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.

Thank you, Michael. And with that, we start our Q&A process. Operator, please kick it off.

Thank you. Ladies and gentlemen, if you would like to ask a question on today's call, please signal by pressing star 1 on your telephone keypad. That is star 1 for your questions today. And up first, we have Peter Beustiger from Bank of America. Please go ahead. Your line is open.

Yeah, good afternoon. Peter Buschtiger here. So two questions, if I may. First one on this 20 gigawatts of CCGT that the German or incoming German government is talking about. Could you scope out for us, you know, how much of that could be RWE installations? What sort of capex are we talking about here potentially for you? How quickly could you turn around and begin construction, and what sort of framework do you need from the government to do that investment, please? And then secondly, on data centers, digitization is part of, again, the new German coalition strategy. I was wondering if you could talk about how you see the opportunity to monetize data sensors, you know, where you are and kind of discussions about using land with connections to site data centers. So that would be very helpful. Thank you.

Yeah, thank you, Peter. Let me start with the first one, the 20 gigawatt. I think we have a very good position to get if we get that framework and there is a clear willingness of the future coalition to get that done very fast and very pragmatic. So I would expect probably it's being simple gas plants and no additional burden on decarbonization. it depends on i mean how successful we are but i i think we are very well advanced with planning we have great sites um we have uh pre-contracts with suppliers so we have uh reserved um turbine slots um and uh our current market share in the german market is 20 so maybe that gives you an indication but in the entity we only invest if we have very good returns and especially for that business i would expect very attractive business cases because you have not so much competition. On data centers, we have three angles to that. One is we sell significant PPA volumes to data center providers, and it's in the Giga Awards in the last year, and we continue that. So seeing good demand and ongoing discussions for further PPAs. Second is If we have land which we don't want to use in the future, where we don't see good opportunities for us to develop batteries or gas backup or whatever, we can sell it. And the third angle is to go for more sophisticated solutions to use our existing infrastructure where we make them available, maybe back them up with 24-7 power supply and green PPAs, but we would not sell the land there. We would lease it long-term because we see it as an attractive opportunity for the future. And I wouldn't be surprised if you see more announcement on all three angles this year, but we will not promise anything. We will tell you about the delivery.

Got it. Okay. Thank you very much. Thanks, Peter.

Thank you. Can we move on to a question from Alberto Gandolfi from Goldman Sachs? Please go ahead. Your line is open.

Afternoon. Hi. Thank you for taking my questions. The first one is quite specific on earnings. I understand, Michael, that the 27 EPS does not include any asset rotation gains. Am I right in saying that in the 2023 CMB for 2027, you were assuming like 250 million asset rotation gains. So it's like 30 cents of EPS. So what I'm trying to understand is one, is this correct? And two, um, It seems an underlying upgrade of 10% versus the previous plan, like for like, without excluding asset rotation. So where is it coming from? Is it just the buyback or anything else that you can maybe discuss below the EBITDA line? The second question is on capital allocation. You just recently announced a buyback for the first time in your history, so I was not expecting you to just already tell us something today. However, can you be, if possible, a bit more specific of where you rank your share buyback versus any opportunity for, for instance, the Germany infrastructure plan? Is your balance sheet capable of coping with incremental investments and or buyback and or is there a share price at which you would rank share buyback at the top? I don't know if the shares are below 35 euros. I'm definitely going to extend the buyback and the shares are higher. We need to think about it. Is that how you're thinking about it or what's your logic, please? Thank you so much.

Yes, Alberto, I just start with the first one. So your assumption is right. So the C&D initially had like 300 million of book gains incorporated in the numbers, which are not anymore incorporated now.

On the share buyback question, Alberto, so let me, you asked a couple of questions. The one was, what is the balance sheet good for in terms of additional investments? I mean, first in this more unstable environment, we said we're going to go to the conservative end of our leverage target range. Of course, if the situation improves, we can go for higher leverage again, but not for the time being. I mean, that may be a decision for the future. And if you look at this chart where we say how much uncommitted capital capex we have until from 26 onwards, this is significant and it does not yet include the plant farm dumps from Sophia and the Norfolk project. So if we are successful on that next year, it will be even more flexibility and headroom for flexible capital allocation decisions from 26 onwards. Now, what is the metric? Of course, we don't have a formula, but you already touched up on the relevant questions. We need to achieve higher returns than in the current market environment. If we don't achieve higher returns for new capital commitments, then we will return the capital to the shareholders. Is there a specific share price? No, but it's part of the consideration, but maybe to give you a flavor, if you would need to take the decision in the current market environment, sitting now at 26 at the flexibility, in the current market environment, we would go for an additional share buyback.

That's very clear. Thank you.

And up next, we have Deepa Venkateswaran from Bernstein. Please go ahead.

Thank you for taking my questions. I had two. Firstly, just on the 2030 EPS, I'm just wondering how you are confident about meeting the four euros per share, although incrementally CapEx is lower by 8.5 billion in today's announcement. I'm already assuming the 1.5 before in the nine-month stage with the buyback. So that's the first question. So what are the levers to still keep the EPS for 2030? And second question is, for the subsidy-free offshore wind projects, Thor and North Sea Cluster, you do mention you would be farming it down and maybe something imminently in 2025. Could I check whether your partners are therefore happy to take the PPA risk, or are you signaling that you could be signing even more PPAs to make this farm down more attractive? If you could just talk about how that would work, and maybe it's more risk-staring rather than gains for those projects. Thank you.

So, Adipa, I take the questions. Let's first start with the 2030 EPS. I mean, first of all, one lever clearly is also our higher return expectations, which also should lead to higher EPS. The other one is, I mean, effectively, you can balance between investments and a combination of share buybacks, as we said. And so you either benefit on the side that you simply have less shares, And then obviously also the less you invest, the less you then have, say, depreciation financing costs, and probably we would also then have to look at the platform and lower some of the P&L DEVX, so that would have an impact. Or the other direction, if the environment turns attractive, then you would actually stick to the investments and achieve the return by attractive investments. So it's ultimately that balance. And given that it's 2030, we do clearly see sufficient flexibility to steer towards that number. Second question on Thor and North Sea Cluster. I mean, please excuse that we can't reveal any details yet, so there are conversations ongoing, and once we have more clarity, we will also obviously communicate to you the deal in more depth.

Thank you. Thanks, Deepa.

Thank you. And from Jefferies, we now have Ahmed Farman with our next question. Please go ahead.

Yes, hi, thank you. Two questions from my side. My first question is just on the 9 billion capex reduction program. Could you split that between, let's say, cross capex reduction and how much of that is farm downs and disposals? And I guess a subpart to that is, is there any sense you can say about how much of those sort of farm downs disposal proceeds do you expect The second question is just in terms of AR7 and the potential CCGTs in Germany, if those investments were to come through, would they be, would they make a meaningful difference to the CapEx profile to 2027, or would that be beyond that period? Thank you.

Yeah, Ahmed. I take the two questions. One on the capex, we see a net capex and you can already see where we're going to invest less. One is what we already announced in the last call, US offshore. We do not expect any US offshore investments in the planned period. We will also significantly lower our hydrogen investments already announced in the last call and we also see that going forward. We also expect significant lower capex, at least in the next years, not additional committed capex in the next years in the U.S. before we have clarity about energy policy, environment permits, and tariff risk. And we also expect significant less net offshore capex. This partly comes from the announced farm downs, but also given the environment we see, you have followed the auction in Denmark, in the Netherlands. there is no willingness to take additional merchant risk in the current environment, so we also expect those investments to be lower. And the second part of the question I translated into, I mean, is what we announced as capital, as flexible capital location sufficient to even go for a very successful AR7? and a good investment framework in the German gas plant build out, and the answer is yes. So, that would fit into the capital, in the flexible capital location we have announced.

Thank you. Thank you, Amit.

Thank you. And we move on to questions from Wanda Servinovska from UBS. Please go ahead. Your line is open.

Hi, two questions for me. One is in the UK mostly. Can you share your thoughts on the wake and blockage effects, the ongoing disputes between the developers, and how does it impact your LCOE assumptions? And when we look at the UK offshoring generation year-to-date, it seems that Triton, for example, is down 30% or 40% year-to-date versus last year. Is it the low wind speed or what is happening in the UK? And the second question is on the German policy. There's a lot of noise about the climate fund, infrastructure fund, and so on, but how RWE can benefit from the new energy policy apart from the CCGT is no longer hydrogen ready. Thanks.

Let me start with the last question first. So I think the clear positive sign is that the future of the next German government as getting back the economy on track as one of the key pillars of their future agenda. And we can expect significant spending from the government itself by loosening the debt break. And we can expect the government to support energy intensive industry to stay competitive in the international market. Both is a clear positive signal for future energy and power demand in Germany, where we are the largest beneficiary. And the third one is the clear intention to solve the security of supply problem with a build-out plan of 20 gigawatt of gas. Here, I think no government money is actually needed. We just need a good investment framework and then private money will do it. But I think the first, so I don't expect any let's say competition from the infrastructure funds to our potential investments. But I think the overall business environments should be much better, given the significant spending from the German government willingness to support energy intensive industries. And of course, all the other methods which have been announced, which make our product cheaper, so lowering taxes on power to the bare minimum, and supporting grid charges, things like that. The other one on the vacant blockage, I take that. I think Michael takes a specific one on the asset. I think there's a lot of noise now. And in the specific, let's say, renewable releases, you can see it almost every day. It's overblown, to be really. It's for us not a big topic. I mean, we know the potential vacant blockage effects We have factored them in. It's not a new thing. I think we are definitely with all our assessment what we see also when we talk with partners on the conservative end of that. I would say the noise you see, especially because the legal ground, how to sort it out and how to deal with it is unclear. And that is why everybody is positioning himself now. But for our investments, for our existing assets, we think we know what can happen worst case and it is factored in.

On the wind, the whole winter, so also Q4 has seen low winds and indeed also the first quarter has started with low winds. That's a fair assessment.

Thank you. Can I have one follow-up on the German politics? Markus, I think that CDU and SPD, they were thinking about bringing the assets from the strategic reserve or from the reserve capacity back to the merchant market to lower the power price, do you think it's likely to happen and is there anything RWG can bring on the table?

This is not political speculation where I typically refuse to enter the discussion, but I want to be very clear. I think this is not a great idea and I've made that also clear to the decision makers. because on the on the surface it sounds great bringing back these plans but you're going to create significant negative effects because you would immediately dampen the investment appetite to go for batteries but batteries are also needed not only for the high price but it also needs for the negative prices to carry the power into the hours where it is needed second you would give an incentive to close even more plans that's definitely not wanted by the government because we could even think about closing our plans you get a guaranteed cost coverage and then you can you can can put them into the market and an additional margin i think bad idea and last bad incentive from that idea is you disincentivize long-term power purchase agreements because everybody who is a long-term contract doesn't suffer from the high prices so only those who speculate short-term suffer from the prices and i think that incentive is also not So in a nutshell, I would be very surprised if that idea comes to life.

Thanks a lot.

Thanks, Wanda.

Thank you. And from Deutsche Bank, we now have Olli Jeffrey with our next question. Please go ahead.

First question for me, please, is, So you've already stipulated that part of the reason for cutting the $10 billion or being $10 billion lower net investments is due to expectations in the U.S. So I guess the question I have is, if you do know more investment in the U.S. onshore, be on what's committed in 2025 and 2026. And under a reasonable outcome for what you might expect from the German gas auction and the level of investment you think you might require there, and any investment you might require under AR7 under a reasonable outcome, do you still think under that scenario you still have balance sheet capacity to do buybacks at least to the same size? that you announced the $1.5 billion in 26 and 27. Just trying to get a sense of, you know, if there's a reasonable outcome of the investments you expect, if you think you still have balance sheet capacity to do buybacks if you wish to. And then just on the AR7, have you got any indication on the potential size of that and when we might expect to hear any views and when we might expect to hear further details on the AR7 auction and parameters in it? Thank you.

Yeah, Olli, maybe on the biggest part, the Norfolk project, what we said today is we want to farm down before FID, so we will not commit to further capex without having farmed it down. And we want to farm down to 50% and deconsolidate so that at CFD award we can go for project finance. That gives you already an indication that the net capex from that is not very significant in our net capex. On the gas plan in the US, I mean, this is now speculation how much you want to do. We're going to answer the question on capital allocation given the drivers we have set, and one part of it is also share price and the returns we can expect. We will give that answer when it's due, when we have the capital allocation flexibility, which is in 26. So we decide that later this year, early next year.

And when do you expect to hear from when the AR7 process potentially?

Sorry, I missed that one. I think the consultation is still in full swing. The ministry is discussing with all relevant parties. I think they're going to come to a conclusion early, and from all indications I get, they don't want to push the auction out to the last quarter. So we're probably going to see it in Q3, so we should get clarity maybe before the summer break.

Thanks. Thanks, Alin.

Thank you. And up next, we have Harry Wybert from BNP Paribas Exxon. Please go ahead. Your line is open.

Hi. Thanks very much for taking my question. So a couple of relatively fundamental ones. The first one is on something that we don't talk about that much anymore in the sector, which is installed costs for renewables. What are you seeing at the moment, the sort of last time we were focused on this, installed costs? I'm thinking mainly for onshore and offshore wind had sort of plateaued and stabilized and we were less worried about inflation. I guess you sort of mentioned the Danish and the Dutch auctions. Developers not wishing to take merchant price risk, but a big component of this is obviously are install costs going to come down and might that make those auctions more likely to succeed in the future? So interested to hear your views on what install costs are doing, both turbine prices and the balance of spend. So that's the first one. And then the second one on new-build gas, the supply chain, what's your take on the supply chain here? So you sort of hear from other utilities, both European and U.S., that the supply chain is quite stretched already in new-build gas. There's talk of some of the components interrelating with defense procurement as well. Is there a risk that it takes longer and is more expensive to build the 20 gigawatts of CCGTs than we currently expect? What's the risk of having another sort of non-productive capital employed situation like we've had in offshore wind emerging CCGTs if they're taking longer to build or you're struggling to get hold of critical components?

Thanks. So Harry, what we see currently on the cost side when we buy it is it is plateauing. It's definitely not going up further. Looking into the future, I would even expect an ease on the supply chain because given the slowdown in US and actually a stop of US offshore wind. So overall I would expect on the wind side that the supply situation should get a bit easier. But I think that will not result into developers willing to take significant more merchant risk. We have always said the merchant risk you can take is depending on the market size and the depth of the PPA market. So we are good with the gigawatt in Denmark and the Netherlands, but we are not willing to do more. And with Germany, we probably also have already reached the ceiling of what we are willing to take. And we also constantly farm down. Overall, in this uncertain environment, what I hear in the market, and we have the same view, there is very, very little appetite for merchant risk or more of merchant risk that has been auctioned in offshore. And I think policymakers, and that's what we are telling them, they need to adapt. They need to move to, I mean, I think, an inflation-adjusted, double-sided CFD model. to get the investments. You would also lower the investment returns. And I think especially when you now move to the UK, they are heading the right direction because part of the consultation is even to extend the CFT period from 15 to 25 years. And having a 25 inflation adjusted government guaranteed income stream is of course much better. It would lower cost for consumers as well because you can go for higher leverage. On the new gas side, It's also a very, very interesting situation. I mean, what I heard at CERA week last week from the big suppliers is that if you want to buy a gas turbine, you probably have a delivery date now 28. So it actually fits a bit with the German schedule if you are fast. But as I already said to a previous question, we have reserved certain production slots. So I think for what we want to buy, for what we want to build, we have the supply chain secured. And I think that's more on a side note. If we would release these production slots, we could even make a bargain today.

Okay, thank you. That's quite interesting. Effectively, you've got a competitive advantage with your build slots. Do you think that's something that your competitors in the potential new build CCGT market have, or do you think that's something that you could use to basically generate higher returns? Sounds like you could, right?

That's speculation, but I think we would not give away that benefit. That is clear. I mean, the benefit of actively managing the supply chain, we have done the same in offshore in certain cases, as you know. with securing equipment there. We want to keep that benefit for us. I mean, that is clear.

Yeah, makes sense. All right. Thank you very much.

Thank you. And our next question now comes from Rob Pullin from Morgan Stanley. Please go ahead. Your line is open.

Thank you. Thank you for taking our questions. At least a few left. So, firstly, I haven't heard the word ampion mentioned in any of the materials or in the call yet. Last we heard, you started a sales process to sell the 25.1% stake. And I think there was some media articles that that was just receiving or had received bids. And so maybe just ask for an update. And is that, capital, shall we say, spoken for in the plan you've presented today, or is that, shall we say, unspoken for capital that could be used for additional distribution or commit to some of these other CapEx plans which might firm up in due course? That's the first question. The second one is, as we look at 2027 guidance and accepting, there's obviously the same EPS and the cap gains has changed. Within the EBITDA range, there's two quite significant changes. One is on FlexGen, where HBG has gone down around about 400 million delta for both the top and the bottom end, whilst offshore wind has gone up around 200. Could you maybe give a bit of color as to what's going on there? Thank you.

Yeah, Rob, let me take the first one. Michael talks about the earnings profile. On Amprion, we have always said, given the significant... capital needs they have. We're going to explore all options to find solutions to that because we think it shouldn't be RWE who is investing in the TSO business here. But we want to keep the cards close and want to keep all options. So we are in the market. Yes, that is correct. but we are in the process of exploring what is the best solution for that. That could also end into partly selling it down. It doesn't need to be, but could be. We don't want to put investments into that anymore, but we want to find solutions for that. If we partly sell it down and get proceeds, these proceeds are not yet included in the net capex we have displayed in the presentation.

Yeah, Rob, on EBITDA 27, fair observation, FlexGen indeed is lower on the back of lower expected prices in flexible generation. In offshore, there are basically three main drivers. One is at the C&D, we still assumed Oranjevent to be fully consolidated. That is not anymore the case. As you know, we have sold it to 50% with total energies. So that is leading to a lower EBITDA. And on the positive, there are two effects. One is that's an accounting treatment around our leaf chips. So what happens is that the lease itself, since it's capitalized, goes through the EBITDA. So there's a positive EBITDA effect, but at the same time, the leases lead to a higher depreciation. So the positive effect in EBITDA is then compensated fully by higher depreciation so that the EBIT effect is the same as we had it at the capital market day. And the third positive effect is from Thor, where we now take those lease payments, which you know that are paid by a kind of CFD mechanism in the first one and two years. And what we have done now, we will distribute them as a lease payment over the entire lifecycle of the project. And that leads to a higher EBITDA effect in 27 and 28 in Thor.

That's very clear. Thank you very much.

So fundamentally, nothing has changed. Exactly. That's the key message.

Got it. Got it. And sorry, Marcus, whilst you're in the mood for follow-ups, I mean, just on the first one, appreciating all options open on the CSO situation, if you were to receive proceeds, could that go to higher distributions to shareholders in terms of revisiting the share buyback and or dividend policy?

So we don't want that direct connection from one euro going to that or that source. I mean, but as we said, the proceeds are not included in, let's say, the flexible capital location part we have. So if we get some, it would increase that. What we do with it needs to be decided the moment we have it, and a decision needs to be taken. But no automatism.

Fair enough. I will turn it over. Thanks very much. Thanks, Bob.

Thank you. And from HSBC, we now have Micah Becker with our next question. Please go ahead.

Yes, hello, everyone, and thank you for taking my question. Maybe coming a little bit more towards the end of the queue, a qualitative one. How conservative do you think your plan is now? I mean, for some of your peers, we have gone through multiple iterations of downgrades. For you on the very positive side, there don't seem to be any execution issues. I mean, your offshore execution seems to go very well. And the PPA signing, you seem quite confident. But on the future cutbacks, like how confident are you that this is now the conservative plan and we are not looking at further downgrades? That would be my first question. And the second one, just sort of like one topic we haven't touched upon yet, is battery development. What are your current plans looking like and sort of like what markets are you looking currently at for your battery ambitions? Thank you.

Yeah, so, Micah, I take the first one. I mean, I think you did a fair summary of the situation. I mean, we didn't have any difficulties with our offshore business. It's progressing well. And I also laid that out in my speech that on all the current offshore projects, we are on budget and on time, so very confident that we'll deliver that. And having said that, we are very confident that we'll also deliver the plan. I mean, by the way, also, if you look at our performance in 2024, beginning of the year, we took a more conservative stance given the commodity price environment, but you also saw by the end of the year, we turned out to be actually above consensus, which demonstrates also the robustness of our portfolio and the ability to deliver.

On the capex plan and the batteries, maybe on the capex plan, whether it's conservative or not, I think what we want to convey is we're going to be disciplined with capex. And we are willing, if the environment is not there and the investments are not attractive enough, we're going to reduce. And we have announced a share buyback in the last call. Now we announce that we go for lower CapEx until 2030 because we see higher risk and require higher returns. And let me take that opportunity to talk a bit about the market, and then I address your battery question. We are actually in a, let's say you could call it very interesting, but also contradictory environment. You have three elements. One is The fundamental growth of the product power is there. You've got to see power demand going up in all markets. That means you need significant investments. What I also observe is that competition is actually easing. People are exiting, can talk about big oil or other, so they're exiting and we see also some peers struggling under financial stress. But on the other hand, the investment environment is not that you like doing big investments in this environment because we have tariff risk, permit risk, energy policy uncertainty. It's a contradictory environment. But what it means is the company like ours who are able to invest with the balance sheet needs to be very disciplined. And we're going to urge our teams to push for higher returns. We need to achieve higher returns. If we cannot get them in that market environment, we shouldn't invest. That's a perfect lead to batteries, which is an investment we like very much in the current environment, also from what we see, how they operate in the market and what returns they make. Our key battery markets are Germany, where we have commissioned significant battery capacity in the last weeks, over 200 megawatt. We have announced other investments of 600 megawatt, so you're going to see more battery investments there. We do battery investments in the UK, and we also co-locate battery investments in the U.S., especially with solar. And this is an area where we have currently not scaled back our investment plans.

Perfect. Very helpful.

Thank you.

Thanks, Micah.

Thank you. And up next, we have a question from Peter Ciesielowski from Citi. Please go ahead. Your line is open.

Hi, good afternoon, everybody. I have two questions. So the first one, I wanted to ask you about the implication for the long-term targets of this higher return threshold that you announced. You gave us a rule of thumb of a 10 times multiple contribution of whatever euro you spend on 2030 or wherever you go. is that the multiple is now lower, so nine times, and this $36 billion, which you have remaining to spend, will contribute more, and can you say how much? And then, assuming you get a lower CAPEX, does this have an implication for your OPEX? You build up quite a machine to develop new projects, and it seems some of the pipeline may not meet your threshold, but maybe you can... You can reduce some of the costs, like we've seen the headline on the U.S. offshore. Is it meaningful, or that's not meaningful at all? Thank you.

Yeah, I mean, good question. I mean, that is obviously all incorporated into the numbers. So that goes back to the question Deepa asked in the very beginning, why are you confident to achieve the 2030 numbers? Obviously, that is exactly the balance you will see. So with less investment opportunities, obviously, would also have an impact on the overall cost structure also in development. So that's very clear.

Okay. Thank you very much. Thank you.

And we move on to a question from Ingo Becker from Kepler Schaffer. Please go ahead. Your line is open.

Yes, thank you. Good afternoon. I've got two questions as well. First is on your supply and trading business. You're still guiding for 100 to 500 million in Abidea, and given that you've basically exceeded that number quite materially for so many years now, I'm wondering how to look at that guidance. I think there was an understanding before that you – would try to potentially keep the trading guidance cautious in order for it to work as an offset if something in the renewables business goes wrong, in which case, in a normal environment, there's a good chance you keep surpassing that guidance. That would be the first question. I'm on the second, trying to understand your slide, 18. Can I ask on the 25 guidance, you give a range of a billion to 1.4 billion and a floor of 900. What exactly is the difference between the low end of the range and the yet bit lower floor? And related to that, you are guiding for a billion and 27 as a floor once again, and a higher range of 1.1 to 1.6, including additional expected earnings. Can I just clarify, I think you've been saying Your distinction before was existing earnings and earnings from new assets, which would indicate investments. But now you say additional earnings. For example, the two points you're making from capacity payments, this is an additional income that comes without the capex outlay, I suppose, while your commissioning of battery projects does have some capex to it. Can I just ask, without spending on expansion in that segment, what would be the range we would be looking for in 2017, if that's possible to say? Thank you.

Yeah, Ingo, let me first start with the supply and trading business. I mean, I can just give the standard answer. I mean, the guidance we give is always based on kind of the long-term earnings expectations that we have in supply and trading. And as we always said, kind of if market conditions are attractive, There is upside to the numbers, but this is kind of the guidance we have done through the last years. And as you know, the last years have been very attractive in the actuals, but the guidance is kind of this 100 to 500, and nothing has changed with respect to the guidance this year. Second question on flexible generation. What is the expected outcome of the sixth segment? That is exactly the guidance range. So, for 25, we expect hundreds to 400, and for 27, we expect . When we were on the road, people typically asked, how can we best model that? And therefore, we felt maybe it's good to kind of give an earnings floor, yeah? And this is really a very conservative assessment. So we looked through the margins and really identified those positions that we feel are very certain. And if you go through the different position, it's clearly capacity incomes. in Germany and in the UK that have been locked in. It's also other regulated incomes that we have in the business. It's obviously also hedge margins. And it's also those incomes where we are very certain that they will realize in the actuals. And that leads you to the 900. But as you rightly asked, there is a delta and clearly the lower end of what we effectively expect as an outcome is higher because we do believe that also some of the positions that are not fully certain yet, they will outturn at least in the lower range of the guidance. But having said that, there is also clearly upside, especially in tighter market. That's why the range is then 1 to 1.4 in 25 and 1.1 to 1.6 in 27. And the numbers obviously do include the upper range, also those investments that we have taken. So there are additional battery investments Marcus talked about included in the numbers.

Thanks, Michael. Can I just ask, so the increasing capacity payments in the UK are in the 1 billion floor figure for 27?

They are included in the 1 billion, but if you go from 25 to 27, 25 obviously has already a higher share a higher share of hedged incomes. That's why, even though the income from the capacity market is higher than 100 million, but it's actually like 200 or even a little more than is the increase in the UK capacity market. But at the same time, you have less margins yet hedged. And that's why the increase is only 100 million. But that already gives you an indication that this is really kind of the conservative low end of what it's like. It's a fraud. Yeah. A very conservative thought.

Thanks so much. Thanks, Inge.

Thank you. We have a couple of follow-up questions. First, we have one from Alberto Gandolfi from Goldman Sachs. Please go ahead.

Thank you for your patience and those two, I guess, are for Michael again. One, I'm a bit surprised that you say no fundamental change at all because if I'm not mistaken, at the EBITDA, you said that you are removing about 300 million from asset rotation gains, but I suspect the least effect is about 100 to 150 and it's fully eliminated at the EBIT level because the DNA goes up. that's actually an underlying, on an underlying basis, it sounds like an upgrade to me. Am I forgetting something or getting something wrong? That's the first. The second, please, is when you talk about your three times leverage, you don't seem to be thinking about your E.ON stake, which is 5 billion euros. Can I ask you if at some point, if E.ON continues to perform very well and RWE is behind, you know, isn't there like, shouldn't you just basically sell E.ON stock to buy back your own stock? But how are you thinking about E.ON more broadly? Because you're three times leverage. If I actually adjust for this, which is the monetizable asset, it's way lower than that. So again, am I right? How are you thinking about it? Thank you so much.

Okay, so I go for my message on fundamentally nothing has changed. I mean, you're right, 300 million is a change, but that's not just offshore. So that was part of all the segments. And the other one with the leasing, I mean, that's just an accounting treatment. So if you look at the EBITDA number of leasing, nothing has changed, yeah? So, this leasing effect is just an accounting effect where it brings a high EBITDA, but then also higher depreciation so that on EBIT, the effect was neutral.

Very clear. So, if you still deliver three euro EPS, there is an upgrade somewhere above, below the line, but there is somewhat an upgrade. Otherwise, it would be much lower in EPS.

Yeah.

Yeah. Thank you.

Thank you. Alberto, on the EON stake, we know that the The lignite provisions are not part of our net debt definition because you have the offsetting Eon stake against it. you sell E.ON, we need to incorporate the provisions into our net debt. And that's this ring fence approach that we say we're going to pay for the net debt provisions from the state claim we still have where we get annual payments. They're going to offset part of the negative cash flow of that business. And when we start utilizing the provisions, we have the E.ON stake. So it's kind of a virtual CTA. It's not a formal one, but it's a virtual one. It's a the closed box of financial assets, E.ON, offsetting the LICNAC proportions.

Thank you, and thank you for your patience.

Thanks, Adato.

And our next follow-up comes from Ahmed Farman from Jefferies. Please go ahead.

Yes, thank you. Thank you for taking the follow-up question. Just one from my side. Marcus, in one of the responses to the buyback versus capex questions, Your response seemed to imply to me that you're sort of suggesting that market conditions will need to improve for that sort of uncommitted CapEx that you show in slide 8 to be translated into committed CapEx. The question is, are there any sort of specific clearing events in your mind for the next 12 months? that will sort of help us, that will sort of help you make those decisions of, you know, sort of moving from the uncommitted flexible to the committed part. Thank you.

I think you have three relevant factors other than the share price, Ahmed. As you rightly pointed out, to move from uncommitted to committed CapEx, we want to see the higher returns. We need to have... clear visibility of better returns than today. Second, the uncertainty is the risk part of it. It's currently very difficult to take investment decisions in parts of our business where you have looming permitting risk, tariff risk, and so on. So if you have a more stable environment and you know you have foresight for the next 12 months, you are more comfortable. Even if the returns are higher, we are not willing to take significant more risk. That's a bad offset. And then the third element is the progress on our disposal program. So we have the plans. We are very far advanced with two of the disposals where we said you're going to expect and you can expect an announcement shortly and we not talk about quarters here. We talk about weeks. That is, that gives us higher confidence about the headroom. And of course also how are we, how successful and when do we deliver the SOFIA at the Norfolk farm now. Now because it would even increase the uncommitted net capex.

Understood. Thank you.

Thank you. And our final question today comes from Peter Beustiger. from Bank of America. Please go ahead, your line is open.

Two last ones from me please. Firstly, on the UK, what's your view on locational pricing and if the government does decide to go for it, what could be the implications for your assets? Any change to your sort of view on the merits of investing in sort of US CCGT? Do you think any interesting opportunities sort of could come up there, and is there any, is that an area that you could use some of your flex for?

Thanks. Yeah, thank you, Peter, for the questions. On the UK, our general view is, and we have also signed that industry letter, We think in an environment where you need billions of investments into the system to move from one pricing system to another one, it is a bad timing. I have no... I have no view what is a better system if you could introduce it overnight. But it's a question of, is this the right timing? Because you create significant uncertainties if you move from the one price zone into zonal pricing in the next year. So I think it's a bad idea. What would it mean for us? I mean, it depends on the details, but maybe two observations. I mean, one is clearly that the UK government wants to ensure that investments happen. That's why part of the consultation for offshore for the AR7 is also what kind of protection do you need in case we decide for solar pricing. So I assume that all renewable investments are immunized against changes on solar pricing. And when you look at the map on the non-renewable assets, you're going to see that all our CCGTs are in the south, so in the probably higher price. But I don't want to speculate on anything because fundamental, even if you would benefit relatively to others, we think moving now from one system to the other is a huge disruption and it actually risks investment and it shouldn't be done Now, on the U.S. CCGT side, I mean, you see the valuation level of CCGTs in the U.S., and I can clearly rule out that here at our side is any plan for any M&A transaction, not only for CCGTs, but also no other. So there's no M&A in the cards.

Can you be more clear? Thank you very much, Markus.

Thanks, Peter.

Thank you. And as we have no further questions in the queue, I'd like to hand the call back over to you, Mr. Denny, for any additional or closing remarks.

Yes, thank you, operator, and thank you everyone for dialing in today. Thank you, Marcus and Michael, for your time. As you know, the IR team is at your disposal any time. Looking forward, on the one hand, for your questions, and secondly, to meet many of you during the roadshows that we have scheduled for the coming weeks. Have a great rest of the day. Bye-bye.