RWE AG

XETRA:RWE

Earnings Call Analysis

RWE Maintains Positive Earnings and Growth Strategy

In 2023, RWE achieved a strong performance with earnings in the first nine months more than doubling, backed by capacity additions and robust earnings from Flexible Generation and Supply & Trading. The company's green capacity development highlights its successful growth strategy, adding 5.7 gigawatts to its portfolio and constructing an additional 7.8 gigawatts. RWE reaffirmed its full-year earnings guidance, projecting an adjusted EBITDA for its core business between EUR 6.3 billion and EUR 6.9 billion, total group EBITDA ranging from EUR 7.1 billion to EUR 7.7 billion, and maintaining a dividend target of EUR 1 per share.

Doubling Earnings and Confirming Full-Year Guidance

The company started off strong, more than doubling its earnings in the first nine months compared to previous periods, with Adjusted EBITDA developing well across all segments. Management confirms the full-year guidance, indicating a robust performance trajectory as the company is well on track to meet or possibly exceed its financial targets for the year, if market conditions continue to be favorable.

Expansion of Capacity and Successful Bids

Strategic moves in capacity addition, including the acquisition of Con Edison Clean Energy Businesses, contribute significant growth to the company's operational capabilities, with a total of 5.7 gigawatts added to the portfolio. With additional capacity under construction and successful bidding in New York offshore auctions, the company is solidifying its position in the renewable energy sector.

Competitive Pricing and Investment Decisions

Contract prices awarded remain competitive, enabling the company to deliver attractive Internal Rate of Returns (IRRs) for their low-risk projects. Despite higher interest rates and higher capital expenditure expectations, management sees no risk of impairment in their renewable assets, particularly highlighting the strong performance and superior pricing of assets like the ones from the Con Edison acquisition.

Financials At a Glance

Adjusted EBITDA within the Hydro/Biomass/Gas business hit EUR 2.4 billion, with notable contributions from short-term asset optimization and strategic hedging. The company's Supply & Trading arm also boasted an adjusted EBITDA of EUR 1.3 billion. The overall group adjusted EBITDA at the end of the third quarter stood at EUR 6.2 billion, while the adjusted net income reached EUR 3.4 billion. Investments in growth led to an increased net debt, a reflection of the company's commitment to expanding its green growth program.

Year-End Financial Outlook

For the core business of the company, the management anticipates an Adjusted EBITDA between EUR 6.3 billion and EUR 6.9 billion. The group's total is projected to range from EUR 7.1 billion to EUR 7.7 billion, with an adjusted net income forecast between EUR 3.3 billion and EUR 3.8 billion. The dividend target remains fixed at EUR 1 per share for the year.

Managing Impairment Risks and Interest Rates

The company has successfully navigated the current high-interest rate environment without significant impairment risks. The management assures that assets acquired, such as those from Con Edison, continue to meet ROI expectations even in an environment where interest rates have risen.

Future Growth and Project Pipeline Stability

Despite the challenging market conditions and competitors facing difficulties, the company has retained a solid vision for their future growth. Investment decisions like Thor in Q1 reflect stable price assumptions, and there are no significant changes to the return profiles of upcoming projects like Hollandse Kust West. The company also recognizes increased demand for pipeline assets, suggesting a continued trajectory of growth.

Earnings Call Transcript 2023-Q3

[Operator]

Welcome to the RWE Conference Call. Michael Muller, CFO of RWE AG, will inform you about the developments in the first 3 quarters of fiscal 2023. I will now hand over to Thomas Denny.

[Thomas Denny, executive]

Thank you, Jeff, and good afternoon, ladies and gentlemen. Thank you for joining the RWE Investor and Analyst Conference Call today. Our CFO, Michael Muller, will guide you through our key highlights and financial performance of the first 9 months of the year.

But before I hand over to Michael, let me remind you of our Capital Markets Day in London in 2 weeks from today. We will present an update of our growing risk strategy in new mid- and long-term financial targets. For those who join us in-person, we also offer breakout sessions with operational management. If you have not yet registered, please reach out to the RWE Investor Relations team. And with this, over to you, Michael.

[Michael Muller, executive]

Yes. Thanks, Thomas, and also good afternoon from my side. We've continued with our strong performance in 2023. Our earnings in the first 9 months more than doubled. Adjusted EBITDA developed well across all segments, especially driven by capacity additions and strong earnings from Flexible Generation and Supply & Trading.

We confirm our earnings guidance for the full year. The development of green capacity underlines the progress on our growth strategy. We have added 5.7 gigawatts of capacity to our portfolio, including the acquisition of Con Edison Clean Energy Businesses with 3.1 gigawatts, mainly solar, and Magnum with 1.4 gigawatts gas capacity.

And on top, we currently have additional 7.8 gigawatts of capacity under construction. And we continue to grow our project pipeline. In October, our joint venture Community Offshore Wind was successful in the New York offshore auction. We have been awarded a provisional offtake of 1.3 gigawatts. The average awarded contract price of the tender was USD 145 per megawatt hour for a total period of 25 years.

The awarded price will be inflated until the approval of the construction and operations plan. We have also been awarded contract for differences for 9 of our new projects in the latest U.K. Round 5 Auction. The inflation index price in 2012 prices for Onshore Wind project was GBP 52.29 per megawatt hour and GBP 47 per megawatt hour for all solar projects.

These prices allow us to deliver attractive IRRs with low-risk projects. Additionally, we have secured lease areas in Germany -- in German North Sea, for our projects Nordseecluster B was 0.9 gigawatts of capacity and in the Gulf of Mexico with a capacity of up to 2 gigawatts. Both leases come with attractive characteristics, given that we did not pay any lease payment for the North Sea area and a minor amount for the Gulf of Mexico lease.

Before we go on with the financials, let me remind you of our Capital Markets Day on November 28. You can expect the full update of our Growing Green strategy. We are very much looking forward to meeting you in person in London.

In the 9 months of 2023, we have performed extremely well driven by the strong operational performance of our core businesses, especially in Flexible Generation and Supply & Trading. In Offshore Wind, adjusted EBITDA increased to EUR 989 million, mainly due to capacity additions in Germany and the U.K. Additionally, earnings increased due to with better wind conditions and higher hedged prices.

Onshore Wind and Solar recorded an EBITDA of EUR 870 million. The increase is driven by capacity additions mainly as a result of the acquisition of Con Edison Clean Energy Businesses. However, lower realized power prices and lower wind conditions had a negative impact on the result. Adjusted EBITDA of the Hydro/Biomass/Gas business was EUR 2.4 billion. The exceptional result was driven by short-term asset optimization and hedges conducted at attractive price levels.

On the back of a strong performance, the Supply & Trading segment reported an adjusted EBITDA of EUR 1.3 billion. Last year's result was negatively affected by a one-off due to sanctions on Russian coal deliveries. In Q3, we divested the gas storage business in the Czech Republic. The book gain of EUR 128 million has been reflected in the nonoperating result.

Overall, the group's adjusted EBITDA stood at EUR 6.2 billion, including the Coal and Nuclear division. Year-on-year, Coal and Nuclear is driven by lower realized margins on unhedged positions as well as higher overhauls and maintenance costs. On the back of the strong operational performance, adjusted net income amounted to EUR 3.4 billion.

Depreciation increased in line with our growth investments. The year-on-year adjusted financial result was stable due to offsetting interest rate effect. For adjusted tax, we applied the general tax rate of 20% for the RWE Group. Finally, adjusted minority interest reflects lower earnings contributions from minority shares.

The adjusted operating cash flow was EUR 6.2 billion at the end of Q3 and reflects the impact from operating activities on net debt. Changes in operating working capital were mainly marked by the decrease of inventories in gas -- of gas in storage and a decrease in trade receivables. Net debt increased substantially due to a significant investment in our growth.

In Q1, we closed the acquisition of Con Edison Clean Energy Businesses. We invested a further EUR 4.0 billion net in our green growth program, including the Magnum and the JBM Solar acquisitions. Net cash investments is also -- net cash investment is also impacted by the divestment of the Gas Storage business in the Czech Republic. Other changes in net financial debt increased by EUR 2.8 billion. This includes timing effects from hedging and trading activities.

Our net position from variation margins for power generation stood at EUR 2.1 billion and this includes net variation margins from the sale of electricity as well as the purchase of the respective fuels and CO2. In the first 9 months, we have added 5.7 gigawatts operating capacity. Capacity additions were driven by our strategic acquisition and our organic green growth.

As we speak, we have 7.8 gigawatts under construction across different technologies. Most notably, within Offshore, we have taken FID for Thor with a capacity of 1.1 gigawatts of the [ Danish ] coast. In the U.S., we have more than 3.6 gigawatts of capacity under construction, including 1 gigawatt of batteries and 2 gigawatts of solar.

For the full year, we confirm our guidance. Adjusted EBITDA for RWE's core business is expected to be between EUR 6.3 billion and EUR 6.9 billion. The range for the group is EUR 7.1 billion to EUR 7.7 billion. Adjusted depreciation is expected to be EUR 2.1 billion. Adjusted EBIT is assumed to stand between EUR 5 billion and EUR 5.6 billion with adjusted net income ranging from EUR 3.3 billion to EUR 3.8 billion.

The dividend target remains EUR 1 per share for this year. And now let me hand back to Tom.

[Thomas Denny, executive]

Thank you, Michael. We will now start the Q&A session. Operator, please begin.

[Operator]

[Operator Instructions] The first question comes from the line of Peter Bisztyga from Bank of America.

[Peter Bisztyga, analyst]

So my first one, I guess, is the obvious one, which is given how strong the 9 months are and given in particular that sort of trading, I think was far, far ahead of your expectations. Why have you decided to sort of keep your full year guidance unchanged? Are there any kind of negatives we need to think about in Q4. So anything to help us kind of bridge that would be very helpful. And then the other one was around sort of impairment risk. Obviously, we've all seen the sort of catastrophe that has suffered in the U.S. Can you sort of maybe run us through why you are comfortable that you don't need to impair any of your renewables assets? And I'm thinking particularly here the consolidated Edison acquisition, which I guess was sort of struck at a time when rates were very different to what we're seeing today?

[Michael Muller, executive]

Yes, Peter, thanks for the question. Let me start with the guidance. No, there are no negatives we currently foresee for the fourth quarter. And from today's perspective, I would also say that financial guidance looks rather conservative. So if volatility in the market remains attractive and wind conditions are good, we should be possible to even exceed the guidance for the full year. But we're still not there. So let's see. Mix on impairment risk. So we currently don't see any impairment risk in our portfolio. I mean, the big difference to our competitors is -- which has to take write-off on U.S. offshore projects, and other offshore projects is that we have not secured any CfDs in the early days for those projects. And if you look at the last auction results in New York, you see that the price -- we -- at least the average price that so far as communicated, is far above previous numbers, and that is sufficient to clearly meet our return expectations also in a higher interest and higher CapEx environment. So therefore, there is no impairment risk. And also on the CEB assets, so the Clean Energy Businesses assets, we don't see an impairment risk. And also here, I mean, for all of the assets to come in the future, it's also clear that we would consider higher interest rates also in investment decisions, and we just, last week, took 2 further investment decisions in the U.S. and both clearly met, and even one of them significantly exceeded our return expectations that already reflects the current high-end interest rate environment.

[Operator]

Next question comes from the line of Vincent Ayral from JPMorgan.

[Vincent Ayral, analyst]

Very strong set of results indeed. I'll come back at the first question from Peter here. If this is the question you already answered that -- it seems conservative. Yes. I'd be interested. If I do some math here, and I assume you look at Q4 last year, and I assume you have done in Q4 this year, you did 0 results on trading. I correct for full reversal Amprion, you would still be at the top of your guidance, assuming you do 0 on trading in Q4. Is it a fair assumption? And if it is the case, basically, how did you manage not to upgrade the guidance? I mean the flexibility there is a bit surprising. So I feel quite interested on that front. And then also on this one, Amprion. So you got some money from the government in Q1 and it's supposed to be reversing in the course of the year. Could you update us on that? So we get a bit of a clarity on what has happened year-to-date? What is left? And what could be the time line and the likelihood, obviously?

[Michael Muller, executive]

Yes. Vincent, thanks for your question. I mean you did your math right. So we saw in Q3 is an extremely strong result in trading. And you know that we do our math for the guidance typically on kind of normalized conditions so both on wins and also the trading performance. So yes, if -- that's why I said if volatility stays in the markets and trading does also performs better, there should be guidance -- upside to the guidance we communicated. With respect to Amprion, you're fully right. So in the equity results from Amprion, we show an increase in the first part of the year since Amprion received from the government support that over the period will be paid out or will be compensated by higher cost they occur for system costs. While initially, we thought that would be already compensated fully in the current year. It currently looks as if Amprion would end with a surplus compared to the initial numbers in this year and some of this compensating effects will then happen in 2024.

[Vincent Ayral, analyst]

Do we have -- that could be postponed to '24?

[Unknown Executive]

No, I don't -- No.

[Michael Muller, executive]

We are probably as close to Amprion in this respect as you are to RWE. So bear in mind, we're just the shareholders, so we just received the shareholder information here.

[Operator]

Next question comes from the line of Alberto Gandolfi from Goldman Sachs.

[Alberto Gandolfi, analyst]

I also will ask 2, please. The first one, considering the fierce debate on returns in the industry in offshore, in particular, would you be able to disclose a project IRR that you see on the U.S. project you were recently awarded? I mean I was calculating that even with a $1 billion seabed cost, sunk cost taken into account, you'd be basically roughly double digit, and you'll be above that if we were to ignore the seabed cost. I was wondering if you can give us any assumptions on CapEx capacity factor IRRs because you should be very factual here or, let's say, one way because there's no power price assumption in the longer term. So this is a perfect case study to bring some confidence in the industry, I suspect. The second question on the 8 gigawatts that you have currently under construction, would you be able to tell us over what time frame you think those would be fully deployed and developed? Because I guess that except offshore, the rest should be within probably most of it within 18 months, if I am not mistaken. And this is a big step up in your asset base. And I think it's underpinned by the fact that your CapEx is already up 30% versus 9 months last year. So am I reading too much into it? Or you're essentially -- we take this 8 gigawatts under construction as the new run rate we should be thinking about?

[Michael Muller, executive]

Yes, Alberto, thanks for your question. I mean apologies that on -- I mean, we don't give details on individual returns of projects. I mean you can expect us to give an update on our expected hurdle rates at the Capital Markets Day. For offshore, obviously, that will again be a range. And as you described correctly, the U.S. project obviously has been a U.S. WACC. And given that it's a 25-year fixed contract, the adder say, for the offtake is not so significant, but I cannot kind of give you exact numbers on the returns. But the only thing I can say, it's clearly in our range and it looks as a very attractive project. Your question around the 8 gigawatts. So you're right. You have to distinguish between, say, projects in offshore, which should come online in '26 and '27. I mean the first results we even will see already in '25 because you know those turbines at the moment, they are commissioned. They already generate income, even though kind of the former commercial operating date of the entire plan assets will come later. So you will see the first revenues in '25 and the '26 and they are fully in, in '27. And the rest is also, as you said, it's the onshore solar and batteries business. And here you talk typically about lead times of, say, 1 to 2 years. So you should see the results of those latest in '25 in our numbers.

[Operator]

Next question comes from the line of Deepa Venkateswaran from Bernstein.

[Deepa Venkateswaran, analyst]

I'd like to ask 2 questions. The first one is on offshore. Could you give us an update on how the construction for Sofia and Thor is progressing and whether there has been any updates for PPAs on Thor, also Hollandse Kust, so if you could just maybe give some clarity on those? And the second question, a bit related to your guidance for the year. Obviously, on the top line, you've had very strong trading performance, but also on the bottom line in terms of financial numbers, minorities are running well below your full year guidance. So I was just wondering again, whether below the line, whether your guidance or expectations for the full year look probably significantly higher. And therefore, would we expect the 9-month run rate on financial results to kind of play out?

[Michael Muller, executive]

Yes, Deepa, first question on the projects. So they are all progressing fine. So Sofia and Thor, I mean, for Hollandse Kust, is called [indiscernible]. We haven't taken FID. But the other one, 2 parts are we have taken FID, and they are progressing well. On the PPAs, I mean, we don't communicate, say, on individual PPAs that we conclude. But I mean, clearly, it is our intention to convert them into PPAs. And as you can assume, we'll do that in a way that we don't influence the market. So you don't want to flood the market with too many PPAs, but rather do that continuously to get high attractive prices out of that. Your question around the financial results. I mean financial results, you have to bear in mind that this also includes the E.ON dividend and the E.ON dividend is paid in the first half of the year. So therefore, you can't assume kind of the Q3 numbers and interpolate that to a full year by just adding a forth. I mean, indeed, you see that also in the actuals that given higher interest rates. We now also earn interest on the liquidity we have on our balance sheet, where previously it was negative or we didn't get any numbers. So therefore, there is an improvement in the financial results. But I mean, overall, with the guidance, it's what I already answered to Peter and also that, yes -- the guidance is probably more on the conservative side, and we now need to see how Q4 develops.

[Operator]

Next question comes from the line of Rob Pulleyn from Morgan Stanley.

[Robert Pulleyn, analyst]

Just staying on the previous topic of those projects you have under construction. I was wondering how you saw the returns profiles on -- I think you have Thor Baltic II in Poland as well as Hollandse Kust West. And whether you referenced PPA prices at the current level you see for presumably 10, 15 years, are those PPA prices sufficient to make the option value you have on the North Sea German acreage viable?

[Michael Muller, executive]

Yes, Rob, I mean, you didn't mention Sofia. I mean, obviously, Sofia has an inflation-linked CfD in the U.K. and then we fixed also the CapEx. So clearly here, the economics rather improve given the high inflation we currently see. So that's very positive. On Thor, I mean we took the investment decision in Q1. And our view is similar to when we took the investment decision and also the price assumption we assumed there clearly stay in place. Hollandse Kust West, as I said, we haven't taken FID yet, but also here, our assumptions haven't significantly changed yet.

[Robert Pulleyn, analyst]

Okay. I take the point on Sofia, less worried on that one. And sorry, Baltic II in Poland because we understand some peers are delaying and restructuring the Polish project.

[Thomas Denny, executive]

Yes, probably recall that Baltic II as far as on the smaller project, which is rather towards the end of the decade. So it's nothing which we expect an FID in the very short term.

[Operator]

Next question comes from the line of Meike Becker from HSBC.

[Meike Becker, analyst]

I have to 3. One is around expectations for full year. In terms of your underlying results in the Offshore and Onshore Wind, what are you seeing so far in terms of wind resources? Should we expect a fairly normal quarter? Or are there any indications in going sort of like in 1 direction -- wind resources? The second question is on your financing options in the U.S. Could you sort of like give your view on the tax equity financing market in the U.S. and sort of like what you're doing and what you're seeing regarding the options of moving to more tax transferability?

[Michael Muller, executive]

Yes, Meike, thanks for your question. I mean on wind resources, we typically only comment at the end of the quarter. So no information here, but also no indication that I should be negative. I mean, Peter already asked about potential negative. No, we don't see any here. So let's just wait how the full quarter develops with respect to wind resources. The question on U.S. tax equity. I mean, we mentioned that in previous calls that the transferability clearly provides for an additional option. And so therefore, what we typically do is when we take investment decisions, we'd rather take a conservative approach here and then it's up to the teams to really optimize the projects and yes, it's always the trade-off between if you get an attractive tax equity financing or if you go rather for transferability. It also very much depends on individual projects. So what is the region, what is the offtake? Is there sufficient appetite for that specific project in the banking industry? But overall, it rather provides upside and more and more optionality for us to optimize the project.

[Operator]

The next question comes from the line of Harry Wyburd from Exane.

[Harry Wyburd, analyst]

Two just relatively short ones for me on numbers. So firstly, on Trading and Flexible Gas. You've had another very good quarter, and you mentioned hedging or good hedges in the presentation earlier. I just wondered when were those hedges struck? And because across some of your peers, there's been some debate about to what extent earnings are being driven by contracts that were signed back when things were more volatile and prices were higher 6 or 9 months ago. So I just want to get a sense how much of the good Q3 is coming from hedges or contracts that you struck a while back versus current market conditions in the actual quarter itself? And then secondly, on lignite, if I've got the numbers right, I think you've made a net loss in lignite in Q2 and Q3. So I just wondered if you could give a bit more color on what's happening there and whether there's any structural change that we should be aware of that's driven earnings to be significantly lower than they were in similar quarters in previous years?

[Michael Muller, executive]

Yes, Harry, let's start with Flex Generation. I mean, in the half year results, we provided some more transparency on the way how the margin in the Flexible Generation or whether the margin is coming from. And if you recall, we have something like what we call system services, which essentially are capacity premiums or certain certificates. And I mean that's a pretty stable income stream, and it rather increases if you -- for example, you can look at U.K. capacity auctions. So with the tightness in the market, that number clearly stays or even goes higher. The next one is what we call short-term optimization and the dispatch of the asset. I mean that is something you don't hedge, but where you benefit from intermittency and volatility in the market. And we also foresee that to stay, and that is actually also a nice hedge to our renewable results. And finally, we have what we call running the assets. And here, it's 2 elements: it's one -- the hedges you talked about, but bear in mind, especially flexible assets also have a significant option value so extrinsic value, and that is basically driven not so much by the spread level as such, but by the volatility in formed markets because then you can realize the option value of that real option. So therefore, a long answer to a short question. Yes, there is some hedging results included. It also benefits from the high price level we locked in 2022. But at the same time, going forward, we still -- we see upside and also stable results, as I said, from scarcity premium and system services and also continued volatility both in the short term, but also in the midterm that you can then realize. On the lignite, indeed, Q2 and Q3 were negative. But as I mentioned, there's 2 effects: one is compared to last year, we also did quite some revisions this summer. So -- and that has 2 effects: one is, it increases the cost because we don't capitalize the revisions in lignite anymore, so it goes directly into OpEx. And secondly, with doing an overall, you are not available and you can't realize the margin. So that's the 1 effect. The other one is that also simply with the price structure and leads to the effect that lignite is much stronger in Q1 and Q4 where it really needed. While in summer, when you have sufficient renewable feed in, you typically don't see so strong margins while obviously, cost of the entire system or at least the fixed costs stay in that time period. So therefore, you can expect Q4, again, to be stronger, yes.

[Operator]

Next question comes from the line of Wanda Serwinowska from UBS.

[Samuel Arie, analyst]

It's Sam Arie from UBS. I'm sorry. I think I might be [indiscernible] as Wanda. We seem to have exchanged our PIN numbers for that. Michael, very good, as always and good results. Just I'd like to ask you a question about [ Orsted ] and the Offshore situation and another one on the sort of commodity outlook, if that's okay. Starting with [ Orsted ] and their problems in offshore wind, I mean I feel like these have been brewing for about a year or more. And I've heard you get the question a million times like, do you have any of the same negative pressures. But what I'd like to ask is, do you see anything actually positive now? In that are the ones sort of -- they'll have to deal with their issues as they have to. But they have said already that they're cutting back on development expenditure and they might be doing disposals of things they didn't plan to dispose before. I just wondered if you see any benefits maybe in your offshore business, any less competition or pressure on the development side or maybe any portfolios of pipeline assets that might be available for competitors to buy maybe on the onshore business? I'm not sure. But just I'd like to ask, do you see any potential benefits from that situation? And then the second one is just on the wider commodity outlook. Look, I'm just listening to the economists. We're -- analysts, we're not economists. But the economists are nervous about European growth. Germany is already kind of in a recession. There are downside scenarios, rates remain high, industrial demand is slipping. I'm just wondering, I know you don't share your specific commodity forecast. But when you look at TTF prices at the sort of [ EUR 40 to EUR 50 ] range, and then we listen to some other peers like NG saying that industrial gas fires were 10% to 20% down with no chance of recovery. I mean do you think that the forward commodity markets are pricing the correct economic outlook at the minute? Or can you help us think about how that might evolve in the next few months?

[Michael Muller, executive]

Yes. Thanks, Sam, for your questions. First, on [ Orsted ], the positives. I mean, 1 positive, I think, is clearly that the markets -- but also on the political side, they have realized, while I fully understand that they want to stick to regimes and don't open up things they already contracted. At the same time, it's very clear that given higher CapEx costs and interest rates that must be reflected also in offtakes, otherwise, we don't get the build-out of renewables as the government wants. And as I mentioned, a good example has been the U.S. where we now secured attractive offtakes. And while it's still rumors, I mean, for me, it's a good indication that the U.K. government is apparently also thinking about price cap -- increasing the price cap for U.K. auctions. So I think that is a general positive development into the market. I mean, does it change competition? I wouldn't say so. I mean, I always mention that on the one hand side, there is competition. And at the same time, I mean all our peers in the offshore arena are professionals. So I don't expect them to act irrationally. So therefore, the situation here hasn't changed. But I think on the political side, that is an important factor to help. And it also helps to put more emphasis on supply chain development, so to strengthen that. With respect to the commodity outlook, I mean, you'll hear different things. On the one hand side, you are right. High interest rates should, yes, lead to a more bearish outlook for growth. At the same time, industry proves to be pretty resilient. So let's see. And in the end, it also depends on how interest rates develop further. I mean I think there's also some potential that interest rates may ease going forward. But that's probably more looking to the crystal ball, and I guess you have to ask somebody else for that question. I mean what stays the case it's at least around gas that as long as we have the tightness here in Europe, there is -- I don't foresee any easing at least on the gas prices. And the same is true with CO2. I mean, ambitions stay high. So therefore, I also don't see easing on that side.

[Samuel Arie, analyst]

Okay. Well, that's a very clear view and very helpful. Just on the question of any pipeline portfolio that might be coming to market, has there been any discussion of that linked to the [ Orsted ] situation or no comment on that point?

[Michael Muller, executive]

So if there would be any, I wouldn't tell you. No. So I mean, you know that we don't comment on...

[Samuel Arie, analyst]

Fair enough. I guess you wouldn't tell me whether in the prop trading part of your trading debt, whether you are net long or short gas?

[Michael Muller, executive]

No, I wouldn't tell you.

[Operator]

Next question comes from the line of Louis Boujard from ODDO BHF.

[Louis Boujard, analyst]

Congratulations on the results. I have to go a bit into some details, one, a lot have already been asked. And -- but maybe not that much detail regarding other consolidation, you don't have that much often question on this one. But the performance in the first 9 months is quite positive at EUR 63 million when I compare to your implicit guidance for the full year, which is minus EUR 200 million. I would like to understand what should be expected in the fourth quarter on this topic that would explain that you might reach this implicit target for 2023 on a full year basis? What is to be expected or not in the quarter to come? Maybe also regarding the working capital evolution, I think that you mentioned some timing effects and hedging activities for EUR 2.8 billion of working cap negative impact on the net debt for 2023, which is, of course, understandable with the volatility in the market. But what I would understand here is if it is expected to be reversed by the end of the year, we need to consider that most of it is going to reverse only in 2024, and that's in order to have a kind of idea of where we should land in terms of net debt by the end of the year?

[Michael Muller, executive]

Thanks for your question. I mean the first is on other consolidation. The positive number is driven by the effect from Amprion that we previously discussed. So here, the equity result from Amprion was positive because of that support from the German government that will unwind if Amprion has to pay for higher system costs. In the course of the year. And as I mentioned also '24, so therefore, you can stick to the guidance we gave of minus EUR 200 million. With respect to net debt, I mean, you know that this number, obviously, is pretty volatile because it very much depends on how market prices develops, and it includes not only the hedging position, but also the positions of our traders. But as a good estimate, you can assume that net debt would stay on that level that we currently have at the end of Q3.

[Operator]

The next question comes from the line of Piotr Dzieciolowski from Citi.

[Piotr Dzieciolowski, analyst]

I have 2, please. So the first one is about your Supply & Trading. Do you have any visibility in...

[Michael Muller, executive]

We can hear you, sorry.

[Piotr Dzieciolowski, analyst]

So do you have any visibility into supply and trading into the next year? You've had a couple of really, really strong quarters as you have this annual guidance and consensus is trending lower to this line over the medium term. But I just wanted to understand whether you already have some positions that could indicate that some of the better performance than the regular run rate? And the second question I have on the kind of a landscape for the PPA for Offshore in Europe. You have over 3 gigawatts that you -- project that you have to derisk and so what is the kind of appetite from the market for the long-term PPA? What is feasible in terms of duration of these contracts and how many industrial customers you have for the type of contracts at the moment? Is it easy to sell or not really?

[Michael Muller, executive]

Okay. Piotr, with respect to our numbers for 2024, you have to wait for 2 more weeks until the Capital Market Day, where we will give you more transparency on the trading business going forward, but not to increase the expectations too much. I mean, we typically don't communicate, say, on individual position. So like if there would be 1 significant position that could last into the next year afterwards, that's not the type of guidance we give. And also, that's not the way how the business runs because positions can change quickly if markets develop. But with respect to an outlook, please wait until the CMD in 2 weeks' time. With respect to PPA and Offshore, we see in healthy environments and interest for PPAs and also for longer durations. I mean the typical duration, I would say, is 10 years that what we currently see. And price levels, we don't reveal that. It also depends strongly on which type of contract you have, if it's pay is produced, pay is nominated or if it's a baseload contract. I mean we mentioned that last time, this is obviously also a benefit we have with our Supply & Trading business plus the combination of our Renewables portfolio and the Flexible Generation portfolio, so including hydro assets that we can also structure PPAs according to the needs of our customers and thereby nicely lock in both the margins from the Renewables, but also part of the Flexible Generation business.

[Operator]

Next question comes from the line of Olly Jeffery from Deutsche Bank.

[Olly Jeffery, analyst]

A couple of questions. First one, just coming back to the financial result development, which is coming in better than expected. Just coming back to the guide for the full year is EUR 550 million. I take your point about the dividend. But if I were to say -- if I had to add your Q3 financial results to your 9 months, that would end up around at around EUR 450 million. And so the question I have, this benefit you're getting from liquidity and the rate, the income that's coming from that. Is that something we could expect on an ongoing basis? I know your CapEx will increase at some point, but certainly, could that benefit last into next year? Second question is on -- can you just give the latest on when you're expecting to hear developments on possible capacity market mechanism in Germany related to on that? And then lastly, Supply & Trading. I know you said you're going to be updating us this in a couple of weeks. But my takeaway from what you said that you might be considering adjusting the guidance for that upwards with the guidance being at the start of the year, you guided to EUR 450 million at the midpoint or EUR 112 million a quarter. And if I look back at the preceding 19 quarters to the start of 2019, you've been lower than that only 3 times and considerably higher than that most of the time. So is it something that you might be considering adjusting upwards from the EUR 450 million midpoint guide you gave at the start of the year?

[Michael Muller, executive]

Okay. Let's start with the guidance. I mean, please don't put words in my mouth. I mean I said we'll talk about guidance of Supply & Trading in the CMD in 2 weeks. With respect to the market mechanism, we are also expecting feedback from the German government and also this morning in the press conference, we clearly stated that this is an urgent task. I mean if the German government really wants to make sure that we shut on coal, it is very important that we not only build out the renewables as we currently do and build out grids, but also get additional gas capacity later to be converted into hydrogen assets into the market. I mean the government is well aware of that topic. So we hope that they come up with a solution, but it's not available yet. I mean our financial results, Thomas?

[Thomas Denny, executive]

Yes, maybe just a quick comment. I think if you take our full year guidance of EUR 550 million and you adjusted for the E.ON dividend and you try to put that into what is -- as a run rate for the quarter, you get to some EUR 180 million to EUR 190 million. And I think that's also a fair assumption for the fourth quarter.

[Olly Jeffery, analyst]

And can I just follow up on the capacity market? Are you expecting to hear -- would you expect to hear news on that this year still? Or could it push into '24?

[Thomas Denny, executive]

I didn't get the question, probably -- if the question was whether we expect to hear in the current year? I think so often, we've been expected to hear something and we didn't expect. So I think we now are a bit more careful than what you expect. But I think the key point is that Michael made, we need to have it rather sooner than later because we don't have auctions next year. And if we don't take investment decision next year, we don't have -- we won't have any gas stocks by the end of the decade when we need them.

[Operator]

Your next question that comes from the line of Tancrede Fulop from Morningstar.

[Tancrède Fulop, analyst]

I have 2. The first one is on the coal exit. Recently, the German finance minister expressed some skeptical comments about the coal exit in 2030. So if you could share your view on the topic, -- and maybe if you could give us the likelihood that this would lead to the agreement that you had with the government last year that it will be undone and the EUR 1.5 billion of provisions that you booked when you made the agreement will be released. This will be my first question. And the second question is on U.S. Offshore. So the recent cancellations of projects and some projects being stalled, raised -- creates challenges for the development of the local supply chain. So is there a risk that is for the project that you won in New York? The situation would oblige you have a risky strategy, meaning to commit a lot of CapEx ahead of the FID, which is what often did basically.

[Michael Muller, executive]

Yes, Tancrede. Let's start with the coal exit. I mean the statement of the German finance minister, I mean, honestly, I would see that as a political statement, yes. There's a clear contract in place. There's a clear legal framework in place that foresees a coal exit in 2030 and that is also what we have committed to and that we'll execute against. And I don't see any changes there. I mean, the comment we make is it's rather that in order to achieve that, it's now important that we continue with the build-out of renewables, build-out of grids. And as we discussed, the strategy for gas assets is essential to realize the 2030. So that comment I would see rather put pressure on the government to come up with a proper solution on the gas strategy. And therefore, also your question on provisions or whatever, so I don't expect any changes there. We'll deliver against 2030 and also the provisions are rightly built. With respect to U.S. projects, I mean, to be fair, the U.S. supply chain for offshore isn't as mature as the supply chain is here in Europe, but you can expect that this is one of our focus topics. I mean, with the award of our bids in New York, that also comes with certain commitments and the teams right the day after started to engage with the suppliers to now also lock in the contracts and get the right agreements and also clearly work on derisking all the different elements of the supply chain. So I'm confident that will probably risk managed that.

[Operator]

The next question comes from the line of Rob Pulleyn from Morgan Stanley.

[Robert Pulleyn, analyst]

Just 1 quick follow-up. Kevin, you mentioned, Michael, the U.K. review of the CfD price, and there was an article in Bloomberg last week referencing GBP 70 to GBP 75 megawatt hour, a bit of confusion as to whether that's a nominal or a 2012 real number. I'd love to know what you read into that and whether that is a good enough price for you to bid the approximately 3 gigawatts worth of capacity from your remaining U.K. seabed in the auction next year for AR6?

[Michael Muller, executive]

I mean -- we virtually don't have further insights than we actually -- Rob read in your comments, yes. So yes, let's wait what the outcome is. I mean for me, it's a good signal that -- and that's also what we are hearing is that the government is serious about the topic. And I would expect that if they lift the cap, it also comes with an attractive level that also then enables us to realize projects. I mean maybe 1 comment I mentioned that in my speech. While the last auction round for offshore was -- didn't come up with 1 bidder to win in the auction as we just discussed, which I actually found good because it set the right signal to the government. At the same time, the onshore and solar auctions were highly attractive. And I mean, as I mentioned, we secured 400 megawatts in those auctions, already took FID for those projects because they are very attractive.

[Unknown Executive]

Has that more than answered your question, Rob?

[Operator]

Mr. Rob's line has now disconnected. So I'll move on to the next question from the line of Sam Arie from UBS.

[Samuel Arie, analyst]

I jump back on with a follow-up to -- and apologies if this means I'm lowering the tone at the end there for it's been an excellent presentation, a very helpful Q&A. But I just wanted to come back to the state aid approval on the coal deal. And I just wonder -- am I right that there's still -- there's no news and nothing has happened and that we're still waiting. And can you remind us how long that's been? And if there's any update from your side?

[Michael Muller, executive]

Sam, I was already wondering why conference would end without that question. So thanks for asking. I mean, unfortunately, same answer. I mean -- at least -- I mean, you know that we are not the one -- in contract directly with Brussels, it's the German government. All we hear from the German government, and we actually had a contact with them again last week is positive. So they are all confident we will get it. But the time line still is unclear. So apologies, I mean, I would love to see the moment where I can communicate it's all done and that question doesn't reoccur. But for the time being, unfortunately, no news. But more importantly, I mean, no news is actually reconfirming the situation we have seen so far.

[Samuel Arie, analyst]

And am I right, sorry, correct me if I'm wrong, but is this like 3 years now?

[Thomas Denny, executive]

Goes back to the agreement that we found in principle with the German government in the beginning of 2020. I think then the year later, we signed the contract. And then sometime later, the German government has formally started the process. So yes, it has been going on for a few years now already.

[Samuel Arie, analyst]

And do you think there's any possibility that this is somehow caught up in the sort of French point about taking back control of power prices? Is there some kind of maybe horsetrading going on that -- France [indiscernible]

[Michael Muller, executive]

No, no, no, that's very clear. No. So it's more kind of procedural stuff with also getting that formally fixed and then legally in a safe way. So clearly, no horsetrading.

[Samuel Arie, analyst]

All right. Okay. Well, that's good to hear. We'll cross our fingers and hopefully, we won't be asking you that question next time.

[Michael Muller, executive]

I hope so too.

[Operator]

There are no further questions in the queue. So I will now turn the call back over to Thomas Denny.

[Thomas Denny, executive]

Thank you, and thank you, everyone, for dialing in. Hope you find this call as interesting as we did over here in Essen. Looking forward to seeing you, hopefully, all in-person again at our CMD in 2 weeks from now. And if you have any follow-up questions. don't hesitate to reach out to the IR team. I wish you a great afternoon or a great morning in the U.S. and speak to you soon. Bye-bye.

[Operator]

Thank you for joining today's call. You may now disconnect your lines.