Verbund Ag Ord

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Forbund AG Half-Year 2023 Results Conference Call. Throughout today's recorded call, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press Start followed by 1 on your touchtone telephone. Please press the Start key followed by 0 for operator assistance. I would now like to turn the conference over to Peter Coleman, CFO of Forbund. Please go ahead, sir.

Thank you. I'm here with Andreas Wollheim. Ladies and gentlemen, let me welcome you to the presentation of our first half year, 23 results. And let me thank you for joining today's conference call. Before we move into the analysis of business development, let me make a few general comments. It's like easing on the energy markets already began at the end of 22. which continued in the first half of 2023. Wholesale prices for gas fell significantly in the first half year compared to the previous year. In addition to the high filling levels of the gas storage facilities, this is also due to the weaker demand for gas. This was accompanied by a drop in wholesale prices for electricity. However, the market environment is still very volatile. Let me highlight one regulatory issue at the beginning. In Austria, the cap for market revenues of infomercial generators was reduced in the second quarter. The reduction of the revenue cap was from 140 euros to 120 euros per megawatt hours, and that applies as of the 1st of June. However, crediting of investments in new renewable generation technologies in Austria is still permitted. Now let's move on to our financial details. At the beginning, I would like to highlight the most important influencing factors for the results development at a glance. Following the development of prices at the electricity exchanges and based on our hedging strategy for our own electricity generation from hydropower, the average achieved contract price increased by 69.6 euros to 182.1. The hydro coefficients determining the generation from our Runners River hydropower plant was better than last year, but below the long-term average. However, production from our hydro reservoirs was higher by 6.2% compared to last year. Generation from wind and PV was up compared to last year, mainly driven by the new renewable assets in Spain. Thermal generation, in contrast, strongly decreased due to lower use of our CCGT in Mellach. The contributions from flexibility products slightly decreased, mainly due to a decrease in pumping and intraday trading. GasConnect Austria was clearly positive for the grid segment results. The sales segment contributed negatively. among others due to higher procurement costs for energy. And finally, a negative impact on our results is coming from the MEVI on excess profits in Austria, Germany, and Romania, totaling 172 million in the first half year. The impact of these influencing factors on the key figures for FABUM in the first half year of 23 is as follows. EBITDA increased by 63.6% to 2.25 billion, and the reported group result increased by 57.5% to 1.287 billion. The adjusted group result increased by 78% to 1.3 billion, and the operating cash flow strongly increased to a level of almost 2.9 billion. The free cash flow after dividends was strongly positive at a level of 927 million and netted decreased by 24.5% to a level of slightly above 2.9 billion. Now let me give you our updated guidance for 23. Based on an average hydro wind and PV generation in the last two quarters of 23, As well as considering the opportunities and the risk situation of the group, we expect a reported and adjusted EBITDA between approximately 3.8 to 4.2 billion, and the reported group results between approximately 205 and 2.3 billion. The payout ratio will be between 45 and 55 percent of the adjusted group results between and 2.32 billion. The earnings forecast and the information on the expected payout ratio are, as you know, not being impacted further by possible energy policy measures just came off some of the profits at energy companies in Austria. On the next page, let me go into more details on the hedging volumes and the hedging prices, which are, of course, highly relevant for our results. I think you all know a one euro megawatt hour plus or minus higher or lower average achieved price has a sensitivity of approximately 25 million euros in our EBITDA line. The 30th of June, we reached an average achieved contract price for our hydro generation of 176.8 euros. And we had sold approximately 88%. For 24, we had sold 44% of our own generation volumes at a price of 155.6. And for 25, we had sold 37%. of our generation volume at 140.7. On a market-to-market basis, with prices as of the 14th of July, the average achieved contract price for 23 are at 168.8, for 24 at 148.8, and for 25 at 135 euros. Now let me comment on some developments in the various business segments. And let me start with the hydro segment. At 0.95, the hydro coefficient, which, as you know, is an index quantifying the hydro power generation of the run of river power plants, was 5 percentage points below the long-term average and 5 points above the level of the first half, 22. Production from annual storage power plants increased by 6.2%. All production from hydropower therefore overall increased by 947 gigawatt hours or 6.7% to slightly above 15 terawatt hours compared to the first half, 22. Higher average achieved prices. The main reason for our increased EBTA, however, slightly lower contributions on flexibility products and the leverage on excess profits had a negative effect on EBTA. In total, EBTA in the hydro segment increased by 62.1% to 1.984 billion. Regarding CATEX, Our main hugger project, the 480-megawatt Lindbergh 3 pump storage power plant, and the 45-megawatt RISIC 2 pump storage power plant. Both projects are on time. The 11-megawatt Run the River project, GATCOM, is also on time. Completion is expected in 24. In addition to the above, we started the 14.3 megawatt Stegenwald Run-of-the-River power plant project, where we have an expected completion in 2025. Now, let me continue with the analysis of our own generation from new renewables. The new renewables coefficient An index quantifying the generation for wind power and PD amounted to 1.01 in the first half of 23 compared to 1.04 in 22. Generation for wind power increased by 6.3%, was 33 gigawatt hours, and amounted to 546 gigawatt hours. in the first six months of 23. More favorable wind conditions in Germany, and especially new installations in Spain, more than upset less favorable wind conditions in Austria and Romania. Generations on PV amounted to 161 gigawatt hours in the reporting period, standing from PV installations in Austria, two gigawatt hours in Spain, 159 gigawatt hours. Now taking a look at the EBTA development in the new and new segment, we see that the EBTA increased to 109.2 million euros. In addition to the increase in volumes, mainly from our projects in Spain, higher average achieved prices contributed positively to this development. The chart also provides an overview on current developments in the renewable sector. Now, on the next page, you see our sales segment. Taking a look at the EBITDA development here, we see that EBITDA increased to a negative value of minus 143.2. The change in EVDA's view, among other things, to a much better result from the valuation of energy derivatives in connection with future energy deliveries, while the sharp increase in electricity and gas procurement prices had a counteracting effect. For Boons, we delivered electricity and gas to approximately 510,000 end customers. That represents a decrease of approximately 18,000 customers year-on-year. Now, on the all other segments, the generation from thermal power plants was down by 462 gigawatt-hours to 342 due to the decreased use of our Mela CCGT for old electricity and distributed production. This led to a declining electricity and district heating revenue. Positive effects from the valuation of energy derivatives in connection with future energy deliveries could not compensate for this and led to a drop in EBITDA despite lower fuel consumption as a result of the reduced generation. The contribution from flexibility products decreased by 5.9 million euros. The contribution from Kellogg, the provincial utility of Corinthia, increased from 5.7 million to 48.3 million as a result of better realized sales prices for their own generation. In addition, the heating and trading businesses also contributed positively. Let me remind you that our CCGP MEDLAV was contracted from Boston Power Grid for future congestion management. In detail, line 10 is contracted from the 1st of October 2021 to the 30th of September 2023, and line 20 from 1st of April 23 to the 30th, September 23. In Q1 and Q4, we use line 20 on a market-driven basis. The district heating power plant in Mela has contracted by APG for the period from the 1st of April 23, again, to the 30th, September 23. Now, on the next page, on our grid segment, as you know, the grid segment consists of our regulated business, Austrian Power Grid, as well as Gas Connect Austria. DEBTA for the first half from the electricity grid business according to IFRS was approximately 184 million, roughly the same as last year. As a reminder, Then we also highlight that as of January 1st, 23, a new regulatory period started. The regulatory system has been changed. E-Control, the Austrian regulator, has a new WAC for 23 and has split the WAC into a WAC for existing assets and a WAC for new assets. The WAC in 23 for existing assets has been set at 3.72%. The WACC for new assets has been set at 4.88%. Therefore, the overall WACC for 23 will be 3.9. On top of the WACC at APG can receive an incentive-based bonus of maximum 12 million euros a year. The WAC for existing and for new assets for 24 will be set again at the end of 23 and will definitely reflect the higher interest rate environment which we're currently in. ADG has appealed against the level of the WAC mainly because it reflects the historic development of interest rates and does not reflect the strong increase in rates since last year. The new EBITDA guidance for the electricity grid for 2023, based on the new regulatory parameters and the increasing regulatory asset base, is approximately €360 million. The main reason for the increased guidance are higher revenues from auctions. The planned amount of the regulatory account at the end of will be approximately 490 million euros. Now with regard to the results contribution of Gas Connect Austria, we reported EBTA of approximately 112 million for the half year. The main reason for the strong increase were higher revenues from the commodity tariffs and lower energy costs. The guidance for 23 with regard to Gas Connect Austria is approximately 140 million euros. On the next page, I will give you the non-recurring effects. We encountered impairments amounting to 15.4 million, stemming from an impairment of the FSHC Meller, devaluation of the trans-Austria gas pipeline TAG. Profit participation rights amounted to minus 0.8 million and had a negative effect on the other financial results. We also had impairments relating to the hallucinogenic participation of minus 15.8 million and TAG with minus 2.8 million. In total amounting to a minus 18.7 million. Also, the reversal of impairments related to our hydropower plant in Albania amounting to 6.3 million euros. In total, the effects on the financial results were 13.2 million euros, minus 13.2 million euros. After considering the effects on taxes and minorities, the non-recurring effects on the group result level amounted to minus 20 million euros. We also showed the non-recurring effects in the first half year of 22 in comparison. Now, going through the key financial figures. First of all, the aforementioned developments on the EBITDA where we had an increase by 63.6% to 2.25 billion. depreciation increased by 15% to 250 million euros, mainly due to the acquisition of Spanish assets and increased investments into the high-voltage grid. The financial result improved from minus 15.7 million to minus 7.1 million. This was attributable to the higher earnings contributions from interest accounted for using the equity method, mainly Kellogg, and higher interest income, while higher interest expense is mainly caused by the issuance of the ESG-linked Schultz and Barlin of $500 million in November. And the interest expense from the loans taken over from the Spanish companies acquired in the previous year had a counterbalancing effect. The group results increased by 57.5% to 1.287 billion. The group result after adjustment for non-recurring effects was up 78%. Finally, I would like to mention the decrease in addition to tangible assets in total from 588.1 in the first half, 22, to 311. in the first half of 23. The decrease is a result of the fact that in 22 for boom is an acquisition of a 70% share in one PV and for wind power project companies in Spain with a total capacity of 171 megawatts. On the bottom left you will find divisions into tangible assets of Gas Connect Austria and Austrian power grid. On the next page, we're looking at cash flows and net debt, for whom operating cash flow strongly increased to 2.89 billion, mainly due to a significantly higher average price achieved for electricity, as well as inflows from margining payments for hedging transactions in our electricity business, those were deposited with the clearinghouse of the exchange as a collateral for open positions. And they basically come back with the prices coming down. These positive effects were partly offset by higher income tax and higher interest payments. The free cash flow after dividends showed a positive development from minus 111 million euros to a level of plus $927 million. The significantly higher operating cash flow and lower investments in property, plant, and equipment were the reasons for this positive development. Dividend payments, on the other hand, increased significantly compared to the previous year. Our decrease in net debt is due to lower financial liabilities because of the repayment of shops and money market liabilities. The gearing correspondingly decreased to a level of 31.3 compared with 46.8 at year end 22. Now I'm coming to the end of our results presentation and would like to give you our earnings outlook. As always at this point, I would like to highlight the sensitivities as of the 30th of June. A deviation of plus minus 1% in the generation from hydropower has an impact of plus minus 10 million. In the Cooper South, a deviation of plus minus 1% in the generation from wind power and PV has an impact of plus minus 0.8 million. And a deviation of plus minus one euro in the wholesale price has an impact of plus minus two million euros in our group results for 23. Now, our updated guidance for 23 is as follows. For booms, expect a reported and adjusted EPTA of approximately between 3.8 and 4.2 billion euros. and a group result of approximately between $2.05 and $2.3 billion under the assumption of average hydro, average wind and PV generation in the third and fourth quarter. For the financial year 23, Forbund plans to pay out between 45% and 55% of our group results after the adjustment for non-recurring effects that would be approximately between 2.07 billion and 2.32 billion. The earnings forecast and the information on the expected payout ratio, as I mentioned before, are contingent on us not being impacted further by possible energy policy measures to skim off some of the profits of energy companies. Now with that, I would like to move on to our Q&A.

Ladies and gentlemen, at this time, we'll begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. In the interest of time, please limit yourself to two questions only. If you're using speaker equipment today, please click the answer before making your selections. Anyone who has a question, please start followed by one at this time. One moment for the first question, please. Our first question comes from with Credit Suisse. Please go ahead.

Hi, good morning. Credit Suisse. Two questions for me, plus one request. So the first question is on the 2023 guidance. I mean, the midpoint, you may have changed. despite a lower revenue cap, which we would expect would have a negative impact. I know there was the upgrade to your greedy BDA. It is clearly stronger than we expected. But was there anything else that basically surprised you on the positive, on the 2023 numbers? Second question on your recent acquisition is saying, I remember back in March, I mean, you guys, you input some assets in Spain, the acquisition. I mean, can you give us some financial or personal data which basically help us to believe that this time it will be a different story. You can basically put some value creation there. And then a little request, as always, Peter, if you could share the latest heading and the hydro, that would be really, really appreciated. And if you could repeat the H1 at your power price, I didn't catch that. Thanks a lot.

Yeah, sure, Wanda. I will start with the hydro. Our current hydro coefficient is 0.93. So when we basically take the half-year hydro coefficient and we assume one for the rest of the year, it would be 0.98. On the power prices, I can give you sort of like the latest hedging levels as of the 21st of July. There we are hedged for 23, 88% at the level of 100%. So when we basically assume the mark-to-market for the open position, we end up with 169. When we look into 24, we are hedged approximately 53%. And there, we are hedged at 154. And as it happens, The open position currently is 154 as well, so 24 to forward. Therefore, the market would be 154. For 25, we are hedged 37%. And there, again, we are hedged at 141. And the open positions are approximately at the same level. So as a result of that, we see a market-to-market level there of around 140. So as you see, we see a lowering of the power curve and the result of the lower gas prices. And that is certainly a certainty that the gas prices need to be carefully watched over the next few months, particularly during the wintertime, to see what impact the gas prices are going to have on the power prices. Now, on our recent Spanish acquisition, in terms of the value creation, There were a number of comments on the price per megawatt hours which we paid. The value creation for that asset, for this wind asset in Spain, needs to be seen particularly in the form of hybridization and in the form of repowering. So we have, in our due diligence, we have looked at the assets very carefully and we have come to the conclusion that we have significant potential for a repowering and also for hybridization. The repowering has more value effect, more value creation potential than the hybridization. But at this point, we're not going to give more details than what I have just mentioned. On the 23 guidance, the reason for the guidance has been mainly the power prices. As you know, the power prices always have the biggest impact. on our results and our EBITDA and with power prices coming down with 12% still unhedged and with volatility which we expect for the remainder of the year. that has flown into our discussions when we determined the guidance. Obviously, we took into consideration the fact that we have, as you have mentioned, Wanda, a new level of 120 euros for the second half of the year, which has come down from the 140 euros in terms of profit skimming. and we are able to take into consideration the slightly better results from our grid.

Just a quick follow-up. On the H1-A6 power price, if you could just repeat it, I didn't catch it. And then on the Spanish M&A, can you give us some financials of the existing assets? I mean, EBDA, DNA generation, something that we can basically work with. And then on the 2023 guidance, is there anything which is hard to see from the outside, like revaluation of hedges, something that we cannot really see from the outside that also impacted your guidance?

No. On the 2023 guidance, it's very transparent what we have said. There is nothing hidden. There is... there are no surprises which we at this point expect. And Wanda, you asked me about which power price, the 24?

No, no, H1 2023, I think it was 180 something, the power price that you guys, you captured in H1 this year. I think you mentioned it at the very beginning of your speech.

Okay, let me just go back to...

I can follow up with the IR team later. That's fine.

Yeah, but I can easily go back to the slide and give it to you right now. Yeah, 176.

Okay, brilliant.

Yeah, you're welcome. Good. Thank you, Wanda.

Thank you very much.

The next question comes from the line of Louis Bouchard with Oddo. Please go ahead.

Yes, good morning. Thank you for taking my question. So then I will limit it to two. Maybe the first one to come back on the sales segment, which is still significantly negative. You have only 510,000 end customers and minus 140,000. million euros here in terms of performance. My question would be, if you dispose, you get rid of your final customer, would it have any impact into your sales segment performance, or do you have other commitments with external suppliers that would make it being non-linked, in fact, to the number of customers that you have to serve in the end? And more precisely, If you have any commitment, what shall we expect for 2024 in terms of performance for this sales division? Do you have room to go back to more normal level by 2024 with the current contractual situation that you can have in this division? And the second question was with regards to GasConnect Austria. I think that you touched it in the presentation, but I'm not sure that I got everything. In particular, it seems that it's clearly front-end loaded in terms of performance for the year 2023 compared to your updated guidance. Can you elaborate a little bit more on the reason why is it that much front-ended and why are you that much cautious for the remaining of the year on this division in terms of potential performance?

Okay. Now, let me start with our sales segment. We have no linkage to external suppliers, so it is basically our own generation, and the procurement is on a is on a basis that, similar to our hedging, the procurement of the sales side is done through our generation. So therefore, if we decided to have lower customers, because customers at the moment produce losses, then that would not have that would not have an impact vis-à-vis any external supply relationships, if I understood your question correctly. On Gas Connect Austria, the key influencing factor on the results there were the high energy costs for our... for our stations which compress the gas. Those compressive stations need, require a lot of energy. And with the energy prices coming down, the cost for the compression obviously comes down as well. And that has given a boost to our results. And that is the reason why the results in Gas Connect Austria have come up. And your third question was, was it again?

Sorry. I actually did not have a third question.

Okay. Maybe you did not remember. Okay, okay. Okay, thank you.

Thank you for your answer.

The next question comes from . Please go ahead.

Hi, it's good morning to everybody, and thank you for the interesting question. I wanted to check on Spain. Can you tell us how much money you spend on all of these acquisitions and organic capital so far, and what is the contribution we could expect from the Spanish renewable assets in, let's say, 2024 and 2025, just trying to put these few acquisitions together and coming up with a multiple on it? And then beyond the repowering and hybridization on this new Spanish asset, are there any synergies that we could quantify between this asset and the existing operations? And that's what I want to ask these two questions.

Could you repeat the second question again? I had an interesting problem.

Sure. Are there any synergies? between the asset you bought, you announced yesterday, versus the assets and then the assets that you own already, whether this is a team combination or any extra synergies on the, you know, EPA providing to external customers. Are there any other synergies we could think about how these things would exist in the portfolio?

Yes. Yeah, that's an important question. There are two aspects which I would like to put some light on. The first one is synergies in operations. As you've rightly said, we have accumulated assets in Spain, both on the solar side and on the wind side. And we believe that the combination of the production of solar energy and the production of wind can be combined into packages for power purchase agreements. We think that is a very important feature in the future. You have seen the discussion around the duck curve. And as a result of that, we also believe that a lot of the future PTAs will take that into account. And as a result of that, market players will be forced to combine different production technologies in order to structure those PPAs. So that is the one side in terms of selling the generation in the most effective way. And the other aspect is to try and develop operational synergies as much as possible between the various parks in terms of maintenance, et cetera, et cetera.

Okay. And the first question, like, can you provide your expectations towards the total contributions from Spain and how much money you spent on all of these M&As if you combine it all together? Yes, please.

Yeah, coming back, you were at the beginning, if I understood you correctly, you were asking about the EBTA contribution for the asset which we just bought, which was announced yesterday, correct?

No, for all of the Spanish assets. So I just wanted to understand, you've been doing it for more than, like for the last two years, you've been buying a number of Spanish assets, and I just wanted to understand and the outcome of it in 25, which is how much money you spent in total and what is the expected contribution to your P&L?

Yeah, I can give you an approximate number in terms of the EBITDA contribution in Spain, which is around 130, 140 million. But what I would like to mention, which is really important, is the following. When we made our acquisitions, yes, part of it were operating assets, but the focus has been on the pipelines. So what we have acquired, for example, in our project Labrador, was a relatively small amount of operating assets, but a very large pipeline of around 2,000 megawatts, which has a high probability, very high probability, and around 2,400 megawatts of medium probability pipeline. As a result of that, the acquisitions which we have made were focused on development and future generations and future build-out of PV and wind and less operating assets when you look at the volume differences. The EBTA overall coming from Spain, and that's an estimate because it depends on power prices and other factors, would be between around 250 and 300 million euros in 26.

Okay. And how much capacity do we need to spend to achieve this number?

Well, the Catholics, that's why I mentioned before, the Catholics might be misleading because the Catholics,

um is you know i was just trying to understand like you you you're going to move your financial bga from 130 40 to 250 300 so roughly more than doubling it you spend the money for found acquisitions and you know if you get to the 26 numbers you need to send so what is the roughly topics you're going to spend in spain um Yes, I can take it also offline.

Yeah, I think it would be better to take it offline because obviously I could give you a number now, but that number could be confusing because our acquisition numbers always include obviously the operating assets and then separate amounts for the pipelines, which we value in a different way, i.e., high probability pipelines. We obviously value higher than lower probability pipelines. As a result of that, when I give you the overall amount, it might be confusing. As a result of that, we'd be more than happy outside this conference call to go with you through the numbers in more detail.

Yes, thank you. Thank you for the answer.

The next question comes from the line of Ingo Becker with Kevlar. Please go ahead.

Thank you. Good morning, Peter. I got two questions. First on the generation price. I think the prices that you've achieved of 176 and also the 168 market currently are above the cap. You've mentioned the cap was lowered, apparently, from 140 to 120, but I understand that's only the lower end of the range, pre-applicable or, you know, renewable investments that can be netted off against that. Could you just confirm what your final realizable prices are for 2023 and for 2024? The hedge price of 155.6 or 156. I understand that's pretty sharp, exactly the applicable cap for the group under the new cap rule, right, just in case the cap would get extended. And that will be my second question, or actually still the first one. Do you see a risk that the caps, which are meant to expire at the end of the year, will get extended? What is the political thinking here? And the second question would be on your retail business, which has made 140 million EBITDA loss in the first half. How should we think about that? I mean, first, would you expect that to be profitable again next year? And is the retail loss actually indicating that, I mean, seemingly you're not recovering the full generation cost at least in the half year now. Does that mean that the generation profit by that amount that you should have actually recovered looks too good this year in 23, and that will flip around next year?

Okay. Now, let me start with the extension question, because that obviously is one we don't know, but we're at this point, I would like to give you a judgment. We don't think that the 120-euro cap would be expanded into next year. The reason for our assumption is that the rest of the European Union has already stopped the caps by the 30th of June. As a result of that, I think Austria now is the only country in Europe that has extended the cap, has lowered the cap, and extended the cap. Therefore, I don't think that it will be either lowered nor extended into 24. You never know. You know, it's a political decision. But at this point of time, we don't think so. In terms of the retail business, I mean, we are... working very hard on bringing the retail business back to zero, or even sort of like, you know, getting a positive EBITDA contribution from the retail business. The challenge is that there is a lot of political pressure on the entire utility market in Austria, so not just on Verbund, but on all the others as well. to lower retail prices. That has something to do with the inflation discussion, with the media very much focusing on retail prices. There has been a huge political discussion around energy prices as a result of that. We need to observe the lay of the land And at this point in time, we need to show, like all the others, prices that are loss-making for us. Now, with the procurement costs coming down, with power prices coming down, and, you know, keeping the level where we are, we should basically... earn ourselves back into positive territory. Will that be in 24? At this point in time, I don't think so. It will be better in 24, but it will not be a plus. In 25, I actually think that we're going to see a positive contribution again for the weaker business. Ingo, did I miss anything in between?

Yes, thanks. Just two things. Your guidance of 3A to 4, 2 billion, what net achievable generation price after all caps for the first and second half are you assuming there? And for retail, just briefly, when you say maybe Even here, that might be fully back in shape only in 26. When we look at the power forward curve, would you say that the prices we are seeing for those years are being acceptable in the political arena? Meanwhile, what prices are higher feeding through to customer builds? And I'm talking about the energy component, not the total tariffs. um, you, you're accepting those losses. I, when you look at our forwards of 25, 26, they're getting, they say about a hundred euros, but getting closer to a hundred euros baseload, at least, would you say that is an acceptable level or for, for the political world?

Um, yeah, that's a good point. And, and an interesting discussion. Um, there's a lot of uncertainty around that. The, um, The political discussion sometimes gets very emotional. It's very often driven by the opposition, which has found a topic which a lot of people are interested in, which obviously concerns every single citizen. Therefore, it is a key topic. It is also highly interesting for the media. And I'm not sure where the exact level is. I mean, the only points, the only data points which we have, and I'm not just talking retail now, I'm talking industry as well, is the discussion which we had in Germany, which I also mentioned in our last conference call, where the discussion was around 60, 70 euros. So basically, the German industry said, in order for Germany to be competitive, power prices there need to be somewhere around 60 to 70. Now, if that is a reference point of sort of like general acceptance, the 100 euros would still be too high. However, people also get used to a new environment where energy prices are higher. So we're coming from a very low energy environment before the invasion. Then because of the war, unbelievable numbers in terms of electricity prices, gas prices, and then, of course, all the retail prices. And now it's coming down. And it will continue to come down, but will it still lead to political discussions? Because the levels are still higher than what people are used to before the war remains to be seen and very much depends on, in my view, on opposition and very much depends on how much the media focus on it as well. And in Austria, don't forget, we have elections in fall of 24.

Okay, great. And the next prize?

Yeah, the prize is around 164. Thank you.

The next question comes from the line of Ollie Jeffrey with Deutsche Bank. Please go ahead.

Thank you very much. A few questions, please. The first one, looking at your balance sheet, your balance sheet wants to be very strong. And we know you're looking to deploy that at opportunities in the renewable space. But in order to really deploy it, are you still looking for that kind of multi-billion opportunity to buy a renewable platform? Or do you think we'll continue to see piecemeal acquisitions because if you care about people acquisitions, I wonder if you actually might need to consider potentially changing dividend policies for a higher payout in order to utilize the balance sheet more effectively. So the thought from that would be good. The second question is just the initial guidance was based on the negative $200 million derivative valuation effect. My understanding is that that perhaps there's less of an impact on that than you first envisaged at the start of the year. Can you confirm that the current balance is still based in $200 million for the valuation effect? And also comment that actually if you were to recut that today, what that number would be, you know, is that closer actually to $100 million in reality? And then lastly, could you just explain a bit, you know, in the first half, flexibility products are going very well. At the start of the year, at four-year results, you commented you thought they'd be down quite clearly year on year. Why are flex products holding up much better than you envisaged? If you'd comment your thoughts on those questions, it'd be great. Thanks very much.

Yeah, sure. We're going to split your questions. I'm going to... talk about sort of the strategy in terms of our acquisitions in Spain and the flexibility products. And Andreas will give you sort of like the detail on the derivatives numbers, which have an impact. Now, I will start with flexibility products. The flexibility products... are now slightly better than we had anticipated when we had our last conference call. The reason for that is mainly the pumping and the turbining. The pumping and the turbining has been better than we had expected. We also have slightly better results on the intraday trading given the volatility. We have not seen any changes for the control energy and concession management. Usually, you might remember sort of like previous years where we had big swings on the concession management. Concession management has been relatively stable within the last sort of like three months. also in terms of our view of the full year. And the pumping and the turbining has, as I mentioned before, slightly better. So on the flexibility products, we think that it is going to be obviously much lower than in 22, where we had... where we had around 480 million contribution in flexibility products. It is going to be much less. It's going to be around 250, so much less than 22. But that is still a very high number when you remember sort of like the normalized contribution of flexibility products. which were anything, you know, between sort of like 100 and 150 million, you know, before we had a very sharp increase in power prices. In terms of our strategy for acquisitions, it is really sort of like a combined strategy of looking at large platforms, To give you an example, we have recently looked at a very large platform which would have covered Spain, Italy, Germany, and a few other countries, but mainly Spain, Portugal, Italy, and Germany. We have come to the conclusion that we would not buy the platform because we thought that, to put it simply, it was too expensive. the pipeline was viewed by the seller as too generous in terms of the probability of implementation. So when we look at Spain, we look at both. We look at small bolt-on acquisitions, which we think fit into our portfolio. both on the solar side and on the wind side, and sometimes those can be relatively small acquisitions when we view that they fit very well. But we continue to look at large platforms. There, on the large platforms, we look particularly not so much on the operating assets, but there we look very much onto the pipelines, and how attractive the pipeline is. And I would not exclude that within the next 24 months, if an opportunity arises. Currently, we're not working on any deals, on any large deals. But if an opportunity arises, it's certainly something we're going to look at. as we feel that the diversification into wind and solar is an important one for the wounds. And at the same time, as I mentioned before, we feel that the combination of hydro, solar, and wind in order to be able to package interesting PPAs also is very attractive to us. With that, I would hand over to Andreas, who is going to give you the details on the derivatives valuations.

Yeah, I think a quick answer from my side. So, you know, the hardware impact coming from the derivatives valuation is basically zero. And what we have currently reflected in the guidance for the third year, based on our current, let's say, trading positions and the long and short positions we have, is a minus of around 85 million euros for the full year guidance. Okay, got it. You have adopted that in the current full year. Sorry, once again? I was just concerned that you have adopted therefore... Yes, yes, yes. Thank you very much for concerning that. Yeah.

The next question. Please go ahead. Hello.

Thank you for taking my questions. I have one more for bookkeeping and a very general question. Can you remind us also of the figure what the tax and revenue cap impact is included in the guidance Maybe I've missed that amount in the call. The second question is, what's your experience with a new year's hydro conditions? So, given that your access to long-term lines, I'm sure you did the math already. Can you give us some info on that?

Sure. We start with the hydro conditions. We have, over the years, worked very closely with science institutes and with universities to look at the long-term hydrological conditions in Central Europe. Most studies have come to the conclusion that Central Europe is lucky in a way. to have very stable hydrological conditions. However, they have come to the conclusion that there will be shifts. When there was more snowfall during the wintertime and then snow melting, that will change to more rainfall during other periods. As a result of that, there will be almost like an equalization of water conditions in Austria throughout the year. But the overall level, according to those studies, will not come down. What we have recently seen Not through our studies, but basically by observing what's happening in the world is that obviously we break one record after another, particularly now. What I've heard from scientists on that phenomenon is that they're still working on, is it You know, is it part of El Nino? Is it part of CO2 emissions? What is the greater influencing factor? Most have come to the conclusion that El Nino is the higher influencing factor. But there again, and this is important, the Central European region, i.e. particularly the mountains region, Austria, Switzerland, and the southern part of Bavaria, seems to be less influenced As a result of that, we think that over the next 50 to 100 years, hydro conditions in Austria are going to be similar to what we are currently seeing. In terms of the... The first question which you have had, we, for the full year, we have approximately 410 million in Austria as a result of the lowering from the 140 to the 120. We have zero from Germany. and we have approximately 12 million from Romania. So overall, we have slightly above 420 for the full year. But there is one important point. There is the possibility and this is something the government has already said, they have not finally decided, but they have already said, that future investments, future investments, i.e. investments done in 2025, 2026 in Austria, can be used to balance out that figure. And if that were the case, those investments would amount to around... The investments that can be used will amount to around $180 million, and that would obviously reduce the amount which I have just given you. But that is an opportunity. That's an upside. We think there's a good chance for this upside, but it's still being negotiated with the ministries.

Thank you very much.

Today's last question comes from the line of Thibault Dujardin with Société Générale. Please go ahead.

Hello, good morning. Thank you very much for taking my question. I have a question on the windfall tax and the offsetting amounts. Just to be sure if you could indicate the amounts consumed or remaining for 2022 of the offsetting amount for investment in renewables and potentially for 2023. And a second point concerning grid returns, if you could give us some insight on the calendar for the e-control updates on the return and on the legal challenge calendars, too.

Okay. I will ask Andreas to give you the details on the question which you have had.

So with regard to the capex, which we can offset in 2023, so basically that's historic capex for this current regulation. I think it's 350 million euros we can deduct, so we can balance from the windfall tax system. So that's the number for 2023. And with regard to, I think the second question, as far as I understood it, was with regard to the grid returns. So as you know, the regulator has changed the system. So we had, since the beginning of the year, we have a regulatory return in the electricity grid of of about 3.72 for old assets and 4.88 for new assets. So in a mix, for this year, it's close to 4%. And the regulator will set up or will define the new WEC for old assets and for new assets at the end of this year. There is no update yet, but if we would follow this way of calculating the weighted average cost of capital, the capex for new investments will be more than 6%, so around 6.3%, and for the old assets, the rate will increase to a level of around 4.2%. But as I said, it's not fixed, so... But it's likely that the regulator will set the new tariffs, I think, in Q3, at the end of Q3, beginning in Q4.

Yes, I mean, to add is there are, and this goes back to some of your questions which you have had before, there are a number of uncertainties in the political discussion. There are obviously uncertainties around the skimming of profits. This is something Ingo asked in terms of the extension. Then, of course, there is uncertainty and an open discussion in terms of how much of future investments we can use. That is something where, obviously, as I mentioned before, we are negotiating, but where we have, where we don't know what the outcome is going to be. And then, of course, on the Austrian power grid, there is the open question around what the regulated return for new investments will be. And that is something where we are working extremely hard on making sure that e-control, the regulator, takes into consideration, number one, the huge tactics which we have in the regulated system, and number two, the fact that interest costs have come up quite dramatically. So those are points which... where we have a very clear stance and where we have a very clear position. And we need to convince the regulator to react accordingly.

And that was the last question. I'll hand back to Peter Coleman for closing comments. Mr. Coleman.

Yes, thank you very much for a very interesting discussion as always. And I look forward, well, first of all, I wish you a great summer and nice holidays. And I look forward to our next conference call in about three months. Thank you very much and goodbye.

Ladies and gentlemen, the conference is now concluded. AMO disconnects your telephone. Thank you for joining and have a pleasant day. Goodbye.