Ladies and gentlemen, welcome to the VERBUND AG Full Year 2024 Conference Call. [Operator Instructions] And the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Peter Kollmann. Please go ahead.
Thank you very much. I'm here with Andreas Wollein, Head of Investor Relations and Finance. We will do this presentation together. Ladies and gentlemen, welcome to the presentation of our 2024 results, and let me thank you for joining today's conference call.
Before we move into the analysis of our business development, let me make a few general comments. In '24, the VERBUND results were down compared to '23, but still high in a historic context due to normalizing conditions in the energy industry following the gas price shock after the outbreak of the Russia-Ukraine conflict.
As you know, the past financial years proved to be challenging for the entire energy industry with very little predictability and high volatility,, in particular, geopolitical events, but also the weakening economy in Europe. In addition, the landmark actions in the EU in many EU member states and of course, in the U.S. gave rise to intensive discussions about the future shape of the regulatory and political framework conditions within the energy sector. These developments made it very clear that tensions between security of supply, climate protection and competitiveness will remain intense over the next years.
Now let's move on to the details of our '24 results. Average achieved contract prices decreased compared to '23. The hydro coefficient determining the generation from our run-of-river hydropower plants was significantly better compared to last year, the generation from the annual storage power plants rose due to higher inflow and reduced reservoir levels outweighing the lower generation from turbining. generation from wind and PV was also up. The increase in new renewables was mainly a result of the commissioning of new renewable power plants in Spain, but also in Austria and Germany. However, the overall result contribution declined due to lower achieved prices, higher other operating expenses and valuation effects of energy derivatives.
Generation from thermal power also rose due to the increased use of our CCGT in Mellach. The results contribution from the sales segment improved and was slightly positive. However, the contribution from retail was still negative. Lower contributions from Gas Connect Austria and Austrian Power Grid were recorded in the regulated Grid segments. And finally, contribution from flexibility products decreased mainly due to lower contributions from concession management.
Now let me go into more details, and let me start with the hedging volumes. Higher relevant, highly relevant for VERBUND results -- as you know, EUR 1 per megawatt hour, plus or minus, has a sensitivity of approximately EUR 25 million in our EBITDA line. As of the 21st December '24, we reached an average achieved contract price for hydro generation of EUR 118, dramatically below '23. As of the 31st December '24, we have sold 66% of our own generation volumes for '25 at a price of EUR 117.5 million. And for '26, we have sold 38% of the generation volumes at a price of EUR 79.3. On a mark-to-market basis, with prices as of the 17th of March '25, the average achieved contract price for '25 is at EUR 108.9 and for '26 at EUR 81.8 per megawatt hour.
On the next page, we talk about the hydro segment at 1.09 hydro coefficient an index quantifying the hydropower generation of the run-of-river power plants, was 9 percentage points above the long-term average and 11 percentage points above the level of '23. The production from annual storage power plants increased by 4.2%. Own production from hydropower, therefore, overall increased by 2,940 gigawatt hours or 9.6% to 33,448 gigawatt hours compared to '23.
The increased volume, however, could not compensate for the lower achieved contract prices. Therefore, the EBITDA in the hydro segment decreased by 23% to EUR 3 billion. Regarding CapEx, '24 marked the completion of very important projects, the 45-megawatt ReiBeck II pumped-storage power plants as well as the 11-megawatt Gratkorn run-of-river powerplant project.
Activities on the 480-megawatt Limberg III pumped-storage pipeline project as well as the 14 megawatts Stegenwald run-of-river power plant projects are progressing very well, and we are expecting them to open in '25.
Now on the new renewables segment. The new renewables coefficient, which similar to Hydro is an index quantifying the generation from wind power and PV amounted to 0.91 in '24 compared to 1.06 in '23. So lower coefficient here as well. The generation from wind power increased by 30.2% or 422 gigawatt hours and amounted to 1,800 gigawatt hours in '24. More favorable wind conditions in Austria, in addition to new installations in Austria, Germany and Spain were the reasons for this development.
Generation from PV amounted to 446 gigawatt hours plus 23% in the reporting period stemming from PV installations in Austria, that is 7 gigawatt hours and Spain 439 gigawatt hours. In both countries, new solar farms went online.
Now taking a look at the EBITDA development. In the new renewables segment, we see that the EBITDA decreased by 25% to an EBITDA amounting to EUR 170 million. Lower achieved prices were offset by increased generation volumes, as I mentioned before. However, higher other operating expenses and a lower effect from the valuation of energy derivatives in connection with future energy deliveries had an additional negative effect. The chart also provides an update on our activities in the renewable sector. The main focus is on the development of our large renewable portfolio in Spain for which we got the approval to start construction of approximately 1.6 gigawatts.
On the next slide, you see an update on our renewable activities. The chart outlines our new renewable assets in operation and in construction in our markets. It is split by technology as well as our targets for 2030. In addition, we are providing the EBITDA contribution in '24 and all the relevant CapEx figures.
Now on the next page, talking about the sales segments. Taking a look at the EBITDA development here, we see that it strongly increased to a slightly positive value of EUR 7 million. The EBITDA in the retail business improved from minus EUR 382 million in '23 to a level of minus EUR 77 million. So that is a big increase. EBITDA in the trading business amounted to plus EUR 84 million. However, this figure includes negative valuation effects of EUR 94 million.
So the improvement in EBITDA was mainly due to lower procurement costs for both electricity and gas in the end customer business, which was offset primarily by lower result from the valuation of energy derivatives in connection with future energy deliveries.
In the Grid segment, as you know, the grid segment consists of our regulated business, Austrian Power Grid and our regulated business, Gas Connect Austria. The EBITDA for '24 from the electricity grid business according to IFRS was approximately EUR 284 million, which is a decrease of EUR 89 million. The main effect for this decrease was the reduced contribution from earnings of our auctions.
The EBITDA guidance for the electricity grid for '25 is at approximately EUR 210 million and can be characterized by 2 different effects. Number one, the regulatory compensation is rising because of higher WACC numbers compared to last year and because of the increase of the regulatory asset base reflecting the National Grid development plan. The company's strong growth, however, is leading to cost increases, which will be reimbursed by the regulator 2 years later. This time lag generally has a negative effect.
As you can imagine, in addition to movements in the regulatory accounts will have a significant negative impact on earnings of EUR 76 million. The planned amount of the regulatory account at the end of '25 will be approximately EUR 480 million. I would also like to give you an update on the WACC development. APG received the WACC of 4.2% for old assets with a commissioning date up to '22 and the WACC of 6.3% for new assets with the commissioning date in '24 and our most relevant WACC of 6.24% for new assets with the commissioning date in '25. So when you take it together, the total WACC for '25 is approximately 4.8%.
As you might know, there will be a yearly update of the WACC for new assets for each tariff-setting process until the end of the regulatory period, which is in 2028. Now with regard to the result contribution of Gas Connect Austria, we report an EBITDA of approximately EUR 86 million for '24, the strong decrease compared to the very high results in '23 is mainly due to the elimination of the so-called commodity tariff and lower auction revenues in the gas network. The EBITDA guidance for '25 is much lower. It's approximately EUR 30 million under IFRS.
What's the explanation? Well, it's the cessation of Russian natural gas transport through the Ukraine. As a consequence, we have a shortfall of approximately EUR 40 million, which will directly reduce the '25 results. But as we are in a new regulatory system, will be compensated with T+2 starting from '27.
I will now hand over to Andreas Wollein, who is going to take us through the next few pages. Please, Andreas.
Yes. Thank you, Peter. So let me continue with the all other segments. So generation from thermal power plants was up by 622 gigawatt hours. We had lower revenues. The reason were mainly due to lower average prices achieved, which could not be offset by the higher production volumes.
In addition, negative effects from the valuation of future energy deliveries were the main reasons for the decline in EBITDA. The contribution from flexibility products also decreased by around EUR 15 million. The contribution from KELAG, the provincial utility of Carinthia increased from EUR 78 million to about EUR 100 million. This year-on-year increase in earnings is mainly due to the improved hydro availability, the higher trading result and the efficient use and optimization of storage capacities.
Now let me come on Page 10 to the nonrecurring effect. We recognized impairments in 2024 amounting to minus EUR 291 million and we had a reversal of impairments of positive EUR 114.3 million. The main reasons for the impairment losses concerning Mellach are lower clean spark spreads achievable in the medium term. The reason for impairment losses concerning Gas Connect Austria are adjustments of the long-term business plan with respect to the new cost notice for the upcoming transmission regulatory period from 2025 onwards.
The main reasons for impairment losses concerning the Spanish renewable assets are lower electricity prices for non-tariff projects and updated operating expenditures. The reversal of impairment losses are, among others, due to lower capital costs.
The total effect of impairments in the EBIT line is minus EUR 177 million. The nonrecurring FX in the financial side amounted to minus EUR 26 million in total and are mainly related to reversal of impairments related to TAG, the measurement of an obligation to return on interest in Donaukraftwerk Jochenstein and the PPR in TAG. The effect on taxes amounted to EUR 47 million. The effect on minorities EUR 55 million. The overall impact of the nonrecurring effects on the group side level amounted to approximately EUR 100 million.
Now moving on to Page 11 which show the development of the most important key figures of the VERBUND. So first, I think we mentioned that because of the aforementioned developments, EBITDA decreased by 22.5% to EUR 3.48 billion. Depreciation increased by about 8% to EUR 578 million due to the increased investment volume, especially in Austrian power grid and the depreciation of the plants acquired in Spain in previous years.
The financial results slightly deteriorated from EUR 55 million to EUR 52 million, on the one hand, an increased from KELAG, but also an increase in interest income from money market transaction. In addition, interest expenses declined. This decline resulted in particular from the repayment of EUR 500 million schuldscheindarlehen in November 2023 and from lower interest expenses from money market transactions.
On the other hand, the issuance of a green bond in May 2024 had an offsetting effect. The other financial result also had a negative effect. This resulted mainly from the measurement of an obligation to return an interest in Donaukraftwerk Jochenstein power plant.
Taxes on income amounted to EUR 639 million; the group result, therefore, decreased by 17% to EUR 1.87 billion. The group result after adjustment for nonrecurring FX was down by 24.5% and amounted to 1.96 billion.
Finally, I would like to mention the decrease in additions to tangible assets in total from EUR 1.45 billion to EUR 1.106 billion. Major investments mainly related to the hydropower plants Limberg III, various electricity grid investments as well as the investments into new renewables in Spain, Austria, Germany and Italy.
On Page 12, you see a further development of key figures. First of all, the operating cash flow decreased in line with the decrease in EBITDA to EUR 3.25 billion. The change was mainly due to the significantly lower prices for electricity, lower inflows from margining payments for hedging transactions and higher income tax payments.
The free cash flow after dividends showed a negative development from EUR 2.1 billion in 2023 to a level of EUR 145 million in 2024. The lower operating cash flow as well as higher dividend payments were the most important influencing factors. Net debt/EBITDA, an important key figure was at 0.6 as of December 31. The slight increase is primarily due to the lower EBITDA.
Based on the results presented, we will propose an ordinary dividend of EUR 2.8 per share for 2024 at the Annual General Meeting on April 29, 2025. The payout ratio in relation to reported group result is 51.9% and 49.2% in relation to the group, which are adjusted for nonrecurring effects.
So let me hand on -- pass on to Peter again for elaborating on the CapEx plan and the outlook.
Thank you, Andreas. Yes. Very important, our CapEx plan for the next 3 years. You can see that we have increased our previous 3-year plan, which has been EUR 5.5 billion to EUR 5.9 billion. Let me go into a little bit more detail here. We are going to invest around EUR 4 billion into growth investments and around EUR 1.9 billion for maintenance investments. The majority of our investments will go into the expansion and maintenance of the regulated Austrian electricity grid that is around EUR 2 billion.
Furthermore, we will invest in renewable generation projects, primarily in Spain, around EUR 1.7 billion and in hydropower plant project in Austria around EUR 1.25 billion. The investments overall related to VERBUND's home markets, primarily to VERBUND's home markets of Austria and Germany, around EUR 4.5 billion and the Spanish market with around EUR 900 million.
VERBUND plans to invest a total of around 1.9% in the financial year '25 of which around EUR 1.34 billion will be invested in growth and around EUR 600 million in maintenance. Now on the last page of our results presentation. As always, our outlook. Before I go into our guidance, I would like to highlight our sensitivities, which we have in our generation, a deviation of plus/minus 1% in the generation from our hydro power plants has an impact of plus/minus EUR 16 million in the group results for '25, a deviation of plus/minus 1% in the generation of wind and PV, has an impact of EUR 2 million and a deviation of plus/minus EUR 1 in the wholesale price, has an impact of approximately EUR 6 million in the group results for '25.
Our guidance for '25 is as follows: we expect the reported and adjusted EBITDA of approximately between EUR 2.7 billion and EUR 3.3 billion and a group result of between EUR 1.35 billion and EUR 1.75 billion as always under the assumption of average hydro, average wind and average PV generation as well as the actual chances and risk situation of the group. The earnings forecast is contingent on the group not being impacted by any further legal or regulatory changes for the financial year. We plan to pay out between 45% and 55% of the group results after the adjustment for nonrecurring effects.
With that, we have come to the end of our presentation, and we open for Q&A.
[Operator Instructions] The first question is from Wanda Serwinowska with UBS.
Two and a half questions from me. The first question is on the new tax in Austria. Your guidance is anything between EUR 50 million to EUR 100 million in this fiscal year. But should we assume anything in Q1 next year? Or do you expect anything beyond December 2025? Because if I look at your achieved power price on the mark-to-market, you will be below the threshold. So do you see a further reason that the government may come and basically lower the threshold from EUR 90 to EUR 70 because it doesn't seem it is very likely that you will pay anything next year?
The second question is on your guidance. If you could help us to bridge your 2025 guidance because if I just look on the '24 versus '25, hydro has been weak. So maybe you're losing a bit of maybe half of terawatt hour. Power price is down by EUR 9 per megawatt hour. So only in this is like EUR 550 million, maybe a headwind at the EBITDA level. Networks are going down by EUR 130 million. There's a tax, let's say, EUR 75 million.
So if I sum it up, I'm ending at EUR 2.7 billion of EBITDA and your guidance is EUR 2.7 billion to EUR 3.3 billion. So what I'm missing? Are there any other moving parts where basically that I'm missing? And the usual -- Peter, if you could disclose the latest hydro and the hedging price, not mark-to-market, but the volumes and the achieved power price so far. That will be appreciated.
Sure, Wanda. Thank you. I will start with the third one, and it also explains part of your question on the guidance. We have hedged for '25 around per today, around 74% at a price of EUR 117 million. The remainder, which is not hedged, we currently mark-to-market it at EUR 109 million. So the unhedged prices, which we're currently using is EUR 90 million. So obviously, that could go up. It could go down. So there is some uncertainty here on the unhedged level for '25. For '26, we have hedged, per today, 42%, there the mark-to-market is EUR 82 million. And when you compare what we have already hedged, it is around EUR 80 million and the unhedged level is also slightly above EUR 80 million. So the mark-to-market is EUR 82 million.
And for '27, we have literally just started with the hedging. So there, we see a '27 forward price of around EUR 76 million. That already leads me into your important question on the tax and on the price cap, and you have rightly said that when you look at the '26 levels, where currently, as I've just said, we are around EUR 82 million. We are below the threshold. You're right. As a result of that, as we have a program until 2030, there is the possibility that next year, the cap will be changed. Why? The government has said that until 2030, they would like to get payments of around EUR 200 million per today that can change as well from the energy sector, from the Austrian energy sector as we are by far the largest player in the Austrian energy sector, obviously, we make a high contribution to that level and when as a result of lower power prices that EUR 200 million or whatever the number is going to be next year is not met, then of course, the cap could be reduced.
Those are all things we don't know. But that is something when you look at the law, there is currently a lot of leeway and a lot of flexibility for the government to be very flexible in terms of how they are going to design the tax within the next few years.
And in terms of the guidance, the guidance at the beginning of the year, Wanda, is not a perfect signs. We have a lot of uncertainty. We have uncertainty in terms of what kind of hydro coefficient, which we're going to have and I am going to answer on the hydro coefficient in a second. We have uncertainty on the power prices. As always, with the IFRS results, we have uncertainty on the Austrian power grid, Gas Connect Austria, we're pretty sure that we're going to come up with around to EUR 40 million.
And as you remember from the last few years, it is very difficult to predict the flexibility products. Sometimes we are surprised how much concession management is required by the market because of volatility also cross order. And sometimes those numbers are much lower than we predicted. That is very much an external factor where we do our best to give a guidance, but it's very hard to really predict.
Now coming to the last point, the hydro coefficient. We had a very dry beginning to the year. We have year-to-date 0.86, which is 14% below the long-term average. That means that we really have to look at and I know that would have been one of the next question. So I'm anticipating it, the snow caps in the mountains. And at this point in time, we don't have a lot of snow. Weather is unpredictable, and we could still have snowfall in the next few weeks, we've seen it before. But as it stands today, there is not a lot of snow in the mountains, and as a result of that, the usual effect which we get from the melting of snow, which is obviously when you look at the topology of Austria is very significant is not huge at the moment.
The hydro coefficient currently, I mean, when you just look at yesterday is 0.6%. So at this point in time, the dryness continues. I always have to say at this point that very often, we have been surprised. So we had a very dry beginning of the year and then come summer and come fall, we see a lot of rainfall and the numbers can even change dramatically even sort of like 12 weeks before year-end as we have seen 2 years ago. So that would be the summary of my responses to your 3 questions, Wanda.
Can I just -- 2 clarifications. One is on the guidance. What are your assumptions on the sales? Because on hydro, on power grid we can work it out, but on sales, do you assume any reversal or something? Or is there anything unusual that is baked into the guidance? And then on the tax, because it's a 12-month period, right, for the windfall profit target. But you include EUR 50 million to 100 million for 9 months effectively. So there will be something in Q1 next year.
Yes. Well, the -- it doesn't run in a calendar year. It basically runs until the end of March of '26, so that would be the impact of the EUR 50 million to EUR 100 million, and I have to make a comment on that in a second. It is the impact for '25. And now I have to give a big caveat on that number. We have been discussing internally if we should give a number or not give a number, as you can imagine. We have decided that we are going to give you the best estimate which we currently have. And this is a number, a range where we see the highest probability of the impact on our '25 results. And that is something that is included in our guidance. That number means that we did not have to change our guidance. It can be absorbed.
However, we don't exactly know what the Ministry of Finance is going to decide vis-a-vis the possibility of using investments, Austrian investments against this windfall tax. Can we use more than we expect? Is it going to be less? And that makes a huge difference, as you can imagine. We think that we can use offsetting investments, and this is how we come up with the number. But could it be higher? Yes, it could be higher. If the offsetting mechanism of investments is worse than we are currently predicting, and it is a wide range because there are many ways to design those investment offsets, it remains to be seen.
However, as soon as we have more clarity, how the legislation is going to be implemented and the implementation is the key. The specific design is the key. As soon as we have it, we'll let you know.
And the sales, EBITDA guidance, sorry, for the...
Yes, on the sales, we are predicting that we are going to end up when you look at the entire sales segment with the number that is significantly higher than what we had in '24 as a result of a complete change in procurement. So it's mainly the retail business, which is doing much better.
The next question is from Harrison Williams with Morgan Stanley.
A couple from me. Firstly, appreciate the color you've managed to provide on the windfall tax. Can I just ask when would you expect to get full clarity on CapEx offsets? And then maybe an extension of that question, taking a wider view of the government in Austria. Do you see any other changes that have implications for your business? I mean we've seen the more pragmatism being adopted, already talked about in other countries in Europe without addressing the energy transition. So I would bee keen to get your view on that.
And then the second question was on your renewable investments. I noticed in your slides versus Q3, you have kind of a 25% increase in solar capacity targets in Spain by 2030, That still seems somewhat of a challenging market given the cannibalization risk. So just hoping to get an updated view on what your return expectations are here, and you previously talked about pairing that with pumped storage. Is that still an ambition? Further color would again be appreciated.
Yes, sure. I'm going to start with the discussion around the tax, the windfall tax and Andreas will take up your renewal question. I would like to take a step back because I think more of an explanation is required in terms of where Austria is coming from, where the Austrian government is coming from. The key issue here in Austria is the very large deficit. And as a result of that, because we had 2 years of negative growth. And we will probably, in Austria go into yet another year of negative growth that is a first -- that is something we haven't seen for a 100-year plus and therefore, it is of great concern in terms of the industrialization in terms of the weakness of the industry and industrial production overall.
That has been the catalyst for the government to look at a number of measures to repair the deficit situation. The EU has also started very detailed discussions with Austria, what Austria is going to do about the deficit situation. As a result of that, they have basically come up with the plan that the energy sector needs to make a contribution as well. So that is the background.
That will not go away because the government has been pretty transparent and basically saying this is something. This is a plan for the next 5 years. because we're not going to repair the budget deficit in 1 year, it is a medium-term project to basically do it at the same time, more money as in Germany needs to go into infrastructure.
So there is on the one hand money is required. On the other hand, there is not enough. The reason why I'm saying that is you asked, could be other measures? And at this point in time, I cannot exclude other measures. Personally, I -- at this point in time, I don't think there will be other measures, but I cannot exclude it.
Two, I think that as I mentioned to Wanda before, do I think that there will be an adjustment in '26? Yes, I think there will be an adjustment because when the finance minister goes through his calculations and realizes that he will not get anything, he will probably make an adjustment. So that's where we stand.
You asked me when do we expect any news, I would say, within the next 4 to 6 weeks. However, the government is still in the formation process. The government has only just decided on the new coalition. It has taken a very long time after the elections. Various coalition structures were discussed. We now ended up with a tri-party government consisting of the conservative party, the socialist party and the party called the NEOS, you could call them a Liberal party. And they have negotiated. They all come from different perspectives. They have different priorities. So they all have to compromise on something. And as a result of that, it might take a few weeks before we have more clarity on the design of the energy tax, particularly the offsetting mechanism for investments, which are very relevant to us. Andreas, could you give us some comments on the renewable question?
Harrison, to start the answer a little bit more general. I mean you know we have a pretty balanced CapEx program going forward. We're around 1/3 of the -- of our capital expenditures will be allocated to the regulated grid business about 30% building to hydro, about 25% into new renewables and the rest goes into batteries. With regard to -- so it's what I want to say first is we have a very balanced CapEx program. With regard to new renewables, you know we have a target to reach about 25% of our total generation new renewables for 2030. It's correspondence, it corresponds with capacity of around 5.5 giga.
We have currently about 1.2, 1.3 gigawatts in operation, more than half of that in Spain, more let's say, what we currently have in operation in Spain is materially wind and to a lower extent, PV. And most of the production is secured through a PPA, but on a tariff, I think we only have a 15% or so merchant exposure. We have acquired a portfolio -- a project portfolio, say, 2 years ago from Q Energy, the Labrador portfolio. It consists of around -- currently about 1.6, 1.7 gigawatts of renewable capacity, majority is -- of the project is PV, to some extent, wind.
And we are now coming into, let's say, the time period where we do the FIDs. So we recently have given FID for -- to start construction of the first 3 portfolios in Spain, which is about a little bit more than 600 megawatts. And I think the plan is to do some additional FIDs in Q2, Q3 this year in order to step-by-step realize within the next 2, 3 years, this 1.7 gigawatt of projects.
I think you know the current situation in Spain. I mean, I think everybody is trying to optimize profitability of the projects through different measures, so do we. So we also have now, let's say, done the approval for -- given the approval to do co-location or hybridization for existing assets.
So in order to increase the profitability, we combined PV with batteries. And we also, let's say, tried to do some co-location in order to increase the efficiency of the grid access. So these are the main targets. I mean, currently, I think when we talked about returns, I think we can achieve WACC plus something. It's maybe currently not the hurdle rate, which we targeted.
But things are also moving and developing in Spain and let's say, we -- on a medium-term basis, we would expect prices in Spain to go up. So -- yes, so this is the current situation for Spain. Does that answer your question?
Yes, that's very useful color.
The next question is from Olly Jeffery with Deutsche Bank.
Coming back to the windfall tax, a couple of questions on that. First, the EUR 50 million low end and the EUR 100 million low end, what was the assumption you've made on the CapEx offset that you'd be allowed? And then also maybe just taking a step back, if EUR 200 million is being targeted from industry overall, what do you think is a reasonable amount to be assumed given the burn size is contributed by VERBUND? And then lastly, could you please say what the guide is for the new renewables division in '25?
Yes, sure. I can't really give you the exact assumptions because we have looked at 5 different scenarios. And we have given probabilities to those 5 different scenarios. We have not run a Monte Carlo simulation, but we could have done. But we have tried to make a sound judgment on everything we know so far, and this is why we have come up with that range.
We could have said EUR 50 million to EUR 120 million would have been just as correct because we don't know at this point in time. But at the same time, we think it would not have been fair towards you if we had basically not said anything in terms of what our estimate is. The -- in terms of -- could you help me with your second question? What did you say again?
Well, the other question was that if you look at the windfall tax in another way, the Austrian authorities are looking to generate EUR 200 million a year, given the size of the VERBUND, given the size of its hydro business overall in the context of Austria. Is something around EUR 100 million probably kind of the ongoing basis type of figure you think they might be looking to target from VERBUND given its size relative to others? Is that reasonable?
Yes, that's -- it's an important question. It's extremely difficult to answer. It seems to us to be a movable feast. There are so many factors that go into it. There is the remainder of the energy sector, I mean, it's not just VERBUND, thank God. There are many other companies as well. There are renewable players that have a tariff. So I think that the finance minister will probably look at sort of like an estimate of the contribution from the entire sector, then he's going to look into where is it coming from? And why is it changing? And then, of course, he will make adjustments. But how he's going to make those adjustments, I don't know.
The only very clear statement which we have received from the government, which is public, has been this is a long-term project -- well, maybe not long term. This is a medium-term project, which the government has, and it is EUR 200 million per annum. So we are also in a position of uncertainty. Uncertainty short term because we don't know what exactly it's going to be for '25 with the explanation on the offset I have given before.
And of course, we have some uncertainty for the years '26 onwards because we don't know if the price cap, which is currently at 90% is going to be obviously, to a lower figure. And the EBITDA contribution, which we expect for '25 would be between EUR 120 million and EUR 140 million EBITDA.
If I may ask one follow-up. If you allow to use the CapEx offset for hydro from 2025 alone, what order of magnitude would that offset be just 1 year?
I know what you're getting at. You're trying to get to our assumptions through the back door. That is totally fair. I would do the same. However, I can't really give it to you. I think we've gone out of our way to really to give you our best judgment.
The next question is from Piotr Dzieciolowski with Citi.
So I have 2 remaining questions really. So first one, I wanted to ask about your Limberg plant that you will have a COD in '25. What is the annual contribution? I mean can you a little bit say how much the plant will kind of load power and offload the power? So any operational metrics if you can on the -- than can provide? And then second question on the GCA APG in your guidance for '25. You provided the new numbers today. How much of negative one-offs you included in them in terms of this reimbursement of old payment from the past years, just to get a feel for the sustainable run rate of these businesses at current level?
Okay. Now the Limberg III question, which you asked, from -- both from a technical point of view, but also from an economic point of view is an interesting one. However, extremely hard to predict. And I'm going to explain why it's hard to predict. The pumping is obviously done when power prices are cheap. And the turbining is done when power prices is high. As we have been doing this for decades, we're pretty good in making estimates sort of like what hours should we be pumping and when should we be turbining.
But it is not just a question of the spread, and that spread is dependent on the overall pricing levels. So the pumping spread obviously has been extremely high in '23 when power prices were very high because the entire base went up. And as a result of that, the difference between the low price and the high price increased as well. The pumping spread increased. And now with lower power prices or the normalization of the power prices, the pumping spread goes down as well. But that is only part of it.
The second part is the volume and the volume basically depends on when is the spread high enough to justify the pumping and the turbining, and that is an estimate as well. So as a result of that, it is very, very difficult to give you an exact estimate on sort of like the revenues, which we produce on pumping and turbining. That is almost impossible because it depends on too many variables, too many external wearables.
It's not as straightforward as the run-of-river power plants because with the run-of-river power plants, it's baseload. The hydro coefficient obviously changes. That is something we report to you on a regular basis. And then, of course, it is the power price, which we achieve. The pumping, turbining, the pump spreads, the volume of the pump spreads is much more complex. So that is an explanation on Limberg. And what was the second one again?
On rates for GCA results and APG.
Yes. Do you want to do that, Andreas?
Yes. Piotr, with regard to Gas Connect Austria, you know that this year, we have a little special situation because the Russia ship, I think, ended the gas deliveries at the -- from the beginning of the year. So we have here a temporary negative effect on GCA results. That's why we guided about EUR 30 million. The negative effect is about -- net effect is about EUR 40 million.
So based on that, I will say the normalized EBITDA in Gas Connect Austria business would have been around between EUR 70 million and EUR 80 million for this year. As I said, it's a temporary effect because that's starting from the beginning of the year, we have negotiated with the regulator to move into a risk-free system. Risk-free system means that we get compensated for the volume risk, which is here the case.
And this compensation will happen or will take place with T+2, so starting in -- from 2027. In '26, we are not going to have this effect, this negative effect because the regulator according to the tariff system has to amend the volumes, transport volumes and as a consequence, the tariffs we increase for '26. And so as a consequence, we are not going to have a negative effect in '26.
So on a normalized basis, in this regulatory period in GCA, we see between EUR 70 million and EUR 80 million of EBITDA contribution.
In APG, it's a little bit different in Austrian Power Grid. We have -- for this year, we will see a normalized EBITDA of around -- I think a good indicator is always the local GAAP EBITDA, which is around EUR 280 million.
There are some amendments, I would say, around EUR 300 million, eliminating all the, let's say, the various effects on the regulatory account coming from balancing energy and from congestion management services and from the auctions. So for this year, we predicted a little bit lower result. The reason in AP chip. The reason -- in APG, the reason for that is because we assume a reduction of the regulatory account of around EUR 75 million, I think, which makes sense that the regulatory account currently stands at a level of around EUR 500 million. So -- but on a normalized basis, for this year, I would say, something around EUR 300 million EBITDA for APG would be a good assumption.
Okay. Can I please follow-up on this Limberg because you explained the logic behind the asset, but you haven't provided any figures? So can you say based on the -- I understand these are all estimates and can vary, but can you roughly say based on the previous year, let's not take the energy crisis, but when you were building the plant, your assumption was, I don't know, 3 hours of daily pumping and offloading and then on the spread of EUR 50, EUR 60 a day on every single hour or like -- just a large bracket would be enough anyway and [indiscernible] some contribution, for example, for '25 is the commission date this year?
Okay. I'll give you a little bit more detail. But -- when we go through our investment decisions, despite the fact that Limberg III is a project right up our alley. This is something we do best. This is something where we have world-class expertise. This is something we do in combination with where we already have assets in the Austrian Alps. So we can combine it with our other assets. So this is something where a third party would say, well, that's a must do for somebody like VERBUND. But we still go through very detailed calculations. So we look at the IRR of the project, and I can tell you that on this project, Limberg III, we have an IRR that is more than 200 basis points above our WACC. So this is on the project-specific profitability.
And that gives you even more of a feeling. Our -- you know that our flexibility products which consists of control energy, congestion management, pumping and turbining and intraday in '24 were EUR 275 million. And we have never really given the detail in terms of how much is coming from control energy and how much from congestion management because it always changes, and we don't want to give you the false feeling of stability in a business that is very much dependent on external factors.
But overall, we had EUR 275 million. The year before, we had EUR 350 million coming from flexibility products in '23. For '25, following the logic, which I explained before, that the pump spreads basically go down with the overall level of power prices, we think that what we are going to make from pumping and turbining is to lower the level of '24.
And as a result of that, we think that in '25 what we are going to get from flexibility products is somewhere between EUR 190 million and EUR 210 million. Per today, you might remember, over the last 3 years, things change because they are, as I said before, a lot of variables. But this is with everything -- we know today, this is our estimate for '25 between EUR 190 million and EUR 210 million.
When we look into sort of like our medium-term planning, we think that flexibility products over the next 3 years will provide us with a level of around, yes, I would say, between EUR 190 million and EUR 240 million, somewhere within that range. That is about as much information I can give you, and that is actually more than I wanted to give.
The next question is from Thibault Dujardin with Bernstein, Societe Generale.
My first question is regarding the development in Spain. Do you -- when you develop the new projects, do you already have PPAs? What are your assumptions in terms of prices? Or do you go merchant? My second point is regarding the load factor of hydro. Do you see any risk of having to buy back power this year due to the lower levels?
Yes. On the -- sort of like the buyback, that is something we have experienced before. And at the time on the conference call, we had an interesting discussion around that. Again, when you have a very dry year, it can happen that you have to buy back. But we are -- now purely mathematically, we are in a good place. Why? Because we basically say that we only hedge 80% of the production. So it really has to go below 80%. The probability of a dry year below 80% is not very high. It can happen, and it has happened before within the last 100 years, but it is a low probability event. So we are relatively safe on that one.
On the -- yes, on the renewables. Yes, in Spain, obviously, we try to do PPAs. The PPA level has come down. At the moment, there is discussion around nuclear energy going out in Spain. Some people argue that could be a boost for energy prices in Spain. I'm not sure. I don't know. This is difficult to say. We also see that there is a move from [ base ] produced to baseload PPAs. There is demand from data centers, of course, but data centers are looking for baseload as well. That's what they need. They need a very stable energy flows. As a result of that, yes, whenever we do a project, we try to do PPAs. But we -- like the rest of the market, we also go merchant.
For the projects we have currently, let's say, under development or where we have given the FID. We don't have PPAs yet. We have started discussions and negotiations with various counterparts in Spain. Basically, you have 3 different types of off-takers of PPA offtakers. First one is the classic utilities and traders. Second is the industry. And third, you have now this big demand from data centers. So this is, let's say, a reasonable cluster where PPAs are already contracted.
So the market is there. As Peter said, I think we are targeting to -- our target is to enter into longer-term PPAs. Currently, I think, 5 to 7 years are doable in Spain. It's always, of course, a benchmark. It's always comparison with our internal price curves and forecasts, but our target is to enter into longer-term PPAs in order to mitigate risk. So if it's doable, we will do that. But there will always be a certain amount of merchant exposure for us as well in order to optimize our own generation, let's say, in the markets.
If I may ask you a follow-up question. Considering that you also have thermal assets in Austria, do you believe that a lower load factor of hydro could -- well, you could compensate with higher load factor of gas plants?
Sorry, acoustically, I couldn't hear the last sentence.
Could the low load factor of hydro be compensated by higher load factor of gas plants?
Okay. Yes. That's an important question. I'm not sure for Austria, but for Germany as well and for some other markets. The entire discussion around the energy transformation is much delayed in my view, focusing on baseload. And last year -- and it shouldn't have come as a surprise that could have been planned already 10 years ago. The more renewables you have and the more baseload you take out of the market in Germany, for example, nuclear and coal, the more demand you have for predictable energy.
And the only predictable energy, of course, is -- or [ plannable ] energy is fossil fuels. Gas is the fossil fuel of choice. And as a result of that, Germany has already decided last year in order to stabilize the system and not be totally dependent on nuclear energy from France, they need to build gas-fired power plants.
In Austria, we also have a discussion. We have a grid reserve, but the grid reserve, which basically consists of gas-fired power plants serves mainly to stabilize the system. It is not necessarily a capacity market when you don't produce enough energy through your existing generation. And we had a situation in January where we -- because it was very dry, and there wasn't a lot of wind, obviously, not a lot of sun.
And we talked about the dryness of the beginning of the year, not a lot of hydro production. So the gas-fired power plants had to run at full capacity, but we had to import as well, which basically shows that the entire discussion about the energy transformation. And this is also important for all of you, the baseload gap, as I like to call it, [Technical Difficulty] because the stability of the energy system is an absolute prerequisite.
And a result of that, in terms of the energy design, one needs to think very carefully what the backup system will be, how potential capacity markets will be designed and at what price the capacity markets will enter the merit order, and will basically have an impact on power price and will have an impact on the effectiveness but also the efficiency of the energy transformation. I hope that wasn't too...
And could you invest in new gas plant in this environment?
We have our CCGT in Mellach, which is very efficient, which is a modern CCGT, but we will not make any further investments into gas as we see ourselves as a renewable generator.
The next question is from Alberto De Antonio with Exane Paribas.
The first one will be related to gas networks. The new regulation is hedged from the risk of volumes. But I will be interested to know if there is any potential upside if we see new flows coming from Russia? And also regarding your guidance on the normalized level of EBITDA contribution that you mentioned, it was around EUR 70 million to EUR 80 million. And given that in this year, we -- there is a negative effect in those EUR 40. Can we assume that this is going to be reverted in 2027 and therefore, the consumption should be in the region of EUR 110 million or EUR 120 million? This will be my question.
The second one will be regarding the guidance of other sectors and KELAG, if you can give us what is your expectations for 2025? And finally, if you could repeat the hedging price without the mark-to-market you have answered to one end of the first question, I would really appreciate it.
Yes. Sure, Alberto. I will start with the -- with Gas Connect Austria. We anticipated that we could see geopolitical issues and problems, which would have a direct impact on our regulated business Gas Connect Austria. So in the previous regulation, we had a volume risk, but that volume risk, obviously never ever could have foreseen the kind of volume changes as a result of a war.
Therefore, we entered negotiations with the Austrian Control Authority, Energy Control of Austria, and we basically talked about a new regulatory system, which is similar to Austrian Power Grid is a cost-plus system. And a result of that, the -- if Russia came back and if Russia -- let's just assume there is a peace agreement, which is something that is being discussed every day today.
So if there is a peace agreement and there will be flows coming through the Brotherhood pipeline, which is a very large pipeline going into Austria, that would not change anything because our system, our regulatory system is basically agnostic towards the volumes coming through the pipes. It is a cost-plus system. And the -- and when Andreas talked about sort of like anomalous level, which is an estimate, we don't exactly know what the normalized level is going to be, but that's an estimate sort of like the EUR 40 million, which we're making less now in T+2 being compensated is already part of the EUR 70 million to EUR 80 million normalized levels.
So that would not necessarily come on top of the EUR 80 million, which we mentioned. But that is something that remains to be seen as we are also in negotiations with the regulator on a number of other things. In terms of the hedging, I can give you the numbers again. So you were asking for the numbers, which we have already hedged and not the mark-to-market, if I understood you correctly, Alberto, right?
Both of them. So the numbers that you have hedged and the price...
Okay. Okay. Good. So for '25, we have hedged approximately 74% at EUR 117 . The unhedged level, we currently -- and that changes almost like every day, but we currently see at EUR 90. So the mark-to-market of '25 would be EUR 109. For '26, we have hedged 42% at around EUR 80. The unhedged levels, we see around EUR 83. So the mark-to-market would be EUR 82. And for '27, we haven't really hedged anything. I mean, a very, very small amount, but they are just taking into consideration the forward prices.
We see them at around EUR 76. So that would be on the hedging. And Andreas, do you have the guidance for -- you said the hour?
Yes, the other sector and KELAG, what's the expectation contributions in order to have more or less like the full bridge on the guidance you have provided?
Andreas is going to look it up, and we take another question in the meantime.
Okay. Maybe if I ask this another one, and apologies for monopolizing the conversation. But coming back to the question regarding the PPAs and the discussions with the offtakers, what will be the level, especially in the Spanish market that I guess is going to be the most relevant for you going into the future at which you will kind of feel comfortable of seeing PPAs and the duration of them?
Yes. I mean, obviously, the more constructive the PPA market, the better. It's always a bit of a negotiation, right? It depends on what offtakers are willing to pay and how long. We -- like all the other producers of energy, we would like to see PPAs for as long as possible if the prices make sense. I know that's not the answer you want to hear, you would like to get a more specific level, but that's impossible because PPA prices change a lot. And there, we can only talk about trends. And the trend currently is towards shorter PPAs. Whenever somebody wants to enter shorter agreements, the catalyst for that is usually because people expect that they might pay less if and when they enter a PPA 2 years down the road.
So that is why they're tending to get shorter. I think for Spain, for the energy market in Spain, it's also important not to completely rely on the PPAs. Mr. [ Draghi ], again, sort of like I think it was yesterday or before yesterday made a comment on the energy transformation and competitiveness and the need for Europe to be more competitive on the -- in terms of energy prices, he suggested CFDs.
The CFDs by definition would be longer term. They are sort of like -- it's around 20 years. And the CFDs would be given out in auctions. And in those auctions, the most competitive generators are obviously winning. Or if the auctions provide a high volume, then, of course, it would be the average price. And as a result of that, for everybody in the renewable market, not only in Spain, but in other markets as well, the challenge is to be -- to have LCOEs that are as competitive as possible.
And Andreas is going to give you the...
The contribution from KELAG this year is expected to be at around EUR 60 million. And I think all others for this year is expected to be at about EUR 10 million plus.
We have a follow-up question from Olly Jeffery with Deutsche Bank.
Just on the regulatory account. I'm just trying to get a sense for the guide for the grids for '25, how conservative they are. So on the regulatory account, has that been approved from the regulator? Is it your working assumption that it will be? And the other follow-up question I have was just on where you see the current level of snowfall in the Alps versus what that would typically be for this time of year, are you able to say how much lower volume relative to the [ P50 ] you'd expect that to generate in your hydro assets? Or is that not possible?
Okay. I will start with the regulatory account. I go back to '23 because I remember that we had this discussion on the regulatory account and sort of like when we discussed the '23 numbers. At that time, the regulatory account was EUR 500 million. Already in '23, we talked to the regulator because we wanted to decrease the regulatory accounts step by step. The regulator did not agree. I don't know why, but it didn't not agree.
So actually, in '24, the regulatory account went up to EUR 550 million. And now we will be able to decrease it by around EUR 70 million to what we think would be EUR 480 million in '25. And then in '26, hopefully, we can take sort of like we can step it down, again, hopefully, in a regular way and not too jumpy.
In terms of the snowfall, that is close to impossible. What I can tell you is that in comparison to previous years, we had less snowfall in the Alps, and the weather was warmer. As a result of that, you didn't have the classic formation of bound snow up in the mountains, and that snow cap is usually a good source for springtime hydro through the little rivers in the Alps going into the larger rivers and finally going into the Danube and increasing the hydro coefficient.
However, I need to be careful here because that is only looking at one side of the picture. It could well be that what we would usually see as snow melting and therefore, hydro flowing from the mountains into the rivers, we could see a more normal rainfall, yes. And if we see normal rainfall, that could compensate for the melting of the snow. So predictions are very difficult, but that is certainly something we are going to observe over the next few months and something we are going to discuss in our next conference call in 3 months.
And to confirm, the regulator did agree to the EUR 70 million decrease in '25 and what you hope in '26 for the APG, is that right? Or is that still to be determined?
It has agreed to the trend and has agreed on the specific number for '25, has not yet agreed on the '26 number.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Kollmann for any closing remarks.
Yes. As always, at this point, I would like to thank you for your participation and for your many questions, which shows your interest. And I look forward to hearing or seeing you again on our next conference call, possibly in the meantime at the various conferences and roadshows. I wish you a wonderful day, and thanks again. Bye-bye.
Ladies and gentlemen, the conference is now over. Thank you for your participation. You may now disconnect your lines. Goodbye.
