E.ON SE

Good morning, everyone, and welcome to our H1 2025 results call. I am here with Leo and Nadja, who will present our half-year results. As with every occasion, we will leave enough room at the end for your questions. With that, I hand immediately over to you, Leo.

Thank you, Iris. Warm welcome to all of you also from my side. Today is a special reporting day. It coincides with E.ON's 25th anniversary. We are really proud how we have successfully repositioned E.ON over the last years. We are a completely different company from what we have been 25 years ago or even 10 years ago. And as a result, we can credibly claim that we are the playmakers of the energy transition. But that said, we are not making a big fuss around this birthday because what truly matters, what truly matters to you is not the past but what we deliver now and in the future. And therefore, let me get straight to my three key messages for today. First, during H125, we deliver both operationally and financially and we remain fully on track for our full year guidance. Second, we are in a crucial phase of the process for the upcoming fifth regulatory period for power in Germany. And while we acknowledge some positive aspects of what we have seen so far from the regulator overall, we see the need for significant improvement. And third, Our resilient growth story will continue well into the 2030s. And this is driven by the transformation of the energy system, not only in Germany, but across Europe. We see strong demand drivers also in our non-German markets, which all highlight the strength of our strategic growth story that we have also shown over the last years. On my first message. Our H1 results came in strongly with an adjusted EBITDA of 5.5 billion euro and an adjusted net income of 1.9 billion euro. CapEx back growth continues up 11% year over year. And with these numbers, we are fully on track for our full year guidance and Nadia will later provide you with more details on our financial delivery. I would like to use the opportunity to highlight some of the outstanding examples of our consistent strong operational performance. We have to deliver against continued high demand in connection requests. For example, we continue to massively connect photovoltaics, PV. Today, and I've mentioned that number already in the past, 28 gigawatts of solar capacity are connected to the grids in the federal state of Bavaria only. And those 28 gigawatts are matching Spain's total solar capacity or nearly matching Spain's total solar capacity of 32 gigawatts. And most of that solar capacity is again connected to the grids of our local DSOs in Bavaria, Bayernwerk and Lechwerke. But what is important, you can't connect such an amount of renewables without upgrading and fundamentally changing the whole grid behind the connection points. That means we had to upgrade our whole grids with a priority on stability and steerability. We are also standardizing all connection processes in Germany and handle them with our proprietary digital platform. This is best in class and enables us to significantly improve the time we need to process connection requests for default cases from 22 days as in the past to under 24 hours. However, if we hit bottlenecks, which we increasingly do, then we can't upheld the 24 hours. In H1, we also made great progress in the digitalization of the German energy landscape. For example, we have now built a complete digital twin for our 700,000 kilometers power grid, which is based on one central data platform. And we have done this using our technology platform. And Envalue is clearly the market leader for smart grid software in Europe. And we can now calculate real time the capacity and the utilization of the low and medium voltage grid to define, for example, available capacities across all our German DSOs. And this is one of the instruments which enhances our ability to allocate resources and manage grid stability. Lastly, let me do one comment on supply chain management. We continue our journey of standardization and forward planning. Most recently, we communicated a new procurement initiative for core grid components, totaling 6 billion Euro. As part of it, we have entered into multiple capacity reservation agreements for transformers, which is one of the critical grid components. And that we have done with suppliers as Hitachi Energy, Siemens Energy, or Concha. The agreements with these three companies alone secure deliveries worth up to 3 billion euros with contracts up to 2033. Such agreements support our ability to make investments, they reduce costs and they dampen inflationary pressure and they help actually the supply industry to increase their capacities. Consequently, we currently see no major procurement barrier to a potential ramp-up in CapEx. So much for the operational performance examples in energy networks. Let me add a few from the other segments. In energy infrastructure solutions, we recently announced a strategic partnership with the data center operator, Cyrus One. We are designing a local power generation and cooling system to deliver up to 61 additional megawatts of power to a Frankfurt campus, setting a new industry standard. So what it does is it allows CIRES-1 to build a larger data center than they would be able to build based on the grid connection alone. In energy retail, the commodity business is performing as expected. Despite volatile wholesale prices and challenging weather conditions, our risk management has ensured stable financial deliveries. And here we have also continued to push forward with new customer-centric innovation, for example, our home and drive tariff in Germany, which allows EV owners to charge intelligently overnight, integrated with the E.ON Home app. It gives customers seamless control over their energy use, and similar propositions are being rolled out across our core markets. To summarize, let me repeat the points of my first message, the key points of my first message for you. We're financially on track, and this is not by chance, but driven by operational excellence. And the examples also show that digitization is happening across the board at E.ON. And with that, let me turn to my second message for today, the regulatory process for German power distribution starting 2029. In the recent months, the German regulator, the Bundesnetzagentur released drafts for important parts of the future regulatory framework for the RP5. We are still in the consultation phase, which will end within the next week. Overall, we do see that the regulator acknowledges that we are in a different situation compared to 10 years ago. And we see some positive signs in the drafts. For example, the WAC model is the correct approach towards simplification and a better linkage to the general market development for capital return, all the points in the right direction. However, we are not there yet. Unfortunately, the current proposals still fall short of both industry and investor expectations. They fail to create the financial conditions needed to attract additional capital, especially when compared to countries like the UK or the US, where grid investments is actively incentivized. And why is that the case? As you know, Regulatory returns in Germany stem from the return on capital employed and the possibility to achieve operational outperformance within the incentive framework. Nadja will comment in more detail on why the proposals on the cost of equity and the cost of debt are still insufficient. I would like to outline our key concerns regarding the proposed chances to efficiency benchmarking. And let me share our view and arguments on how the proposals could improve. One key concerns is the breadth, the multiple changes of the plan simultaneous methodological changes. The reduction in benchmarking methods applied, a shorter period for addressing inefficiencies, and an expanded comparison group disadvantage exactly those grid operators who invest heavily today in network infrastructure compared to those who do significantly less. The other critical issue for us is the inclusion of the redispatch costs into the efficiency benchmarking. These costs are concentrated among a few DSOs, especially in the regions under the greatest strain from rapid renewables expansion. Including redispatch cost penalizes grid operators who are doing the most to advance the energy transition. And let me illustrate that. Between 2020 and 2024, our northeastern German DSO Aedes invested around 1.4 billion euro into its power networks and integrated nearly four times as many generation units as in the last, in the 20 years before. EDIS is not an exception at E.ON because E.ON predominantly operates in rural areas where demand for renewable connection is higher. As a result, in 2024, E.ON DSOs incurred approximately 80% of the redispatching cost across the entire German distribution grid. It's obvious a municipality of Berlin has no redispatch cost because they have no renewables. But we have the renewables, so we have the redispatch cost. They are the result of non-market-based build-out plans for renewables without due consideration of existing infrastructure. They are not the result of poor planning on our side. And treating them as controllable whilst they are not is economically and legally incorrect. At the last point, full inflation compensation for OPEX is essential. We cannot understand the proposed two-year time lag, which lacks, in our eyes, justification and undermines the credibility of the regulatory framework. Summarizing, to attract additional capital to increase our CapEx run rate, several aspects of the current proposals need to be amended to achieve an attractive regulatory framework. We trust that the Bundesnetzagentur will take both industry and our feedback serious. And based on our longstanding experience with the regulator, we expect that also for the new regulatory period, an attractive and also internationally competitive general framework for network investments in Germany will be ensured. In light of the enormous growth potential, and the need for further network investments, we remain confident that the regulator will apply its discretion in the right direction. And let me now move to my final key message and look at our non-German network businesses, which are performing ahead of expectations driven by strong customer demand. In H1 2025, we increased capex in energy networks outside of Germany by 11%, It's the same number as for total capex, so 11% in total, 11% in non-German business year over year. Some examples to make it tangible. In Poland, data centers are ramping up in the Warsaw area, and this is where we are the supplier. We are already installing a new 220 kV line and have a pipeline of connection requests totaling 1.8 gigawatts of capacity from data centers alone in Warsaw. That's actually spectacular, and for the non-engineers, this means that we are building in the distribution grids assets, 220 kV assets, which are normally only a topic that the TSOs are building. In Slovakia, six major car manufacturers have now reserved capacity totaling around 450 megawatts. In Czechia, we have received 18,000 new connection requests in H1 2025, half of them driven by solar insulation, including households within the low voltage grid. And the list goes on and on for all the markets. What it shows is the growth is actually absolutely fundamental. There is no political driver, only it's driven by customer demand in the meantime and by innovation. But in addition, it's fair to state that also the political background is overall favorable for us. The EU reaffirmed the 2040 climate target and set a renewed focus on grid expansion. Not renewables are the bottleneck of the energy transition infrastructure is. In Germany, the new government kept the ambitious target. It also signaled the need for better synchronization between the expansion of renewables and grid infrastructure, which we fully support. And both the European Commission and the German government have put more emphasis on cost efficiency of the energy transition. And here, E.ON has actively provided thought leadership and used our system-relevant positioning to support policymakers. In that sense, it is encouraging to see that seven out of the ten recommendations which we made in our E.ON energy playbook, which considers a more affordable approach to net zero, were actively considered in the German coalition agreement. So let me conclude with a reiteration of my three key messages for today. We continue to deliver what we promise. Germany's new regulatory framework must be internationally competitive to attract the capital needed. And finally, there is a continued robust growth outlook, not only in Germany, but also in Europe. And now, over to you, Nadja, for a closer look at the numbers, please.

Thank you, Leo, and a warm welcome to all of you from my side as well. Let me start first by sharing our financial and operational development in the first half of 2025, before taking some time later in my speech to also comment on the current status of the regulatory process in Germany. First, E.ON continued to deliver strong operational and financial performance in H1, which puts us firmly on track to deliver our full year guidance. Our adjusted EBITDA reached €5.5 billion, and our adjusted net income came in at around €1.8 billion, which is a year-over-year increase of 13% and 10% respectively. Our increased earnings were predominantly driven by investment-backed growth, as well as strong operational execution and value-neutral timing effects in energy networks. Second, we have accelerated our CapEx spending by around 11%, year over year, with the main share going to our energy networks business. Our planned capex ramp-up and EBDA contribution are on track in terms of quarterly fill rates across all our business segments. Our economic net debt outturn of around 45 billion euro in the second quarter came in as expected, reflecting the typical seasonality of operating cash flow for the first half of the year, the usual Q2 dividend payment, and higher investment activity. Our strong balance sheet continues to provide a solid foundation for our investment plans. And finally, we fully confirm our short and mid-term guidance, including our dividend policy. Let us move on to the details of our H1 year-over-year adjusted EBTA development. The EBTA increase was primarily driven by our energy networks business due to accelerated investments in our regulated asset base across almost all of our business regions. In Germany, we saw timing impacts coming from stronger volumes as well as lower redispatch costs during the first half year. As I already communicated in Q1, a substantial contribution to our earnings growth also came from network loss recoveries and volume effects in southeastern Europe. As you know, these effects are all economically neutral, given the regulated nature of our segment. We are providing the year-to-date performer figures as part of the appendix to this presentation, as we did in Q1. Moving on to our energy infrastructure solution business. The growth in adjusted EBDA was driven by higher weather-related volumes coming from normalized weather in the first six months compared to last year, and improved asset availability, especially in the UK and the Nordics. The commissioning of new projects and increased smart metering installations in the UK also continued through the growth. Our energy retail business is performing as expected. As indicated during the Q1 call, there were adverse temperature-related effects in April and early May. Record high radiation led to low volumes delivered to our prosumer customers. After a strong Q1, we saw the anticipated earnings normalization in the UK, which was already fully reflected in our guidance. In our UK B2C customer segment, margins normalized as customers changed from SVT tariffs into fixed-term tariffs with lower margins. In our UK B2B business, the elevated margins from contracts made in the last years continue to roll off. Regarding our customer base, we continue to focus on value by prioritizing customer loyalty, supported by our continuously improving quality of service. Customer satisfaction increased across all major markets, as shown by improving MPS costs. We expect our customer base to remain at around 47 million by year end. Our adjusted net income came in at around 1.8 billion euro. all P&L elements below adjusted EBITDA developed in line with our expectations. As a result, we are well on track to meet our full year 2025 guidance, supporting the promised high single-digit underlying adjusted net income growth. Let me turn to the development of our economic net debt, which increased to 45.3 billion euro from 44 billion euro at the end of Q1 and 41 billion euro at the year end 2024. We have seen strong operating cash flow, which fully covered our Q2 investment spending. The seasonal uplift in E&D was driven by the usual dividend payment in May. For year-end, we expect E&D to be slightly below €44 billion, assuming current interest rates, representing a year-over-year increase of around €3 billion, driven by our significant CapEx ramp-up. Following the rating confirmations from S&P and Moody's earlier this year, we have now also received Fitch's confirmation of our strong balance sheet position. With this, all three rating agencies continue to positively assess our funding and financing outlook. Let me now add some further remarks on the published RP5 proposals on top of what Leo has said. I would like to start on a positive note. In recent months, we have seen a constructive and much needed dialogue between the German regulator and the industry on shaping the future regulatory framework. This is welcome, but also essential for setting the right course to achieve our common goal for a successful energy transition in Germany. We see that the regulator wants to better link the financial parameters with the general market developments and is running the process in a transparent manner. And we also appreciate that the regulator acknowledges our competence in managing the energy transition by introducing a dynamic factor for our cost base regarding the growing number of connection requests. As the energy transition will continue beyond the next regulatory period, this instrument is permanently needed, and not only in RP5. In addition, the proposed adjustments to the cost of equity and cost of debt still do not create the attractive financial conditions required to remain competitive in the global race for private capital. Looking beyond Germany, we see that other countries are setting more attractive investment signals. The latest draft by Ofgem in the UK, for example, proposes a nominal post-tax ROE of around 8% plus the prospect of higher remuneration through additional incentives. As we could see from latest announcements of other international network operators, this enables massive further investments into the necessary grid build-out in the UK. By the shift to a more widely accepted and internationally recognized Roth-based remuneration system is a step in the right direction in Germany. It falls short of the required levels of 8% ROE nominal post-tax as demanded by the industry and investors. For a truly more market-oriented reform, the interdependencies between the risk-free rate and the market risk premium must be taken into account and not just technical adjustments. This would allow for a consistent application of the capital asset pricing model, which results in line with market-based observations. Same applies for the cost of debt, where we also need to have a more market-based approach. Since long-term infrastructure assets are typically financed through long-term debt, we need a dynamic rolling average approach to better reflect the recent interest rate levels instead of fixed cost of debt over the entire regulatory period using historical averages that include exceptionally low interest rate years. This approach fails to reflect actual financing conditions with the risk of slowing down investments. The mentioned aspects are crucial for the financial soundness and attractiveness of the German regulatory system. Together with other industry players and our energy associations, we are advocating for a competitive, market-based regulatory system to achieve our shared goal of a successful energy transition in Germany. That said, I remain confident that the regulator will consider our economically sound arguments and ultimately ensure an attractive general framework that allows us to attract additional capital to increase our capex. Let me conclude today's presentation with my key takeaways and outlook. The strong H1 outturn firmly supports our expected earnings delivery for 2025. Second, our investment ramp-up is progressing as expected, underpinning our midterm targets. Third, our balance sheet remains solid. We will continue to focus on delivering an attractive total shareholder return based on value-creative organic growth, supporting sustainable growing annual dividend per share. And finally, on our full year 2025 outlook, in our energy network segment, we expect to reach the upper end of the guidance range, driven by the mentioned value-neutral timing effects. This brings us also to the upper end of our group EBTA guidance range. For our adjusted net income, we expect to lend comfortably within the guidance range, as the positive timing effects, especially in southeastern Europe, are subject to tax and minority interest deductions. With that, we fully confirm our full year 2025 guidance and 2028 outlook, including our dividend policy. And with that, now back to you, Iris.