphasize, operationally, we are ready. And we are equipped with the necessary strong balance sheet capacity for additional investments from the Easter package. But to invest even further, we require more substantial improvements, especially in a German regulatory framework. In particular, the rate of return must improve to further attain the required return for our investors, and Marc will add more details on that later. Let me now continue with our second segment, the long-term contracted infrastructure activities in our ICE business. ICE has continued to live on its growth trajectory, 2023 was successful, driven by strong operation and sales performance. Investments year over year increased by 30%, reaching close to 700 million euros. 80% of these investments were focused on growth projects and the expansion of our heating networks, a long-term and quasi-regulated business. We are targeting for a total CapEx program of around 5 billion euros until 2028, maintaining our expected IRR rate of 7% to 10%. We are confident that we will be able to deliver here, also looking at our pipelines, which is already today two times the size of our sales targets for the year 2024. And with that, let me turn to retail. Our energy retail business delivered in a challenging market environment. We have shown, again, resilient returns and cash flows, short and long term. To protect these results, we have defined three areas to drive our operational excellence. First, we radically digitize and automate our processes. In Germany, we can now, for example, run 10 million price contract adaptations today in only six weeks compared to 14 weeks in the past. And we will further accelerate this. We have included AI tools to improve our customer experience, and we are working diligently to be one of the highest quality energy supplier in Europe, also building on the reliability which we've shown over the last years. Second, with our energy market departments, we manage a fully integrated portfolio optimization across all regions. More advanced hedging supports customer price protection and enables us to actively manage retail commodity risks. And third, we continue to focus on high-quality customers, lowering our exposure to large B2B customers whilst focusing on high-value customers. And all of these initiatives will further improve our revenue margin profile in energy retail going forward. Outside of commodities sales, our large customer portfolio is providing a strong leverage for E.ON to be the provider of choice also when it comes to new customer solutions. And we were able to continue to grow also this business both on capabilities and lead generations. I want just to highlight a few examples, like in the e-mobility business, we have closed additional prime partnerships with BMW and became the strategic partner for Mercedes in Europe. And we're working on more to come. And these are just two of the examples for successes which we have seen. Our new solutions business will deliver 10% CAGR going forward. So much for the great 2023 financials and our updated 42 billion growth program with a focus on infrastructure businesses. Let me now turn to our progress in becoming more sustainable and more digital. First, digitization. The systems of the future can only be operated fully digitally. And therefore, we are in the process of digitizing the core of our operations with market-leading technologies. We have by now moved 100% of our applications from our data centers into the cloud. We have no data centers anymore. We have ripped them out. By 2026, we will have massively improved and standardized how we steer and observe our grids. We are simplifying grid connection processes, minimizing connection times, and increasing the stability of our system-relevant infrastructure. And that is obviously a benefit for society overall. But also with regards to our customers, we are continuing our efforts to migrate all accounts to upgraded sales platforms. We have shifted to a digital-first customer experience, and already today we have more than half of our customer interactions fully digital. This share will further increase, obviously with benefits for cost to serve. We are also seeing an increasing number of energy companies putting trust in our software solutions, which are available to the third markets, not all, but some. And here we generate additional external revenues and operate a portfolio of startups that offer cutting-edge software technologies. And all of that we have bundled in our E.ON. One example is Enveleo. which is offering twin of digital grids, of electricity grids, and already today 30 million connection points in Europe are running on that technology. Now on sustainability. With everything we do, we are helping our customers to become more sustainable, but that doesn't stop us, ourselves, from becoming more sustainable. And we strive to continue this year by year. I would, however, without going now into all targets, like to emphasize one target especially, safety. For us, it's of an absolute importance that every employee returns home safely and healthy every day. And we are operating grids and infrastructure within a potentially dangerous environment. And therefore, this is an absolute focus, and we have been able to reduce our KPIs in the health and safety area year over year to a significant amount, but we are never satisfied in that area because every single severe accident which we have is one too many. The effort, the emphasis which we are putting on health and safety, we are also putting diligently on all kinds of other targets. In total, you should take note of the fact that we are now including the CDP A-A list, which really makes us a champion, and they are looking at all the parameters, so we are really moving towards becoming more sustainable year over year. And we have also a prime status B minus by ISS ESG and a low risk profile according to Sustainalytics. So all the rating agencies are basically giving us scores which are slowly hard to even improve going forward. So let me conclude. We deliver on the financial targets. We deliver on sustainability. We deliver on digitization. And we are uniquely positioned to capture unprecedented growth opportunities. We will focus on value creation and on an investment plan that is based on sound financials. And we again commit to annually increase our dividend per share by up to 5% year over year. And now Mark will guide you through the updated financial framework, which is building on that, and how we translate our strategy into an attractive financial reward for all our shareholders.

And with that, over to you, Mark. Leo, thank you very much and welcome from my side to everyone. When it comes to the changes in the management board, it's announcement day, not a farewell. That's why I directly cut through to my main messages. First, we significantly over-delivered in 2023 on our earnings targets, as you just heard from Leo. The magnitude of the beat certainly is extraordinary. The fact that we outperform should nevertheless not come as a surprise to you. We deliver what we promise, and we always strive to achieve more. Which brings me to my second message. We have successfully demonstrated in 2023 we can manage an investment momentum leading to an increase in our annual organic capex run rate by close to 35%. This is an important muscle that we will continue to use big time. We increase our midterm investment guidance by close to 30% to 42 billion euro by 2028. More importantly, when we do this, we have a clear focus on value creation. Which brings me to my third message. Our operational strength is backed by a strong balance sheet. Our accelerated investment program is fully financed by our operational cash flows and a controlled build-up of financial debt. we can comfortably ensure a strong BBB BAA rating. Even with the full execution of our growth plan, we see an additional 5 to 10 billion euro balance sheet capacity by 2028. Fourth and final message, our ambitious midterm plan will provide a highly attractive total shareholder return. We will deliver high single-digit underlying earnings growth. In addition, our shareholders will continue to benefit from our super reliable dividend growth commitment by up to 5% annually, as Leo just said. Let's zoom in on our 2023 operational performance. Our adjusted EBITDA came in at 9.4 billion euro. This is roughly 1.5 billion euro above our initial guidance midpoint for the full year 2023. In our energy networks business, the increased underlying EBITDA of 6 billion euro came from capex-driven RAB expansion essentially in all countries. On top, we saw temporary upside from lower than expected so-called redispatch costs in Germany. And as you know, these timing effects are all economically neutral over the years. Outside Germany, we also observed additional temporary upside from a continued recovery of network losses. In our customer solutions business, we achieved an adjusted EBITDA growth of around 1.1 billion euro, which was driven by recurring and non-recurring elements. When it comes to the recurring effects, we observed a normalization of our B2C retail margins due to an improved market environment and our fast adaptation to a more volatile commodity price environment. We are now comfortable that an underlying earnings level of 1.6 to 1.8 billion euro will be a new base to grow off. And let me be clear, this new norm also applies in today's, very today's commodity price environment. Our energy infrastructure solutions business is fully on track with its underlying 10% EBITDA growth trajectory. In 2023, this growth was partially disguised by adverse ethics effects and an exceptionally strong financial year in 2022, containing partially positive one-off effects from asset optimization in the high price environment. Let's move on to the adjusted net income, which came in at 3.1 billion euro, roughly 0.7 billion euro above our initial guidance midpoint for the full year. The growth is essentially driven by the positive EBITDA development because earnings with a non-recurring character mainly occurred in entities with major non-controlling interests. Minorities have been exceptionally high. This effect will fully normalize already in 2024. Let me now turn to our strong balance sheet. Our debt factor at year-end sits comfortably at four times. This builds the solid foundation for the acceleration of our green growth plan. The quality of our earnings will remain high. Our cash conversion rate for the medium-term plan will stay at the well-known 100%. Cash conversion came in in 2023 at the expected 80%, belong, 100% norm. And you're all aware of that this builds on the very strong 150% cash conversion back in 2022. So an expected normalization, which will bring us back to the earnings quality, which you are used to from us. Our provisions were driven by the strong decline in interest rates in Q4. our pension discount rates dropped by around 100 basis points in the fourth quarter alone. The environment led to an increase in our pension liability and to an increase in the accounting value of the asset retirement obligation. If you look at current rates, you will observe that this effect has already partially reserved as I'm speaking. All in all, this means that we have an exceptionally strong balance sheet which provides a solid foundation for our future growth plans. Which brings me to our CAPEX plan. As Leo already said, we are facing a unique investment opportunity. The lion's share of our CAPEX upgrade will be invested in our energy networks business. 90% of this is RAP effective. We target to increase our annual capex run rate by a further 20% each year until 2025. This will translate into a sustainable CAGR of our power regulated asset base of 10% annually. Our networks investments have a clear regional focus and follow largely the same underlying trends across markets. As a significant part of our investments are directed at German regulated networks, I would like to zoom in for a brief moment on the value creation in Germany. In the German regulatory system, we create value through allowed capital returns in our investments and through becoming more efficient relative to our benchmarked cost base. Our ambition is clear. We want to achieve 150 to 200 basis points value spread on our total cost of capital across our entire networks business. And our German business, by far the largest market, will live up to this as well. This is made very transparent for you if you look at the composition of our EBITDA. Our step-up in investment volume presented today is well tailored to the total effective returns that we can and will earn. For an even further step-up of our investments, we would need to see additional improvements in the regulatory environment. In this context, we highly appreciate that the German regulator has started an open and transparent consultation process on how to make the German regulatory regime fit for what is and will be needed in the future. In parallel, we continue to take legal actions where regulatory parameters are not in sync with market standards. This continues to be the case for the market risk premium for the current regulatory period. If this was to improve to international market standards, it could justify further investments beyond our currently communicated envelope. Next to energy networks, we continue to gradually increase our investments in the energy infrastructure solutions business. We see growing demand from our industrial and commercial customers for decarbonized energy and heating solutions. we have not yet factored in the significant potential from the municipal heating transition, which is gaining more and more momentum across Europe. And in energy retail, we continue to focus our investment activities on strengthening our digital sales and service platforms against the digitization strategy that Leo laid out. Or our investments are required to meet strict internal hurdle rates, build up of project and country-specific WECs, plus risk-adjusted spread ambitions. Turning to our 2028 outlook as we roll forward our five-year guidance horizon. Our operational achievements in 2023 and our transparent value creation set the starting point for a unique green growth story. Of course, we need to discount for the significant positive non-recurring effects that we saw in 2023. Doing this, we will increase our underlying earnings by 6% per year, or in absolute terms, EBITDA will grow on an underlying basis by more than €3 billion to more than €11 billion in 2028. In the same period, adjusted net income will grow by €0.9 billion on an underlying basis to €3.3 billion. And this should provide for you a feel for the underlying robustness and strength of our earnings trajectory also well beyond 2028. As a reminder, our net income line is now protected against any further change in interest rates due to the remuneration scheme for new investments in German energy networks. Finally, we focus on value creation and increase our ROSI guidance by 100 basis points to a range of 8-9% on average for the coming years. Our green growth story is supported by all three business segments. Close to 90% of the EBITDA growth can be attributed to our two infrastructure business segments. Growth in energy networks is driven by our growing investments. Our power-wrapped CAGR of 10% translates into an underlying EBITDA CAGR for energy networks of 7%. Energy infrastructure solutions is expected to grow at a CAGR of 13% until 2028. This is supported by a total investment plan of 5 billion euros. Be reminded, the segment will be a standalone segment from Q1 2024 onwards. We will then share with you additional details on the business. Finishing with our energy retail business. Based on the strong recurring earnings growth in 2023, we envisage our energy retail business to grow gradually by another €0.3 billion to around €2 billion by 2028. Growth will be driven by an increased focus on high-quality customers, excellence in operations, and an increasing share from our decarbonization products and services. Onto our balance sheet and capital structure commitments. We have a strong financial position with ample headroom to further accelerate the clean energy transition going forward. we remain fully committed to our strong BBBAA rating commitment. With our accelerated green growth plan, we will remain comfortably below our up to five times debt factor commitment. In terms of rating relevant ratios like FFO to net debt, we look at an additional balance sheet capacity of 5 to 10 billion euro by 2028 on top of our current 42 billion euro capex envelope. We explicitly reserve the option to carry out additional opportunistic portfolio measures over the course of the next five years. This would provide for even more balance sheet headroom. Importantly for you, executing upon such disposals should still leave us in line with our EBITDA and adjusted net income guidance for 2028. All this sends a clear and simple signal to you, there is room for much more. Let me conclude on what all this means for our shareholders. We are fully confirming our long-term dividend growth commitment with annual increases in our dividend per share of up to 5%. This commitment is backed by a strongly growing earnings per share of 6% on average across the next five years. We will propose to pay out 53 cents per share for 2023 And based on yesterday's closing price, our financial commitment to you translates into a total annual shareholder return of significantly more than 10% for the next five years. And if there is one thing that you can continue to rely upon, and with that I'm getting back to my first message, we will deliver. what we promise, and we always strive for more. And with that, back to Iris.