Verbund Ag Ord

Ladies and gentlemen, welcome to the conference call on the half-year results 2024 of Fabuntage. I'm Vassilios, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference has been recorded. The presentation will be followed by question and answer session. You can register for questions at any time by pressing star and one 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 Forbund for the first half year 24. And let me thank you for joining today's conference call. I'm here with Andreas Wollan, our head of finance and investor relations. After a record year in 23, Forbund started the financial year 24 as a strong, resilient and well-positioned company. But as you know, the energy environment remains highly uncertain. In particular, the most important value driver for Fagund, the wholesale power price, is highly volatile. We have an increase in the second quarter following the sharp correction in the first quarter of 2024. And overall, the level of wholesale prices remains higher than before the start of the Russian-Ukrainian war, but well below the highs of 22 and 23. But now let's move on to the details of the first half year 24. At the beginning, as always, let me highlight the most important influencing factors for the results development in the first half year 24 at a glance. Based on our hatching strategy for our own electricity generation from hydropower, the average achieved contract price decreased by 68.8 euros per megawatt hour to 113.3 euros in the first half year 24. The hydro coefficient determining the generation from our run-of-river hydropower plants was well above the long-term average at 1.12%. Generation from wind and PV was up compared to last year, mainly driven by the commissioning of new power plant capacity in Spain, Germany, and Austria. The sales segment also contributed positively, among others, due to lower procurement costs for energy. Contributions from the grid segment decreased, coming from lower results of GasConnect Austria, as well as Austrian Power Grid. The same applies to all other segments, whose contributions also decreased mainly because of higher gas procurement costs due to the increased use of C3C Mela. Contributions from flexibility products were lower, mainly due to a decrease in congestion management and controlled energy, but substantially higher than in the first quarter 24. And in the half year 24, we had to book an impairment loss For GasConnect Austria, because of the final cost decree, setting the regulatory framework starting from the 1st of January, 25. Now, the impact of these influencing factors on the key figures of FABON in the first half year, 24, are as follows. EBITDA decreased by 21.9% to 1.762 billion. and the reported group results decreased by 29.3% to 910 million. The adjusted group result decreased by 22.9% to slightly above 1 billion, and the operating cash flow also decreased to a level of 1.85 billion. The free cash flow after dividends was negative at a level of 600 million euros. net debt increased by 41.9 percent to a level of 2.496 billion. Now, let me give you our updated guidance for 24. Based on average hydro, wind, and PV generation in the quarters three and four, As well as the actual opportunities and risk situation of the group, Verbund expects reported and adjusted EBITDA between approximately 3 billion and 3.3 billion. And the reported group results between approximately 1.5 and 1.65 billion for 24. The payout ratio will be between 45% and 55% of the adjusted group result between approximately 1.6 and 1.75 billion. Now, on the next page, as always, very important are hedging volumes. Let me go into more detail here and let me start with the volumes and the hatching prices, which you know are highly relevant for our results. One euro per megawatt hour plus or minus has a sensitivity of approximately 25 million euros in our EBTA line. Now, as of June 30, 24, we reached an average achieved contract price for our hydro generation of 123 euros for 24, and we have hatched approximately 88% of our own generation volumes. For 25, we have sold 51% of our own generation at a price of 121.9, and for 26, we have sold 33%. of our volumes at 78.7 euros per megawatt hour. Now, very important on a market-to-market basis with prices as of the 15th of July 24, the average achieved contract price for 24 is at 116.6, for 25 at 107.4, and for 26 at slightly above 80 euros. Now, on the next page, let me comment on some developments in the various business segments of Verbund. And I will start with the hydro segment on this page. As I already mentioned, at 112, the hydro coefficients, which is an index quantifying the hydropower generation of the Rwanda River power plants was 12 percentage points above the long-term average and 17 percentage points above the level of the first half, 23. The production from our annual storage power plants, however, decreased by 3.1%. On production from hydropower, therefore, overall increased by... 2,239 gigawatt hours of 14.9% to 17,292 gigawatt hours compared to half year 23. Now lower average achieved prices could not be compensated by the increase in volume and are the main reason for decreased EBTA in the hydro segment. In addition, flexibility products decreased by 16.1 million euros. In total, EBITDA in the hydro segment decreased by 24.4% to roughly 1.5 billion. Now, regarding CAPEX, our main hydro projects, the 480 megawatt Lindbergh 3 pump storage power plant, the 45-megawatt RISEc II storage power plant project, as well as the 11-megawatt round-of-river project in Kaplan are progressing very well and will start operation in 2024 and 2025, respectively. Now, let me continue with an analysis of our own generation from new renewables. The new renewables coefficients and index quantifying the generation from wind power and PV amounted to 0.94 in the first half 24 compared to 1.01 in 23. Generation from wind power increased by 81.1% or 443 GWh and amounted to 989 GWh in the first half of 24. New installations in Spain, in Austria and Germany more than offset overall less favorable wind conditions. Generation from PV amounted to 210 gigawatt hours in the reporting period, representing an increase of 30.5% and stemming mainly from PV installations in Spain. Now taking a look at the EBTA development and new renewable segment, we see that the EBTA decreased by 19.4% to an EBTA amounting to 88 million euros. Although volumes increased due to the acquisition of wind power installations in Spain in the third quarter of 2023 and in Austria and Germany in the first two quarters of 2024, lower average achieved prices led to this decrease in EBITDA. Although approximately 80% of the total renewable volumes are either protected by tariffs or hedged with long-term PPAs, there is a remaining exposure to spot market prices, which were obviously lower in the first half, 24. Now, the chart also provides an overview on current developments in the renewable segment. Now, let me continue with an analysis of the sales segment, which, as you know, comprises trading and sales activities of Verbones. Now, taking a look at the EBTA development here in the sales segment, we see that EBTA increased strongly due to a slightly positive value of 15.9 million after the minus 143 million euros in the first half of 2013. The 15.9 million EBTA contribution from the sales segment consists of minus 43.5 million from the retail business, so still a significant loss, but 59.4 million plus from the trading business. The increase in the segment EBTA is mainly due to lower procurement prices for electricity and gas, In addition, flexibility products decreased by 2.7 million euros. Forbund delivered electricity and gas to approximately 480,000 end customers in 24, representing a decrease of approximately 5.5% year on year. Now, next page, we're discussing all other segments. The generation from thermal power plants was up by 81 gigawatt hours or 23.5% to 423 gigawatt hours due to an increased use of our CCGT in Mellor. The strong decline in EBTA is mainly due to negative effects from devaluation of energy derivatives in connection with future energy supplies of approximately 54 million euros and increased fuel expenses due to the increased use of our CCGT Mela. The contribution from Kellogg, the provincial utility of Corinthia, increased from 38.3 million to 52.2 million due to better hydro situation as well as higher margins in the trading business. Finally, let me remind you that our Mellach CCGT is no longer contracted from APG for future congestion management. Line 10 and Line 20 are operated on a market-ridden basis, at least until the first April 25. The district heating power plant in Mellach is in contrast contracted by APG for the period from the 1st of October 23 to the 30th September 24. On the next page, we will give you more detail on the grid segment. As you know, the grid segment consists of our regulated businesses, Austrian Power Grid, as well as Gas Connect Austria. The EVDA for the half-year 24 from the electricity grid business, according to IFRS, was approximately 128 million euros and therefore 55 million lower than last year. The reduced earnings contribution from auctions had a negative impact. In addition to a significantly higher tariff roll-up of previous years in the area of EPM provisions, there is also a significant increase in the other provisions compared to the previous year, mainly due to a volume-related reduction of national grid revenues. The EBTA guidance for the electricity grid for 24 was decreased very slightly from approximately $235 million to approximately $230 million. The reason for the slight decline includes lower national revenues due to lower volumes. The planned amount of the regulatory account at the end of 24 is expected to be more or less unchanged at around 510 million, which, as we have discussed in the last conference call, is a pretty high number. Let me also remind you that starting from 1st January 24, a new regulatory period started. APG receives a WAC of 4.16% for old assets with a commissioning date up to 22. A WAC of 4.88% for new assets with a commissioning date in 23. And now, very important, a WAC of 6.33% for new assets with a commissioning date in 24. So the total WAC for 24 is approximately 4.5%. Now, there will be a yearly update of the WEG for new assets for each tariff setting process until 28. Now, with regard to results contribution of Gas Connect Austria, we report an EBTA of approximately 47 million euros for the first half 24. The main reason for the decrease of lower transmission revenues due to the war in the Ukraine, particularly from the commodity tariffs because of a tariff-related overcompensation in 23. You will remember that in 23 gas prices, gas we need for the compressor stations went up dramatically and were compensated by the regulator with the commodity tariffs. The guidance for 24 with regard to GasConnect Austria increased slightly from approximately 75 million to approximately 80 million euros under IFRS. The increase is due to slightly higher transmission revenues. Overall, we see a strong decrease in the EBTA of the grid segment from 295.5 million, which we had achieved in the first half of 23, to 175.9 million in the first half of 24. Now, with that, I would like to hand over to Andreas, who is going to discuss non-recurring effects and the key financial figures. Please, Andreas.

Yeah, thank you, Peter. So a quick word to the non-recurring effects, which you may not have expected. So we booked impairments amounting to around 195 million euros, stemming from an impairment of the CCGT Mellach, as well as an impairment of GasConnect Austria. The declining weighted short and medium-term contribution margins due to lower clean spark spreads are the reason for the MEGALAC impairment. At GCA, the reason for the impairment loss is the adjustment of the long-term business plan with regard to the new regulatory system for the upcoming regulation period starting from 2025. Because of the changed business environment and the inherent risk of future gas flows, starting from 2025, GasConnect Austria will be moving to a risk-free tariff system. A risk-free system comes with a lower future result contribution because the regulator has changed the regulation of the graph from low inflation values to low book values. In addition, GasConnect Austria has to repay They started to be collected with premiums for 15 years with 2 cents. Gas Connect Austria has either appealed against the cost of it. The measurement of an obligation to return an interest of Dolar Kraftwerke Jochenstein had a negative effect of around 17 million euros on the other financial results. In total, effects on the financial results were minus 17 million. After considering the effects on taxes and minorities, the non-recurring effects on the group recycle level amounted to minus 98.5 million euros. On the next slide, on slide 10, a quick summary of the development of the key financials. Because of the aforementioned developments, the EBITDA decreased by 492.8 million to 1.762 billion euros. Depreciation increased by 13.4% to 285 million euros, mainly due to the acquisition of Spanish assets and the increased investments into the high-voltage grids. The financial result improved to 24.7 million. This was attributable to higher earnings contribution from our participation in Kellogg. Higher interest income and lower interest expenses mainly caused by the repayment of Ashutosh and Darlin as well as lower interest expenses from money market transactions. So taxes on income decreased also to an amount of 297 million euros. The group result therefore decreased by 377 million euros to 910.1 million euros. I would like to mention the increase in additions to tangible assets in total from €311 million in half-year 2023 to about €444 million in half-year 2024. On slide 11, you see development of operating cash flow and free cash flow as well as our gearing. For bulls operating cash flow in the first half year decreased to 1.85 billion euros mainly due to a lower average achieved price for electricity as well as lower cash return flows from margining payments for our hedging transactions in the electricity business which were deposited with the clearinghouse of the electricity exchange as collateral for open positions. The free cash flow after dividends also showed a negative development from 927 million in half year 23 to a level of minus 600 million euros in half year 24. The lower operating cash flow and higher investments in property, plant and equipment as well as higher dividend payments were the reason for this development. In Q2 2024, we paid in total dividends to the bonds and minority shareholders in subsidiaries of approximately $2 billion. Net net increased from $1.759 billion at the end of 2023 to $2.496 billion at the end of first half year 2024. Gearing correspondingly increased to a level of $24.2. compared with 15.7% at the end of 2023. So with that, I'll hand over to Peter for the outlook, so the last chart of the presentation before we go into Q&A.