Verbund Ag Ord

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the conference call on the Quarters 1 to 3 for 2023 results of Bourbon AG. 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 star followed by 1 on your touchstone telephone. please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Peter Coleman.

Yeah, thank you very much. Good morning, ladies and gentlemen. Let me welcome you to our presentation for the first three quarters 23. And let me thank you for joining today's conference call. I'm here with Andreas Wallein, I'm traveling, so I'm hoping for a very stable telephone line. If not, Andreas is here with us as well, calling in from Vienna. Before we move into the analysis of the business development of Verbund, let me make a few general comments. After the rollercoaster year 22, which was mainly influenced by several factors such as the Ukraine-Russian war, massive changes in the capital markets with high interest rates and inflation. And last but not least, the sector specific challenges like the structural change in the wholesale markets with extreme price hikes and volatilities. Volatilities which were accompanied by massive state interventions and enormously increasing CapEx requirements into renewables, but also into infrastructure and new applications. Now, the business year 23 has gone back into, how should we say, more quieter waters, more normality, however, with structurally higher prices and higher volatility, a volatility which is going to stay with us for many years to come. The energy world is obviously in a massive transition and at the end of this transition will look very different. Against this background, FABUM is presenting its Q3 figures, a very strong set of figures, indeed the best numbers which we have ever presented. We have strong earnings, strong cash flows, high profitability, and an enormous financial strength, which you can see when you look at our balance sheet with very low debt levels. we are very well positioned for the future and for the energy transformation, which I have just mentioned. Now, when we move to the next page, let me highlight the most important influencing factors for our results development. Following the development of prices at the electricity exchanges and based on our hedging strategy, of our own electricity generation from hydropower, the average achieved contract price increased by 64.4 euros to 176 euros. The hydro coefficient, which is determining the generation from our run of river hydropower plants, was better than last year, but below the long-term average. Production from our hydro reservoirs was also higher by approximately 7% compared to last year. Generation from wind and PV was up compared to last year, mainly driven by the new assets which we acquired in Spain and took into operation. Thermal generation, in contrast, strongly decreased due to lower use of our CTGT in Malach. Contributions from flexibility products are still at a very high level, but decreased compared to the record year 22. The sales segment contributed negatively, among others, due to higher procurement costs for energy. The grid segment developed well, with strongly increasing contributions from the Austrian power grid, as well as from GasConnect Austria. Finally, a negative contribution to our results was coming from the levy on excess profits in Austria and Romania, totaling approximately 77 million in the first three quarters, 23. Now the impact of these influencing factors on the key figures of the bund in the first three quarters is as follows. EBITDA increased by 83.6% to 3.549 billion and the reported group result increased by 85.9% to 1.98 billion. The adjusted group result increased by 103% to Just above 2 billion, the operating cash flow strongly increased to a level of 4.15. The free cash flow after dividends was strongly positive at a level of 1.475 billion and net debt decreased by 38% to a level of 2.42 billion euros. On the basis of the strong financial development in the first three quarters of 2023, we updated our guidance for the full year of 2023 based on average hydro, wind, and PV generation in the fourth quarter, as well as the opportunities and, of course, the risk situation of the group. Verbund expects to report an adjusted EBITDA between approximately $4.15 and $4.45 billion and the reported group results between approximately 2.25 and 2.45 billion for the full year 23. The payout ratio will be between 45% and 55% of the adjusted group results between approximately 2.27 and 2.47 billion. The earnings forecast and information on the expected payout ratio are obviously contingent on Verbund not being impacted further by possible energy policy measures to skim off some of the profits at energy companies. Now, let me go into more detail on our hedging volumes and hedging prices, which are, as you know, highly relevant for our results. I have to remind you, one euro per megawatt hour plus or minus is has a sensitivity of approximately 25 million euros in the APDA line. Now, as of the 30th, September 23, we reached an average achieved contract price for hydro generation of 173.2 euros, and we had sold approximately 96%. For 24, we had sold 51% of our own generation volumes at a price of 151.8. And for 25, we had sold 38% of the generation volumes at 138.3 euros. On a mark-to-market basis with prices as of the 13th of October, the average achieved contract price for 23 is at 171, for 24 at 148, and for 25 at 134 euros per megawatt hour. Now, moving on to the next page, let me comment on some developments on the hydro segments. At 0.93, the hydro coefficients, which you know is an index quantifying the hydropower generation of the Randolph River power plant was seven percentage points below the long-term average, but 9% above the level of 22. The production from annual storage power plants increased by 7%. Bone production from hydropower, therefore, overall increased by 2.26 gigawatt hours, or 10.9% to 23,000 gigawatt hours compared to the first three quarters of 22. Higher average achieved prices and higher volumes are the main reasons for the increased EBTA. However, levies on excess profits and lower flexibility products had a negative effect on EBTA. In total, EBTA in the hydro segment increased by 71.6% to 3.114 billion. Regarding CAPEX, our main projects, excuse me, the 480 megawatt Lindbergh 3 pumped storage power plant projects and the 45 megawatt RISIC 2 plus pumped storage power plant projects, as well as the 11 megawatt round of river project GADCON and the 14.3 megawatt Stegenwald round of river power plant projects are progressing well. and are all on time. Let me continue with the analysis of the own generation from new renewables. The new renewables coefficients, which is an index quantifying the generation from wind power and PV amounted to 1.04 in the first three quarters 23 compared to 1.01 in the same period last year. Generation from wind power increased by 19.5% for 140 gigawatt hours and amounted to 858 gigawatt hours in the first three quarters. More favorable wind conditions in Germany and Romania, as well as new installations in Spain, more than offset less favorable wind conditions in Austria. Generation from PV amounted to 287 gigawatt hours in the reporting period stemming from PV installations in Austria and Spain. Taking a look at the EBTA development in the new renewable segment, we see that the EBTA increased by 75% to a level of 157 million euros. In addition to the increase in volumes, mainly from our new installations, and acquisitions in Spain, we had higher average achieved prices, which made a positive contribution to our EBTA development. The chart also provides an overview on current development in the renewable sector. Now, we had numerous requests regarding more details on our new renewable activities. so we decided to provide you with an additional chart on a regular basis from now onwards. This chart outlines our capacities in operation and in construction in our markets, split by technology, i.e. wind and PV, as well as our targets for 2030. In addition, we are providing the expected EBTA contribution in 2023, the historic CAPEX spend, as well as the planned CAPEX until 2030. Please note that the additional explanations in the footnotes on the bottom left of the chart. As you can see, we have currently slightly more than 1,000 megawatts of new renewables in operation. That is approximately 760 megawatt in wind and 250 megawatt in PV. Out of the 1,000 megawatts, we currently operate approximately 600 megawatts in Spain, 90 megawatts in Germany, 110 megawatts in Austria, and approximately 230 megawatts in Romania. We have currently approximately 115 megawatts renewables assets under construction. Now, with all the projects outlined on the chart, we will already reach our target of 3.8 gigawatts renewable capacity by 2030. Furthermore, I would also like to add that our most recent project communicated to the market on the 25th of October regarding the acquisition of 56.4 megawatts wind portfolio in one of Germany's federal states in in Hesse, North Rhine-Westphalia, and Lower Saxony, was sold by an infrastructure fund managed by Impact Asset Management, and that is now included in the figures of the chart. Now, moving on to our sales segment. As you're aware, the results development in the sales segment is still negatively influenced by the margin pressure stemming from strongly increased wholesale prices of the past and the impossibility to pass on the price increases to our end customers. In the first three quarters 23, the EPTA contribution improved but is still negative at a value of minus 165 million euros. The EPTA contribution from the retail business was negative at approximately 300 million euros. Now this figure includes a 70 million euro provision for the lawsuits, a provision which we booked in the first three quarters of this year. For bonds delivered electricity and gas to approximately 500,000 end customers in the first three quarters, which represents a decrease of approximately 31,000 customers. Now let's move on to the grid segment. As you know, the grid segment consists of our regulated business Austrian Power Grid, which is the electricity transmission grid operator, as well as GasConnect Austria, which is the gas transmission operator. EBTA for the first three quarters, 2023, from the electricity grid business, according to IFRS, was approximately 240 million euros. Now, as a reminder, let me highlight that as of the 1st of January 23, we have a new regulatory period. The regulatory system has been changed. E-control, the Austrian regulator, has set a new WEC for 23 and has split the WEC into a WEC for existing assets and a WEC for new assets. The WAC 23 for existing assets has been set at 3.72%. The WAC for new assets has been set at 4.88%. So overall, the WAC for 23 is 4% on average. On top of the WAC, APG can receive an incentive-based bonus of maximum 12 million euros per year. Now the WACC for existing and for new assets for 24 will be set again at the end of 23 and will reflect the higher interest rate environment. APG, as you know, has appealed against the level of the WACC mainly because it reflects a historic development of interest rates and does not reflect the very strong increase in rates since last year. The Guidance for the electricity grid for 2023 is unchanged at approximately €360 million. The planned amount of the regulatory account at the end of 2023 will be approximately €490 million. Now, with regards to the results contribution of GasConnect Austria, we report an increase of our EBTA to approximately 173 million for the first three quarters 23. Now, what is the reason for this increase? It is mainly due to a one-off increase in the commodity tariffs because of higher gas prices. And that will be reversed by the regulator next year. The guidance for 23 with regard to GasConnect Austria is therefore increased to approximately 190 million euros on the IFRS for the full year. Now we'll hand over to Andreas with all the other segments. Please, Andreas.

Yes, hello. Let me continue with the last segment, all others. Yeah, despite the fact that the thermal generation failed by around 500 gigawatt hours, the EBTA contribution in all other segments increased to a level of approximately 17 million because of positive valuation effects from the energy derivatives in connection with future energy deliveries. However, the contribution from the flex products to the segment decreased by around 14 million euros. The contribution from our participation in KELAG, the provincial utility of Carinthia, increased from 13 million to 47 million due to better realized sales prices for old generation in addition to better hydro conditions. Furthermore, the heating and trading business contributed positively. Finally, let me inform you that the CCGT Mellach is no longer contracted from Austrian Power Grid. for future congestion management. Both lines are operated on a market-driven basis, at least until April 1st, 2025, if economically feasible. If we move on to the next slide, we now present to you the development of the most important key financial figures. So slide 10 shows The development of EVTA, as mentioned before, EVTA increased by 84% to around 3.549 billion euros. Depreciation increased by 15% to 388 million euros, mainly due to the acquisition of our Spanish renewable generation assets and increased investments into the high-voltage grid. The financial results improved from minus 23 million euros to minus 18 million euros. This is mainly attributable to a higher earnings contribution from interests accounted for using the equity method, mainly Kellogg, and higher interest income while higher interest expenses mainly caused by the issuance of an ESG-linked two-chain darling of 500 million euros last year. and the interest expense from the loans taken over from the Spanish companies acquired in the previous year had a counterbalancing effect. The group result increased in total by 86% to 1.980.6 billion. The group result after adjustment for non-recurring effects was up by 103.7%. Finally, I would like to mention the increase in additions to tangible assets in total from 811 million euros to close to a billion euros. This included, for example, the acquisition of operating wind power plants in Spain with a total capacity of 257 megawatts and potential for hybridization repowering from EDPR. Yeah, if we move on then to the next slide, you'll see the impressive development of the cash flow. So for bulls operating cash flow in the first three quarters strongly increased to 4.153 billion, mainly due to a significantly high average contract price achieved for electricity as well as inflows from margining payments for hedging transactions. which were deposited with the clearinghouse of the electricity exchange as collateral for open trading positions. These positive effects were partly offset by higher income tax payments and higher interest payments. The free cash flow after dividends showed a positive development from minus $628 million to a level of 1.475 billion. The significantly higher operating cash flow was the main reason for this development. And finally, the decrease in net debt to a level of 2.4 billion is due to lower financial liabilities because of the repayment of short-term money market liabilities. Gearing correspondingly decreased to a level of 23% compared with 46.8% at year-end 2022. The next slide, page 12, shows our current actual capex plan. I think it's unchanged, so the bond plans to invest in total 4.5 billion euros in the period 2023 to 2025. Out of this number, approximately 3.1 billion is for growth, and approximately 1.5 billion is for maintenance capex. Approximately 1.4 billion goes into the electricity grid, approximately 1.1 billion goes into new renewables, and approximately 1.2 billion into our hydropower business. The rest will be invested into GCA, Gas Connect Austria, and other projects like storage technology. Yeah, opportunistic M&A activities, of course, are not included in this figure. Please note that we are currently working on a new CapEx plan, which will be presented with the full year figures in March next year. Yeah, so, Peter, I again would like to hand over to you for presenting the outlook.