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.

Thank you, Andreas. As always, at this point, we want to highlight the sensitivities as of the 30th, September 23. A deviation of plus minus 1% in the generation from hydropower has an impact of plus minus 3.8 million euros. In the group result, a deviation of plus minus 1% in the generation from wind power and PV has an impact of plus minus 0.4 million and a deviation of plus minus 1 euro. in the wholesale price has an impact of 0.7 million euros in our group results for 23. Now, we updated our guidance due to the following three factors. Number one, we expect low expenses for windfall taxes. Why? Mainly due to the fact that the planned capex for the years 24 to 26 is now also deductible from the levy. Falling electricity prices also had a positive effect on the calculation. The second reason is we expect to earn more from flexibility products in the full year 23, mainly from pumping. And the third reason is we increased the guidance for Gas Connect Austria, as I outlined before. Now, our updated guidance for 23 is the following. We expect the reported and adjusted EBTA of approximately between 4.15 and 4.45 billion, and the reported group results of approximately between 2.25 and 2.45 billion. Of course, under the assumption of average hydro, wind, and PV, generation in the fourth quarter, 23, as well as the chances and risk situation of the group. For the financial year 23, Fabun plans to pay out between 45% and 55% of the group results after adjustment for non-recurring effects of approximately between 2.27 and 2.47 billion euros. The earnings forecast and information on the expected payout ratio are contingent on Verbund not being impacted further by possible energy policy measures to skim off some of the profits at energy companies. Now with that, let us move on to the Q&A session, which Andreas and I will do together. Thank you.

Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on the touchstone 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 are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes from the line of Ollie Jeffrey with Deutsche Bank. Please go ahead.

Thanks for taking my question. questions please so the first one is just looking at the guidance that you the updated guidance you've given today but what you've achieved in the nine months but what's implied for what um you'll do in q4 if you get to the midpoint of guidance and that would imply 750 million in around 370 million net income that income net income quarter was Q1, where you did 530 million. Explain why you're expecting to see that drop off. Is that just being conservative, or are there other things that we should consider? The first question. The second one I'll ask is . Austria, you mentioned the guidance increase. of a off-circle bit spec to come next year when that situation is reversed?

Yeah. Okay. Now, when we look at the key drivers for our revised guidance, first of all, we had originally... considered a windfall tax of slightly more than 400 million. With the offset of investments in 24, 25, and 26, we have been able to reduce that to about 125. So that is the key reason. That is the reason number one with an impact of around 300. The flexibility products went up from 250 to 300. And the key difference has also been GasConnect Austria. And maybe I should explain that in a little bit more detail there. We're moving from 140 to 190. As you might remember from last conference call, GasConnect Austria is suffering from lower capacities because the capacities from Russia are obviously coming down dramatically. However, the regulator has given us what they call a commodity tariff which is basically a special payment for the compressor stations which are using gas and that gas is much more expensive. And that has an effect of around 50 million, i.e. from 140 to 190, and that is included in our guidance as well. Overall, in terms of the hydro coefficients, we currently have around 0.92. So we are eight percentage points below the long-term average. And when we take everything into consideration, we think that our guidance is fair. It's not overly conservative. It's a fair guidance for the rest of the year.

Should we consider the 50 million next year or is there a steeper decline in the EBITDA outlook for GCA? Okay.

That's important. We expect Gas Connect Austria EBTA over the next three years to come down. So this 190 in 2023 really is a one-off as a result of this commodity tariffs, which will go away in the coming years.

Mr. Jeffery, are you done with your question?

Yes, thank you very much. That was very clear.

The next question comes from the line of Harrison Williams with Morgan Stanley. Please go ahead.

Hi there, morning. Thanks for taking my questions, two from me. The first was on windfall taxes, so thanks for the updated guidance this year. As we look forward to next year, Recently, the European Council agreed that these price caps could be in place until mid-next year. Are you able to provide any guidance on the impact of that, or is it such that these allowances make that de minimis? And the second question I had was just on long-term capex spend. I think you mentioned in the release you estimate you will invest about $15 billion over the next decade. I was hoping you could maybe provide some or a breakdown of that investment between hydro, electricity grids, gas grids, and renewables. I appreciate you provide that to 2025, but is it possible, should we be extrapolating that or expecting an increase in maybe electricity grids towards the end of the decade? Thanks.

Yeah, sure. First of all, on the windfall tax and for the capex allocation, I will hand over to Andreas. On the windfall tax, the EU has given member states, as you have rightly said, the possibility to prolong the inframarginal tax, the windfall tax, until middle of 24. We have no indication per today that Austria is planning to take advantage of that possibility. However, given the fact that we had until the end of this year in Austria, as opposed to a number of other countries, I think there is the possibility that the Austrian government will decide to take advantage of this possibility given by the European Union and will extend the windfall tax in Austria as well. So to summarize, we at Verbund, we don't know what the government will decide. However, sort of like my personal judgment would be that there is a possibility that it will be prolonged until the middle of next year. Now, on the capital allocation, maybe just before Andrea started, the one thing you should be aware of, because it has been in the press that infrastructure investment of around $9 billion will be necessary. You know, as we have talked many times before, the infrastructure is the absolute foundation for the integration of renewables. So that is something that is very, very important for the overall transformation of the energy system, not just in Austria, but everywhere. So those are highly strategic and very important investments. Having said all that, you need to go through pretty cumbersome approval processes, which basically means, and you have insinuated that, the big investment in infrastructure will come towards the end of the 10-year period. So the grid development, the 9 billion euro plan, and the investment, the capital allocation into those investments will be much heavier towards the end of the 10-year period than at the beginning. Now on the overall distribution, please Andreas.

I think the overall strategy here is with regard to capital allocation is a diversification of cash flows going forward. When we talk about the split and please take in mind that this The capex numbers are always moving parts and we're currently working on that as well and may come out with different numbers at the beginning of next year when we publish our full year results. But when we talk about this currently 15 billion until 2030, I think it's fair to assume that the biggest share goes into the regulated electricity grid business, so it's around 40%. And then we have around 20% moving into hydropower, again about 20% moving into new renewables, and about 20% into hydrogen and storage facilities. So this is a rough split. until 2030. And as I mentioned before, it's following the logic to diversify our cash flows away from, let's say, from merchant exposure in our home markets.

Very clear. Thanks very much.

The next question comes from the line of Thibault Duardin with Societe Generale. Please go ahead.

Hello, thank you very much for taking my question. A quick comeback regarding the windfall tax. May I ask if you had an estimate of the impact it could have in 2024, assuming the same level as it is currently? And second point, would you have the latest edge of hydro production levels and prices?

Yeah, sure. Let me start with the latest figures in terms of our hedging levels, literally per yesterday. We are for 24, we are hedged 60% at a mark-to-market of 145 euros, and for 25, we are hedged at 40% at a level of 130 euros. In terms of the windfall tax, no. We have no impact calculations in terms of a potential windfall tax in 2024. Obviously, first of all, we don't know if it's going to come. If it comes, we don't know at what level. The most recent cap in Austria was 120, which was reduced from 140, where it was before. Then we had the offsetting mechanism with the Austrian investments in 24, 25, 26. So we don't know what the rules would be in terms of offsetting of investments, if for the next six months period a windfall tax would be introduced. So there are just too many moving parts in order to make an impact analysis.

Thank you very much. Maybe a follow-up question concerning the windfall tax for 2023, including in your guidance, you mentioned 125 million euros. May I ask the capex associated in terms of offset?

Yeah, the capex which we are offsetting, that is a number which we have not made public. Those are internal investment capex numbers for Austrian investments.

Okay, thank you.

Ladies and gentlemen, if you would like to ask a question, please press the star followed by one on your telephone. The next question comes from the line of Louis Bouchard with Odo. Please go ahead.

Good morning and thank you for taking my question. I would like to come back maybe on the first question on the grid segment and more specifically on what we can expect for next year and going forward, in particular in APG. What we see here is that you have a poor remuneration framework at this stage. At the same time, you have a strong commitment or willingness to increase investment on this topic going forward. What could be the likelihood of a significant revision and what could be the magnitude and when shall we have some indication on the probable or likely higher remuneration that you could expect from it on the wrap basis? On top of it, there is a lot of moving parts in this business next year. Could you maybe help us to bridge a little bit what could be the potential earnings of this asset in the next year with regards to the one-off effect and the different elements that have been recognized in this year. Maybe the next question would be also to elaborate a little bit, but this time in the sales segment. Here, it's a poor result, of course, considering the situation, but at the same time, you mentioned that there is some elements in terms of mitigating measures that could be implemented in order to avoid too harsh price increase to the final customers. How shall we expect it to impact the earnings going forward more specifically in 2024 does that mean that we are going to remain in a difficult situation for this segment going forward or do you have room eventually to improve a little bit and enjoy a better and better asset return on these on these assets thank you very much yeah um i'm going to share um the the answer with andreas uh let me make um

a statement with regards to both the grid segment, the electricity grid segment, and the gas grid segment. First on the gas one, we're showing a very high EBTA number for GasConnect, as I mentioned before, moving up to $190 million because of a very special tariff. But when you look at the overall development of the gas business, this business is very challenged by much, much lower capacities. As you might remember, Gas Connect Austria is basically a hub for Russian gas, which came in through the Ukraine, was then used obviously in Austria, was delivered on to southern Germany and to Italy, very large amounts. And with those gas capacities being much, much lower, we are currently negotiating with e-control a new tariff model for the coming years. Without such a new tariff model, the business model of Gas Connect Austria would be highly challenging. So depending on what the new tariff model is going to look like, we are going to have a new set of EBTA figures going forward, and obviously this is something where we will inform you as soon as we have agreed something with eControl. The situation with the Austrian power grid is exactly the opposite. There we have a lot of growth because of very important infrastructure investments. There the challenge is the regulatory return, which is why we have gone to court. because we have come to the conclusion that the historic consideration of interest rates should not be applied in a situation where you have a very, very large increase in interest rates over a very short period of time. As we have seen, we argue that, by the way, like many others in Europe, we argue that the higher interest rates should be reflected and that the methodology should be changed slightly. Now eControl has already listened to us as far as the new investments are concerned. So the rate for the new investments for 24 will be much higher than it was in 23. it will be around 6.25%. This is for the new investments. Overall, the development of the EBTA, because if I understood you correctly, you were asking for sort of like the key influencing factors going forward over the next few years. I would say the top five influencing factors would be Number one, of course, the regulatory asset base, which is going to increase year by year. The regulatory account, the way it's going to be used by the regulator. And then, of course, the classic influencing factors, which are the auction results, the concession management, and control energy. Those are sort of like the key influencing factors which we need to observe. Overall, of course, it is the regulated return, i.e., the WAC, which we are going to achieve in APG. With that, I would hand over to Andreas to talk about the sales segment.

Yeah. So with regard to the sales segment, I think, Luis, we discussed it a couple of times earlier. I think you know that we have currently a negative. It's the only segment which is not performing as we would like to see. So there is a negative contribution coming from the end customer business of more than €380 million, including the provision for the full year. You know that we have set up a provision for this lawsuit based on the so-called VKI of this lawsuit. We do not have a final decision yet. We don't know when this court decision will come. We expect it end of the year, maybe beginning of next year. But I think we have set up a probability-weighted provision in order to reflect a potential negative impact. I mean, for next year, we cannot give you a forecast yet. I mean, we don't have a formally approved budget yet, so we're not going to publish a forecast of the various segments, but when we look into next year, we expect the negative contribution to be strongly reduced, maybe not to zero, but there will be a much lower negative impact next year coming from the retail segment. I think, and of course, we are doing all relevant measures in order to restructure the business as much as possible. And we are considering a lot of different options with regard to the end customer segment going forward, but maybe too early to talk about that.

Thanks very much.

The next question comes from the line of Piotr Dziesioloski with Citi. Please go ahead.

Hi, good afternoon. It's Piotr Dziesioloski from Citi. I have two questions, please. So, first of all, I wanted to ask you about your 15 billion capex by the end of the decade. I mean, looking at your current consensus for your profitability, it looks like you will generate more cash than 15 billion and you don't have any debt. or you have a limited debt at the moment. So at what point do you think this longer-term strategic plan will be revised, either increasing your capex or thinking about different ways to pay shareholders, either dividends or share buyback or anything like this? So what needs to happen for you to take the decisions on these two directions of the cash allocation? And then second, when you think about the 3.8 gigawatt renewable target, how much of it do you think you will buy and how much of it you will build organically?

Yeah, okay. Let me start with the second one. And Andreas, please chip in when there is any additional information. On the 3.8 gigawatts, We are going to do more organically than in the past. The reason is value creation. Obviously, when you buy through M&A, you are not in the full scale of value creation. It is important in order to have a platform. It is important to gain critical mass. But at a specific stage, it is important to get more into organic development. So that is something we're going to increase. But when we talk about M&A, it's not just buying existing projects. There is also the possibility of buying developers or taking advantage of opportunities. As you know, the market has been very difficult recently from a development perspective, the reason being higher capex. Solar panels are now cheaper, but capex is still a challenge. Then, of course, there is a lot of volatility on the PPA side. There is a tendency towards base PPAs as opposed to price as produced. And then, of course, there's high interest rates. So there are a number of challenges for the market, and we having a very strong balance sheet and having the firepower, we will take advantage of opportunities if and when they arise, and that could be opportunities on the development side. In terms of the CAPEX, the 15 billion CAPEX, I mean, you know our business model. Our cash flow generation is very much dependent on the power price. So if the power price remains relatively high, if there is a structural change in the power price, which some people argue remains to be seen, but some people argue that we're going to have structurally higher power prices, if that were the case, we would have a higher cash flow generation and that together with the leeway which we have on our net at EBTA would allow us to make investments into all areas which we have mentioned before in terms of our capital allocation. And in addition, we will be able to pay a generous dividend. So That is something where we need to look at power price developments very carefully and adjust our capex accordingly. But for today, and with the increase in capex on various fronts, I would say that the 15 billion number is rather conservative number. and not a very aggressive number in terms of CapEx allocation.

Okay. Thank you very much.

We have a follow-up question from the line of Oli Jeffrey with Deutsche Bank. Please go ahead.

Two quick follow-ups. First one was, can you just clarify that for the $15 billion that any corporate M&A of renewable development portfolios would be on top of that. I think that's what you were saying, just to clarify. The question is a hypothetical. So, this year you now have a capex offset. You can include for capex spend 24 to 26. If the windfall tax is extended into next year, presumption be that you would not have any ongoing capex offset CapEx is allowed to be offset from 27 and beyond. Right way to think about it. So that next year, if the cap were extended, you potentially might not have any CapEx to offset.

Yeah, that's a way to think about it. I can't really comment on it because I really don't know. You know, I don't know if the government is going to, uh, extend, um, you know, having seen the government extending until the end of the year, despite the fact that many, many other countries in Europe, hasn't done that. Germany, for example, you know, they, they finished, um, uh, June 23, uh, Austria extended down until the end of the year. So they have already shown in the past, um, that they number one extended, they have reduced the cap from 140 to 120. Um, again, you know, there was something where, uh, there weren't many other countries that were, um, following a similar stance. I mean, Romania is at 90 years, but they are sort of like an outlier. Um, so yes, there is a possibility, but how, how it would be structured, what the cap would be, uh, what, uh, the, um, what the offset of investments would be. You know, would they basically go beyond 26, the way you've mentioned? We really don't know. That's very, very hard to say. And coming back to your CapEx, yes, you're right. If we were to make acquisitions on the development side, that would be on top of the 15 billion. And generally speaking, I mean, as Andreas has said, you know, we have not – We don't have an approved budget that will be in December. We don't have the guidance and the CAPEX plan for the years 24, 25, 26 published. We will do that with the full year figures in March of next year. But it's a fair assumption that the CAPEX for the next three year periods will go up.

The next question comes from the line of Theresa Sheenwald with Rifeson Bank International. Please go ahead.

Thank you for taking my question. I was a bit surprised about Mellach not being contracted to APG. because so far I understood that Malach was strategically important also location-wise for the great stabilization, not only in Austria, but also in southern Germany. So could you please elaborate a bit on that? And the second one, speaking about southern Germany, is there any update on your take about the potential crisis zone split of Germany and what's your impact assessment on Austria Theresa could you sorry maybe it was just me having a bad line could you repeat the second question yeah if there is an update of your impact assessment on a potential power zone pricing zone split of Germany for Austria okay

Okay, so I'll do the second one, and Andreas, if you were so kind as to do the CCGT question. Well, an impact assessment on a potential split in Germany is very difficult because there are many, many variables that would go into such a split. It is very complex. By the way, I don't think that there will be a split in Germany because it's not even necessary. The new system basically has critical branches. And with the flow-based market coupling, there are algorithms which look into different zones across Europe. And if there is a concession in a specific zone, i.e. a critical branch, that will then be resolved. So the splitting into two zones, when you look into the future development of the European grid system, might not even be necessary. However, theoretically, if you split Germany into two zones, you would obviously have a lower price in the north, you would have a higher price in the south, Um, and, um, and Austria would, um, obviously be much, much closer, uh, to the Southern price than to the Northern price. Um, you know, having settled that it's, it's, it's very theoretical because, you know, with all the information per today, um, I cannot really see, um, um, as, as some splitting within Germany. Um, Andreas, could you. comment on the CCGT, please.

Yeah, Teresa, with regard to Mela, I think it can be easily explained. It was a pure economic decision. So we were considering what is the best economic or commercial option for us either to participate in this regulated congestion management process or to sell, let's say, the electricity produced by Mela into the market on a merchant basis. These two options showed a clear result, which is to sell the electricity into the market at least until 2025, where we can then make a new decision and we can apply theoretically for these congestion management services again. It was an economically driven decision, and we have decided not to apply or to participate in this congestion management process, which Austrian Power Grid had to handle.

Thank you very much. Thank you.

There are no further questions at this time. I hand back to Peter Coleman for closing comments.

Yes, ladies and gentlemen, let me thank you for, as always, many questions, a very good discussion. And I look forward to our next conference call with our full year results. and wish you a great day. Thank you very much. Bye-bye.

Bye.

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