Verbund Ag Ord

Ladies and gentlemen, welcome to the conference call on the Quarter 1, 2024 results of Fairbairn AG. I am Vassilios, the course call operator. I would like to remind you that all participants will be in listen-only mode when the conference is being recorded. I would like to remind you the presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Peter Coleman. Please go ahead.

Thank you very much. Ladies and gentlemen, let me welcome you to the presentation of a boom for the first quarter 24. And let me thank you for joining today's conference call. Before we move into the analysis of the business development of Forbund, let me make a few general comments. Forbund can look back on an extremely successful year 23 with the best results in the company's history and is starting the year 24 as a strong, resilient, and well-positioned company. However, The energy industry value drivers relevant to Verbund's earnings have deteriorated compared to the highs of 22 and 23. Thus, Verbund earnings declined slightly in the first quarter. The fall in gas prices with its consequences on electricity wholesale prices is due to in particular to the lower demand for gas as a result of the mild winter and the rather weak economy in Europe, as well as the comparatively high filling level of gas storage facilities. Now, despite the changed framework conditions in the energy industry, we're working consistently on the implementation of our Sustainable Strategy 2030, which focuses on strengthening our integrated position in the market the expansion of new renewable energy generation in Europe, and the development of a green hydrogen economy. Now, before I continue with the Q1 presentation, let me state that the interim report for the first quarter differs slightly from previously published interim reports due to a comprehensive change in the group-wide platform for data processing and the preparation of management information. Now let's move on to the financial details of the first quarter 24. At the beginning, let me highlight the most important influencing factors for the results development. Based on our hatching strategy for our own electricity generation from hydropower, the average achieved contract price decreased by 84.7 euros to 118.1 euros per megawatt hour in the first quarter. The hydro coefficient determining the generation from run of river hydropower plants was very strong, with 1.29 compared to last year and far above the long-term average. However, production from our hydro reservoirs was lower by 4.8 percent. Generation from wind and PV was up compared to last year, mainly driven by the commissioning of new power plant capacity in Spain. Thermal generation also increased due to the increased use of our Mela CCGT. The sales segment also contributed positively, among others, due to lower procurement costs for energy. Contributions from the grid segment decreased, mainly coming from lower results of GasConnect Austria. The same applies to all other segments, whose contributions also decreased mainly because of negative measurement effects. The contribution from flexibility products was lower, mainly due to a decrease in congestion management and control energy. Finally, a minor negative impact on our results was coming from the levy on excess profits in Spain. There were no impacts in the other countries of operation in the first quarter from levies on excess profits. The impact of these influencing factors on the key figures of Verbund are as follows. EBITDA decreased by 8.7% to 883 million and the group result decreased by 4.3% to 506 million. The operating cash flow also decreased to a level of 929 million euros. The free cash flow after dividends was positive at a level of 675 million, and net debt improved by 35.8% to a level of 1.129 million euros. Let me now give you our updated guidance for 24. Based on average hydro, wind, and PV generation, in the quarters two to four, as well as the actual opportunities and risk situation of the group, Verwund expects a reported and adjusted EBITDA between approximately 2.8 and 3.3 billion, and the reported group results between approximately 1.45 billion to 1.75 billion in 2024. The payout ratio will be between 45% and 55% of the adjusted group results between approximately 1.45 and 1.75 billion. Now, on the next page, let me start with the hedging volumes and hedging prices, as you know, highly relevant to Forbund results. You know that one euro plus or minus had the sensitivity of approximately 25 million euros on the EBTA line. As of the 31st of March, 24, we reached an average achieved contract price for hydro generation of 129.5 euros for 24, and we had sold approximately 77%. For 25, we had sold 45 percent of our own generation at a price of 126.6 and for 26 we had sold 32 percent of the generation volumes at 79.4 on a mark to market basis with prices as of the 16th of april 24 The average achieved contract price for 24 is at 118.7 euros per megawatt hour. For 25, it is at 112.4. And for 26, it is at 82.7 euros. Now, on the next page, let me comment on some developments in the various business segments of Faboons. And let me start with the hydro segments. At 1.29, the hydro coefficient, as you know, that's our index quantifying the hydropower generation of the run-of-river power plants, was an impressive 29 percentage points above the long-term average and 36 percentage points above the level of the first quarter 23. The production from annual storage power plants decreased by 4.8%. Own production from hydropower therefore overall increased by 1.8 terawatt hours or 29.6% to 7.893 terawatt hours compared to the first quarter, 23. Lower average achieved prices, however, could not be compensated by the increase in volume and are the main reason for the decrease in EBTA in the hydro segment. In addition, flexibility products decreased by 17.8 million euros. In total, EBTA in the hydro segment decreased by 18% to 714.4 million euros. Regarding capex, Our main hydro project, the 480-megawatt Lindbergh 3 pumped storage power plant and the 45-megawatt RISEG 2 pumped storage power plant are progressing well. The 11-megawatt Randolph River project as well, and the COD is expected in 2024. Now let me continue with the analysis of the own generation from new renewables. The new renewables coefficient, that is an index quantifying the generation from wind power and PV, amounted to 0.89 in the first quarter of 24 compared to 1.03 in the first quarter of 23. The generation for wind power nevertheless increased by 65.6%, about 221 gigawatt hours, and amounted to 558 gigawatt hours in the first quarter. New installations in Spain and Austria more than compensated for less favorable wind conditions. Generation from PV amounted to 77 gigawatt hours in the reporting period, stemming mainly from PV installations in Spain. Now, taking a look at the EBDA development in the new renewal segment, we see that the EBDA decreased by 6% to an EBDA amounting to 56.7 million. Although volumes increased due to the acquisition of wind power installations in Spain, And in Austria, lower average achieved prices led to a slight decrease in EBTA. The chart also provides an overview on current developments in the renewable segment. On the next slide, you will find an update of our renewable activities. The chart outlines our new renewable assets in operation and construction in our market split by technology as well as our targets. With that, I would like to hand over to Andreas Wollein, who is going to take us through the sales segment, the other segments, and we'll continue with the key figures.

Please, Andreas. Thank you, Peter. So on slide six, you see the development of the sales segment in the first quarter. So the EBITDA development in the sales segment. increased strongly to a slight positive value of 6.8 million after minus 103.5 million in the first quarter of 2023. The increase in EBITDA is mainly due to lower procurement prices for electricity and gas. However, lower earnings contributions from flexibility products had an opposite and opposing effect. Flexibility products decreased by around 8 million euros. For both delivered electricity and gas to approximately 586,000 end customers in Q1 2024. Moving on to the next slide, you see the development in all other segments. The generation from our thermal power plants was up by about 6.7% to 328 gigawatt hours. due to the increased use of the CCGT Mela for electricity and district heating production. The decline in EBITDA is mainly due to negative effects from the valuation of energy derivatives in connection with future energy supplies. The contribution from our participation in KELAG, the provincial utility of Corinthia, increased from $14 million to around 21 million euros due to a better hydro situation as well as higher contributions from the trading and heating business. Finally, let me remind you that Mellach is no longer contracted for future congestion management, so both lines are operated on a market-driven basis at least until April 1st, 2025. The next slide shows the development in our important regulated grid segment. As you know, the grid segment consists of the regulated business Austrian power grid as well as GasConnect Austria. The EBITDA for Q1 2024 from the grid business according to IFRS was approximately 85 million euros and therefore more or less equal to last year. EBITDA guidance for the electricity grid for 2024 was increased from approximately 220 to 235 million euros. The reasons for the increased guidance are lower procurement costs for control energy and lower congestion management procurement, counterbalanced by lower revenues from the yearly auctions. The planned amount of the regulatory account at the end of 2024 will only slightly increase to a level of approximately 515 million euros. Let me also remind you that starting from January 1st, 2024, a new regulatory period has started. APG receives a weighted average cost of capital of 4.16% for old assets with a commissioning date up to 2022. A weighted average cost of capital of 4.88% for new assets with a commissioning date in 2023 and a WEG of 6.33% for new assets with a commissioning date in 2024. So the total WEG for 2024 is approximately 4.5%. With regard to the results contribution of Gas Connect Austria, we report an EBITDA of approximately 26 million euros in the first quarter 2024. The main reason for the decrease are lower transmission revenues, particularly from the commodity tariff. The guidance for 2024 increased from approximately 60 million to approximately 75 million euros because of lower procurement costs for gas. On the next slide you see the key financial figures. So I think Pete already outlined the development of the EBTA so it was up by 84 million, it decreased, sorry, by 84 million to 8.7%. to €883 million, depreciation increased by 10% to €138.6 million due to the acquisition of Spanish assets and increased investments into the high-voltage grid. The financial result improved to $16.6 million. This was attributable to higher earnings contributions from interests accounted for using the equity method, mainly Kellogg. Higher interest income and lower interest expenses mainly caused by the repayment of Schultz & Dahlin in November 2023. and the amount of around 500 million euros as well as lower interest expenses from money market transactions. So taxes and income decreased to an amount of 175 million euros. The group result therefore decreased by 22.9 million or 4.3% to 506 million. Moving on to the next slide, we see the development of the cash flows and the gearing situation. So for bulls operating cash flow in the first quarter decreased to 929 million euros mainly due to a lower average price achieved for electricity as well as lower return flows from the margining payments for hedging transactions in the electricity business which were deposited with the clearinghouse of the electricity exchange as collateral for open trading positions. In addition, higher income tax payments contributed negatively. The free cash flow after dividends showed a negative development, but it's still very attractive at the level of plus 675 million euros. The lower operating cash flow and high investments in property, plant and equipment were the reasons for this development. decreased again from $1.758 billion at the end of 2023 to $1.129 billion at the end of the first quarter of 2024 due to the positive free cash flow. Gearing correspondingly decreased to a level of 9.4% compared to 15.7% at the end of 2023. So now we are coming to the last slide, the outlook, and I will hand over again to Peter. Thank you, Andreas.