Verbund Ag Ord

Ladies and gentlemen, welcome to the Verbum Dei Gei full year 2024 conference call. I would like to remind you that all participants will be in this only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time, 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. I'm here with Andreas Wollein, Head of Investor Relations and Finance. We will do this presentation together. Ladies and gentlemen, welcome to the presentation of our 2024 results. And let me thank you for joining today's conference call. Before we move into the analysis of our business development, let me make a few general comments. In 2024, The verbund results were down compared to 23, but still high in a historic context due to normalizing conditions in the energy industry following the gas price shock after the outbreak of the Russia-Ukraine conflict. As you know, the past financial years proved to be challenging for the entire energy industry. with very little predictability and high volatility. In particular, geopolitical events, but also the weakening economy in Europe. In addition, the landmark elections in the EU, in many EU member states, and of course in the US, gave rise to intensive discussions about the future shape of the regulatory and political framework conditions. within the energy sector. These developments made it very clear that tensions between security of supply, climate protection, and competitiveness will remain intense over the next years. Now let's move on to the details of our 24 results. Average achieved contract prices decreased compared to 23. The hydro coefficient determining the generation from our run of river hydropower plants was significantly better compared to last year. The generation from the annual storage power plants rose due to higher inflow and reduced reservoir levels outweighing the lower generation from turbaning. Generation from wind and PV was also up. The increase in new renewables was mainly a result of the commissioning of new renewable power plants in Spain, but also in Austria and Germany. However, the overall result contribution declined due to lower achieved prices, higher other operating expenses, and valuation effects of energy derivatives. Generation from thermal power also rose due to the increased use of our CCGT in Mellach. The results contribution from the sales segment improved and was likely positive. However, the contribution from retail was still negative. Lower contributions from GasConnect Austria and Austrian Power Grid were recorded in the regulated grid segments. And finally, contributions from flexibility products decreased, mainly due to lower contributions from concession management. Now, let me go into more details, and let me start with the hedging volumes. Higher, relevant, highly relevant for FABON results, as you know, one euro per megawatt hour, plus or minus, has a sensitivity of approximately 25 million euros in our EBTA line. As of the 21st December, 24, we reached an average achieved contract price for hydro generation of 118 euros, dramatically below 23. As of the 31st December, 24, we have sold 66% of our own generation volumes for 25 at a price of 117.5. And for 26, we have sold 38% of the generation volumes at a price of 79.3. On a mark-to-market basis, with prices as of the 17th of March, 25, the average achieved contract price for 25 is at 108.9, and for 26, at 81.8 per megawatt-hour. On the next page, we talk about the hydro segment. At 109, the hydro coefficients, an index quantifying the hydropower generation of the Rannoch River power plants was 9 percentage points above the long-term average and 11 percentage points above the level of 23. The production from annual storage power plants increased by 4.2%. On production from hydropower, Therefore, overall increase by 2,940 gigawatt hours or 9.6% to 33,448 gigawatt hours compared to 23%. The increased volume, however, could not compensate for the lower achieved contract prices. Therefore, the EBITDA in the hydro segment decreased by 23% to 3 billion euros. Regarding capex, 24 marked the completion of very important projects. The 45 megawatt RISEX II pumped storage power plant as well as the 11-megawatt GradCon run-of-river power plant project. Activities on the 480-megawatt Limburg III pumped storage power plant project as well as the 14-megawatt Stegenwald run-of-river power plant project are progressing very well, and we are expecting them to open in 2025. Now, on the new renewable segment, The new renewables coefficient, which, similar to hydro, is an index quantifying the generation from wind power and PV, amounted to 0.91 in 24 compared to 1.06 in 23, so lower coefficient here as well. The generation from wind power increased by 30.2% or 422 gigawatt hours and amounted to 1,800 gigawatt hours in 24. More favorable wind conditions in Austria, in addition to new installations in Austria, Germany, and Spain, were the reasons for this development. Generation from PV amounted to 446 gigawatt hours, or plus 23 percent in the reporting period stemming from PV installations in Austria, that is seven gigawatt hours, and Spain, 439 gigawatt hours. In both countries, new solar farms went online. Now, taking a look at the EBDA development, In the new renewable segment, we see that the EBITDA decreased by 25%, to an EBITDA amounting to 170 million euros. Lower achieved prices were offset by increased generation volumes, as I mentioned before. However, higher other operating expenses and a lower effect from the valuation of energy derivatives in connection with future energy deliveries had an additional negative effect. The chart also provides an update on our activities in the renewable sector. The main focus is on the development of our large renewable portfolio in Spain, for which we got the approval to start construction of approximately 1.6 gigawatts. On the next slide, you see an update on our renewable activities. The chart outlines our new renewable assets in operation and in construction in our markets. It is split by technology as well as our targets for 2030. In addition, we are providing the EBTA contribution in 2024 and all the relevant CapEx figures. Now, on the next page, talking about the sales segment, Taking a look at the EBITDA development here, we see that it strongly increased to a slightly positive value of 7 million euros. The EBITDA in the retail business improved from minus 382 million in 2023 to a level of minus 77 million. So that is a big increase. The EBTA in the trading business amounted to plus 84 million. However, this figure includes negative valuation effects of 94 million. So the improvement in EBTA was mainly due to lower procurement costs for both electricity and gas in the end customer business, which was offset primarily by lower results from devaluation of energy derivatives in connection with future energy deliveries. In the grid segment, as you know, the grid segment consists of our regulated business Austrian Power Grid and our regulated business Gas Connect Austria. The EBITDA for 24 from the electricity grid business, according to IFRS, was approximately 284 million. which is a decrease of 89 million. The main effect for this decrease was the reduced contribution from earnings of our auctions. The EBITDA guidance for the electricity grid for 2025 is at approximately 210 million euros and can be characterized by two different effects. The regulatory compensation is rising because of higher WAC numbers compared to last year and because of the increase of the regulatory asset base reflecting the National Grid Development Plan. The company's strong growth, however, is leading to cost increases, which will be reimbursed by the regulator two years later. This time lag generally has a negative effect, as you can imagine. In addition, the movements in the regulatory account will have a significant negative impact on earnings of 76 million euros. The planned amount of the regulatory account at the end of 2025 will be approximately 480 million euros. I would also like to give you an update on the WAC development. APG receives a WAC of 4.2% for old assets with a commissioning date up to 22 and a WAC of 6.3% for new assets with a commissioning date in 24. And now most relevant, a WAC of 6.24 for new assets with a commissioning date in 25. So when you take it together, the total WAC for 25 is approximately 4.8%. As you might know, there will be a yearly update of the WAC for new assets for each tariff setting process until the end of the regulatory period, which is in 2028. Now, with regard to the results contribution of GasConnect Austria, we report an EBITDA of approximately 86 million for 24. The strong decrease compared to the very high results in 23 is mainly due to the elimination of the so-called commodity tariff and lower auction revenues in the gas network. DBDA guidance for 2025 is much lower. It's approximately $30 million under IFRS. What's the explanation? Well, it's the cessation of Russian natural gas transport through the Ukraine. As a consequence, we have a shortfall of approximately $40 million, which will directly reduce the 2025 results. But as we are in a new regulatory system, we'll be compensated with T plus 2 starting from 27. I will now hand over to Andreas Wollein, who is going to take us through the next few pages. Please, Andreas.

Yeah, thank you, Peter. So let me continue with the old other segments. So generation from thermal power plants was up by 622 gigawatt hours. We had lower revenues. The reason was mainly due to lower average prices achieved, which could not be offset by the higher production volumes. In addition, negative effects from the valuation of future energy deliveries were the main reasons for the decline in EBITDA. The contribution from flexibility products also decreased by around 15 million euros. The contribution from Cadillac, the provincial utility of Carinthia, increased from 78 million euros to about 100 million euros. This year-on-year increase in earnings is mainly due to the improved hydro availability, the higher trading result, and the efficient use and optimization of storage capacities. Now let me come on page 10 to the non-recurring effects. We recognized impairments in 2024 amounting to minus 291 million euros, and we had reversal of impairments of positive 114.3 million. The main reasons for the impairment losses concerning Mellach are lower clean spark spreads achievable in the medium term. The reason for impairment losses concerning GasConnect Austria are adjustments of the long-term business plan with respect to the new cost notice for the upcoming transmission regulatory period from 2025 onwards. The main reasons for impairment losses concerning the Spanish renewable assets are lower electricity prices for non-tariff projects and updated operating expenditures. The reversal of impairment losses are, among others, due to lower capital costs. The total effect of impairments in the EBIT line is minus 177 million euros. The non-recurring effects in the financial result amounted to minus 26 million in total and are mainly related to reversal of impairments related to TAC, the measurement of an obligation to return an interest in Donor Draftwerke Jochenstein and the PPR in TAC. The effect on taxes amounted to $47 million. The effect on minorities, $55 million. The overall impact of the non-recurring effects on the group-side level amounted to approximately $100 million. Now moving on to page 11, we show the development of the most important key figures of the bold So first, I think we mentioned that because of the aforementioned developments, EBITDA decreased by 22.5% to 3.48 billion. Depreciation increased by about 8% to 578 million due to the increased investment volume, especially in Austrian power grid, and the depreciation of the plants acquired in Spain in previous years. The financial results slightly deteriorated from €55 million to €52 million. On the one hand, an increase from Kellogg, but also an increase in interest income from money market transaction. In addition, interest expenses declined. This decline resulted in particular from the repayment of €500 million in November 2023. and from lower interest expenses from money market transactions. On the other hand, issuance of a green bond in May 2024 had an offsetting effect. The other financial result also had a negative effect. This resulted mainly from the measurement of an obligation to return an interest in Donaukraftwerke Jochenstein Power Plant. Taxes on income amounted to $639 million. The group result therefore decreased by 17% to $1.87 billion. The group result after adjustment for non-recurring effects was down by 24.5% and amounted to $1.96 billion. Finally, I would like to mention the decrease in additions to tangible assets in total from $1.45 to 1.16 billion, major investments mainly related to the hydropower plant Limburg III, various electricity grid investments, as well as investments into new renewables in Spain, Austria, Germany, and Italy. On page 12, you see a further development of key figures. First of all, the operating cash flow. decreased in line with the decrease in EBITDA to 3.25 billion euros. The change was mainly due to the significantly lower prices for electricity, lower inflows from margining payments for hedging transactions, and higher income tax payment. The free cash flow after dividends showed a negative development from $2.1 billion in 2023 to a level of $145 million in 2024. The lower operating cash flow as well as higher dividend payments were the most important influencing factors. An important key figure was at 0.6 as of December 31st. The slight increase primarily due to the lower EBITDA. Based on the results presented, we will propose an ordinary dividend of 2.8 euros per share for 2024 at the annual general meeting on April 29th, 2025. The payout ratio in relation to reported group result is 51.9% and 49.2% in relation to the group result adjusted for non-recurring effects. So let me pass on to Peter again for elaborating on the CAPEX plan and the outlook.

Thank you, Andreas. Yeah, very important CAPEX plan for... The next three years you can see that we have increased our previous three-year plan, which has been $5.5 billion to $5.9 billion. Let me go into a little bit more detail here. We are going to invest around $4 billion into growth investments and around $1.9 billion for maintenance investments. The majority of our investments will go into the expansion and maintenance of the regulated Austrian electricity grid. That is around $2 billion. Furthermore, we will invest in renewable generation projects primarily in Spain, around $1.7 billion, and in hydropower plant projects in Austria, around $1.25 billion. The investments overall relate to Verbum's home markets, primarily to Verbum's home markets of Austria and Germany, around 4.5 billion euros, and the Spanish market with around 900 million. Verbum plans to invest a total of around 1.9 in the financial year 2025. of which around 1.34 billion will be invested in growth and around 600 million in maintenance. Now, on the last page of our results presentation, as always, our outlook. Before I go into our guidance, I would like to highlight our sensitivities which we have in our generation. A deviation of plus or minus 1% in the generation from our hydropower plants has an impact of plus or minus 16 million euros in the group results for 2025. A deviation of plus or minus 1% in the generation of wind and PV has an impact of 2 million and a deviation of plus or minus 1 euro in the wholesale price has an impact of approximately 6 million euros in the group result for 2025. Our guidance for 2025 is as follows. We expect the reported and adjusted EBITDA of approximately between 2.7 and 3.3 billion and a group result of between 1.35 and 1.75 billion, as always under the assumption of average hydro, average wind, and average PV generation, as well as the actual chances and risk situation of the group. The earnings forecast is contingent on the group not being impacted by any further legal or regulatory changes For the financial year 25, we plan to pay out between 45 percent and 55 percent of the group results after the adjustment for non-recurring effects. With that, we have come to the end of our presentation, and we open for Q&A.

We now begin the question and answer session. Anyone wish to ask a question may press star and 1 on the telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Anyone with a question may press star and 1 at this time. The first question is from Wanda Servinoska with UBS. Please go ahead.

Hi, good morning. Two and a half questions from me. The first question is on the new tax in Austria. Your guidance is anything between 50 to 100 million euros in this fiscal year, but should we assume anything in Q1 next year or do you expect anything beyond December 2025? Because if I look at your achieved power price on the mark-to-market, you would be below the threshold. So do you see a further risk that the government may come and basically lower the threshold from 90 to 70 euro? Because it doesn't seem it's very likely that you will pay anything next year. The second question is on your guidance. If you could help us to bridge your 2025 guidance, because if I just look on the 24 versus 25, Hydro has been weak, so maybe you're losing a bit of, maybe half of terawatt hour. Power price is down by 9 euro per megawatt hour, so only in this is like 550, maybe a headwind at the EBDA level. Networks are going down by 130. There's a tax that says 75. So if I sum it up, I'm ending at 2.7 billion of EBDA, and your guidance is 2.7 to 3.3. So what I'm missing, are there any other moving parts? were basically that are missing. And the usual ask, Peter, if you could disclose the latest hydro and the hedging price, not market to market, but the volumes and the achieved power price so far. That would be appreciated. Thank you.

Sure, Wanda. Thank you. I will start with the third one, and it also explains part of your question on the guidance. We have hedged for 25% today, around 74%, at a price of 117. The remainder, which is not hedged, we currently mark to market it at 109. So the unhedged prices, which we're currently using, is 90 euros. So obviously that could go up, it could go down. So there is some uncertainty here on the unhedged level for 25. For 26, we have hedged, per today, 42%. There, the mark-to-market is 82. And when you compare what we have already hedged, It is around 80, and the unhedged level is also slightly above 80. So the market is 82. And for 27, we have literally just started with the hedging. So there we see a 27 forward price of around 76. That already... leads me into your important question on the tax and on the price cap. And you have rightly said that when you look at the 26 levels, we are currently, as I've just said, we are around 82. We are below the threshold. You're right. As a result of that... As we have a program until 2030, there is the possibility that next year the cap will be changed. Why? The government has said that until 2030 they would like to get payments of around $200 million per today. that can change as well, from the energy sector, from the Austrian energy sector, as we are by far the largest player in the Austrian energy sector. Obviously, we make a high contribution to that level. And when, as a result of lower power prices, that $200 billion or whatever the number is going to be next year is not met, then, of course, the cap could be reduced. Those are all things we don't know, but that is something when you look at the law, there is currently a lot of leeway and a lot of flexibility for the government to be very flexible in terms of how they are going to design the tax within the next few years. And in terms of the guidance, The guidance at the beginning of the year, Wanda, is not a perfect science. We have a lot of uncertainty. We have uncertainty in terms of what kind of hydro coefficient which we're going to have, and I'm going to answer on the hydro coefficient in a second. We have uncertainty on the power prices. As always with the IFRS results, We have uncertainty on the Austrian power grid. GasConnect Austria, we're pretty sure that we're going to come up with around the 40. And as you remember from the last few years, it is very difficult to predict the flexibility products. Sometimes we are surprised how much congestion management is required by the market. because of volatility also cross-border, and sometimes those numbers are much lower than we predicted. That is very much an external factor where we do our best to give the guidance, but it's very hard to really predict. Now, coming to the last point, the hydro coefficients, we had a very dry beginning to the year. We have year-to-date 0.86, which is 14% below the long-term average. That means that we really have to look at – and I know that would have been one of the next questions, so I'm anticipating it – the snow caps in the mountains – And at this point in time, we don't have a lot of snow. You know, weather is unpredictable, and we could still have snowfall in the next few weeks. We've seen it before. But as it stands today, there is not a lot of snow in the mountains, and as a result of that, The usual effect which we get from the melting of snow, which is obviously when you look at the topology of Austria is very significant, is not huge at the moment. The hydro coefficient currently, I mean when you just look at yesterday, is 0.6%. So at this point in time, the dryness continues. I always have to say at this point that very often we have been surprised. So we had a very dry beginning of the year, and then come summer and come fall, we see a lot of rainfall, and the numbers can even change dramatically, even sort of like, you know, 12 weeks before year end, as we have seen three years ago. So that would be the summary of my responses to your three questions, Wanda.

Can I just, through clarification, one is on the guidance. What are your assumptions on the sales? Because on hydro and on power grid, we can work it out, but on sales, do you assume any reversal or something, or is there anything unusual that is baked into the guidance? And then on the tax, because it's a 12-month period, period, right, for the windfall profit tax, but you included 50 to 100 for nine months effectively, so there will be something in Q1 next year.

Yeah, well, it doesn't run in a calendar year. It basically runs until the end of March of 26th. So that would be the impact, the 50 to 100, and I have to make a comment on that in a second. It is the impact for 25. And now I have to give a big caveat on that number. We have been discussing internally if we should give a number or not give a number, as you can imagine. we have decided that we are going to give you the best estimate which we currently have. And this is a number, a range, where we see the highest probability of the impact on our 25 results, and that is something that is included in our guidance. That number means that we did not have to change our guidance. It can be absorbed. However, we don't exactly know what the Ministry of Finance is going to decide vis-à-vis the possibility of using investments, Austrian investments, against this windfall tax. Can we use more than we expect? Is it going to be less? And that makes a huge difference, as you can imagine. We think that we can use offsetting investments, and this is how we come up with the number. But could it be higher? Yes, it could be higher. If the offsetting mechanism of investments is worse than we're currently predicting, and it is a wide range because there are many ways to design those investment offsets. It remains to be seen. However, as soon as we have more clarity how the legislation is going to be implemented and the implementation is the key, the specific design is the key, as soon as we have it, we'll let you know. And the sales EVDA guidance, sorry for the... Sorry, yeah, on the sales, we are predicting that we are going to end up, when you look at the entire sales segment, with a number that is significantly higher than what we had in 24 as a result of a complete change in procurement. So it's mainly the retail business which is doing much better. Thank you very much, Peter.

The next question is from Harrison Williams with Morgan Stanley. Please go ahead.

Hi, morning. Thanks for taking my questions. A couple for me. First, I appreciate the color you've managed to provide on the windfall tax. Can I just ask, when would you expect to get full clarity on those CapEx offsets? And maybe an extension of that question, taking a wider view of the new government in Austria, do you see any other changes that have implications for your business? I mean, we've seen, let's say, more pragmatism being adopted, already talked about in other countries in Europe about addressing the energy transition. So be keen to get your view on that. And then the second question was on your renewable investments. I noticed in your... your slides versus Q3, you have kind of a 25% increase in solar capacity targets in Spain by 2030. You know, that still seems somewhat of a challenging market given the cannibalization risk. So just hoping to get an updated view on, you know, what your return expectations are here. And you previously talked about pairing that with pump storage. Is that still an ambition? You know, further color would, again, be appreciated. Thanks.

Yes, sure. I'm going to start with the discussion around the tax, the windfall tax, and Andreas will take up your renewable question. I would like to take a step back because I think more of an explanation is required in terms of where Austria is coming from, where the Austrian government is coming from. The key issue here in Austria is the very large deficit. And as a result of that, because we had two years of negative growth, and we will probably in Austria go into yet another year of negative growth, that is a first. That is something we haven't seen for 100 years plus. and therefore it is of great concern in terms of deindustrialization, in terms of the weakness of the industry and industrial production overall. That has been the catalyst for the government to look at a number of measures to repair the deficit situation. has also started very detailed discussions with Austria, what Austria is going to do about the deficit situation. As a result of that, they have basically come up with a plan that the energy sector needs to make a contribution as well. So that is the background. That will not go away because... The government has been pretty transparent in basically saying, you know, this is something, this is a plan for the next five years because we're not going to repair the budget deficit in one year. It is a medium-term project to basically do it at the same time. More money, as in Germany, needs to go into infrastructure. So there is, on the one hand, money is required. On the other hand, there is not enough. The reason why I'm saying that is you asked, could there be other measures? And at this point in time, I cannot exclude other measures. Personally, at this point in time, I don't think there will be other measures, but I cannot exclude it. Do I think that, as I mentioned to Wanda before, do I think that there will be an adjustment in 26 Yes, I think there will be an adjustment because when the finance minister goes through his calculations and realizes that he will not get anything, he will probably make an adjustment. So that's where we stand. You asked me when do we expect any news. I would say within the next four to six weeks. However, the government is still in the formation process. The government has only just decided on the new coalition. It has taken a very long time after the elections. Various coalition structures were discussed. We now ended up with a tri-party government consisting of the conservative party, the socialist party, and the party called the NEOs. You could call them the liberal party. And they have negotiated. They all come from different perspectives. They have different priorities. So they all had to compromise on something. And as a result of that, it might take a few weeks before we have more clarity on the design of the energy tax, particularly the offsetting mechanism for investments, which is very relevant to us. Andreas, could you give us some comments on the renewable question?

Yeah. To start the answer a little bit more generally, I mean, you know we have a pretty balanced CapEx program going forward. We're around a third of our capital expenditures will be allocated to the regulated grid business. About 30% goes into hydro, about 25% into new renewables, and the rest goes into batteries. What I want to say first is we have a very balanced CAPEX program. With regard to new renewables, you know we have a target to reach about 25% of our total generation in new renewables by 2030. It corresponds with a capacity of around 5.5 giga we have currently about 1.2 1.3 gigawatt in operation more than half of that in spain more let's say what we currently have in operation in spain is materially wind and to a lower extent pv and most of the production is secured through a PPA or a tariff. I think we only have a 15% or so merchant exposure. We have acquired a portfolio, a project portfolio, say, two years ago from Q-Energy, the so-called laboratory portfolio. It consists of around 1.6, 1.7 gigawatts of renewable capacity. The majority of the project is PV, to some extent wind. And we are now coming into, let's say, the time period where we do the FIDs. So we recently have given FID to start construction of the first three portfolios in Spain, which is about a little bit more than 600 megawatts. And I think the plan is to do some additional FIDs in Q2, Q3 this year in order to step-by-step realize within the next two, three years these 1.7 gigawatt of projects. I think you know the current situation in Spain, I mean, I think everybody's trying to optimize profitability of the projects through different measures, so do we. So we also have now, let's say, given the approval to do co-location or hybridization for existing assets. So in order to increase the profitability, we combine PV with batteries, and we also let's say, try to do some collocation in order to increase the efficiency of the grid access. So these are the main targets. I mean, currently, I think when we talk about returns, I think we can achieve WEC plus something. Yeah, it's maybe currently not the hurdle rate which we targeted, but, you know, things are also moving and developing in Spain. And let's say we, on a medium-term basis, we would expect prices in Spain to go up, yeah. So, yeah, so this is the current situation for Spain. Does that answer your question?

Yes, that's very useful, Carlo. Thank you.

Okay. The next question is from Oli Jeffrey with Deutsche Bank. Please go ahead. Thank you.

Coming back to the Winnipeg Act, a couple of questions on that. First, the 50 million low end and 100 million low end, what was the assumption you've made on the CapEx offset that you'd be allowed? And then also, maybe just taking a step back, if 200 million is being targeted from industry overall, what do you think is a reasonable amount to be assumed given the bund size is contributed by the bund? And then lastly, could you please say what the guide is for the new renewables division in 2025? Thank you.

Yeah, sure. I can't really give you the exact assumptions because we have looked at five different scenarios and we have given probabilities to those five different scenarios. We have not run a Monte Carlo simulation, but we could have done. But we have tried to make a sound judgment on everything we know so far, and this is why we have come up with that range. We could have said 50 to 120 would have been just as correct because we don't know at this point in time, but at the same time, we think it would not have been fair towards you if we had basically not said anything in terms of what our estimate is. In terms of, could you help me with your second question? What did you say again?

Well, the other question was that if you look at the windfall tax from another way, you know, the Austrian authorities are looking to generate 200 million a year, given the size of the bund, you know, the size of its hydro business overall in the context of Austria. Is something around 100 million probably kind of the ongoing basis type of figure that you think they might be looking to target from the bund, given its size relative to others? Is that reasonable?

Yeah, it's an important question. It's extremely difficult to answer. It seems to us to be a movable feast. There are so many factors that go into it. You know, there is the remainder of the energy sector. I mean, it's much of Verbund, thank God. There are many other companies as well. There are renewable players that have a tariff. So I think that the finance minister will probably look at sort of like an estimate of the contribution from the entire sector. Then he's going to look into where is it coming from and why is it changing. And then, of course, he will make adjustments. But how he's going to make those adjustments, I don't know. The only very clear statement which we have received from the government, which is public, has been this is a long-term project. Well, maybe not long-term. This is a medium-term project which the government has, and it is $200 million per annum. So we are also in a position of uncertainty, uncertainty short-term because we don't know what exactly it's going to be for 2025, you know, with the explanation on the offset I've given before. And, of course, we have some uncertainty for the years 2026 onwards because we don't know if the price cap which is currently at 90, is going to be altered, obviously, to a lower figure. And the EBDA contribution, which we expect for 2025, would be between 120 and 140 million EBDA. Thank you.

May I ask one follow-up? If you were allowed to use the CAPEC offset for hydro from 2025 alone, what order of magnitude would that offset be just for one year?

I know what you're getting at. You're trying to get to our assumptions through the back door. That is totally fair. I would do exactly the same. However, I can't really give it to you. Fair enough. I think we've gone out of our way to really give you our best judgment.

Thank you very much.

The next question is from Piotr Zizkowski with Citi. Please go ahead.

Hi, good morning everybody. I have two remaining questions, really. So first one, I wanted to ask about your Limburg plant that you will have a COD in 25. What is the annual contribution and can you a little bit say how much the plant will kind of load power and offload the power? So any operational metrics that you can provide. And then second question on the... GCA ACG new guidance for 25. You provided the new numbers today. How much of a negative one of you included in them in terms of this reimbursement of all payments from the past years? Just to get a feel for the sustainable run rate of these businesses at current level.

Okay. Now, the Limburg free question which you asked, both from a technical point of view, but also from an economic point of view, is an interesting one. However, extremely hard to predict, and I'm going to explain why it is hard to predict. The pumping is obviously done when power prices are cheap, and the turbine is done when power prices are high, As we have been doing this for decades, we're pretty good in making estimates, sort of like what hours should we be pumping and when should we be turbining. But it is not just a question of the spread, and that spread is dependent on the overall pricing levels. So the pumping spread obviously has been extremely high in 23 when power prices were very high because the entire base went up, and as a result of that, the difference between the low price and the high price increased as well. The pumping spread increased. And now with lower power prices or a normalization of the power prices, the pumping spread goes down as well. But that is only part of it. The second part is the volume. And the volume basically depends on when is the spread high enough to justify the pumping and the turbaning. And that is an estimate as well. As a result of that, it is very, very difficult to give you an exact estimate on the revenues which we produce on pumping and turbining. That is almost impossible because it depends on too many variables, too many external variables. It's not as straightforward as the run of river power plants because with the run of river power plants, You know, it's baseload. You know, the hydro coefficient obviously changes. That is something we report to you on a regular basis. And then, of course, it is the power price which we achieve. The pumping, turbaning, the pump spreads, the volume of the pump spreads is much more complex. So that is an explanation on Lindbergh. And what was the second one again?

Yeah, do you want to do that, Andreas? Yeah. With regard to GasConnect Austria, you know that this year we have a little bit of a special situation because the Russian ship, I think, ended the gas operation. deliveries from the beginning of the year. So we have here a temporary negative effect on GCA results. That's why we got it about 30 million euros. The negative net effect is about 40 million. So, based on that, I will say the normalized EBTA in GasConnect Austria business would have been around, yeah, between 70 and 80 million euros for this year. As I said, it's a temporary effect because, you know, that's starting from the beginning of the year. We have negotiated with the regulator to move into a risk-free system, risk-free system that we get compensated for the volume risk which is here the case and this compensation will happen or will take place with t plus two so starting in uh from 2027 yeah in 26 we are not going to have this effect this negative effect because the regulator according to the tariff system has to amend the volumes, the transport volumes. And as a consequence, the tariffs will increase for 26. And so as a consequence, we are not going to have a negative effect in 26. So on a normalized basis, in this regulatory period in GCA, we see between 70 and 80 million euros of EPTA contribution. In APG, it's a little bit different. In Austrian Power Grid, we have for this year, I would say, a normalized EBITDA of around, I think a good indicator is always the local gap EBITDA, which is around 280 million. There are some amendments, I would say, around 300 million euros, eliminating all the, let's say, the various effects on the regulatory account coming from balancing energy and from congestion management services and from the auctions. So for this year, we predicted a little bit of lower result. The reason in APG, the reason for that is because we assume a reduction of the regulatory account of around 75 million euros. I think which makes sense, you know, that the regulatory account currently stands at a level of around 500. So on a normalized basis for this year, I would say something around 300 million euros EVTA for APG would be a good assumption.

Okay, thank you very much. Can I please... follow up on this Lindbergh because you explained the logic behind this asset but you haven't provided any figures so can you say based on the I understand these are all estimations can vary but can you roughly say based on the previous years let's not take the energy crisis but when you were building the plant your assumption was I don't know three hours of daily pumping and offloading and then on the spread of a 50, 60 euro a day or on every single hour or like just a large bracket would be enough in a way. And what is the assumed contribution, for example, for 25 is the commission date this year.

Okay. I give you a little bit more detail. Thank you. When we go through our investment decisions, Despite the fact that Lindbergh Free is a project right up our alley, this is something we do best. This is something where we have world-class expertise. This is something we do in combination with where we already have assets in the Austrian Alps, so we can combine it with our other assets. So this is something... where a third party would say, well, that's a must-do for somebody like Forbund. But we still go through very detailed calculations. So we look at the IRR of the project. And I can tell you that on this project, Lindbergh Free, we have an IRR that is more than 200 basis points above our WAC. So this is on the project-specific profitability. And I give you even more of a feeling. You know that our flexibility products, which consist of, control energy, congestion management, pumping and turbining, and intraday. In 24, we're 275 million. And we have never really given the detail in terms of how much is coming from controlled energy and how much from congestion management because it always changes and we don't want to give you the false feeling of stability in a business that is very much dependent on external factors. But overall, we had 275. The year before, we had 350 million coming from flexibility products in 23. For 25... following the logic which I explained before, that the pump spreads basically go down with the overall level of power prices, we think that what we are going to make from pumping and turbining is to lower the level of 24. And as a result of that, we think that in 25, What we are going to get from flexibility products is somewhere between 190 and 210 per today. You might remember over the last few years, things change because there are, as I said before, a lot of variables. But this is, with everything we know today, this is our estimate for 2025, between 190 and 210 per day. When we look into our medium-term planning, we think that flexibility products over the next few years will provide us with a level of around, I would say, between 190 and 240, somewhere within that range. That is about as much information I can give you, and that is actually more than I wanted to give.

Thank you very much. Thank you. Very helpful.

The next question is from Thibault Desjardins with Bernstein Societe Generale. Please go ahead.

Good morning. Thank you very much. My first question is regarding the development in Spain. When you develop the new project, do you already have PPAs? What are your assumptions in terms of prices or do you go merchant? My second point is regarding the load factor of hydro. Do you see any risk of having to buy back power this year due to the low levels?

Yeah, on the sort of like the buyback, that is something we have experienced before. And at the time, you know, on the conference call, we had an interesting discussion around that. Again, you know, when you have a very dry year, it can happen that you have to buy back. But we are... Now, purely mathematically, we are in a good place. Why? Because we basically say that we only hedge 80% of the production, so it really has to go below 80%. The probability of a dry year below 80 is not very high. It can happen, and it has happened before within the last 100 years, but it is a low probability event. We are relatively safe on that one, on the renewables. In Spain, obviously, we try to do PPAs. The PPA level has come down. You know, at the moment there is discussion around nuclear energy going out in Spain. Some people argue that could be a boost for energy prices in Spain. I'm not sure. I don't know. You know, this is difficult to say. We also see that there is a move from pay as produced to baseload PPAs. There is demand from data centers, of course, but data centers are looking for baseload as well. That's what they need. They need very stable energy flows. As a result of that, yes, whenever we do a project, we try to do PPAs, but we, like the rest of the market, we also go merchant.

But for the projects we have currently, let's say, under development or where we have given the FID, we don't have PPAs yet. We have started to discussions and negotiations with various counterparts. You know, in Spain, basically, you have three different types of PPA off-takers. First one It's the classic utilities and traders. Second is the industry. And third, you have now this big demand from data centers. So this is, let's say, a reasonable cluster where PPAs are already contracted there. um so the market is there um as peter said i think we're targeting to our target is to to enter into longer term ppas currently i think five to seven years of doable in spain um it's always of course a benchmark uh it's always a a comparison with our internal price curves and forecasts uh uh but uh yeah our target is to anything to longer term ppas in order to to mitigate risk. If it's doable, we will do that, but there will always be a certain amount of merchant exposure for us as well in order to optimize our own generation, let's say, in the markets.

Thank you very much. If I may ask you a follow-up question. Considering that you also have thermal assets in Austria, do you believe that a lower load factor of hydro could Well, you could compensate with higher load factor of gas plants.

Sorry, acoustically, I couldn't hear the last sentence.

Could the low load factor of hydro be compensated by higher load factor of gas plants?

Okay, yeah. That's an important question, not just for Austria, but for Germany as well and for some other markets. The entire discussion around the energy transformation is much too late in my view, focusing on baseload. And last year, and this shouldn't have come as a surprise, you know, that could have been planned, you know, already ten years ago, the more renewables you have and the more baseload you take out of the market in Germany, for example, nuclear and coal, the more demand you have for predictable energy. And the only predictable energy, of course, or plannable energy is fossil fuels. Gas is the fossil fuel of choice. and as a result of that, Germany has already decided last year, in order to stabilize the system and not be totally dependent on nuclear energy from France, they need to build gas-fired power plants. In Austria, we also have a discussion. We have a grid reserve, but the grid reserve, which basically consists of gas-fired power plants, serves mainly to stabilize the system. It is not necessarily a capacity market when you don't produce enough energy for your existing generation. And we had a situation in January where we, because it was very dry and there wasn't a lot of wind, obviously not a lot of sun, and we talked about, you know, the dryness of the beginning of the year, not a lot of hydro production. So the gas-fired power plants had to run at full capacity, but we had to import as well, which basically shows that the entire discussion about the energy transformation, and this is also important for all of you. The base load gap, as I like to call it, because the stability of the energy system is an absolute prerequisite. As a result of that, in terms of the energy design, one needs to think very carefully what the backup system will be, how potential capacity markets will be designed, and at what price the capacity markets will enter the merit order. And that will basically have an impact on power price and will have an impact on on the effectiveness, but also the efficiency of the energy transformation. I hope that wasn't too... No, thank you very much.

And could you invest in new gas plants in this environment?

We have our CCGD in Mellor, which is very efficient, which is a modern CCGD, but we will not make any further investments into gas as we see ourselves as a... as a renewable generator.

Thank you.

The next question is from Alberto D'Antonio with Texen Paribas. Please go ahead.

Hi, good morning, and thank you so much for taking my questions. The first one will be related to gas networks and the new regulation which is hedged from the risk of volumes. be interested to know if there is any potential upside if we see new flows coming from Russia. And also regarding your guidance on the normalized level of EBITDA contribution that you mentioned, it was around 70 to 80 million. Given that in this year there is a negative effect of 40 euros, can we assume that this is going to be reverted in 2027 and therefore the contribution should be in the region of 110 or 120. This will be my first question. The second one will be regarding the guidance of other sectors and GILAC, if you can give us what is your expectations for 2025. And finally, if you could repeat the hedging price without the mark-to-market that you have answered to Wanda in the first question, I would really appreciate it. Thank you so much.

Yeah, sure, Alberto. I will start with Gas Connect Austria. We anticipated that we could see geopolitical issues and problems which would have a direct impact on our regulated business, Gas Connect Austria. So in the previous regulation, we had a volume risk, but that volume risk obviously never ever could have foreseen the kind of volume changes as a result of a war. Therefore, we entered negotiations with the Austrian control authority, Energy Control Austria, And we basically talked about a new regulatory system which, similar to Austrian power grid, is a cost-plus system. As a result of that, if Russia came back and if Russia – let's just assume there is a peace agreement, which is something that is being discussed every day today. So if there is a peace agreement and there will be flows coming through the Brotherhood pipeline, which is a very large pipeline going into Austria, that would not change anything because our system, our regulatory system, is basically agnostic towards the volumes coming through the pipes. It is a cost-plus system. And when Andreas talked about sort of like a normalist level, which is an estimate. You know, we don't exactly know what the normalist level is going to be, but that's an estimate. Sort of like the $40 million, which we're making less now, in T plus 2 being compensated is already part of the 70 to 80 normalized levels. So that would not necessarily come on top of of the 80 million which we mentioned. But that is something that remains to be seen as we are also in negotiations with the regulator on a number of other things. In terms of the hedging, I can give you the numbers again. So you were asking for the numbers which we have already hedged. and not the mark-to-market, if I understood you correctly, Alberto. Right?

Both of them. So the numbers that you have hedged and the price.

Okay, both. Okay, good. So for 25, we have hedged approximately 74% at 117%. The unhedged level we currently, and the change is almost like every day, but we currently see at 90 euros. So the mark-to-market for 25 would be 109. For 26, we have hedged 42% at around 80. The unhedged levels... we see at around 83. So the mark-to-market would be 82. And for 27, we haven't really hedged anything. I mean, a very, very small amount. But they are just taking into consideration the forward prices. We see them at around 76. So that would be on the hedging. And, Andreas, do you have the... The guidance for, you said the other?

Yeah, the other sector and QILAC, but the expectation contributions in order to have more or less like the full bridge on the guidance you have provided.

Andreas is going to look it up and we take another question in the meantime.

Okay, maybe if I ask another one on policies for monopolizing the conversation, but coming back to the question regarding the fee, and the discussions with the opt-takers. What will be the level, especially in the Spanish market, that I guess is going to be the most relevant for you going into the future, at which you will kind of feel comfortable of seeing in MPPAs and the duration of them? Thank you so much.

Yeah, I mean, obviously... The more constructive the PPA market, the better. It's always a bit of a negotiation, right? It depends on what off-takers are willing to pay and for how long. We, like all the other producers of energy, we would like to see PPAs for as long as possible if the prices make sense. I know that's not the answer you want to hear. You would like to get a more specific level, but that's impossible because PPA prices change a lot, and there we can only talk about trends, and the trend currently is towards shorter PPAs. Whenever somebody wants to enter shorter agreements, the catalyst for that is usually because people expect that they might pay less you know, if and when they enter a PPA, two years down the road. So that is why they are, you know, tending to get shorter. I think for Spain, for the energy market in Spain, it's also important not to completely rely on the PPAs. You know, Mr. Draghi, again, sort of like it was yesterday or before yesterday, made a comment on the energy transformation and competitiveness. and the need for Europe to be more competitive on the, you know, in terms of energy prices. He suggested CFDs. The CFDs, by definition, would be longer term. You know, they're sort of like, you know, it's around 20 years. And the CFDs would be given out in auctions. And in those auctions, you know, the most competitive generators are obviously winning. Or if the auctions provide a high volume, then, of course, it would be the average price. And as a result of that, you know, for everybody in the renewable market, not only in Spain but in other markets as well, The challenge is to be, you know, to have LCOEs that are, you know, as competitive as possible.

And Andreas is going to give you the other response. The contribution from Kellogg this year is expected to be at around 60 million. And I think all others for this year are expected to be at about 10 million plus.

Perfect. Thank you so much.

You're welcome. Okay. We have a lot of questions today.

Yes, we have a follow-up question from Ollie Jeffrey with Deutsche Bank. Please go ahead.

Just on the regulatory account, I'm just trying to get a sense for the guide for the for the grids for 25, how conservative they are. So on the regulator account, has that been approved from the regulator or is it your working assumption that it will be? And then the other follow-up question I have was, just in where you see the current level of snowfall in the Alps versus what that would typically be for this time of year, are you able to say how much lower volume relative to the P50 you'd expect that to generate in your hydro assets or is that not possible? Thank you.

Okay.

I will start with the regulatory account. I go back to 23 because I remember that we had this discussion on the regulatory account in sort of like when we discussed the 23 numbers. At that time, the regulatory account was 500 million. Already in 23, we talked to the regulator because we wanted to decrease the regulatory account step by step. The regulator did not agree. I don't know why, but they did not agree. So actually in 24, the regulatory account went up to 550, and now we will be able to decrease it by around 70 million to what we think would be 480 in 25. And then in 26, hopefully we can take sort of like we can step it down again, hopefully in a regular way and not too jumpy. In terms of the snowfall, that is close to impossible. What I can tell you is that in comparison to previous years, we had less snowfall in the Alps, and the weather was warmer. As a result of that, you didn't have the classic formation of bound snow up in the mountains, and that snow cap is usually a good source for springtime hydro through the little rivers in the Alps going into the larger rivers and finally going into the Danube and increasing the hydro coefficient. However, I need to be careful here because that is only looking at one side of the picture. It could well be that what we would usually see as as snow melting and therefore, you know, hydro flowing from the mountains into the rivers, we could see more normal rainfall. And if we see normal rainfall, that could compensate for the melting of the snow. So predictions are very difficult. But that is certainly something we are going to observe over the next few months and something we are going to discuss in our next conference call in three months.

Thank you. And to confirm, the regulator did agree to the $70 million decrease in 2025 and what you hope in 2026 for the APG. Is that right, or is that still to be determined?

has agreed to the trend and has agreed on the specific number for 25, has not yet agreed on the 26 number.

Thank you.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Coleman for any closing remarks.

Yeah, as always at this point, I would like to thank you for your participation and for your many, many questions, which shows your interest. And I look forward to hearing or seeing you again on our next conference call, possibly in the meantime at the various conferences and roadshows. I wish you a wonderful day, and thanks again. Bye-bye.