EVN AG

VSE:EVN

Good morning, ladies and gentlemen, and welcome to the EVN's conference call for the first quarter of 2024-2025 financial year. [Operator Instructions]

Let me now turn the floor over to Alexandra Wittmann.

Good morning, everybody, to EVN's conference call on the results for the first quarter of our current financial year. Today's results define EVN's new normal level of results together with our full year guidance, which we confirm today. I would like to remind you that 2 years ago, a normal level for EVN's group net results were between EUR 200 million and EUR 250 million. We now see such normal level between EUR 400 million and EUR 440 million, which is our outlook for this financial year, which means a substantial step-up in the group's earnings level.

The past 2 financial years were extraordinary due to the unusually high electricity prices, which pushed results from generation to levels which are not sustainable at current much lower electricity prices.

We are well on track to reach our renewable expansion targets by 2030. In December, our installed wind capacity reached a historic milestone of 500 megawatts, which corresponds to an average annual wind generation of 1.3 terawatt hours. We are currently working on further new wind and photovoltaic projects. I can, therefore, confirm our targets. We aim to expand wind power capacity from 500 to 770 megawatts and PV from about 100 to 300 megawatt peak till 2030.

The ongoing evolvement of a renewable energy system offers new business opportunities for EVN. We strongly believe in the growing importance of sector coupling for renewable energy, especially in the transportation sector. Therefore, we will invest up to EUR 100 million into e-charging infrastructure until 2030.

With over 3,200 charging points, we are currently the market leader in Austria. Our strategy is to establish e-charging stations which can easily be incorporated into daily routines. For example, we are building e-charging stations on the parking lots of 2 large supermarket chains in Austria as well as in Bulgaria. Last week, we published a new cooperation. Over the next 4 years, EVN will install 600 fast-charging points at 92 locations for Austria's leading furniture chain, XXXLutz.

E-mobility and the expansion of renewable generation form together with our network infrastructure and the Austrian drinking water business, our key investment areas. As already announced last autumn, our annual investments will amount to EUR 900 million until 2030. This is already visible in Q1. Year-on-year, our investments are up by more than 30% and amounted to EUR 170 million in the reporting period.

We are still in negotiations with STRABAG regarding the sale of the international project business as agreed in the term sheet in December. All available for-sale parts of the business are now being reported according to IFRS 5. Therefore, in today's financials, all P&L items for the previous Q1 had to be restated to already reflect the IFRS 5 disclosure. So whenever talking about P&L effects today, please be in mind that they refer to restated comparative Q1 figures.

Today, in about an hour, the Annual General Meeting for the previous financial year will take place. As you know, we will propose to the AGM the payment of a dividend of EUR 0.90 per share. Such dividend is almost 10% higher than the minimum dividend of EUR 0.82 per share according to our dividend policy.

Now on the next slide, I will take you through the main financial developments in the reporting period. Revenue was slightly down by 1.3% year-on-year to EUR 804.1 billion. The main reasons were a price-related decline in revenues from the marketing of EVN's own renewable generation and declining effects from the valuation of hedges. In contrast, revenue in all 3 network companies benefited from positive volume and price effects and the supply companies in Bulgaria and North Macedonia also recorded a volume and price-based increase in revenue.

The increase in other operating income was due to insurance compensation for damages, which resulted from the floodings in Lower Austria during September '24. The cost of electricity purchases from third parties and primary energy expenses increased due to higher procurement costs in the regulated energy supply business in Southeast Europe. This increase was contrasted by lower procurement costs for natural gas due to lower gas volumes traded and at EVN Wärme.

The cost of materials and services were up due to the repair costs for the flood damages, which, as already mentioned, are largely covered by insurance. The rise in personnel expenses reflects the increase in workforce and adjustments according to the collective bargaining agreements as well.

Other operating expenses declined. In the previous year, we had 2 one-offs, being the impairment loss on receivables in the international project business and the energy crisis contribution for electricity, which was still due in the previous year's Q1. The share of results from equity accounted investees slightly improved to EUR 47.1 million. Higher earnings contributions from RAG and Energie-Allianz were contrasted by a price-related decline of results at the Verbund Innkraftwerke power plants.

In total, group EBITDA amounted to EUR 253.1 million, which is 6% decline year-on-year. Scheduled depreciation and amortization increased by 7%, reflecting our high investment program. Hence, group's EBIT totaled EUR 166.2 million, which means a decline by 11.4%. Financial results amounted to minus EUR 16.9 million. In total, we generated a group net result of EUR 115.5 million in the first 3 months, which is 19.7% below the previous year's period.

Now let's move on to the next slide, which provides information regarding the group's balance sheet structure. As of the end of December, EVN's net debt amounted to EUR 1.3 billion and was above the level as of end of September '24. Correspondingly, gearing ratio stood at 19.3%. Our indebtedness is increasing in line with our higher investment program.

Our financial flexibility remains secured and solid. EVN holds contractually committed undrawn credit lines in the amount of EUR 815 million.

On the next slide, I will present the developments of our segments in more detail. First, the Energy segment. Energy demand for natural gas and heat increased due to colder temperatures, whereas electricity sales volumes declined year-on-year. The drivers for this development include strong competition and increasing electricity generation from customers' own photovoltaic systems. Our equity consolidated supply company, EVN KG, is in charge of the electricity and natural gas sales, whereas the heating business is fully consolidated. Therefore, heating is one of the main drivers for the revenue of the Energy segment.

The other main factor for the development of revenue is the marketing of the electricity generated in our mainly renewable power plants. In the first 3 months, revenue fell year-on-year to EUR 180 million due to lower realizable prices in the marketing of our own generation, volume and price effects in natural gas trading as well as reduced earnings effects from the valuation of hedges.

In line with the declining market prices, operating expenses also decreased. The earnings contribution from equity accounted investees amounted to EUR 12 million. Both supply companies, EVN KG and Energie-Allianz, contributed positively. In total, segment EBITDA amounted to EUR 51 million and EBIT totaled EUR 44 million.

Let us now turn to our Generation segment. Electricity generation volumes in the segment increased by 5% year-on-year. Water flows equaled the above average, high prior year level. The ongoing expansion of our wind generation fleet compensated for weaker wind conditions. Our Theiss power plant was called more frequently by the Austrian network transmission operator for network stabilization.

Revenue decreased due to declining market prices and despite higher generation volumes. The Generation segment also contains the effect from lost revenue and repair costs at our thermal waste incineration plant due to the floodings in September '24.

Operating expenses were year-on-year lower due to the absence of the energy crisis contribution for electricity. At the level of the equity accounted investees, we had lower earnings contribution from Verbund Innkraftwerke due to lower market prices. All in all, EBITDA amounted to EUR 58 million. Based on higher scheduled depreciation and amortization, because of our investment program, segment EBIT stood at EUR 46 million.

Let's continue with the Networks segment. The colder weather and the increased use of our Theiss power plant for network stabilization led to an increase in network distribution volumes for electricity and natural gas.

In view of the positive volume effects and higher network tariffs for electricity, revenue in the segment increased. Operating expenses also increased due to higher costs for materials as well as personnel expenses. In total, EBITDA declined to EUR 86 million. Taking into account higher depreciation and amortization due to the high investment level, EBIT totaled EUR 43 million.

Let's move on to the Southeast Europe segment. In Bulgaria and North Macedonia, we are reporting today higher electricity network and energy sales volumes. The volume growth was, among others, driven by low temperatures in Bulgaria. Revenue increased to EUR 406 million due to positive volume and price effects. This was contrasted by the offset of positive earnings effects from recent years in Southeast Europe in accordance with the regulatory methodology.

Operating expenses increased in line with higher procurement costs in the regulated energy supply business in Southeast Europe. All in all, EBITDA amounted to EUR 31 million and segment EBIT totaled EUR 9 million. The decline is in line with our segment guidance and the expected regulatory adjustments of past positive effects.

And finally, the Environment segment. Due to the IFRS 5 disclosure of the discontinued operations representing those parts of the international project business, which we plan to sell to STRABAG, the financials of the Environment segment look different. In other words, the P&L of the segment only covers the following activities, which are excluded from the planned sale. Firstly, our drinking water business in Lower Austria. Secondly, the equity accounted companies for the projects in Zagreb and Prague. Thirdly, the deconsolidated company for the wastewater treatment plant project in Budva, Montenegro. And finally, the deconsolidation effects from the sludge-fired combined heat and power plants in Moscow, whose sale was closed on 31st October '24.

For the activities to be sold, IFRS 5 disclosure requires us to report results from discontinued operations. This amounts to EUR 5 million in Q1. In comparison, the restated prior year value is EUR 12 million. The reduction reflects the progress on the international projects, especially in Kuwait. I kindly ask for your understanding that I can't disclose any further details of the divestment other than those already public. The time line for the transaction is unchanged. We expect that the signing of the agreements will take place soon.

The next slide shows the development of our group cash flows. Gross cash flow was lower year-on-year at EUR 165 million. The main drivers were the lower results before income tax and the correction of noncash earnings components. Cash flow from operating activities totaled minus EUR 32 million. The increase in trade receivables was contrasted by a lower capital commitment for our supply company, EVN KG. Cash flow from investing activities amounted to EUR 13 million. Despite a substantial increase in investments, the sale of cash funds led to a positive value. The position cash flow from financing activities amounted to minus EUR 18 million and included scheduled repayments. The net change in cash and cash equivalents amounted to minus EUR 37 million.

Let's come now to the outlook for this current financial year. I confirm our guidance for this financial year. We expect group net results to be within a range of EUR 400 million to EUR 440 million. This is under the assumption of a stable regulatory and energy policy environment. We don't expect a significant impact from the possible WTE transaction on the results. Our dividend policy remains unchanged. The dividend will equal at least EUR 0.82 per share.

As demonstrated with today's dividend proposal to the AGM, we want our shareholders to appropriately participate in any additional earnings growth. In the medium term, a payout ratio equaling 40% of group net results adjusted for extraordinary effects is targeted. Our annual investments will amount to EUR 900 million until 2030. The core areas are investments in network infrastructure, renewable generation, e-charging infrastructure and drinking water supplies.

That's the end of our presentation, and we look forward to answering your questions.

[Operator Instructions] And the first question is from Dujardin, Thibault.

Thibault speaking. First question is regarding the supply activity. I see that EVN KG was roughly stable at EUR 8 million contribution in Q1. May I ask if you have a view on Q2? I see that last year, it was where the contribution was most negative. If you have any view on the full year and on the evolution of the supply activity, it will be helpful.

Yes. I can confirm the outlook for KG will be positive for the full year '24-'25.

Okay. And any view on the Q2, if it will be also positive in Q2?

Full year. I want to confirm the full year guidance.

Understood. Understood. Very clear. And a second question regarding the disposal of WTE. I see in the report that you are referring to a signing in Q2. Do you have any -- and initially, the press release was mentioning a deal by end of February. May I ask if you have any additional information?

I just can confirm that we foresee the signing soon.

[Operator Instructions] And I have one more question from Richard Alderman.

I was going to also ask about the supply business. You mentioned then -- you're talking about full year as a really positive turnaround. But in the conversation on the slide, obviously, you're still talking about a quite demanding strong competitive environment. What's driving your thoughts, therefore, around that comment about really positive full year? Is it just the hedging effect rolling into that process? Or are you winning customers? What's driving that thought process around the full year thoughts? And is that potentially the largest driver, if you were to upgrade full year guidance later in the year? Would that be probably where we're getting the turnaround and the growth?

Let me answer that multifold. We expect EVN KG will generate positive earnings as we also don't expect additional negative one-offs as we had them in the past. EVN KG basically offers 2 contract types with different -- 2 different procurement and hedging strategies. Number one, floating prices with monthly index price amendments, back-to-back hedgings and contracts with fixed prices for 12 months. So that's a pre-rolling portfolio hedging strategy. And yes, we still confirm that this will guarantee a positive outlook. And with the new price strategy, this is also a backup strategy to this outlook.

And we have one more question from Peter Crampton.

Yes. It's Peter Crampton here from Barclays. And 2 questions kind of all relating to the ongoing Austrian kind of government kind of talks. We -- since the election in September, obviously, haven't had that new government, I was just wondering, firstly, what you'd kind of hope this new government delivers on energy policy and anything that maybe allows you to invest in? And then secondly, there's been some press speculation of additional taxes for the energy sector and whether you see a risk care for extra taxation something that might hurt EVN.

Thanks, Peter. First of all, I pick up on your especially windfall tax or special dividend question or similar. Unfortunately, at the moment, we don't have visibility on possible new laws or measures which the government may plan. Therefore, I really can't be more specific on this question.

And on the energy policy, we also have no information yet. So we still have to give it some time, but I think not very long anymore.

So at the moment, there are no further questions. Okay. There are no further questions.

Thanks for joining today's conference call. We will publish the results for the first half of the '24-'25 financial year on Monday, 26th of May. Thanks again, and goodbye.