E.ON SE

Good morning, everyone, and a warm welcome to our half-year 2024 results call. I'm here with Leo and Nadja, who will present our H1 results. Special welcome to you, Nadja, your first call in your new role as our CFO. Happy to be here with you. As with every occasion, we will leave enough room at the end for your questions. This time, we will also aim to finish two to three minutes earlier because we know that you probably want to jump on the next call with RWE. We will cater for that. With that, I hand over to you, Leo.

Thank you, Iris. Good morning, everybody, also from my side. Happy to be here again with you. A warm welcome. I'm happy to talk to you about another successful six months for E.ON. And once again, we show that we are the playmakers of the energy transition. And I have today only three very simple messages for you. Let me just kick it off with them. First, during H1, we have not only delivered financially, we have also further scaled our investments. With that, we continue to be fully on track to meet our Group 24 guidance. Second, we target to be the efficiency leader in all our businesses. And today we will share with you some significant achievement that we have made in this regard. And third, our growth story really has just begun, considering the massive investment requirements for distribution grids in the next decades all over Europe. To my first message. Our group financials are in line with our expectations. Our reported performance is damped by well-known positive timing effects and one-off effects, which occurred in 2023, but do not reoccur this year. And Nadja will give some more details on all of that later. The underlying earnings development is predominantly driven by the successful execution of our investment plan. We increased our investments by more than 20% or in absolute numbers by around 500 million euros in the first six months of this year in comparison to the same period of last year. And to make it a little bit more interesting and tangible what we are talking about, I brought to you some of our CapEx. What you see here is one out of three phases of a 110 kV cable. So three of those are one 110 kV line. So we're building all of that like hell. It's actually quite impressive I put it like this. Yeah. No, so it stands between the two of us. This we don't want. So we are making progress in terms of CapEx delivery. And with all of that, financially and operationally, we are fully on track to achieve our group guidance for 2024. And again, Nadia will give more details later. Now, on my second message for today, E.ON's efficiency leadership. We are leading the pack in terms of efficiency, and this is also clearly our aspiration. We received an average individual efficiency score for our German power networks of around 100%, which is significantly above the average. And in addition, two of the DSOs, which we have, have received a super efficiency bonus from the regulator, which brings them to an efficiency even above 100%. We also continue to proactively address potential operational bottlenecks. We have increased our workforce in the first half of this year by more than 2,000 employees on a net basis. We have actually hired more, but on a net basis, we have increased them by 2,000, actually slightly north of 2,000 employees. And the vast majority of those have been added into the German network business. We are with that fully on track to achieve also the plant additions in workforce which we are aiming for the full year. We have also made significant progress in the standardization of key components. The reduction of the number of variants that we use is a clear example of this. For example, on high voltage pylons where we then put those decent cables below, we have reduced from 130 different types to 20. And in the substation transformer variants from around 90 to around 20. And this simplification of variants actually helps us to also future-proof our supply chain because it's obviously easier with a standardized approach to actually achieve the volumes in which we have. And furthermore, on the supply chain, we have diversified our supplier base and optimized the ways in which we forecast materials. And this allows for a more reliable long-term planning with our key suppliers. And consequently, we have been able to plan and secure quantities with certain suppliers for critical classes of materials up till 2033. Let me now elaborate a little bit on the strong operational performance across our different business segments, which obviously this performance is the base for our future growth. What is clear for us is that future power networks need to be digital. This is why a large proportion of our investments into networks and solutions are, metaphorically speaking, not just copper and aluminum like here, but also in silicon. A core part of our strategy is to standardize, digitize and automate all processes across the company. And we apply them along our value chain from the connection request for a customer who wants to feed in renewables to the billing process. And for example, we have already half the processing time for approving new connections. We have mentioned to you in the past that we are progressing well towards full digitization of connection request handling. And let me now shed some light on the meter to cash process where we reached an extremely important milestone just this June. We went live with the new meter-to-cache system in the first half of 2024 for around half of our German grid customer base. The system which we have installed to that regard provides standardized processing for things like meter reading, device management, billing. And to make clear what a migration effort we are talking about, this implied that we had, which we did successfully, we had to migrate half of our German customer base together with 12 billion data sets over one weekend and then go live from Friday to Monday. It's actually a huge achievement and it shows how much progress we have made in becoming a digital utility for the future energy world. Now that we have validated the system, we will, in the second half of the year, also migrate the remainder of our customer base. Within our energy infrastructure solution segment, ICE, we are progressing in decarbonizing our customer and society while securing financial growth for E.ON in the future. And here are just some examples. In the UK, we have announced a long-term partnership with Peel Ports Group. the UK's second largest port operator. This partnership includes plans to install the UK's largest roof-mounted solar energy system on the port of Liverpool. We also signed an agreement to build our pioneering low-carbon energy network Ectogrid for more than 6,000 new homes and business properties at Silvertown in East London. These achievements demonstrate that the demand for decarbonization solutions remains strong, and this strength is also reflected in the ICE sales portfolio pipeline for the second half of this year. On the energy retail side, customer numbers were stable despite the increase in market activity in some markets. Additionally, we continue to roll out digital customer handling and can now report that two-thirds of our contact volumes are being handled digitally, which is a significantly marked increase versus around half what we had last time. The strong operational competence of our energy retail segment is also highlighted by our new partnership with, in this case, MAN Energy. Truck and bus, where we will lead the build-out of a public charging infrastructure for electric trucks, which will also be available to the public, for example to cars. We will install a total of 400 public charging stations at 170 locations across Europe. And that brings me then to my third and last message for today. Unchanged. It's an unchanged message. We continue to see significant upside potential for investments. And I want to put that into numbers. And let me just quote a recent Euroelectric study. Europe will need to almost double investments annually. to around 55 to 67 billion euros depending on the assumptions which you make which is roughly twice the 33 billion which we are in distribution networks spending today and this huge demand for network investment is being driven by the addition of renewables as well as by charging a changing customer behavior by e-mobility and all the well-known effects For our German DSOs, this translates into an increase of relevant connections by four times from around 1.7 million in 2023 to around 7 million connections in total by 2030. Considering the constantly progressing and challenging macro environment, I would like to highlight in this context the very important point that our growth story is actually very sustainable and very robust. The new EU Commission is expected to develop a proposal for new climate targets towards 2040 and its first climate policy project. As its first climate policy project, actually the 90% which have been announced have zero impact on our growth trajectories going forward. We are pretty independent also on the political target when it comes to our growth stories in the next 10 years. A continuous re-evaluation of the set target is important, but it's of greater importance to focus on implementation and affordability rather than actually discussing additional and adjusted targets. So what we would really need is to find a way to provide adequate returns to allow for a faster build-out. And here we still require substantial improvements, especially in the German regulatory framework. in particular the return on equity must improve to attain the required return for our investors beyond the level which we have already in our plans if this were to improve to international market standard it could justify further investments beyond what we have in our plans so far in addition a focus on flexible energy system and more efficient build out requirements with regards to where the build out of renewables should happen to ensure that sufficient grid capacity is available would be very helpful, and the last two aspects that I mentioned would both reduce significantly the system cost, which would also be a positive in terms of affordability. So much also from my side. Three simple messages. Let me just repeat them again. Continued financial delivery, including growth. Continued operational excellence, including digitization. And a sustainable and robust growth outlook. And with that, over to you, Nadja.

Thank you, Leo. And a warm welcome to all of you from my side. I'm delighted to present to you our financial results for the first time today. As your new CFO, I fully stand behind E.ON's capital market story, and my focus is to deliver on the financial promises that we have made. The execution of our growth plan is of high importance to me, and I will ensure that we create value for our investors in everything that we do. With that, let me walk you through our solid results of the past six months. Here are my three key messages today. First, with €4.9 billion EBTA and €1.8 billion adjusted net income, our H1 key earnings metrics are in line with our expectations. Our underlying EBTA is actually growing in the order of a low triple-digit million euro amount, putting us in line with the full-year underlying growth assumptions that are baked into our guidance. As you well know, our reported growth is dampened by non-recurring positive and one-off effects from 2023, which arose mainly in the first half. Overall, we fully confirm our group guidance for 2024 and the targets for 2028. Second, investment-backed earnings growth and strong operational execution remain significant growth drivers across all our segments. We are progressing substantially with our planned investment ramp-up and increased our H1 capping spending by more than 20% year-over-year to 2.9 billion euro. Third, H1 economic net debt came in as expected and continues to provide a solid foundation not only for our current investment growth plans, but also for potential increases in the futures if returns are adequate, like Leo mentioned. Let's move on to the details of our H1 EBTA development. Our adjusted EBTA was down by 800 million euros year over year due to the non-recurrence of positive impacts from timing and one-off effects seen in H1 2023. As mentioned before, adjusting for these, we would have seen a solid low triple-digit million euro increase. Looking at the drivers in our different segments, let me start with energy networks. The small decline in H1 was driven by the unwind of prior year positive timing impacts from lower re-dispatch costs, as well as slightly higher than expected costs from upstream networks in the first quarter of 2024, and slightly lower wheeling volumes in Germany due to warmer temperatures during the second quarter in 2024. As a reminder, all those effects are economically neutral given the regulated nature of the segment. Additionally, the accounting change for our Slovakian business to Ad Equity has driven a technical reduction in EBTA in our Central European business. Regarding the underlying operational performance, we continue to be very excited about the growth path of our networks business. Underlying EBTA shows significant WAP-driven earnings growth in all regions, the positive uplift from regulatory parameters in Sweden, and positive inflation protection in Germany. Additionally, we are realizing the remaining network loss recoveries in southeastern Europe. In energy infrastructure solutions, investment-driven growth is progressing well, as expected. Underlying EBITDA growth is currently overcompensated by effects we had already mentioned in Q1, namely the non-recurrence of positive 2023 runoff effects, the accelerated maintenance schedule, and temporarily lower volumes in our district heating and cooling business, driven by warmer temperatures, with the latter effect also extending into Q2. Fundamentally, we are fully committed to the exciting growth path that lies ahead of us for the energy infrastructure solution business. In energy retail, the year-over-year EBITDA decline we see is fully in line with what we expected. Let me explain the various drivers behind it. The largest impact came from the well-known unwind of 2023 runoff effects from procurement optimisation and the UK tariff deficit recovery. B2B performance in the UK continues to be strong, slightly overcompensating for the well-managed impact from lower volumes due to warmer temperatures. Another key effect which drove the EBITDA year-over-year variance was the increase of market activity which we already had anticipated. Let me point out. The continuously reliable performance of our energy retail business, not only during the energy crisis, but also in the ongoing phase of normalization of market conditions, is in line with our guidance and confirms our strong conviction to this highly cash-generative segment. The H1 2024 Adjusted Net Income Development, shown on page 9, follows EBTA with all earnings elements below EBTA in line with our expectations. This puts us on track for our full-year guidance. The development of our economic net debt, as shown on page 10, shows our typical Q2 seasonality. We have seen strong operating cash inflow broadly covering our Q2 investment spending. The economic net debt uplift is largely driven by the dividend payment in May. When it comes to our capex ramp-up, it continues to progress well. Across the group, our capex fill rate in H1 stands at roughly 40%, which is around 2% ahead of H1 2023. Our ramp-up remains frictionless with respect to the management of our operations and supply chains, and we remain confident on the future development of our investment spending. Finally, following the rating upgrade by S&P and Moody's rating confirmation in March, we have also received Fitch's confirmation of our strong balance sheet position. Fitch kept our BBB Plus rating unchanged. With this, all three rating agencies continue to positively assess our funding and financing outlook after the significant capex increase that we announced in March. This also confirms our view that, in line with our commitment to a strong BBBA rating, we have additional balance sheet capacity to fund further energy transition investments if regulatory conditions are adequate. I would like to close today's presentation by fully confirming our guidance. Our solid H1 results support our 2024 earnings expectations, particularly in the energy networks and energy retail segments. We have seen some temporary effects in our energy infrastructure solutions segment. These stem from warmer temperatures resulting in lower volumes in the district heating and cooling part of the business. Therefore, we now expect the segment's earnings to be in the lower half of our 550 to 650 million euro guidance range. That being said, we fully confirm our 2024 guidance, both for our segments and for the group. We see the midpoint of our group guidance range still as the best estimate for our full year result, meaning that we expect the other segments to compensate for the temporary effects in energy infrastructure solutions. We also confirm all our 2028 targets, both for all our segments and for the group. Finally, let me say that our balance sheet remains sound. This enables us to continue to pursue value creation in organic growth opportunities while rewarding our shareholders with a growing dividend. With that, back to you, Iris, for the Q&A.