Hello, and good morning, ladies and gentlemen, and welcome to EVN's call regarding the results for the first half of the 2024-'25 financial year. [Operator Instructions]
Let me now turn the floor over to Alexandra Wittmann.
Good morning, everybody, to EVN's conference call on the results for the first half of our current financial year.
Our half year results are solid and in line with expectations. Group net profit came in at EUR 250.6 million. That's an increase of 26% compared to last year. These results clearly show that EVN's diversified business model provides stability and resilience, especially when external factors deviate from long-term averages as we have seen with wind conditions. As a result, our renewable generation volumes were lower despite the continued expansion of our wind and photovoltaic parks. On top of that, market prices for our own electricity generation has declined year-on-year.
In contrast to those factors, winter temperatures were in line with the long-term average. This led to stronger energy demand compared to the milder weather we experienced last year. As a result, we saw positive developments, particularly in our Austrian network and district heating businesses.
Based on the overall sound performance in the first 6 months, I can confirm today our full year guidance. We expect group net results in a range between EUR 400 million and EUR 440 million, subject to a stable regulatory and energy policy environment. I would like to remind you that only 3 to 4 years ago, a normal level for EVN's group net results were between EUR 200 million and EUR 250 million. We now see such normal level between EUR 400 million and EUR 440 million, which means a substantial step-up in the group earnings level.
We are also on track in realizing our investment program. CapEx were up by 23% at EUR 318 million during the reporting period. This is in line with our plan to invest annually about EUR 900 million until 2030. The key investment areas remain unchanged. So about 3/4 of our CapEx will be made in Lower Austria in networks, renewable generation, e-charging infrastructure and drinking water supplies.
In our ambition to further position EVN as an attractive ESG stock, we have successfully taken the next important step. The internationally renowned Science Based Targets initiative has validated our new CO2 emission reduction targets, and these are now fully aligned with the 1.5-degree goal of the Paris agreement. This means our targets have, once again, been independently verified, and they are now even more ambitious than our previous well below 2-degree goals.
The cornerstone of our greenhouse gas reduction strategy is the expansion of our renewable generation fleet. During the reporting period, we reached several important milestones. Our installed wind power capacity now stands at 500 megawatts, and our photovoltaic capacity has surpassed 100 megawatts peak. We are currently working on a number of new projects as we continue moving towards our 2030 expansion targets. Those are 770 megawatts of wind and 300 megawatts peak for photovoltaics.
On the next slide, I will take you through the main financial development in the reporting period. Before I begin, I'd like to remind you that we are reporting the international project business, which we plan to sell to STRABAG, in accordance with IFRS 5. Therefore, all P&L items for the previous half year have been restated to reflect the IFRS 5 disclosure.
Revenue rose by 6.6% year-on-year to EUR 1.7 billion. The main reasons were positive volume and price effects from all 3 network companies as well as from our supply companies in Bulgaria and North Macedonia. Colder temperatures during the winter months led to higher revenue at EVN Wärme. In contrast, there was a drop in revenue from renewable generation and natural gas trading, mainly due to lower prices and volumes. On top of that, there were also negative impacts year-on-year from the valuation of hedges due to positive effects in the previous year.
The increase in other operating income was due to insurance compensation we received to cover damages, which were caused by the floods in Lower Austria during September '24. The cost of electricity purchases from third parties and primary energy expenses increased due to higher procurement costs in the regulated energy supply business in Southeast Europe. This increase was contrasted by lower procurement costs and reduced quantities of natural gas. The cost of materials and services were up due to the repair cost for the flood damages, which, as already mentioned, are largely covered by insurance.
The rise in personnel expenses reflects the increase in workforce and adjustments according to the collective bargaining agreement as well.
Other operating expenses declined. In the previous year, we had 2 one-offs, being the impairment loss on receivables in the international project business and the energy crisis contribution for electricity, which was still due in the previous year's Q1.
The share of results from equity accounted investees improved substantially. Higher earnings contribution from RAG and the movement in EVN KG's results were contrasted by a slight decline at the Verbund Innkraftwerke power plants.
In total, group EBITDA rose by 20% year-on-year and amounted to EUR 513 million. Scheduled depreciation and amortization increased by 7%, reflecting our high investment program. Hence, group's EBIT was up by 28% and totaled EUR 335 million. Financial results amounted to minus EUR 29 million. In total, we generated a group net result of EUR 250.6 million in the reporting period, which represents an increase by 26%.
Now let's move on to the next slide, which provides information regarding the group balance sheet structure. As of the end of March, EVN's net debt amounted to EUR 1.3 billion and was above the level as of end of September '24. Correspondingly, gearing ratio stood at 19.7%. Our indebtedness is increasing in line with our higher investment program. Our financial flexibility remains secure and solid. EVN holds contractually committed undrawn credit lines in the amount of EUR 805 million.
I can also inform you today that both credit ratings were confirmed recently. In April, Moody's reaffirmed it's A1 rating with stable outlook, and in May, Scope again awarded us an A+ rating with stable outlook. Our declared goal is to maintain solid A category ratings in the future. To achieve such ratings, we are strictly monitoring the adjusted target ratios of both of our rating agencies. Therefore, we used the net debt-to-FFO ratio as a KPI to manage our financial performance, investments and capital structure.
On the next slide, I will present the development of our segments in more detail. As always, after 6 months, I will also provide you with an update of our segment outlook for the full year.
I will start with the Energy segment. Energy demand for natural gas and heat increased due to colder temperatures, whereas electricity sales volumes declined year-on-year. Such decline was due to declining electricity sales to industrial customers in Germany. In Austria, cooler weather, the increased use of heat pumps and the continuing trend towards e-mobility offset the effects from strong competition.
Our equity consolidated supply company, EVN KG, is in charge of the electricity and natural gas sales, whereas the heating business is fully consolidated. Therefore, heating is one of the main drivers for the revenue of the Energy segment. The other main factor for the development of revenue is the marketing of the electricity generated in our renewable power plants.
In the first 6 months, revenue fell year-on-year to EUR 372 million due to lower realizable prices in the marketing of our own generation volume and price effects in natural gas trading as well as reduced earnings effect from the valuation of hedges. In contrast, our heating business benefited from the colder temperatures.
In line with declining market prices, operating expenses also decreased. For our equity accounted supply company, EVN KG, the expected operational turnaround continued as planned. However, during the [ reporting period ], the reversal of accruals from the previous year led to a one-off negative effect. As a result, EVN KG reported a loss of EUR 11 million, but that's still a significant improvement compared to the previous year.
In total, segment EBITDA amounted to EUR 63 million, and EBIT totaled EUR 49 million. Due to the beforementioned one-off in EVN KG, the full year EBIT in the Energy segment might end up below the expected range of EUR 50 million to EUR 60 million. However, I can confirm the planned operational normalization in EVN KG.
In recent meetings with analysts and investors, we have highlighted the strong future potential we see in e-charging infrastructure. We are already the market leader in Austria, which underlines our position. That's why I'm pleased to inform you that we have signed a new cooperation with Austria's leading furniture retailer, XXXLutz. According to the contract, we'll install and operate 600 e-charging points at the parking areas of 92 of their stores across Austria.
We see e-mobility as a key part of the renewable energy system. It's a great example of how sector integration works. As a provider of e-charging infrastructure, we help to use surplus renewable electricity in the transport sector. This surplus often comes from wind and solar power, especially in summer. E-mobility helps to absorb this excess energy. And with bidirectional charging, electric vehicles could even act as mobile batteries in the future.
Let us now turn to our Generation segment. Electricity generation volumes in the segment declined by 10% year-on-year due to lower wind and water flows in Austria. Our Theiss power plant was called more frequently by the Austrian network transmission operator for network stabilization.
Revenue decreased due to declining market prices and lower generation volumes. The Generation segment also contains the effects from lost revenue and repair costs at our thermal waste integration plan due to the floodings in September '24. Our equity accounted investees, Verbund Innkraftwerke, delivered a lower earnings contribution as compared to the previous year.
All in all, EBITDA amounted to EUR 96 million. Based on higher scheduled depreciation and amortization because of our investment program, segment EBIT stood at EUR 69 million.
I confirm the outlook we shared in December. Due to the decline in electricity spot and forward prices, revenue in the Generation segment is expected to drop significantly. Assuming average wind and water conditions and an EBIT margin of 25% to 35%, EBIT will, therefore, be lower than last year.
Let's continue with the Networks segment. The colder weather, increased use of heat pumps and e-mobility as well as the increased use of our Theiss power plant for network stabilization led to higher network distribution volumes for electricity and natural gas. In view of the positive volume effects and higher network tariffs for electricity, revenue in the segment increased.
Operating expenses also increased due to rising upstream network costs for electricity. In total, EBITDA was up at EUR 208 million. Taking into account higher depreciation and amortization due to the high investment level, EBIT totaled EUR 121 million.
We are taking a more positive view on our guidance for our Networks segment. Higher investments will grow the RAB. In addition, both higher tariffs and positive volume developments in the first half will support EBIT and full year results. However, please bear in mind that the volume effects will be offset in the coming years in line with the Austrian regulation.
Let's move on to the South East Europe segment. In Bulgaria and North Macedonia, we are reporting today higher electricity network and energy sales volumes. The volume growth was, among others, driven by low temperatures in Bulgaria.
Revenue increased to EUR 891 million due to positive volume and price effects. This was contrasted by the offset of positive earnings effects from recent years in South East Europe in accordance with the regulatory methodology.
Operating expenses increased in line with higher procurement costs in the regulated energy supply business in South East Europe. All in all, EBITDA amounted to EUR 79 million, and segment EBIT totaled EUR 34 million. The decline in results is in line with our segment guidance and the expected regulatory adjustments of past positive effects. However, I can confirm that we expect EBIT of the South East Europe segment to reflect the lower end of the medium-term range of EUR 60 million to EUR 90 million in this financial year.
I would like to remind you that EBIT in South East Europe clearly exceeded our segment guidance in the past 2 financial years, thanks to favorable regulatory parameters. Please keep in mind that this financial year reflects a reduced result based on a correction in line with the regulatory mechanism in Bulgaria. Overall, results are well in line with our long-term average and future results ambitions for the region.
And finally, the Environment segment. The negotiations with STRABAG are progressing. Due to the complexity of the transaction, we had to adjust the time line, which is subject to a final agreement with STRABAG and the receipt of approvals from authorities and other third parties. Due to the IFRS 5 disclosure of the discontinued operations representing those parts of the international project business, which we plan to sell to STRABAG, the financials of the Environment segment look different.
In other words, the P&L of the segment only covers the following activities which are excluded from the planned sales, such as our drinking water business in Lower Austria; the equity accounted companies for the projects in Zagreb and Prague; the deconsolidated company for the wastewater treatment plant project in Budva, Montenegro; and finally, the deconsolidation effects from the sludge-fired combined heat and power plants in Moscow, whose sale was closed on 31st October '24.
For the activities to be sold, IFRS 5 disclosure requires us to report results from discontinued operations. This amount to EUR 14 million in the first half. In comparison, the restated prior year value is EUR 12 million.
I can confirm the outlook for the segment. Because of a negative one-off effect in the previous year, we expect an improvement in the current financial year.
The next slide shows the development of our group cash flows. Gross cash flow was lower year-on-year at EUR 478 million. The main reason was the correction of noncash earnings components, although this was partly offset by a higher result before income tax. Cash flow from operating activities totaled EUR 232 million. Year-on-year, it was negatively influenced by an increase in trade receivables and a parallel decline trade payables at balance sheet date, which was reduced by a lower capital commitment for our supply company, EVN KG.
Cash flow from investing activities amounted to minus EUR 217 million and reflected a substantial increase in investments. The cash outflows were partly offset by network subsidies and the sale of cash funds. The position cash flow from financing activities amounted to minus EUR 91 million and included scheduled repayments, the dividend payment for the last financial year and a new Schuldscheindarlehen, a promissory note loan. The net change in cash and cash equivalents amounted to minus EUR 0.7 million.
Let's come now to the outlook for this current financial year. I confirm our guidance for this financial year. We expect group net results to be within a range of EUR 400 million to EUR 440 million. This is under the assumption of a stable regulatory and energy policy environment. We don't expect a significant impact from the possible WTE transaction on the results.
When looking at today's results and our full year guidance, it's important to bear in mind that energy demand isn't evenly distributed throughout the year. In other words, there is a clear seasonal bias, with significantly higher energy demand during our winter half year. Consequently, especially our fourth quarter results always differ from those of the rest of the year.
Our dividend policy remains unchanged. The dividend will equal at least EUR 0.82 per share. As demonstrated in the past, we want our shareholders to appropriately participate in any additional earnings growth. In the medium term, a payout ratio equaling 40% of group net results, adjusted for extraordinary effects, is targeted.
Our annual investments will amount to EUR 900 million until 2030. The core areas are investments in network infrastructure, renewable generation, e-charging infrastructure and drinking water supplies. At a strategic level, we are continuing to explore the potential of large battery storage systems. These will help us manage electricity loads more efficiently and will optimize the operation of our distribution networks. We are also evaluating the option of installing batteries near our wind and solar parks, allowing them to function as virtual power plants. You can expect more updates on these initiatives and plans later this year.
That's the end of our presentation, and we look forward to answering your questions.
[Operator Instructions] And the first question comes from Peter Crampton, Barclays.
It's Peter Crampton here from Barclays. Maybe 2 questions on kind of the new Austrian government. We obviously, as part of the budget, have this kind of EUR 200 million kind of targeted tax for the utility sector. Is it correct, though, that this is more kind of generation related and the impact for EVN rather limited? And maybe if you can give us a little bit of a number that you kind of see this year?
And then obviously, you're talking a lot about kind of new initiatives. What do you kind of want from the new Austrian government? And do you believe we will get some kind of updated kind of utility-related strategy given all the decarbonization plans?
Peter, thanks for the questions. I will tackle the first one, which is related to the energy crisis contribution for electricity. Maybe it's helpful to recap a little bit for everyone. I think just as a small reminder, the federal act on the energy crisis contribution for electricity was initially put in force for the period from 1st of December '22 to 31st of December '23, and was then extended for '24. Now in March '25, the new Austrian government reenacted the law for the period from April 1, '25 to 31st of March 2030.
At the moment, the ministry is still working on the regulations, which define the parameters for the calculation of the levy. Therefore, the potential effects on EVN for the full year '24-'25 are not clear yet. Our estimate is a low single-digit amount.
According to preliminary information, the new parameters for the calculation of levy on earnings from electricity generation will be tightened. Remember, previously, it was EUR 120 per megawatt hours. This might be tightened to EUR 90 per megawatt hours for existing plants and EUR 100 per megawatt hours for new plants. Any excess earnings are taxed at 95%. Also, again, here, tightened. Previously, it was 90%. And the maximum deductibles for renewable investments have not been determined yet. But I repeat, we expect a low single-digit amount.
And to tackle your second question, what do we want from the new government, I think we need to have clear circumstances for our industry. Therefore, it would be good to have the new electricity act in place, which is expected for months already.
Does that answer your question, Peter?
Yes, it's very good. Thank you very much and for the detail as well what to expect from the levy.
The next question comes from Patrick Steiner, ODDO BHF.
It's Patrick Steiner speaking, ODDO BHF. A couple of questions from my side, and we'll start with the first one. In Q2, we saw a decline in renewables generation by a bit more than 40%. And my question is, is this only related to lower wind and water flows? Or are there any other effects included as well?
Patrick, no, it's really mainly related to less wind and less water.
Okay. Very interesting. Second question would be, in your April 2025 company presentation, you defined the annual Networks investments at roughly EUR 450 million or about 50% of your total EUR 900 million CapEx for '24 to 2030. Is this, from the current perspective, realistic in your view? Or should you factor in a gradual increase in this number due to inflation?
No, I don't see a major increase to this number.
Okay. A third one and I will get back in line.
Go ahead with the third one.
Okay. I'm still in line. Yes, talking about the network tariff adjustments for household customers, they were pretty high over the last 3 years. I mean we know where this is coming from, but do you expect the development in these network tariffs to continue? Or should you expect a more gradual increase over the next years, comparable to what we've seen before the outbreak in -- of war in Ukraine?
I would expect a gradual increase.
Okay. So less steep as we have seen over the last 3 years?
Yes.
The next question then comes from Thibault Dujardin, Bernstein Societe Generale.
My first question will be regarding the disposal of WTE, if you have more details regarding the time line and any changes in terms of economics regarding potentially the Kuwait activity.
And second question would be regarding the investments you plan in batteries. Do you expect it to enter into the RAB? That will be my 2 questions.
Okay. Thibault, thanks for the question. First question regarding the WTE sale, I think it's important that I confirm that both parties, EVN and STRABAG, are fully committed to the transaction, and we are working highly professionally and focused on the transaction.
Of course, unfortunately, certain details of the transaction are very complex, and solving these details in the contract simply requires more time than originally expected. And -- but we are really positive and hope that we can soon inform the public about the signing of the SPA with no major impact.
And moving on to your next question, which was if batteries are included in the RAB, no, that's not allowed in Austria. But we still will do the investment. We plan a 70-megawatt battery at our energy spot or location in Theiss.
And maybe a third question regarding the Environment. You confirmed the outlook. Can you confirm, it's for EUR 10 million to EUR 20 million EBIT?
Can you repeat it? I did not get the question.
Regarding the guidance for the Environment segment, you indicated that you confirm the outlook. Can you confirm that the outlook is between EUR 10 million and EUR 20 million for EBIT?
Yes. It is -- the result outlook of the Environment segment is above previous year. Last year, we had a receivable devaluation effect from Budva, which was EUR 22 million. So that's why we see an increase to the previous year.
So at the moment, there are no further questions. [Operator Instructions] There are...
All right. Thanks for joining today...
I'm sorry. Yes.
Okay. Thanks for joining today's conference call. We will publish the results for the first 3 quarters of the '24-'25 financial year on the 28th of August. Goodbye and have a great day.
Your conference call has come to an end. Thank you all for attending. Goodbye.
