Rwe Ag Ord S/Adr

Thank you, and good afternoon, ladies and gentlemen. Thanks for joining our RWS conference call on full year 2024. Our CEO, Markus Kreber, and our CFO, Michael Müller, will first guide you through our presentation, and then we'll start our Q&A session. And with this, I hand over to you, Markus.

Yeah, thank you, Thomas, and a warm welcome to everyone. Despite some headwinds from a sharp decline in European commodity prices at the beginning of 24, we delivered on our promises. Our robust business portfolio has enabled us to put in a strong operational and financial performance. And we have proven our ability to debt quickly and reallocate capital to our shareholders by introducing a 1.5 billion euro share buyback program in Q4 of last year. While the market fundamentals for power demand are promising and significant investments in additional power generation capacity are needed in all our core markets, we are experiencing higher uncertainty in the investment environment. We will therefore be even more cautious with regards to additional investment commitments. We will target the leverage ratio to be at the conservative end of our range to maintain a strong balance sheet in more uncertain and volatile times we have increased our return requirements across all technologies and markets and we will apply stricter investment criteria especially in the us consequently we have significantly reduced our 2030 investment program for the years 25 to 2030 we have cut our plant investments by 25 or 10 billion euro compared to our capital market day Part of our CapEx optimization is an active sell-down and partnering strategy for our offshore portfolio to reduce the burden from capital employed under construction. With 12.5 gigawatt projects under construction across all technologies, our committed net cash investments currently stand at 13 billion euro. These projects will deliver attractive returns. While our planned investments in 2025 are fully committed, we have a high degree of flexibility in our capital allocation from 2026 onwards. Our financial targets are confirmed. We expect EPS to grow from 2025 to 2027 at a CAGR of 18%, reaching €3 per share. We also confirm our long-term target of €4 adjusted earnings per share in 2030. We confirm our increased dividend for 2024 and target another increase by 10 cents to 1.2 euro per share for 2025. And our current share buyback program of 1.5 billion euro runs until Q2 26. Let us briefly look back at 2024. We have delivered a strong financial and operational performance On the back of the robustness of our integrated generation portfolio, adjusted EBITDA stood at 5.7 billion euro and exceeded the midpoint of our guidance range. Adjusted earnings per share stood at 3.1 euro, also clearly exceeding the guidance midpoint. At the same time, we have made progress in decarbonization. In 24, our CO2 emission dropped by another 13% compared to the prior year. Over the last 12 months, we closed six lignite power plants with a total capacity of 2.4 gigawatt. And we have converted our Dutch plant, AMA, to run on 100% biomass. After a thorough review process in December, the science-based target initiative confirmed that RWE's climate targets to reduce its emissions are in line with the 1.5 degree pathway. Given the recent market developments, we have updated our capital allocation plans until 2030. On the one hand, the power sector continues to show strong fundamentals in Europe and the U.S. Power demand is expected to increase significantly driven by general electrification and the need for additional data centers to fuel research in artificial intelligence. Power generation from renewables in combination with batteries and the backup from gas is set to deliver the necessary additional supply. Significant investments are needed in renewables, batteries and gas generation in all our core markets. However, for massive investments, a stable and reliable investment framework is key. And unfortunately, here we experience much higher uncertainties. Questions over the energy policy direction in the U.S. and overall geopolitical tension have potential implications for international trade. We need to reflect this environment on our future investment decisions. And therefore, we now take a more cautious approach. We have increased our return targets. We have introduced stricter investment criteria, especially in the US. We will maintain our strong balance sheet in the current environment and target the more conservative end of our leverage range. Consequently, we have adjusted our 2030 investment program and reduced planned net investments by around 25% or 10 billion. In the period 25 to 30, we now plan to invest 35 billion euro net. Part of our optimized capital allocation is an active portfolio management of our offshore wind business. Here we also aim to reduce the burden from capital employed for projects under construction. We follow a systematic approach. We look at projects in all three phases of either development, construction, or commercial operation. Depending on the risk and capital intensity, we decide about the optimal timing of farming down a project and the respective size. In some cases, we see value in keeping the project majority and other to deconsolidate and allow for project violence, respectively. Page 7 shows that we have already implemented and what we plan to do. We have successfully farmed down a minority stake in our 3 gigawatt UK Dogger Bank South project to muster with the goal to partner early and reduce capital needs on our balance sheet. And we have partnered with Total Energies for our 800 megawatt Oranje wind offshore project in the Netherlands as well as for our 4 gigawatt wind coastal development project off the German coast. And we will do more. We plan to further farm down stakes of our projects under construction. We are well advanced with the sell-downs of Tor and North Sea Cluster and expect to be able to make a positive announcement shortly. For the Norfolk portfolio, we plan to farm down prior to FID, as well as project finance after the CFD is secured. And finally, we will farm down 49% stake in our highly attractive project Sophia, which will be commissioned next year. Under the new investment plan, we expect net cash investment of around 19 billion Euro from 2025 to 2027. As one should expect, for the current year, our net investments are committed. From 2026 onwards, the share of uncommitted investments will increase significantly. This gives us a high degree of flexibility in our capital allocation. Executing our outside farm downs of Sofia and Norfolk will increase flexibility further compared to what is indicated on page eight. Further share buybacks are part of any capital allocation consideration going forward. We will decide on the optimal capital allocation for the flexible part early next year when we expect clarity on future U.S. and German investments. Let's now take a closer look at our running investment program on page nine. Currently, we have 12.5 gigawatt of capacity under construction, well balanced across technologies and regions. For the investment decisions taken, we have achieved an average IRR of 8.3 at FID, clearly exceeding our previous 8% target. We also actively risk management our construction projects. All of our offshore and onshore wind projects are on time and on budget. And we continuously reduce our merchant offshore exposure by locking in attractive off-takes. For our North Sea Cluster offshore wind projects, we have already secured the first 400 megawatt. We have signed the PPA with Tesla to supply clean electricity from a pan-European wind portfolio, including 100 megawatt from North Sea Cluster. In addition, an agreement has been signed with Total Energies to supply 30,000 metric tons of green hydrogen per year for its refinery in Leuna from 2030. The hydrogen will be produced in our 300 megawatt electrolyzer currently under construction in Lingen, planning to use renewable electricity from our Nordic cluster offshore wind farm. With that, we have not only implicitly hedged 300 megawatt of offshore wind, but also contracted our H2 production from the electrolyzer investment. The supply chain for our US onshore wind project is largely de-risked. Equipment for projects under construction is secured thanks to our well-established domestic supplier relations. We see only very limited tariffing risk. With all relevant permits in place, we don't have risk from federal permitting. Across our whole onshore wind and PV construction portfolio, more than 95% have a secured offtake. For all future investment decisions, we have increased our return requirements. We have lifted the spread over WEX by 50 basis points to a new range of 150 to 350. Accordingly, our new average target IRA will be above 8.5%. And we have introduced very strict requirements for U.S. investments given the current market environment. We will only bring projects to FID that have all federal permits in place, where all relevant tariff risk is mitigated, where offtake is secured, and tax credits are safe harbors. Despite the discussed changes in the market environment and our reduced investment plans, we are set to deliver our earnings targets. We confirm our 27 and 2030 adjusted EPS targets, which we set out back in our capital markets day in 23. Our strong existing portfolio, the attractive returns from our committed investments, and the flexibility in our capital allocation going forward will deliver results. and adjusted earnings per share CAGR of 18% from 2025 to 2027. We offer attractive mid-term shareholder returns. With the current dividend yield of close to 4% and the target to increase the dividend by 5% to 10% per annum. Through bottom-line earnings growth with an 18% EPS CAGR to 2027 and with our existing share buyback program of 1.5 billion euros. It runs until Q2 26. With dividends and the share buyback program, we will distribute almost €4 billion in capital to shareholders until 2017. Let me summarize. RWE is a highly attractive investment with a significant upside to its current valuation. We have a strong track record of operational and financial performance. In the last five years, we have outperformed our guidance every year. Our committed investments will deliver attractive returns and we have a clear focus on capital allocation discipline with high flexibility from 26 onwards. We have clear visibility on our EPS growth and have confirmed our mid and long-term EPS targets for 27 and 30. And finally, we have a highly attractive shareholder remuneration through continuous dividend growth and our current share buyback program We'll continue until next year. And with that, I hand over to Michael.

Yeah, thanks, Markus, and also good afternoon from my side. Let's first take a closer look at the financials for 2024. We've delivered a strong financial performance in 2024 and exceeded our expectations from November. Adjusted EBITDA stood at 5.7 billion euros thanks to a strong performance in our flexible generation and supply and trading businesses. Depreciation was minus 2.1 billion euro due to a one-off effect on U.S. assets that were commissioned prior to the early year on asset swap. Our adjusted financial results improved due to lower tax interest and interest provisions. Additionally, interest during construction had a positive effect. At the bottom line, adjusted EPS exceeded the midpoint of the guidance range. 2025 will be the earnings trough as earnings and flexible generation and trading normalize. From 2025 to 2027, earnings will grow on the back of all investments. For offshore wind, we expect 2025 EBITDA to be in the range of 1.3 to 1.7 billion euros, which is comparable to 24. From 2025 to 27, the offshore EBITDA CAGR amounts to 24% driven by the commissioning of new assets. All our projects under construction are well underway, on time, and on budget. The most advanced project is SOFIA. We expect COD in the second half of 2026. To date, more than half of the offshore foundations have been installed. The offshore converter station, onshore substation, and the onshore and offshore export cables are in place. Last week, we saw the arrival of the turbine installation vessel, which will start installation shortly. In addition, the first 150 recycled blades have been manufactured and are ready for installation. We expect the first generation and revenues later this year. After commissioning, the project will benefit from a 15-year inflation-linked CFD. In addition, our Nordsee cluster project in Germany is well underway, and we have signed all major supplier contracts. The fabrication of foundations and substations is progressing well, and first offshore works to prepare for the installation of the foundations have started. We intend to bring the project online in 2027. Our 1.1 gigawatt Danish offshore project tour is also progressing as planned. Onshore construction works are well underway, and 50% of the foundations have already been delivered to Eemshaven port. They will be installed this summer. We expect to commission the project in 2027. 2027 EBITDA is also driven by the effect from lease accounting of the long-term charter of installation vessels. At EBIT level, this effect is neutral. Our guidance does not include any book gates. Let's now turn to onshore wind and solar. The increase in our 25 earnings is driven by organic growth. We expect adjusted EBITDA to be at 1.65 to 2.15 billion euros. And we expect further growth in the coming years. 2027 EBITDA will range between 2.5 and 3 billion euros. The implied annual growth rate stands at 20%. The key drivers for the development from 2025 to 2027 are growth from our existing asset base already under construction, and we also expect earnings from projects that are not yet under construction. These FIDs are, of course, subject to our strict investment criteria, increased return requirements, and depend on our capital allocation. Lower power prices will partly counteract the earnings growth. Similar to our offshore guidance, we did not include book gains into our guidance for onshore solar. Over the past few years, our flexible generation business benefited from high power prices and volatility. For the future, we assume normalized levels for both drivers. 2025 adjusted EBITDA is expected to range between 1 and 1.4 billion euros in line with the midterm average we guided a year ago. For the flexible generation segment, we have introduced a EBITDA earnings floor. The earnings floor consists of capacity payments and regulated incomes as well as margins that we have already secured or that are very certain. For 2025, the EBITDA floor amounts to 900 million euros. In 2027, adjusted EBITDA will range between 1.1 and 1.6 billion euros. This implies an annual growth rate of 6% from 2025 to 2027, driven in particular by higher capacity payments in the UK and the commissioning of battery projects in Germany. However, our new EBITDA target is lower than expectation at the CMB due to lower margins and lower investments. The 2027 EBITDA floor stands at 1 billion euro, driven by higher capacity and regulated payments. Let me highlight that these secured payments are set to continue for longer. Just last week, we secured more than 6.4 gigawatts in the UK T-4 capacity auction for the delivery year starting October 2028. This will provide us with an income of roughly 400 million pounds plus inflation. In 2024, our existing business generated an adjusted operating cash flow of 5.9 billion euros. Despite lower EBITDA in 25, the business will continue to deliver strong cash flows going forward. For the coming years, we expect an adjusted operating cash flow of $5 billion on average. This is driven by strong cash contribution from our growing core business. The adjusted operating cash flow also includes the cash flow from our phase-out business, as well as cash financial results and cash taxes. Over the period, From 2025 to 2027, we also expect positive effects from working capital. In the current market environment, we will maintain our strong balance sheet. We will therefore target the more conservative end of our 3.0 to 3.5 leverage range. Our net to adjusted EBITDA leverage factor at the end of 2024 stood at 2.0 for 2025, we will get closer to 3.0. And we will maintain our solid investment rating of BAA2 from Moody's and BBB Plus from Fitch. Let me summarize. We have delivered a strong operational and financial performance in 2024 with adjusted EBITDA and net income both exceeding the midpoint of the guidance range. This was driven by a robust portfolio and, in particular, by the strong performance of flexible generation and supply and trading. We have high visibility on our earnings growth in each segment until 2027. On the back of our robust portfolio, we will generate 5 billion euros cash on average over the years 2025 to 2027. and we will maintain our strong balance sheet and solid investment grade rating. And with that, let me hand back to Thomas for Q&A.