Verbund AG

VSE:VER

Earnings Call Transcript 2022-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the VERBUND AG Q3 Results Conference Call. [Operator Instructions]

I would now like to turn the conference over to Peter Kollmann. Please go ahead.

[Peter Kollmann, executive]

Thank you. I'm here with Andreas Wollein, our Head of Investor Relations and Finance. Ladies and gentlemen, welcome to our presentation. Before we move into the analysis of the business development of VERBUND, let me make a few general comments.

The first 3 quarters were marked by difficult geopolitical and energy industry developments. Significant factors influencing the business development of our group changed in particular due to the war in the Ukraine as well as record inflation and rising key interest rate expectations. The difficult framework conditions led to major distortions and challenges, particularly in the European energy markets, which were reflected in extreme price increases and volatility.

Prices for primary energy sources increased drastically over the year, and changes in gas supply volumes and purchase structures had an enormous impact on gas prices in particular. European wholesale prices for electricity continued to rise or reached new highs as a result of the strong increase in world market prices for primary energy and the increasing risks.

Now due to the difficult situation in the European energy sector and in order to address the high impending price burden for all customer groups, discussions on short- and long-term market interventions and profit levels has been initiated at national and EU level. The aim of these measures is to reduce the extremely high energy prices and to create financial scope for the state to reduce and customer prices.

These discussions and decisions on market interventions caused uncertainties on the capital markets and also led to a decline in the VERBUND share price. With a closing price of EUR 87.5 as of the 30th of September '22, the VERBUND share price recorded a minus 11.6% compared to year-end 2021. It still performs far better than the Austrian benchmark index ATX and the sector index STOXX Europe 600 Utilities.

Now let's move on to details. At the beginning, let me highlight the most important influencing factors for the results development in the first 3 quarters. Based on our hedging strategy for own electricity generation from hydropower, the average achieved contract price strongly increased by EUR 60.3 per megawatt hour to EUR 111.6 per megawatt hour in the first 3 quarters '22 compared to the first 3 quarters '21.

The hydro coefficient determining the generation from our run-of-river hydropower plants was 16 percentage points below the long-term average and 15 percentage points below the first 3 quarters '21. That development had a negative EBITDA effect of approximately EUR 640 million. It also forced us to buy back electricity at very high market prices to cover supply obligations, with an additional EBITDA effect of approximately EUR 350 million. So in sum, it's EUR 1 billion that hit us here as a result of a very, very dry environment.

The production from our hydro reservoirs, on the other hand, was positive with an increase of 2.5% compared to last year. Contributions from flexibility products increased strong in all categories, especially concession management and pumping. In total, it increased by 180% to EUR 314.8 million compared to last year. But there was also positive contribution from Gas Connect Austria. And finally, there were positive nonrecurring effects of, in total, EUR 82.6 million compared to EUR 21 million in '21.

Now the impact of these influencing factors on the key figures of VERBUND in the first 3 quarters is as follows. EBITDA increased by 68% to EUR 1,933.3 million, and the reported group result increased by 81.4% to EUR 1.065 billion. The adjusted group result increased by 73.5% to EUR 982.6 million. The operating cash flow increased to a level of EUR 1.12 billion, and the free cash flow after dividends was negative at a level of EUR 628.4 million. Net debt increased by 28.3% to a level of EUR 4.5 billion.

Let me now give you an update on the guidance. Due to the low hydro availability in the first 3 quarters 2022, the point I mentioned before, and the announced EU measures to skim off of profits, VERBUND now expects for '22 a reported and adjusted EBITDA between approximately EUR 2.8 billion and EUR 3.3 billion, and the reported group result between approximately EUR 1.53 billion and EUR 1.88 billion based on average generation from hydro wind and PV for the rest of the year. The payout ratio will be between 45% and 55% of the adjusted group results, which will be approximately EUR 1.45 billion and EUR 1.8 billion.

The earnings forecast and the information on the expected payout ratio are contingent on not being impacted by possible further energy policy measures to skim off some of the profits at energy companies. As you know, a very big discussion across Europe. The guidance 2022 for flexibility products is approximately EUR 380 million. Our old guidance was approximately EUR 250 million. The reason for this increase are the exceptional results in the first 3 quarters.

Now before I talk about the segments, I will give you an overview of the hedging volumes. For '22, we achieved an average achieved contract price for hydro generation of EUR 119.6, EUR 177.8 for '23 million and EUR 131.4 for '24. Please note that we had already hedged approximately 96% of the volumes for '22, 49% of the volumes for '23 and approximately 24% of the volumes for '24. This is, of course, as of the 30th of September '22. On a mark-to-market basis, as of the 24th of October, we calculate with a price of EUR 127.3 for '22, EUR 280.5 for '23 and EUR 219.9 for '24 million. As you know EUR 1 up and down is approximately EUR 25 million on our EBITDA line.

Now let me start with more thorough analysis of a hydro segment. At 0.84 billion the hydro coefficient, which, as you know is an index quantifying the hydropower generation of the run-of-river power plants, was 16 percentage points below the long-term average and 15 percentage points below the level of '21. So that's quite a low level when you look at the history of VERBUND. The production from annual storage power plants increased, as I mentioned before, by 2.5%. Own production from hydropower for overall decreased by 2.8 -- sorry, 2,844 gigawatt hours or minus 12% to 20,836 gigawatt hours compared to '21.

Higher average achieved prices and an increase in the contribution from flexibility products more than overcompensated the reduction in volumes. Therefore, the EBITDA in the hydro segment increased by 115.6% to EUR 1.815 billion. Our main hydro projects, the 480-megawatt Limberg III pump storage power plant project and the 45-megawatt Reißeck II pumped storage power plant project, are on time. The 118 megawatts project in Töging, which is a revitalization, went into operation in Q3 according to our plans.

Now I'm on Page 9 -- sorry, on Page 5, let me continue with an analysis of the own generation from new renewables. The new renewables coefficient, which is an index quantifying the generation from wind power and PV, amounted to 1.01 in the first 3 quarters '22 compared to 0.88 in '21. Generation from wind power increased by 22.4% or 132 gigawatt hours and amounted to 718 gigawatt hours in '22. More favorable wind conditions in all markets were the reasons for this development. Generation from PV amounted to 3.5 gigawatt hours in the reporting period.

Now taking a look at the EBITDA development in the renewables segment, we see that EBITDA increased by 236% to an EBITDA amounting to EUR 90 million. Now in addition to higher volumes, higher average achieved prices were the reasons for this development. The chart also provides an overview of our successful acquisitions in the renewable sector.

Now let me continue with an analysis of the sales segment, which comprises trading and sales activities of VERBUND. Taking a look at the EBITDA development in the sales segment, we see that EBITDA decreased strongly to a negative value of EUR 178.1 million. The negative EBITDA is mainly due to a negative result from the valuation of energy derivatives in connection with hedging transactions for future energy deliveries and higher procurement prices of electricity and gas for our end customers. In principle, the negative valuation effect should balance out again in the future, with the realization of the underlying transaction.

On the other hand, the positive contribution in the sales segment resulted from flexibility products. Here, we saw an increase of EUR 66.6 million compared to last year. VERBUND delivered electricity and gas to approximately 527,000 end customers that represents a decrease of approximately 1.5% year-on-year.

Now let me continue with the analysis of all other segments. The generation from thermal power plants was up by 566 gigawatt hours to 879 gigawatt hours due to the market revenues of one line of our CCGT Mellach for electricity and district heating production. Then higher sales prices were counterbalanced by increased gas procurement costs and negative effects from the valuation of energy derivatives, thus leading to a more or less equal EBITDA compared to last year. The contribution from flexibility products decreased slightly by EUR 2 million.

The contribution from KELAG, the provincial utility of Carinthia to the financial result decreased to EUR 13.1 million due to nonrecurring effects and the weaker operating performance. Finally, let me remind you that the CCGT Mellach was contracted from APG for future concession management. In detail, Line 10 is contracted from the 1st of October '21 to the 30th September '23, and Line 20 from the 1st of April '22 to the 30th of September '22, and from the 1st of April '23 to the 30th of September '23.

In quarter 1 and quarter 4, we use Line 20 on a market-driven basis. The district heating power plant Mellach was also contracted by APG for the period from the 1st of April; 23 to the 30th September '23. Activities for converting the plant for burning coal instead of gas is on hold due to the missing legal framework.

Now we are coming now to the Grid segment. As you know, the Grid segment consists of our regulated business, Austrian Power Grid, as well as Gas Connect Austria. Now first, the contribution from APG, our subsidiary responsible for the Austrian high voltage grid. As you know, there is a difference between local GAAP and IFRS. Under IFRS, in contrast to local GAAP, volatilities in the results contribution cannot be avoided because the regulatory -- the so-called regulatory accounts cannot be applied.

The EBITDA for the first 3 quarters from the electricity grid business according to IFRS was approximately EUR 156 million. The new EBITDA guidance for the grid is approximately EUR 105 million. Now the reason for this decrease are as follows. In the auctions, we had very high revenues in the first half of the year due to the increased price spreads of the quarters, especially with [ Dürnrohr ]. Since the go-live of the core region, there are currently losses from auctions due to the new regulation as a result of the core region.

In addition, expenses for grid loss energy will increase in the fourth quarter and the clawback of the regulator to reduce the regulatory account will have a negative impact. That is the reason for the decrease from EUR 156 million until September 30 to EUR 105 million, which we are currently planning for year-end.

Gas Connect Austria operates and constructs natural gas, high-pressure pipelines in Austria. The company is also responsible for the marketing and provision of transport capacity at border points, so-called entry and exit capacities, and the transport capacity required for domestic natural gas demand. The company plays an important role in the supply of natural gas in Austria and Europe. The natural gas is transported to the Austrian federal states, but it is also transported to Germany, France, Slovenia, Croatia and Hungary.

With regards to the result contribution of Gas Connect Austria, we reported an EBITDA of approximately EUR 56 million for the first 3 quarters. The guidance for '22 is changed to approximately EUR 80 million under IFRS. The main reason for this is the increase in energy costs, mainly for the compressor station.

Now the next slide, I show you the nonrecurring effects in the first 3 quarters. We encountered impairments amounting to EUR 31.9 million, stemming mainly from an impairment in the Austrian hydropower plant, Gratkorn and the impairment of the goodwill of Gas Connect Austria. There was also a reversal of impairments relating to Mellach the amount of EUR 56 million. In addition, the measurement of an obligation to return an interest in the hydropower plant, Donaukraftwerk Jochenstein, amounted to EUR 28 million, which had a positive effect on the other financial results.

The valuation of the trans-Austria gas pipeline, TAG, where we have a profit participation rights, amounted to minus EUR 11.3 million, and had a counteracting effect on the other financial results. We also had impairments relating to Ashta, the hydropower plant in Albania, and TAG amounting to minus EUR 4.2 million in total. So in total, the effects on the financial results was EUR 12.5 million.

In taxes, we had in addition to the effects due to the above-mentioned topics, also the revaluation of deferred taxes as a consequence of the decision to lower Austria's corporate income tax rate in connection with the Eco-social Tax Reform Act. This effect amounted to EUR 56.6 million on an isolated basis. So total effects on taxes were EUR 44 million. Now after considering the effects on minorities, the nonrecurring effect on a group result level amounted to EUR 82.6 million. We also showed the nonrecurring effects in the first 3 quarters '21 as a comparison for year.

Now for the key financial figures and the financial liabilities, I will hand over to Andreas Wollein. Please, Andreas.

[Andreas Wollein, executive]

Thank you, Peter. So in the next 3 slides, I would like to present quickly the development of the key figures. So on Slide 10, you can see that EBITDA increased to EUR 1.93 billion, an increase by 68%. As mentioned, this increase is mainly attributable to an improvement in all other -- in all segments, except the sales segment and all other segments. The hydro segment was EUR 973 million higher than in Q1 2022, mainly caused by higher average achieved prices and an increase in the contribution from [ flex ] products.

The new renewables segment was up by EUR 63 million due to more favorable wind conditions and higher prices. The Grid segment was up by EUR 14.7 million, mainly due to the initial consolidation of Gas Connect Austria, and the sales segment was down by EUR 260 million, as we mentioned because of valuation effects. Depreciation by around 10% to EUR 335 million due to the acquisition of Gas Connect Austria last year and the increased investments following our, let's say, CapEx strategy, mainly into the high-voltage grid and into hydropower plants.

The financial result deteriorated from plus EUR 34 million to minus EUR 23 million. This was, among others, attributable to lower earnings contributions from our participation in KELAG, the Carinthian provincial utility. Taxes on income were influenced by a positive nonrecurring FX amounting to EUR 56 million, which I already mentioned before. The group result, therefore, increased to EUR 1,065.2 million. The group result after adjustments for nonrecurring FX was up by 73%.

Finally, I would like to mention the increase in additions to tangible assets in total from EUR 430 million to EUR 811 million, so an increase -- so basically a doubling of the figure. The increase resulted, in particular, from the acquisition of the 70% of shares in 4 wind and 1 PV project in Spain, with a total capacity of 171 megawatts from Capital Energy as well as investments into connection with Limberg III, Töging and the 380-kilowatt line in Salzburg.

On the bottom left, you will find the additions into tangible assets of Gas Connect Austria and APG, so the regulated business. Whereas, on the bottom right, you will find the additions in potential assets in our core business and others.

Moving on to Slide 11. VERBUND's operating cash flow in the first 3 quarters increased compared to the first 3 quarters 2021 by 119.5% to EUR 1.1 billion, mainly due to higher average contract prices and higher operating cash flow from the Grid segment. Higher tax payments and increased margining payments for energy derivatives that are counterbalancing effect. The free cash flow showed a slight negative development from minus EUR 595 million to minus EUR 628 million.

The higher operating cash flow had a positive effect versus the high payments for investments in intangible assets and property, plant and equipment higher dividend payments as well as the acquisition of our renewables portfolio in Spain had a negative impact. Net debt increased from EUR 3.5 billion to EUR 4.5 billion, mainly due to money market transactions in connection with margin costs and the acquisition of Spanish photovoltaic and wind power companies. Therefore, the gearing increased from 55.2% to 89%.

On Slide 12, you can see the financial liabilities development. Of course, there's a big change because of the short-term financing of margin calls. So on the left side up, you see the debt maturity profile of our group. You can see a peak in 2024 with a repayment of EUR 700 million. And also, let's say, after 2029, that's our long-term green bond of EUR 500 million. At liquidity backup, VERBUND has access to a EUR 500 million syndicated loan facility, but VERBUND has also access to committed and uncommitted lines with a large number of banks of approximately EUR 3.7 billion.

The total amount of the financial liability is approximately EUR 4.1 billion increase, as I mentioned, is mainly caused by the considerably high amount of short-term money market liabilities due to higher margining requirements. The average interest rate on our debt is approximately 1.8%. 35% of the debt is subject to fixed interest.

Yes. So that was basically a quick summary of the financial liabilities. And I would like to hand over to Peter again for giving you the outlook.

[Peter Kollmann, executive]

Thank you, Andreas. Yes, we have come to last page here with the outlook. As always, at this point, we want to highlight the sensitivities. A deviation of 1% in the generation from hydropower has an impact of EUR 18.5 million, a deviation of 1% in the generation from wind power has an impact of EUR 0.4 million and a deviation of EUR 1 in the wholesale price has an impact of EUR 0.5 million in our group results.

Now on the basis of the forementioned developments, especially our low hydro situation in the third quarter, we adjusted our guidance for '22. We now expect the reported and adjusted EBITDA of approximately between EUR 2.8 billion and EUR 3.3 billion, and reported group result of approximately between EUR 1.53 billion and EUR 1.88 billion. All that under the assumption of average hydro, wind and PV generation in the fourth quarter, as well as chances and the risk situation of the group.

For the financial year '22, we plan to pay out between 45% and 55% of our group results after adjustment for nonrecurring effects approximately between EUR 1.45 billion and EUR 1.8 billion. In addition to our regular dividend, the management Board of VERBUND AG will propose to the '23 AGM, the distribution of a special dividend in the amount of EUR 400 million. Distribution of the dividends must be approved by the Supervisory Board at the meeting at which the annual financial statements are to be approved, and also requires the approval of the shareholders of VERBUND at the '23 AGM.

The earnings forecast and information on the expected payout ratio are contingent on not being impacted by possible further energy policy measures to skim off some of the profits at energy companies.

Now with that, we are happy to go into Q&A.

[Operator]

First question is from the line of Wanda Serwinowska with Crédit Suisse.

[Wanda Serwinowska, analyst]

Wanda Serwinowska from Crédit Suisse. I would ask about 2 topics. The first one is about your 2022 guidance. I'm still a bit confused if you included anything in your 2020 (sic) [ 2022 ] guidance on the revenue curve or windfall profit, if you could clarify what is included in your guidance, because it may affect roughly 2 gigawatt hours if it's only December. And then if you could walk us through the bottom end of the guidance. I know it's very tricky. You have big losses from the valuation of derivatives. But if you could help us to understand if there is further downside to your 2022 guidance.

The second is one thing that I would like to ask about is the revenue cap or windfall profit tax. Any comment from your side will be much, much appreciated. What is the discussion in Austria these days? What do you expect? And maybe if you could also comment on your exposure to the spot sales derivatives forward, because from what we see elsewhere in Europe, this becomes very relevant in terms of the revenue cap. And the very last one, I promise, the latest hydro and hedging would be much, much appreciated. I know Peter, you always disclose it.

[Peter Kollmann, executive]

Okay. Okay. Wanda, you have increased from 2 to 4 questions, but they're all very relevant and I will go through it step by step. Now first of all, on the 2022 guidance. I mean the key influencing factor on this guidance change has been an extremely dry quarter, which was unexpected and had a major impact. I've mentioned that the impact has been a very big number, EUR 1 billion, of which 2/3 has basically been the volume and 1/3 has been what we had to buy back because of our low generation. So that was the key point for our guidance change.

You asked how much we have included into the guidance numbers in terms of windfall tax. We have included around EUR 30 million. The reason why we have included that number is that we have taken the only data point which so far we have seen, which is EUR 180 from the European Union. And everything else, there's a huge discussion and we will certainly, on this conference call, talk more about it, but we had to use the one data point, which we have had.

And we have included of course, Romania, where we already have a specific -- very specific windfall tax, where we have a specific data point as well. And we have done it for December. I know that there are discussions in other countries that would be retroactive. But so far, everything we have learned from the EU in official statements is from the beginning of December until the end of December. So that is what has basically gone into our '22 guidance.

Now your second question is on the revenue cap. I mean that is a major uncertainty, not just for us, for everyone across Europe. On the political side, on the national side, there are big discussions, there is analysis. There has been a draft paper, which has come out in Germany that is basically talking about having a retroactive measure in terms of the windfall tax. There have been rumors in terms of where the cap is going to be set in terms of profits per technology. That is something where we have obviously no confirmation. It is very hard to say how this is going to influence Austria, for example, in terms of their decision-making.

The hedging, I'm more than happy to give you sort of like the latest figures in terms of '22, '23 and '24. We have hedged approximately 96%, 97% at EUR 119.2. If we take the mark-to-market, we come out with more than EUR 127, between EUR 127 and EUR 128. In terms of '23, we have 58%, and there, we have hedged at -- slightly above EUR 178. And on a mark-to-market basis, we had EUR 280. And as far as '24 is concerned, we're around 31%, and there, we are hedged at EUR 130. And with the mark-to-market, that's EUR 220.

The one thing that is really important, and I need to mention that here, obviously, with the very high volatility, that mark-to-market changes every day. And whilst in the past, it would change by very small amounts, at the moment it can change dramatically because we have such a high volatility in energy crisis. So with the -- like in '24, for example, with the fact that there are still 70% unhedged, those 70% are influenced by very, very large increases or decreases in forward power prices. So that is something you need to bear in mind. That is just a level of uncertainty on our unhedged levels for '23 and '24. And then you had a question on exposure. Could you repeat that, Wanda, please?

[Wanda Serwinowska, analyst]

Yes, sure. Could you explain the exposure to the spot sales to the derivatives? Because when I look at the leaked document or the leaked numbers from the German government, I mean, there is a difference between treating windfall profit, if it's going to be spot sales or is it going to be the forward contracts? I'm trying to understand where -- how you hedge your generation. That would be very helpful, just to help us to understand how you hedge guide.

[Peter Kollmann, executive]

Yes, sure, sure. Well, we haven't really changed our hedging strategy over the years. There are small modifications. But at the end of the day, we hedged 60%. We were starting 1.5 years forward. Then we have 20% with our quarterly products. And then we have 20% with more shorter period products. In terms of how they are going to skim off the profits, there are no specific details. The understanding is that they're basically going to look at a specific level x.

And any contracts which entered -- and it doesn't really matter if it's a short-term hedging or if it's medium-term hedging, will be taken into consideration for that specific year. For anything that is going to be hedged for '23, obviously, would not be included in windfall tax for '22. So it would only be the hedges for '22 that would be included. And the amount between whatever the number x is going to be, we have used to have 180, but in Germany, they're not discussing anything between 60 and 100 according to technology. So we have not yet heard, not even rumors, what onshore wind, solar or hydro would be in Germany.

I personally think that whatever the number is going to be in Germany is going to have an impact and influence on the discussion here in Austria. And that would be significant. I mean, no doubt, when you look at the '23 numbers and when you look even at the '24 numbers, if it were at a level even at like around EUR 100, EUR 120, it doesn't really matter, but all that is going to have quite a significant impact. The same is true for the rest of Europe. So that is something that is going to have an influence on the entire energy sector in Europe. And right now, it is very hard, not just for you, but also for us because we simply -- we can simulate different levels, but we cannot really say what the level is going to be.

And then if I remember correctly, you also mentioned sort of like -- in one of your questions, sort of like what our preparation for the volatility is in terms of margin payments. There, we have been very conservative. You might remember from our last conference call, I mentioned that we have started very early to increase our liquidity cushion. We have already started at the middle of '21 really early to increase our liquidity quite dramatically. We have then continued in fall of '21, fall of last year, again, and so we have gone up step by step. And I can assure you that we have ample liquidity reserves even for a very, very big increase in electricity prices for margin calls.

[Operator]

Next question is from the line of Ekaterina Smyk with Bank of America.

[Ekaterina Smyk, analyst]

I have a couple of questions. The first one is, if I may follow up on the power price caps, what you just mentioned. Basically, all contracts being affected. Do I understand correctly that -- I mean, just looking at your Q3 hedge price, obviously, the incremental volumes between Q2 and Q3, they came at a much higher price than the current data point we have, which is EUR 180. So do I understand correctly that these contracts for 2023 will be affected by the cap, too? So is this your current expectation?

And a related follow-up, with respect to power price caps, how should we think about the special dividend that you plan to pay for 2022, like next year? If a lower power price cap is introduced in Austria, is there a risk of the special dividend being canceled and not approved by the Board, by the shareholders? And then the second question I had was on your CapEx profile. So as far as I see it remained sort of unchanged related to Q2 guidance. Is there a reason why you have not included potential extra CapEx or development of the sort of renewal pipeline you have acquired year-to-date? When do you plan to adjust your planned investments for that?

[Peter Kollmann, executive]

Okay. Quite a few. But again, all important and highly relevant given all the discussions which we're having in the European energy sector. First of all, on the revenue cap. Now we -- as I mentioned before, we don't have any details. But the understanding is that, right now, the windfall tax would run, despite what we're hearing from Germany, that it would be running from the beginning of December until the middle of '23. There is a discussion that if the situation continues, there could be the entire year '23 that would be included. But that is a discussion, that is not something that we are currently assuming. Right now, it's basically from the beginning of December until the end of June '23.

What would be included? Now the -- depending on where the cap is going to be set, it would basically be the sales of electricity for the year '23, either sales that are done on a spot basis, but also sales that would be done on a hedging basis. So short-term hedges that are for electricity production in '23, if they were above the cap, they would be included. Hedging that would be entered for '24, and I mentioned before that we already hedged around 31% for; 24, obviously that would not be included because it is electricity generation of the year '24, which we are now selling forward as part of our hedging strategy. So that would not be included. But we are still waiting for details, yes? So it's going to be interesting how exactly that is going to be defined, but that is my current understanding.

In terms of the special dividend, we have a very strong confirmation -- well, I shouldn't say confirmation. We have a very good understanding that -- from the Republic of Austria, that the special dividend will be accounted for, i.e., the special dividend will not come on top of a revenue cap as far as '22 is concerned, but will basically be taken into consideration. Which is perfectly logical, because when we decided that we're going to pay an extra dividend, special dividend of EUR 400 million, we did it exactly as a response to the additional profitability which we have had, yes? But that is something that obviously would be decided when the Republic of Austria and the Ministry of Finance decides how the revenue caps are going to be designed, yes?

So therefore, we currently assume that we're going to pay the special dividend of EUR 400 million, yes, that is our current assumption. I said that, obviously, it depends on the AGM and it depends on the Supervisory Board. But that is the current plan of the Supervisory Board to pay the dividend of EUR 400 million. That's point number one. Point number two is that it is our understanding that the EUR 400 million special dividend will be taken into consideration when sort of like whatever future measures are going to be designed.

In terms of the CapEx profile, the CapEx profile for the next 3 years will be announced when we have our conference call for the year '22, for the full year results '22, and then we're going to give the new CapEx plans. As you know, we have a very low debt level. We have ample capacity in terms of investments. And as a result of that, as per today, we don't see any changes in our CapEx plans going forward. Does that answer your questions?

[Ekaterina Smyk, analyst]

Yes, that's quite detailed. Just a small follow-up on the dividends with respect to you having an understanding that this will be -- dividends will be accounted for when the Republic of Austria is taking a decision in terms of the power price caps. But this is with respect to 2022, do I understand correctly? So I mean...

[Peter Kollmann, executive]

Only '22. This is only with respect to '22, and no decision has been made. There is -- this is just an understanding, and this has been made public by statements which has been made, that the EUR 400 million special dividend is being seen as a very positive move by VERBUND. As you know, we were very early with the announcement of a special dividend, and there have been several comments by the Ministry of Finance with regards to the special dividend. However, very important special dividend is '22. It has nothing to do -- it will be paid out in '23, but that is only covers '22. It has nothing to do with any potential revenue caps or potential windfall taxes for '23.

[Operator]

Next question is from the line Olly Jeffery with Deutsche Bank.

[Olly Jeffery, analyst]

Two questions from me, please. The first one is a follow-up on the discussion we were just having. So there are heavy prices in '23 and '24 and the hydro volumes are EUR 177 and EUR 131 per megawatt hour, respectively. [ You are capped ] at EUR 180, obviously below that. But when you look in Q3, and get this as a follow-up, in Q3 just gone, the implied hedge price for '23 and '24 for the additional volumes is EUR 520 per megawatt hour and EUR 370 per megawatt hour, I believe. So I just want to get your understanding here. So if the point caps at EUR 180, in fact based on a yearly average, 2023 achieved price cap of EUR 177, you'd be able to keep all of that perhaps. But if it's based on a quarterly profile or a short time period, you might not be keep all of that.

So do you have a view on in your working assumption? Is it based on -- do you think the price cap will be based on average year prices? Or have we down [ EUR 175 ] perhaps. That's the first question. And the second one is just going back to the read-across from Germany. You mentioned price level there of EUR 100 to EUR 120 a megawatt hour, is that where you see -- you believe the price at or hydro in Germany might come out? And do you think it will be quite politically difficult for Austria to have a price cap for hydro that's higher than what Germany has, because it was seen optically a bit of a tricky thing to do.

[Peter Kollmann, executive]

I can't really speculate either sort of like what the results in Germany is going to be. I'm basically reading the same information you're reading. The only thing I know is that there are obviously big discussions. There has been an article this morning in the Handelsblatt, which some of you might have read, where there's a very strong criticism, particularly with regards to the retroactivity of the revenue cap. People are basically saying that, that is something that should not be implemented. And that just shows you that there is still a lot of uncertainty in terms of the structure.

Now when we talk about Austria, in Austria, everything will be analyzed, what is happening around Austria will have an indirect impact. Because when Germany comes up with a specific number on caps, on technologies, obviously, it will enter the discussion and -- it will enter the political discussion in Austria. That is unavoidable. What the result of that political discussion is going to be and what is, at the end of the day, decided, it can be very different from Germany, but it can be similar to Germany. That is that is completely open. I would like to give you a more precise answer, but there we don't have any details whatsoever.

Furthermore, on exactly how the revenue cap is going to be calculated is also -- there, we also have no specific details. In Austria, they haven't even talked about the revenue cap yet. So we're still using the EUR 180 because that is the only data point we have. But if there were a lower revenue cap and the way that revenue cap would be calculated, we don't know, yes? And then did you have an additional question on that?

[Olly Jeffery, analyst]

Well, just did you have a view on if you think the revenue cap will be applied on a yearly basis or if it might be applied on a quarterly basis, because that would impact your -- how you hedged and the potential impact on yourself?

[Peter Kollmann, executive]

Well, the -- our hedging, we have a very specific hedging strategy. And right now, we can't really see how revenue cap would specifically impact our hedging strategy. If the calculation would be on a quarterly basis or if it would be on an annual basis, that is something, again, that has not been decided yet. I don't even think that it has entered any public discussion yet in terms of that kind of granularity how it's going to be calculated.

[Olly Jeffery, analyst]

Next question is from the line of Ingo Becker with Kepler.

[Ingo Becker, analyst]

Yes. Also a question on this price cap. And I think, Peter, you just indicated that, apparently, there's so much uncertainty around it, but I was just wondering on your views or the assumptions you made for the last quarter of the year. When we look at the base peak-load price spreads in the market, it's not just that prices are on unprecedented levels, but also the particular spread over baseload is at record levels. So I would have 2 questions. First, what is your view on the structural spreads here on a market basis? How would you see that?

And secondly, how do you think or how do you assume, at least in your guidance, how that share of peak-load sales that you are having is treated under a cap, this EUR 180? In other words, do you assume that's a baseload cap? Or is that a total blended average achieved price cap, i.e., how is peak load treated here in your view?

[Peter Kollmann, executive]

Yes, Ingo, that is a very good question, and I can't really give you a good answer. On the structural spreads, you have probably seen that the base peak delta has moved dramatically over the year. It has been -- over the last 5 years, it has been relatively stable. But recently, it has moved quite dramatically, and that is something only export factor analysis, where you have all the data and where you have all the information on demand and supply, that you could really assess where the volatility is exactly coming from.

I mean the one thing that is certain is that we had that we had a lot of changes in net transfer capacity across borders, and France and Germany being 1 quarter that has been impacted significantly. And as we have a European system, that is a very, very complex algorithm that, at the end of the day, needs to be assessed in order to answer your question. I'm not trying to avoid it, but it is simply very difficult to answer.

In terms of the revenue cap, the understanding, and there is -- again, there is no detail and we need to be very careful. But the understanding is that it is a cap that covers mainly baseload yes. It's an understanding. I'm -- however, there is a school of thought that is basically saying that any revenue caps should basically not make a differentiation between baseload and peak load, but they should basically just take into consideration what has been sold, what volume has been sold at what price. And then you basically take the new price, the cap price and then you basically calculate what the windfall tax would be.

And there, it would be totally irrelevant if that would come from a baseload product or from a peak load product. And that -- because if you make a differentiation between the 2, it would make it very, very difficult to calculate the tax. I think it's already pretty complicated to calculate. And the regulator or the tax authority is very much depends on the proper the companies do their revenue calculations, because they have to rely on that piece of information. If you then separate the baseload from peak load, it would make it -- it would add an additional complexity.

The one thing that is going to be excluded -- and again, there has been no confirmation, but that has also been in the papers have come out recently in Germany and that is also in accordance with what the EU has said, is the pump storage. Because the pump storage obviously has a very important function for the stability of the energy system. As a result of that people -- decision-makers seem to have decided that it should be excluded. So that is -- I know that is not a fully satisfactory answer, but it's anything that can be said at the time.

[Ingo Becker, analyst]

Can I maybe add just one more question to this. If you -- the way the discussions are progressing and one is wondering, I mean, this only sounds easy in theory, right? In practice, really implementing those technologies, specific price caps in an interconnected market with lots of cross-border trading where you might or not want to have a different rule country by country, it seems to become one way or another utterly complex. The government being very dependent on the data that you or others are submitting, then you will most likely have the sense on how this data is to be interpreted and used in the calculation.

It seems to be a sensing of the outcome -- mirroring the outcome of a fully regulated regime, which seemingly also the EU isn't really planning to do. But thinking the way the market works and putting something on top that regulates the profit outcome, isn't it simpler? And I'm interested in what you hear and what you see, how the political arena thinks about that to just handle this via the general corporate tax rate, which is based on an established system of working out the profit.

And if that profit is seen too high, you can just easily, like the U.K. does for oil and gas upstream, for example, and something similar has been suggested by the EU for oil and gas producers, handle the whole thing, [ where there's caps ] in tax system rather than kind of in an in-between way trying to tap into varied technology and market-specific profit outcomes that are most likely going to be very tricky to agree on from the outside. Just wondering what your view is on that.

[Peter Kollmann, executive]

Yes. Well, my view on everything basically is keep it simple, because if you don't keep a simple, it gets -- it can get very messy. And what I have said at the outset, and you might remember already sort of like conference calls we had 9 months ago, I basically argued for a synchronized, harmonized way to deal with the issue of higher power prices across the EU. You're right that anything where you have a national measure and then at the same time, you have the European energy market, it makes it very complicated.

Now they -- at the moment, they are trying to avoid the complexity of changing the merit order. So the merit order remains the same, which basically means that the entire way the system, the algorithms work across Europe with all the border capacities and the market coupling, the capacity calculations and the flow-based market coupling, and the way the system, the energy system operates, that has not been changed at all because they didn't want to do that. And they're right not to do it because it would have created a monster. That does not exclude that medium term, the merit order could have -- could be changed.

In fact, I think there's a relatively high probability that medium term, something will be done as far as the merit order is concerned. But there will be enough time to do it properly and to do it in a fully synchronized European way. In terms of the measures, the national measures at the moment, because of the uncertainty, they sound very complex. You're right. They completely rely on the data, which is going to be furnished by the companies. But it would be foolish for any company not to give them the 100% correct data. So I think that the data will be delivered will be correct.

The important thing is that the government need to be very specific and detailed how they want to calculate the revenue cap. Because if they're not very precise and it's not very detailed, the companies are going to have a gray area, and in that gray area, calculations are going to be different. So that is a condition seeing going on. They need to be highly detailed, and then the company is now exactly what they need to do. And then they will deliver the data and then they will deliver -- and then whatever payment needs to be made to the government will be evaluated.

Your point about the more money you make, the higher the tax rate sort of like the same way your income tax is applied, but not just in terms of in terms of corporates. I've looked into it. I think it's an interesting concept. It is obviously easier. I haven't thought it's rough completely, if there are sort of like weaknesses in the concept. But you're right, it is simpler. I think the reason why I didn't want to do it is they wanted -- and this is the discussion which we're seeing in Germany right now, they wanted to make a difference between the different technologies.

So basically I wanted to say, look, we fully understand that different technologies have different production costs. And as a result of that, we are aware of the fact that you need to make a profit according to your production cost. And we are well aware of the fact that you need to make future investments because that's what they all want, for us to invest into renewables, into the grid, et cetera, et cetera. So they don't want to curb any investments but they basically want to find sort of like the gold middle of taxing the windfall profits, making sure that the investments go into the energy system, i.e., that there are no reductions in CapEx. And at the same time, they want to be seen to be fair as far as the different technologies are concerned.

That is not easy. So I'm very curious how that is going to be resolved. You asked me from my personal opinion, I personally think that the progressive tax rate is not going to be applied. I think it's going to be something that has come out of this paper 2 days ago, this -- I don't know if it was leaked or how it came out. But I think that is already a pretty good idea of what it's going to look like for '23, for the first 6 months of '23.

[Operator]

Next question is from the line of Piotr Dzieciolowski with Citi.

[Piotr Dzieciolowski, analyst]

I think there's plenty of questions asked about the skimming off profits, and I have a couple of other questions. I wanted to ask you, in your experience, the fact that we have such a poor hydro situation, doesn't have any read-across for the next year? Or this is basically up to a winter and how much snow we got? And in the past, has there been any years where we had a very bad hydro, and next year there was a follow-up because you didn't -- that wasn't enough of the hydro storage and so on. So that would be the first question.

I wanted to also ask you, where do you expect your net debt at the year-end? And at what point you could collect some of these valuation margins that you've been paying over the last couple of quarters? There was clearly a big mismatch between the operating cash flow and your EBITDA. And I saw that at some point, that should change and you should see improvement. And then finally, thirdly, I wanted to ask about your -- this negative valuation of hedging transactions that impacted the sales segment, supply segment. What is about this hedge? What actually happened there? Because I -- none of the other companies really are forced to record such losses due to the hedges. So what have you done differently? Or why you treat it differently than -- in terms of the others?

[Peter Kollmann, executive]

Yes. I'm going to share the answer with Andreas here. I'll make a general comment on hydro because I think it is important. It has something to do with, obviously, with the weather. And the interesting thing is that -- and we're looking at 100 years. We're looking at the data over the last 100 years. And the surprising thing is that it is very difficult to predict. It is also a case where one year has no influence on the next year. So even if one year is particularly wet, it doesn't mean that the next year could not be particularly dry.

The only thing -- and if I heard you correctly, you were insinuating on that. The only thing is that when you have a lot of snowfall in the mountains, then, of course, you have some spring when the snow melts, then you have then you have more water, obviously, not just going into the Alpine storages, but you also have more water in the rivers. So when you have very little snowfall, that is not such a good start to the year. When you have a lot of snowfall, that is already a good basis, yes, but only for the melting in spring. Again, that is just an indication because we had situations where we had relatively low snowfall, but then we had so much rain in a year that, again, the hydro coefficient was relatively strong despite the fact that it was not a great winter.

So the answer which I can give you is that our long-term average, which is basically the calculation for our hydro coefficient of 1, is the 100-year average. And that includes all the extremes you can imagine, and therefore, is a pretty good indicator. And that is also the reason why for our budgeting and even now for the rest of the year calculation, we always use the one. That is on the hydro situation. For the others, I will hand over to Andreas.

[Andreas Wollein, executive]

Yes. Piotr, with regard to net debt, as we showed, net debt figure currently is around -- is at around EUR 4.5 billion. It consists, I think, more than EUR 1.5 billion of short-term credit lines. We -- of course, we cannot forecast the same prices. So if we take the current price levels as the basis also for, let's say, the fourth quarter, the end of the fourth quarter, we could assume that the debt figure can go -- could come down by around between EUR 500 million and EUR 1 billion. So if prices stay where they are, we would expect, based on cash flow generation and also the, let's say, reduction of margin costs, that we can reduce net debt by around EUR 500 million to EUR 1 billion. So that's the current expectation.

With regard to the sales segment, as you know, there is a negative impact, valuation impact. So without this negative valuation impact, the EBITDA in sales segment would have been positive by around -- with around EUR 90 million, which is a normal figure. The reason why we have this negative valuation effects in the P&L is because, as I said, because we have here specific electricity products which cannot be classified as cash flow hedges. These products especially related to the hedging of the pump storage volumes and also, let's say, the monthly hedges, which cannot be classified as cash flow hedges. As a consequence, they do not go through the balance sheet, but these volumes go through the P&L. And here, we have the reason for the negative development in the sales segment.

[Piotr Dzieciolowski, analyst]

Okay. And maybe last follow-up, because I think you said you included -- you embedded within your guidance a December negative skimming effect of the power prices. Can you say what did you assume in terms of either pricing or absolute euro amount?

[Andreas Wollein, executive]

Yes. It's not a big amount. Nevertheless, so it's around EUR 30 million. And EUR 30 million, so the biggest part is not coming from the Austrian, let's say, price cap, it's coming from the Romanian price cap where we have currently, as a data point, as Peter said, EUR 90 per megawatt hours as a price cap. So this -- so here we have the impact, a negative impact on our wind power plants in Romania. And then there is, let's say, a small amount is based on, let's say, the comparison between the current -- the potential planned market cap of EUR 180 per megawatt hour compared to the hedging we did for the month of December, but it's only a small amount here in Austria.

[Operator]

Next question is a follow-up question from Olly Jeffery with Deutsche Bank.

[Olly Jeffery, analyst]

Apologize if you've answered this, my line was cutting out. Just on hydro for the quarter so far, did you say how the hydro being performing already? And if not, could you update on that, please?

[Peter Kollmann, executive]

Yes, we have mentioned on the -- we have mentioned that for the 3 quarters, we were 16% below. So we were at 0.84 in terms of our hydro coefficient. And for the rest of the year, the number would be -- for the rest of the year, we -- as I mentioned before, we calculate with 1, and that would give you approximately 0.87, yes, approximately.

[Olly Jeffery, analyst]

Is it too early to say how October performed?

[Peter Kollmann, executive]

October would be -- yes, we don't have the detailed numbers. But if you take for the entire year, 0.87, 0.88, that would basically be a fair assumption. But we don't know what the end of the year is going to be because, as I mentioned, this -- we always use the 1 because we don't know if there is going to be a strong rainfall in November and December.

[Operator]

There are no further questions at this time. I would like to hand back to Peter Kollmann for closing comments.

[Peter Kollmann, executive]

Yes. Well, thank you very much for today's very large participation in our conference call. I fully understand that given the uncertainty in the market on any future European regulation, there has been a big discussion on this point. That is clearly -- in addition to the volatility, which we have in the energy markets, that is an additional uncertainty.

I would like to thank you for your questions. I would like to thank you for the discussion. And I look forward to either seeing you or hearing you soon. Thank you very much, and have a great day.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you very much for joining. You may now disconnect.