Elia Group SA/NV (ELI) Earnings Call Transcript & Summary

[Presentation] Welcome back. For those who are just joining us, we are about to start the first part of today's event, an overview of Elia Group's growth strategy presented by Chris Peeters and Stefan Kapferer. Welcome to you both. What can our guests expect in the next few hours?

Well, first of all, our guests have seen over the last years that Elia Group has fully transformed into a European company with a lot of organic growth. We have a strong track record in growing organically by supporting the energy transition. What we will see today that this is not over. We still have many years of organic growth to go. But not only that, we will also start to focus on offshore growth outside of our regulated areas.

Stefan, in Germany, you had already the Bankers Day, but this is new. It's a group concept today.

Yes. Of course, our German colleagues are very familiar with the Bankers Day we do regularly in Germany. But today, the focus is on the group level and the opportunities of Elia Group in a common European single energy market. And to be honest, Marleen, I joined Elia Group 1.5 years ago. And daily, I'm impressed by all the changes in the energy sector by the vibrant situation we have in the energy sector. And a lot of opportunities to touch on.

Okay. Opportunities, that is what this event is about. Chris, the first question for you. Let's come back on the video that we just saw. To remain relevant, Elia Group has to speed up its activities. Why is this acceleration so critical for society?

Well, as we see, we need to accelerate because the climate change is happening as we speak. And so if we want to get our society carbon neutral by 2050, there is no time to lose because this is a very complex transition. It not only needs infrastructure that we have to build, but it also needs that we are changing the way, how we look at mobility, changing the way how we look at heating, but also reviewing completely how certain industrial processes and value chains are composed. This is not only a big challenge, it's also an opportunity because it creates new compositions on those value chains. It gives us a focus to opportunities in terms of innovation. And on top of that, it will create more services to customers.

Okay. Before we continue, let's have a look at some figures to fully understand how big the societal challenges are that we are facing. Last week, an agreement on the European Climate Law was reached. The deal makes the goal of Europe becoming the first climate-neutral continent by 2050, binding for all member states. And on the way to 2050, Europe has to cut its CO2 emissions by 55% by 2030 compared to its 1990. Also by 2030, 65% of the Union's total electricity production needs to come from renewable sources. The figure is 39% today. And in its offshore strategy, the European Commission has outlined its goal of increasing Europe's offshore wind capacity from 15 gigawatt to at least 60 gigawatt by 2030. Stefan, impressive figures. What impact do they have on the activities of Elia Group?

Yes. First of all, it is obvious that the electricity sector will play a crucial role in this transformation process. And when we talk about the electricity sector, it is the grid infrastructure as a part of the electricity sector, which is key. Because if we have to integrate more and more renewable energy, which is generated decentrally or often offshore, and we have to integrate a lot of additional renewable energy, we have also to invest in the grid infrastructure. We have to adjust the grid infrastructure in Europe to the accelerated integration process of renewable energy. And obviously, in interest of society, and you mentioned the figures, Marleen, starting from 39% last year to 65% in 2030, it is only 9 more years to go. We have a pressure to accelerate the investment in the grid infrastructure now.

Elia Group is operating in 2 countries, as you can see on the map here, in Belgium and Germany. Do you see a difference, Stefan, in the way that those countries are coping with the energy transition?

Yes. First of all, Marleen, I see a lot of commonalities because the target is the same one. It's the climate neutrality in 2050. But of course, there are some minor differences. First of all, in Germany, the industrial areas are located in the south and the west of the country. The wind generation is in the north. So we have to transport a lot of electricity from the north to the south and the west of our country. So finalizing the grid infrastructure for these transport of offshore wind energy, onshore wind energy from the north to the south is crucial for the success. But the commonalities are also very clear because what we need is additional renewable energy because Belgium and Germany are both short on renewable energy. So we need additional interconnectors in our countries. Elia -- Belgium was very successful in that in establishing ALEGrO last year, commissioning Nemo Link a few years ago. And in the future, offshore will play a key role for that. We will need additional investments in offshore wind capacities in the Baltic Sea and in the North Sea as well because we are both densely populated countries. Public acceptance is a big challenge for all of us. So offshore is key to be successful.

Indeed. There is no doubt that offshore energy will become increasingly relevant during the next phase of the energy transition. We have already mentioned the target of establishing 60 gigawatt of capacity by 2030. But if you look towards 2050, the figure is even more impressive. The target capacity is 300 gigawatt. That's 20x more capacity than it is today. Let's listen to a statement from Giles Dickson, CEO of WindEurope, the association that represents the European wind sector.

Good morning, Chris, Stefan. Ladies and gentlemen, the European Union wants offshore wind to be 30% of all of the electricity that we consume by 2050. This makes perfect sense. Offshore wind is now cheap. It is a reliable source of electricity with very high load factors, and the wind industry can deliver the huge expansion of offshore wind that this entails. Of course, at the same time, we need to invest heavily in grids of offshore and to reinforce those onshore grid connections. And we need to move beyond the simple point-to-point grid connection model we've had so far. More projects like your Kriegers Flak with grid connections to 2 or more countries, more of those hubs, platforms or the artificial island that you want to build in the middle of the Princess Elisabeth Zone in Belgium. This will require very close collaboration between TSOs, with governments, with the offshore wind farm developers. It's got to be a collective, collaborative approach with business models that work for everyone.

Thank you, Giles. Listen, we need a collaborative, collective approach, hybrid solutions, energy islands. Offshore development seems to be the next big thing. Chris, how is the Elia Group responding to this?

Well, always nice to see the enthusiasm of Giles in this. What we will see in the coming years is, of course, that Elia will have to further develop the renewable energy in Belgium and Germany. But for that, we actually need as well to expand outside of a regulated zone. Because Belgium and Germany, as Stefan already said before, will be renewable short in the long run. By 2050, we cannot cover all the demand that we have by the renewable production that we will have within the zones that we operate today. And therefore, we need to be in the early phase where we expand or reach outside of these regulated zones into the Baltic Sea, into the North Sea. And for that, we have both 50Hertz and Elia recently signed LOIs with Energinet in Denmark so that we can build additional interconnectors and integrate more renewable energy into our regions. We know Energinet already for a while because Energinet is, of course, a company that worked already since '95, together with 50Hertz. And also last year, we inaugurated Combined Grid Solution, the first hybrid interconnector in the world.

Indeed. Well, let's have a look at the Belgian Danish project. If it's build indeed, it's still under investigation. The interconnector is due to cover of a distance from more than 600 kilometer, which will make this one of the longest HVDC cables in the world. Chris, why is Belgium going so far in its quest for renewable energies?

Well, this is a direct consequence of what I just said. We will be renewable short in an energy-dense country in terms of demand in Belgium. We have an industry cluster, which is demanding a lot of energy. We have a dense population. So we will need a lot of renewable energy, and we can outsource this only from our direct neighbors. So we look to countries that are further remote from us so that we can have access to renewables that are less correlated to the renewable energy that we have in our own country. In addition of that, this would be a hybrid interconnector that passes over the first Danish island in the North Sea. And there, they will connect more than 10 gigawatt of offshore wind. So we get access to the northern part of the North Sea. And further on, we can then look further towards Norway, towards the U.K. to have more access to more renewable because that's what we need to support our industry in their decarbonization and as well to supply our households with renewable energy.

Joint collaboration with Energinet is new for Elia, but not for 50Hertz. Last year, 50Hertz and Energinet jointly completed the Combined Grid Solution project in the Baltic Sea, the world's first hybrid interconnector. It is indeed an exceptional project, as you can see from the following video. [Presentation]

Yes. That was last year. But in the meantime, Stefan, 50Hertz is exploring a new hybrid interconnector with Denmark. It's called the Bornholm Energy Island. Let's have a look at the map to see where exactly it is located in the Baltic Sea. Why does Germany needs another interconnector with Denmark?

Yes. First of all, Marleen, there is really a long-standing successful cooperation between Denmark and Germany, between Energinet and 50Hertz. Chris mentioned 1995. In 1995, we commissioned the KONTEK cable and since then, we have seen a lot of additional projects in the Baltic Sea, the last one, the Kriegers Flak solution, last year commissioned. But now we heard about it, it is obvious that we will see additional opportunities in so-called offshore hubs. And there is a great advantage at the Bornholm Energy Island because Bornholm is a natural island. It is existing. So we do not have to invest in the island itself, only in the wind farms. We can use Bornholm as an offshore hub in the future, link it to offshore wind farms 20-kilometer south, Southwest to Bornholm Island. And this is a concept starting with partners in Denmark and Germany but, obviously, it is open to other players here in the Baltic Sea. We have 7 transmission system operators in the Baltic Sea. Two of them, Poland and Germany, are short on renewable energies. Others have additional areas where we can invest in offshore wind farms. So I can imagine that this is in a mid- and long-term perspective, an integrating approach to develop the wind farm capacities in the Baltic Sea and to develop really a transnational view on these kind of renewable energy generation in the Baltic Sea.

Okay. It will start as a Danish-German project but it can evolve towards the transnational project. Thank you, Stefan. We have a personal message from the CEO of Energinet, your partner in this project, Chris and Stefan. Let's see what Mr. Thomas Egebo has to say.

Hi, Chris. Hi, Stefan. Hi, friends at Elia and 50Hertz. Thanks for the invite to greet you all today. At Energinet in Denmark, we are simply thrilled and enthusiastic about cooperating with you on what might become the world's first energizers in the North Sea and in the Baltic Sea. Personally, I cannot stress enough how important that is right now at this moment in the history of Europe. That country has come together in international collaborations like ours, come together in a common dedication and effort to pave the way for new technologies and new solutions, as we have shown with Kriegers Flak Combined Grid Solution, Stefan, and thus, for more green energy to meet the climate goals. Chris, Stefan and all our friends in Elia and 50Hertz, I'm confident that you share my feeling and that we will have a very fruitful cooperation in the years to come. Looking so much forward to it. Have a very nice day.

Another enthusiastic speaker today. Stefan, do you see other opportunities in the Baltic Sea, other than Bornholm Energy Island that you just explained that are not yet included in the CapEx program?

Yes. To be honest, Marleen, first of all, we have to do our homework in Germany. Of course, there are additional areas in the German Baltic Sea, which are also able to be used for offshore wind energy, for example, and you can see it on the map, the Gennaker area, which is very closely to the Baltic 1 area. And I think we have a lot of vested interest in the Baltic Sea. That's shipping, that's defense aspects, that's spurt protection. But if climate neutrality is such a relevant target of the European Union and of all the member states, it is obvious to me that we have a priority for more additional offshore wind projects also in the German Baltic Sea, and Gennaker with 900-megawatt is a very good example for that. Secondly, we're just reviewing the opportunity to invest in the Baltic wind interconnector. We have the Baltic states with also additional areas for generating offshore renewable wind but there are 2 countries. We mentioned it several times in the Baltic Sea area, Poland and Germany, which will need additional renewable electricity. So why don't we cross from the Baltic states in the eastern part of the Baltic Sea to the western part in the Baltic Sea to Germany with Baltic wind interconnector. And last but not least, in Germany, we just discussed the grid expansion development plan 2035. And all 4 TSOs agree that 1 additional DC voltage power line is needed from our control area in the north to the North Sea coastline in Heide West. And that's an interesting opportunity to transport offshore wind capacity from the North Sea via the 50Hertz control area to the south of Germany.

Okay. Interesting projects in the pipeline, maybe. One thing is clear, cooperation is becoming crucial for unlocking the large potential of offshore wind. To better coordinate the development of the offshore grids, 9 countries, including Belgium and Germany, have joined the North Seas Energy Cooperation. And Belgium is currently chairing this cooperation. We now have a statement from Energy Minister, Tinne Van der Straeten, to share with you.

Dear ladies and gentlemen, this decade will be remembered as the one in which COVID arrived and was then overcome. But it will also be remembered for the green recovery and in which our energy landscape underwent its biggest shift ever. This decisive decade is no longer simply about making plans, it's about getting the job done. Because 2030 is now. We will turn the North Sea into one big sustainable power plant. We will position Belgium in the middle of this energy transition as the connecting country for new energy vectors, including hydrogen. If we want to make the energy transition a success, a sustainable investment of EUR 1 trillion is needed over the next decade. We can do this. After years of standstill, this government has set out a clear direction, with a concrete road map reaching 100 renewable energy and becoming climate neutral. With Elia Group, we have a partner who has proven to be visionary and competent. Today is, therefore, about connecting the dots, connecting public money with private investments, connecting plans with investors coming closer together across businesses and across sectors. So let's get the job done together.

Thank you, Tinne Van der Straeten, Minister of Energy in Belgium. Connecting plans with investors, that is indeed the intention of today's Capital Markets Day. Chris, the Minister referred to the COVID recovery plans. Belgium, let's have a look at the map, wants to invest in an energy island, multifunctional energy island 40 kilometers off the Belgian coast. And this is part of the Belgian dossier that can claim a subsidy from the European recovery fund. How is Elia Group involved in this project in the North Sea?

Well, as you heard the Minister, she said, let's get this thing done. I think that's what we try to do. We first had to unlock the potential of the Princess Elisabeth Zone, which is the second offshore zone for Belgium. We already developed 2.3 gigawatt in the first concession area. And now we are developing a second zone, which will have about the same size and that we need to bring to shore. Initially, we talked about using a 3-platform approach to bring all this energy back to shore. But then we revisit those plans in light of the relaunch and recovery plans of Europe. And we said, if we build an island, can we have something which is more future-proof than a traditional 3-platform solution? And we developed a whole concept around a first energy hub in the North Sea. And if we can develop this energy in the North Sea, Belgium can connect towards more renewable energy in the U.K. and in the northern part of the North Sea. On top of that, it will create opportunities. We will build early on know-how in the way how this further away offshore needs to be developed. That's an opportunity not only for Elia, but also for the industry that will join us in the development of this concept.

Yes, a lot of opportunities. And one of the big supporters of the Belgium energy island is Prime Minister, Alexander De Croo. We have a short statement from him to share with you as well.

Ladies and gentlemen, as you all know, our economy has to become carbon-neutral by 2050. It is a commitment we took in the Paris Climate Agreement. It is our European obligation, but more importantly, it is our national ambition. And we know one thing for sure. Offshore wind energy will be crucial in achieving this ambitious goal. This is why our North Sea has to become a power center of clean energy. And the construction of this new energy island in the Princess Elisabeth Zone is the main building block of our ambition. We will build an energy capacity of 700 megawatts by 2026. We will double this capacity to 1,400 megawatts by 2028. This multifunctional energy island will be more than the sand it's made of. It will be part of a network for sustainable energy in Europe, the most cost-efficient way to generate and transport electricity to Belgium and abroad. This energy island is an export product in and of itself because it showcases our engineering skills, especially the skills of the people of Elia, who show they have the guts and the talent to undertake such a magnificent project. Thanks to Elia, Belgium will be at the forefront of the sustainable revolution.

Very nice compliment from the Belgium Prime Minister. Chris, Elia Group has a strong record in offshore development. So for all the projects that we have realized were within our perimeter, but given all the opportunities that you see in offshore, do we also looking outside the borders of our business areas?

Yes. Thank you for the question, Marleen. Indeed. So, so far, we have focused ourselves in developing the new shore, both in the Baltic and the North Sea by our 2 regulated entities. So far, we already connected 13 wind farms, and we had already 3 subsea interconnectors in our portfolio. On top of that, we have developed things in different kinds of technology. We have done things in AC. We have done things in DC. We have built hybrid interconnectors. We're now working on an island. We have done this in a regulated environment, also in more commercial environments as we have witnessed within the Nemo Link project. And so what we see now is, of course, that relatively soon in terms of what a transport company like ours is doing, we will have fulfilled our task within the region that is within the zone, the economic zone of both countries. And therefore, to stay relevant for those countries and to ensure that we can realize this energy transition, we have to make sure that we link into the further North Sea, linking into the further Baltic Sea in the areas that might be nonregulated, and that's what we plan to do.

It's indeed relevant because it contributes to the decarbonization of the societies. But how concrete are these ambitions today?

Well, last year, we had a strategy update where we discussed all these elements. We said like how much time will it take before we have fulfilled our task within the regulated zone in terms of building the infrastructure of the future. And there, we see dates which are somewhere in year between 2030 and 2040. There might be still some things happening afterwards. But then actually, we need to support those countries to integrate much more renewable energy coming from abroad and outside of these areas. And therefore, we will have to look for partners. And so we have to look for working together with wind farm developers that go for those more complex projects. We have to work together with other type of players, maybe even go to oil companies to do that. And we're not going to do that only by sharing our expertise and ensuring that they can have access to all the engineering capacity that we have, we also will do that as a co-investor because we strongly believe that there is a need for a North Sea and a Baltic Sea grid that will be operated by a company that has the capabilities that we have as Elia Group.

We do it as a partner and as a co-investor. Thank you. Let's bring up the graph again to highlight the enormous steps that need to be taken in offshore wind. Stefan, how do you see developments in offshore wind evolving over time, if you see those figures?

Yes. I think it's obvious that we have to work that we stay ahead of the technological development. It was mentioned by the Prime Minister that, thanks to Elia Group, Belgium is at the forefront of the technical development. And it was mentioned earlier today that the Combined Grid Solution is the first worldwide hybrid interconnector. To remember, we have seen for many years now, a very traditional solutions, like it is showed on the map. We had seen point-to-point connections between an offshore wind farm on sea and, of course, an onshore grid connection. But this is a very traditional view on these kind of projects. In the future, it is very clear we will see additional hybrid projects like Bornholm Energy Island, like the North Sea Island mentioned earlier today. And of course, this is the right direction to develop these hubs in the sea as center key of an integrated grid infrastructure in all European seas, especially in the North Sea and the Baltic Sea.

Yes. It is clear that Elia Group wants to position itself as a strategic partner in the offshore development. What can we offer our partners, Stefan?

I think a lot, Marleen. First of all, 10 years of unrivaled understanding of how to integrate offshore grid to onshore grid, 10 years of experience how to develop the permission process to invest and to operate the grid connections offshore. Then designing technical solutions, which enable us to make our energy system also with offshore wind farms as reliable as possible and as cost-efficient as possible because this will also play a key role in the midterm and long-term future. Then, of course, we can offer a lot of expertise and a lot of relationship in the supply chain, which is, of course, also needed when we will develop more offshore projects with different partners. It's good to know that Elia Group is so well experienced with the partners in the supply chain to reduce risks, to mitigate risks and to reduce costs. And last but not least, at the end, reliability of the system is a key point because if all these wind farms are not delivering in a reliable way, it is a big problem for our future. So this reliability experience is maybe the most important topic in the future.

Yes. And that brings us to the next topic. So far, we only talked about grid development infrastructure, but another area we should discuss is system management. The share of intermittent renewables is going up, is growing. A lot of electricity will come from our seas. What will be the impact, Chris, on maintaining the balance between generation and consumption?

Yes. This is a very important challenge that all TSOs have, and which we have already taken many steps within Elia Group. If you want to keep a system in balance where you have more intermittency, where you have more renewables coming from faraway places, you need to have access to flexibility. We have done that in the past. In the initial phase, of course, we used the flexibility that you see into turbo plants. And then we moved in Elia in Belgium as one of the front-runners in developing as well demand response into large industries. So we integrated these flexibilities in the way how we operate the system. And that is something that we are at the forefront of what most of the flexibility that we can find today is into that section. But if we want to continue to integrate renewables, we have to push this further. And so we are looking already today to smaller users. We want to get access to the flexibility that is sitting in batteries of electrical vehicles, that is sitting in heat pumps, in the inertia of buildings. If we want to succeed into that, of course, we have to have as well access to the use of digital tools because that is very fragmented flexibility, and we have to bring that to a level that we can balance it with large size renewables and therefore, digital technology will help us to get access to that. But not only that, it would also help the consumer to get better services and to have access to new ways of working into this new future system.

Yes. We need more digitalization, but also current -- the current market design is not okay for the future, where you have more flexibility needs. Indeed, increased flexibility behind the meter as a result of electrification is an important change brought by the energy transition. This brings us to the Internet of Energy project, IO.Energy. The ecosystem was set up 2 years ago in Belgium on Elia's own initiative. And together with distribution companies and many industrial partners and start-ups, the Internet of Energy project promotes innovation across the energy sector by setting up case studies that allow end consumers to optimize their energy management. We will now introduce you to some IO.Energy pilot projects involving electric mobility and smart building. [Presentation]

Yes, Stefan. The Internet of Energy project was originally a Belgium project. Now it seems that it also has been introduced in Germany.

Yes, Marleen, that's, first of all, a clear proof how do we work in our group. It is challenging each other also on innovation between Elia Belgium on the one hand and 50Hertz in Germany on the other hand. And it was mentioned by Chris, e-mobility is becoming a relevant part of our daily life also in the electricity world. Imagine we will see 10 million e-vehicles in Germany till 2030. That's a large amount of cars. So the study of Elia last year to e-mobility was very timely. And also 50Hertz is starting now a project together with Elli, Elli is a daughter company of Volkswagen, to review a little bit better what are the clear cooperation potentials between the mobility sector, the transport sector based on electricity and a TSO like 50Hertz in the future. And another topic which will definitely increase in all our countries is a situation with heat pumps because also, heat has to be decarbonized, and often heat pumps will play a key role. And also there, we started a case study together with Bosch and our DSO in Berlin, Berlin Stromnetz, to look deeper into these opportunities in the future.

Okay. So far, we haven't yet talked about the energy-intensive industries and their role in the energy transition directly linked to our grids. They are important partners in providing flexibility. Electrification and greening their business processes are high on their agenda. We now have a statement from Holger Lusch, who is speaking on behalf of the Federation of German Industries.

Climate neutrality, the political target of climate neutrality until 2050 is an unprecedented challenge for the economy and the whole society. However, we from the Federation of German Industries, BDI, think that climate neutrality could be achieved if some important preconditions can be fulfilled, such as openness for innovation, massive public and private investment, sufficient financing and an internationally similar ambition. Industry is a key player to turn the political target into reality. A strong industry is necessary to develop and build the Energiewende. In the future, climate-neutral economy, renewable electricity is one key element. To bring the renewable electricity to the consumption centers, we need a reliable energy system. Therefore, system operators have an important task in realizing their immense investment plan to manage and balance a secure electricity system and to integrate hydrogen into the system. In other words, a good and modern infrastructure is central for a strong industry, but also for the whole of society. Sector integration is becoming just as important. We see it already happening in the automotive industry, one of our biggest industries in Germany. Our interactions with the electricity grid will change and will become more intense and complex. Therefore, it is important that we can count on reliable system operators to support the industry in their energy management, delivering green electricity whenever and wherever it is needed, having a strong focus on affordability at the same time. So what do we need? To make a long story short, we need green energy and a safe system in a competitive environment. And we need reliable partners.

Yes. We will see sector conversions. The way the industry looks at the grid is changing. Stefan, how can we make sure that we still understand the needs of the industry as a group?

Yes. I can imagine, Marleen, that the context we have with the industry in our control areas is much more intense as it was in history, and it was mentioned by Holger Lusch as well. It is more intense cooperation. I think it's good news for us as a TSO that it is a more intense cooperation. What are the reasons for these more intense cooperation? First of all, the electrification of many industrial processes. We see it in the steel industry. We see it in the chemical industry. We see all the investments in battery technologies in the European Union. Though the electricity demand in the industrial sites will increase a lot also by direct electrification, and that's obvious to everybody, will increase the relevance of the grid infrastructure. The second aspect, it was also mentioned in the statement, is green molecules, green hydrogen because some of the industrial processes are hard to abate by direct electrification. So in a second wave, we will see more investments in electrolyzers. We have 5 projects at the moment in our control area to be reviewed in Germany, and I think we will see more projects like this. And also there, a TSO will play a key role in transporting a lot of green electricity to these places. And there is a last third aspect I want to mention, it is the flexibility in the system. Of course, we talked about the private households e-mobility, heat pumps, all these storage capacities, but we will also see more flexibility from the industrial side in our control areas. And that's the reason why 50Hertz started its 60 to 100 campaign. We want to fulfill and to cover 100% of the electricity demand in our control area by renewable energy in the average in 2032 because we have learned that this is one success factor for industrial sites in our countries in the future.

Okay. My last question, Chris, is for you. It is clear that a new energy value chain is emerging. Elia Group has to play an important role when it comes to providing the infrastructure, facilitating the management of flexibility. What other opportunities do you see along the energy value chain for Elia Group?

Well, Marleen, Stefan already spoke about all the changes that we will see happening in the coming years in the value chains that we see at the industrial side. So companies will electrify companies who will use green molecules, and that will fully reconfigure those value chains. But we see the same trend actually happening with households. What we see happening in households is that mobility will electrify. We will see that heating will electrify. So in the end, the whole setup that people have at home behind-the-meter will be a complete different setup and they will also, therefore, start to have new needs. They want to optimize their energy consumption. They want to make sure that all the investments they have done that they come to their benefit by more comfort and lower prices. That is an urgent call for more sector conversions. We see sector conversions as a collaboration between us and the mobility sector, us and the housing sector that we can ensure that they can deliver the high levels of comfort but at the same moment, take into account the grid constraints that we have. If we're talking, for instance, around mobility, and we would have millions of vehicles into our grid that will charge at the same time, we will, of course, have a hard time at some moments of time because we don't have enough renewable energy. So that would create a massive problem. But actually, we see as well an opportunity because if they would charge at the moment that we have excess renewable energy, put that in their batteries, put that in the inertia of their buildings, we would have less need of capacity at the moment. And this is something that, of course, needs to be linked to the needs of that customer. So this customer says, "I want to drive somewhere. I have a certain freedom in my mobility that I want to have, and I want to actually have the feeling that I charge whenever I want," which actually will then be managed by the system. And to make that happen, we have to communicate much more together, give signals for all of the electricity sector towards these other sectors so that they can optimize their user experience. And to show that, we have developed this diagram that gives this -- how this new sector convergence will work. So on top, you see the sectors that electrify and they want to deliver the optimal user experience, which means I can drive my car whenever I need and my battery is always sufficiently charged. I can use some part of my battery to do my cooking at home. I'm an industrial player, and I can have the most cheapest energy at the moment. There's a lot of renewable energy somewhere in that system. Of course, that needs to be done by linking that user experience to the constraints that we have in the grid for delivering that service. And so what we will develop is a digital system where all these elements come together. Each of those layers will develop applications, will develop access to data to ensure that the ones that understand the user experience can translate this into algorithms, and that from our side, we can translate that into a good balance of the grid. And that, of course, creates a new space with new services to clients. Energy-as-a-Service will be something that we'll develop over the years, and we will jump on to this new development. One thing we already have done last year is we found re.alto. re.alto is a store that is actually delivering in this value chain to different pieces that have to come together to deliver such a service. And so when new players come up like other players, and they want to develop a nice service to their clients, they can actually go into the store and see for a forecast for renewable energy the next day. They can go there and to find an application that sees how much charge is there on a battery. They might find over time, even things what is the driving pattern of this client, and how do I adapt my energy management to that system? And so this is a very promising area. We will explore this further on. Of course, value chains are not fully defined as we speak. They will develop over time, but we will have a close look. And in a role of a company that is responsible for the fact that the balance is there. We have a lot of information about the system, and we can play an important role towards these players that want to digitalize their new electrified services.

re.alto, indeed, a new company within Elia Group. It's indeed a promising initiative. And this brings us to the end of the first part in which we gave an overview of the Elia Group's strategy with a focus on offshore developments. Thank you, Stefan, and Chris, and we will see you back for the Q&A around noon. [Break]

Talking about the Q&A, we are going to peek at our community host, Stéphanie Luyten. Have you received any reactions from the audience so far?

Yes. Marleen, indeed. It seems like an exciting time for Elia Group as we are helping to shape this offshore development in Europe. So I can understand why we're obviously very interested in the projects that have just been mentioned by Chris and Stefan. [Operator Instructions] Back to you, Marleen.

Okay. Thank you. We'll see you back in half an hour. It's time now for a quick break. We will meet again in 5 minutes for the second part, during which we will present our sustainability strategy, sustainable business strategy. During the break, a video outlining a number of innovation projects will play for you on the screen. Elia Group is constantly looking to adapt and use new technologies, such as artificial intelligence and blockchain. We look forward to see you back here in 5 minutes. Enjoy the video. [Presentation] [Break]

Welcome back. Climate change is one of the greatest challenges for society. Since Elia Group is enabling and facilitating the energy transition, sustainability is already at the core of our strategy. But that's not enough. With the ActNow initiative, Elia Group defined concrete and measurable targets related to how we will embed sustainability in our business processes in the coming years. We focus on 5 fields of action. In a minute, they will be introduced by Olivier Feix and Catherine Vandenborre. First, let's have a look at a short introductory film. [Presentation]

Good morning, ladies and gentlemen. Before we deep dive into the various elements of our sustainable strategy, let's have a look at the wider societal context of sustainable development. The Green Deal is at the core of the European evolution and the real game changer since we know now it's about the full decarbonization of all sectors. This has become, in Europe, a global sustainability policy that encompasses all sectors and all parts of society. You will see today how Elia Group's business strategy embraces sustainability and supports various dimensions of the Green Deal. Sustainability is at the heart of each cornerstone of our vision, our mission and our strategy for a successful energy transition for a sustainable world. We ensure sustainability in the way we operate our business. We find sustainability back in our business plans, daily activities and so forth. Putting it at the center of all our activities keeps us relevant for society and is our basis for future growth. This is more than a sustainability strategy. It's our business strategy that is sustainable and makes us act now. Our strategy is organized around the sustainable development goals of the United Nations that set a framework in a common language, setting clear expectations for the way we want to live on this planet. It helps us to work out and show how we contribute this company to a positive global development. For us as TSOs, the United Nation goals lead to 5 dimensions we focus on: climate action; environment and circular economy; diversity, equity and inclusion; health and safety; and governance, ethics and compliance. They build the link between the global objectives and the internal company perspective. We operationalize our sustainable business strategy via those dimensions that give concrete guidance internally to ensure the right implementation focus within our everyday processes and activities. Our first dimension on climate action is the most impactful one. As a responsible corporate citizens, we commit to reduce our own CO2 footprint to meet the targets of the Paris Agreement. In the following slides, we will show you how we want to achieve this. Transforming into a sustainable business is not only possible, it's the only way to stay successful. But at the same time, it's very important to realize that as group of TSOs, we are in a unique position to integrate renewables in order to drive decarbonization of the power sector. This is where we have our biggest CO2 reduction lever. The picture illustrates the completely different orders of magnitude. Connecting wind farms Arkona and Wikinger, for example, with an installed capacity of some 750 megawatts in the Baltic Sea and an annual generation of 3 terawatt hours, save 2,250 kilotons of CO2. This is 50% more than our annual footprint as a company. These savings are, of course, not all on us. But they show how important it is to realize our grid projects. As mentioned, in the first part of the Capital Markets Day, we are fully dedicated to speed up offshore in order to save many more times our own footprint.

Thank you, Olivier, for having explaining us how we put sustainability in a wider context at Elia Group. And as you said, the essence of our mission as TSO is a successful energy transition leading to decarbonization of the power sector, which is facing high emission reduction targets. And this is why we facilitate integration of renewable energy. We have massive investments in the grid. We have new market design and enhanced system operations and why we support electrification of consumers and effective sector convergence. Why do we highlight that so much? Because as shown in the left-hand side chart, the ambition of society is to reduce the footprint of the power sector by 233,000 tons of CO2 equivalent in 2030 in Belgium and Germany. And that is by far the most important level. Furthermore, by being an actor in the systematic change towards greener society, we create financial value. As far as we are concerned, there are no title between sustainability and financial value creation. Investing in our business has a strong leverage effect on the decarbonization of the European power sector. What you see on the right-hand side of the slide is that alongside our initiatives to accelerate decarbonization of society, we, of course, also take actions to decarbonize our own activities, even if the global impact is much lower. But this is our commitment to act as a good corporate citizen. Concretely, our commitment is to run a carbon-neutral power system by 2040, and to run our own activities carbon neutral by 2030. Also, we are partnering with all suppliers to assess the footprint of our supply chain and better factor the impact of CO2 emissions into the decision-making process for new investments via an internal carbon price.

And now Catherine, let's deep dive a bit into those objectives. First, we enable the decarbonization of the power sector via our grid development projects in order to reach 65% of renewables in the power mix in Germany and 40% in Belgium by 2030. Those are the political objectives. We will achieve them by developing our grids by further developing market products that facilitate the integration of variable renewables, by upgrading our system operations for a renewables-dominated world. We also prepare our infrastructure for more electrification, another core element of the decarbonization of Europe. We assess the concrete electrification potential together with industrial players such as, for example, Linde, ArcelorMittal, BASF and Total, who are active in our grid regions in order to identify jointly the best possible way to supply their growing electricity needs. We assess together suitable locations for the setting of new data centers or hydrogen production facilities, as Stefan was mentioning, in order to speed up their deployment and ensure the system is ready to cope with that.

Indeed, but that's not all we do. In addition, we are also convinced it's not sufficient to fulfill our national plans. That's why we go for the extra mile. We do develop energy islands with industrial partners, one along the Belgian Coast and one in the Baltic Sea. We push to harvest quicker the offshore growth potential at European level. You just heard Chris and Stefan about that. This can lead to 20 more terawatt hour in the system of Elia and 50Hertz by 2030. That is an increase of 15%. On top of that, we help developing a new market design that is more consumer-centric and better takes into account the decentralization of generation units. We also see sector coupling has an additional possibility to integrate more renewables. We push for digitalization to allow for more integration of the central flexibility. A smart way of charging electrical vehicles in the future would enable to integrate another 1.5 terawatt of renewable energy more in Germany and Belgium, for example. We run joint investigation with producers and consumers, how to practically speed up the deployment of renewable energy. We identified suitable areas for additional health which streamline our grid connection processes and we developed lean technical connection solutions. On top of the current growth, we want to integrate additional 15 terawatt hours of clean electricity by 2030 in order to reach our objective of 100% coverage of the annual consumption of the entire secured area by 2032. Now Olivier will give a couple of examples to show how we plan to reduce emissions related to our activities.

Thank you, Catherine. Let's start with system operations and first, power losses. They are a consequence of transmission of electricity. They constitute a source of CO2 as long as the electricity generation mix is not completely carbon neutral. The amount of losses over the lifetime of our assets has always been a key criteria in our grid design processes and decisions, where we explore all possibilities to reduce as much as possible the increase in losses. In absolute terms, losses will grow over the next years since we have to integrate and transport more and more variable electricity from renewables. Also, the amount of losses will increase. We commit to decrease the emissions associated to these losses by 28% in our control areas by 2030. We will do so by investing in assets with lower emissions, thorough impact assessment for each investment decision as well as operational measures in maintenance and grid operations. In addition, we explore ways to reduce needs associated to ancillary services and redispatch. Even though these emissions are not on our balance, we want to continue to contribute to better processes with other TSOs, national and European, to get these needs down.

And let me continue, Olivier, concerning our own activities this time and starting with mobility. We will reduce our emission by 90% by 2030. To do so, we have developed our technical capabilities to evolve part of commuting and some business travel needs. For the remaining part, we offer innovative solutions to commute to work. We also promote ecological business traveling, hence we electrify our fleet. We manage the transition of all of fleet vehicles towards carbon-free alternative. Also we had installation of charging infrastructure on all sites. Since a couple of years, we use high ecological standards for new or refurbished buildings at Elia and 50Hertz. At our Monnoyer building in Brussels, for example, the electricity consumption was reduced by 40% and CO2 emissions by 45%, thanks to a green roof and the use of environmentally friendly materials. The roof was fitted with 4,500 square meters of photovoltaic panels. Our 50Hertz headquarters in Berlin was awarded LEED gold standard as well as the DGNB gold certificate for its ecological design. For all our offices, we procure green electricity for the outstanding energy needs. Regarding the assets and all the assets that are insulated via SF6 gas, we will introduce SF6-free assets as soon as technically feasible. We will use SF6-free solutions for 50% of our upcoming SF6 needs. This avoids 30% of the projected emission increase by 2030 and 60% by 2040. We continuously improve our leakage monitoring and management to remain well below the target of 0.25% leakage rate.

And concerning the fourth element where we act as a company, concerning the value chain for new assets and construction works, we will increase our maturity for CO2 accounting from spend to category based for 60% of our investment volume by 2023. This will allow us to reduce subsequently the up and downstream footprint in a very targeted way. We will set -- so a specific scope 3 reduction targets latest by 2023. And we move from a case-by-case usage of an internal carbon price in procurement decisions towards integrating the ICP in all parts of our decision-making process.

Yes. And last but not least, we also match our emission reduction activities and targets with international approaches and frameworks. Against the frame of the new European taxonomy regulation, for example, the vast majority of our activities are to be considered as key enabler and catalyst for the decarbonization of the power sector. We are, therefore, confident that our grid development activities will qualify with the criteria set out in the new regulation. Our first reporting in 2022 will be crucial for the first refinancing of our CapEx program. We also use the GHG Protocol to assess our own emissions. In the framework of the Science Based Targets initiative, even if it does not value and sometimes even punishes the most impactful activities, we as TSOs must do to speed up decarbonization of the power sector. We are committed to meet the SBTi targets in 2030. We are open to collaborate with SBTi to further develop the framework and to properly consider the activities contributing to decarbonization. And before we start with the second dimension on environment, let's see how it looks like in reality in all substations in Belgium and Germany, and how all people view sustainability in their daily work. [Presentation]

We just saw Catherine's little movie how environmental aspects are directly integrated in many of our daily activities. Our second sustainability dimension is related to environment and circular economy. We design our assets so as to first avoid the impact on environment; to second, reduce it; and finally, to compensate the unavoidable. However, we are very aware that grid development has a high impact on landscape, fauna and flora. On the positive side, this also encompasses opportunities to act locally in order to implement positive measures for ecosystems and biodiversity. We go beyond our legal duties via increasingly co-developing ecological activities with local partners, while combining efforts to reach a nice leverage effect. Local and regional eco pool projects are often much more effective than compensation payments. Around 6% of the project costs of an overhead line go into our ecological projects. Our environmental activities reinforce the link to local communities. They increase our anchorage in society and the positive impact of our activities by co-shaping them with partner with local society. Concerning our own properties, we ban herbicides by 2022. And we will be ISO 14001 certified by '22 in Germany and by '23 in Belgium. On circular economy, we are in the learning phase. And we set the foundation now to embed circularity and eco design in our decision-making processes for new assets. We plan to further increase the level of recycling at the decommissioning moment of assets. This allows for a more efficient use of our materials. A few concrete examples and objectives. Power lines naturally affect bird life. We just saw that in the movie. For this region, Elia Group minimizes negative effects on bird life. Sensitive bird populations are considered very early on the planning phase of our routing of new lines. And in the current grid, we also commit to upgrade our bird protection markers as you just saw at sensible sections. We first identify these sections with NGOs. We set up a bird protection portal, for example, with NABU and BirdLife, and we run a targeted upgrade program for installing additional bird protection devices. We set up a bird protection portal, for example, with NABU and bird life, and we run a targeted upgrade program for installing additional bird protection devices. At 50Hertz, this means we're going to install devices an additional 120 kilometers of lines crossing special bird protection areas in order to reach nearly 400 kilometers in 2030. At Elia, the ambition is moving from today, 44 kilometers to 200 by 2030. In forested areas, as you also saw in the little movies, we established corridors for electricity lines. And for that purpose, we have developed the ecological corridor management, which is a way to minimize interventions and to run in ecological way, those new corridors, so that natural habitats are created there again while also taking into account safe grid operation. In 2030, Elia and 50Hertz will both manage 90% of all forest corridors in a way to support biodiversity. For 50Hertz, we go from 3,870 hectares to 4,150. For Elia, we go from 562 today to 1,150 by 2030. Two examples to give you a last little quick flavor on ecological activities we perform in our grid development projects. Here you see, for example, that we have created a biotope network in Sülzetal. The measure establishes meadows and pastures by upgrading and preserving ecologically valuable areas, southwest of Magdeburg, which is in Saxony-Anhalt, together with the local cultural landscape foundation. Farmers in the region co-developed this measure with us and enhanced biodiversity without stopping cultivation. We invest there EUR 2.7 billion. As part of the upgrading of the new 380 kV cable in Berlin, 50Hertz currently performs the Watercourse restoration in Charlottenburg Palace Garden, an investment of EUR 579,000, including oxygen enrichment, reduction of biomass in the water system, the creation of breeding sites for King fishers and habitat enhancement. The garden, therefore, gains biological diversity and contributes to quality of life and species conservation in the middle of Berlin. And already today, our transformers and pylons are close to 100% recycling rate. And this motivates us to investigate how to push the recycling rates also for all other types of assets we are having in our grids. Starting with logistics and spare parts management, Elia is exploring, for example, the use of 3D printing for the warehouse in order to increase the lifetime of our assets. And before I give back the word to you, Catherine, let's watch a short introductory video from one of our constructors on safety in order to get the outside perspective on our safety culture. [Presentation]

You have understood it, our third dimension relates to health and safety. And as TSO, major activities are related to work heights, work with electrical assets and works in the maritime environment. Health and safety is not only an essential social duty of a good company, it also strengthens our license to operate and yields in our conviction to reach operational excellence. This is why we have a long-established safety culture. We do not only have strict safety procedures in place and have regular trainings and safety campaigns, we also enhance our technical and digital solutions to reduce the risks of accidents. We go for 0 accidents, not only for our own staff, but also for all contractors, as we just heard in the video. Our ambition is clear, keeping a good track record even when rolling out or increasing CapEx program. To illustrate one of the KPIs we are tracking, you see our total recordable injury rates currently at 5.1 on group level. This is reflecting a good industry standard, and we managed to stay well below our target of 8.5. An example for an innovative solution that we are introducing in order to reduce the risk exposure is the high step system, which reduces risks significantly when climbing pylons. Another example to show how we create additional value for society while protecting our own people, we have a helicopter rescue service for offshore crews, which is also available for external partners and the public in case of emergency. Only last month, helicopter has rescued 2 fishermen in the Baltic Sea.

Besides avoiding accidents, the physical and mental well-being of our employees is a big priority for us. We see our working environment is changing very fast. We need to make sure that our employees stay healthy, well adapted and resilient in order to face all the challenges ahead. Here as well, this leads to operational excellence and ultimately to more efficiency. This is why we have established a successful preventive health and safety approach over the past years. Activities that are part of this approach are, again, amongst others, the provision of a broad range of external medical services including hotlines where employees can place their fears and problems anonymously. We run regular pulse checks and employee surveys as well as a regular sharing of group-wide good practices. To illustrate again one of the KPIs we are tracking. You see here our sickness rate on the slides with a good level of 3% as compared to well above 5% industry average. We are proud to be an industry leader here and are committed to keep our standard this high.

Yes, and to complement you, Olivier, let's recall that it's important to us to make mental health a subject of discussion. This is why we run a preventive awareness campaign and online training. And complements those initiatives with health and fitness apps. As you can imagine, making sure that all our employees receive the best possible care during this difficult COVID-19 pandemic is a top priority for us, encouraging home office and offering testing facilities in all offices was the first step. Now we are mitigating possible negative effects of working from home, for example, through our work at home catalog, a step-by-step guide providing useful tips on ergonomics, on nutrition, work-life balance, et cetera, and to start with now our fourth sustainability dimension on diversity, equity and inclusion. Let's have first a little look at some testimonials we collected after our last International Women's Day. [Presentation]

In order to realize a successful energy transition. diverse talents and opinions bring our strategy, our solutions, our innovative ideas forward and implement them in an effective way. We have to ensure that there are no barriers for certain parts of society, unbiased recruitment, selection and career path based on equal opportunities. This ensures that we can attract and retain the talented people and unlock their potential to participate in the evolution of the Elia Group. Our group counts today 38 nationalities, this is an increase of 41% over the last 2 years. We see the benefits of being an international group. The exchange between different cultural and nationalities has enriched our way of thinking and acting, at EGI, at Rialto, at 50Hertz and at Elia, and it's a key success factor to realize our growth ambitions.

Indeed, and we also enlarge the role that women play in the energy sector. We are conscious that the energy sector has historically been led by male technical expertise. But things are progressing today, we have reached a proportion of 22% of women in our group. Our recent efforts to further increase those rates have already borne fruit. In senior leadership position, the number of women has increased by 7% over the last 2 years. We place attention on gender diversity, as you see, and we also focus on educational experience, diversity in various experience of the group. Both are essential to deliver the right solutions for the complex challenging years of the energy transition and the digital transformation. We developed a company culture, keeping a healthy balance between work and life. Diversity and a healthy balance gives us a competitive advantage while being more resilient, more innovative in delivering operational excellence. We also believe that we understand better the societal trends we are seeing and that we are able to address the challenge years of the energy transition in a better way.

And in order to embed our diversity charter into the whole organization, we have involved all important internal stakeholders being HR, our employees, our leadership teams. The recruitment and promotion processes have been reviewed and adapted in order to lower the barriers at hiring and promoting moments. Specific trainings and workshops for leaders on inclusive culture for all employees promote our new leadership model, which has diversity at its core. Our ambassadors network of employees connect diversity initiatives into their teams into the daily work. We also have flexible working scheme policies, parental leaves, sabbaticals and home working. They are key elements for a healthy work-life balance and to retain the best talents.

And let's now move to the fifth dimension on governance, ethic and compliance. Good governance not only underpins confidence in the delivery of everything that you have seen today, but it also -- it is essential to give guidance for long term and sustainable success. This means that we have an effective oversight from the Board, we have strong internal controls, we have effective risk management, and finally, we do audits to remain compliant with the legal and regulatory provisions and also to prevent fraud. All this contributes to more resilience, more risk mitigation and more efficiency in delivering our activities in an effective manner. Besides the SteerCo of the internal Act Now program, the members of the Elia Group management board are directly accountable for the implementation of our sustainability strategy. Part of the variable pay of the executives is linked to its sustainability objectives. We have introduced a Group Code of Ethics providing a frame and guidance on group-wide behaviors. We have policies in place to ensure integrity towards s contractors and suppliers. And have set up a person responsible for anti-discrimination measures, anti-corruption measures or human rights infringements that can be anonymously contacted.

And we will continue to give transparency and early stakeholder engagement a high priority, especially with local citizens, you just saw that, but also with association market players, industry, consumers and academia. This helps us to work best in the interest of society and to co-develop powerful solutions. Being open and transparent, engaging into a real dialogue with our stakeholders not only strengthens our license to operate in our anchorage in society. It also increases the impact of what we do, while using the intelligence of our partners to co-shape better solutions. This is why we, for example, have set up a scientific advisory and project board with academia to cooperate on interdisciplinary challenges. Why we organize regular stakeholders meetings. Why we do regular roundtables with industrial players, with NGOs, with unions. Just like this Capital Market Day in order to show you transparently and to get your feedback and suggestions for our future evolution. We are also supporting cultural activities in our regions. For example, we are a partner of the cultural festival in Mecklenburg-Western Pomerania, of the artist and residence program of the Konzerthaus in Berlin, and we promote young artists with the Museum Hamburger Bahnhof. In social and health matters, we, for example, support the solidarity campaign operated by the King Baudouin Foundation. We organized local sport meetings, and we developed for kids an interactive school exhibition on the energy solution. More examples can be found on an annual report. However, we avoid supporting political and religious parties. In our grid development projects, we apply a systematic participatory approach in the same spirit in order to engage with civil society and local citizens. Each time we plan something new in the infrastructure in the region, we collect and discuss information and suggestions by our dialogue tools. And that helps us to find the best possible routing and good technical solutions. And we complement these tools with digital formats for more interaction in public participation. In the same spirit of co-developing good solutions for society, we have set up the Renewable Grid Initiative, an association of now 11 European TSOs and 10 environmental NGOs that promotes the necessary grid development to enable the growth of renewables in order to fully decarbonize Europe. An endeavor that we are looking forward to is evolving our reporting towards a value to society approach that illustrates better our contribution to the value we create for society, the energy transition and the green deal. As a first step, we will develop our integrated reporting.

And now coming to our ESG rating Like you know, we have issues, and they have improved over the past few years. And we will put our efforts in improving them further. We are really convinced that this approach benefits all stakeholders. This approach is profitable for society, for our customers, for our people and for our shareholders. We are reducing our exposure to risk. We are becoming more resilient, and we are able to grow and create value for society and shareholders. We have seen that acting as a responsible company is valued. Sustainability has become business as usual. We choose to focus on sustainability as a key topic during today's events because we felt it was essential for the financial community to get more insight into and a deeper understanding of our sustainable business strategy. In addition to the more traditional information about our assets or cash flows or returns and investment pipelines, we wanted you to know more about our strategy, our concrete actions and contribution to global sustainability goals, our culture and mindset also that you can better assess the value and future of Elia Group. We have also taken our first steps towards developing a sustainable financing strategy. In May last year, Eurogrid issued its first green bond for EUR 750 million, the proceeds of which being exclusively allocated to 2 offshore renewable electricity projects, namely Ostwind 1 and Ostwind 2. The Ostwind 1 and 2 projects, which are co-financed by these green bonds though still with a new action plan on climate change. Elia Transmission Belgium also started its sustainability finance journey. In October, it signed a credit facility with a pricing mechanism, which is linked to 3 sustainable performance targets. Those targets are related to 2 different dimensions: climate change and health and safety. Going forward, both Elia Transmission Belgium and Eurogrid will access the debt capital market independently to finance the organic growth. They will most likely take the form of a green bond or sustainability-linked instruments. The rollout of our sustainable business strategy today therefore marks another strategic milestone in terms of the benefit offered to all consumers and shareholders.

Thank you, Catherine and Olivier, for your comprehensive presentation on the 5 dimensions of our sustainable business strategy. Ladies and gentlemen, if you have any questions regarding this presentation, please do not hesitate to type in your question via the chat. Let's go live to Stéphanie Luyten. Stéphanie, what reactions did we receive so far?

Marleen. Indeed, sustainability is a topic that is very high on the agenda for our investors. And as mentioned also by Olivier today, sustainability is not just nice to have but it's really crucial for our operations of our business, and we are fully committed to it. I can see we're in for a very interesting Q&A session.

Okay. That's for half an hour. Yes. Sorry, continue.

[Operator Instructions]

Okay. Thank you, Stéphanie. We'll see you back in half an hour. In the meantime, I will make some room for Yannick Dekoninck, who will take care of the third part of today's event. See you soon.

Welcome back in Part 3 of Elia's Group's Capital Markets Day. We already presented our ambitions in offshore and our sustainable action plans. But how will those will be translated into financial profit. Welcome back Catherine. Welcome Marco, CFO of 50Hertz. Marco, I believe, it's was very intense when you met a lot of our financial stakeholders.

Indeed, Yannick. You will have just finalized successful issuance of EUR 500 million bond at very good conditions. We thank our investors for their confidence in our business and in our strategy.

Indeed. Catherine, Elia Group's activity spanned over several countries. Can you provide us an update on the regulatory framework we are operating on?

Yes. So like you know, Elia Group encompasses 2 grid operators and one offshore connection entity. 99% of our net result is generated by 3 different regulatory regimes. I believe we can say that the regulatory frameworks of our grid operations in Belgium and Germany are widely recognized as robust and supportive of the group's cash flows. Now the relative contribution of each framework to the group result is quite different. The vast majority of cash flows comes from Belgium and Germany. In 2020, as an example, the German segment contribution amounted to about 50% of our results, whilst the Belgium segment contribution amounted to about 48%, and the Nemo Link contribution was around 2%. The group's exposure to different regulations allows us to diversify regulatory risk, which is, by definition, the key risk factor for any regulated utility. We have quite good visibility across the 3 regulatory frameworks for the next 3 years. In Belgium, a new regulatory period started in 2020, which will last until 2023. In Germany, it's exactly the same with the regulatory framework also running till 2023. Lastly, the regulatory framework for Nemo Link, which is our interconnector with the U.K., is fixed until 2044 and this is a cap and floor model. The profitability of this interconnector comes from the difference in electricity price between Belgium and the U.K. times the traded volumes on the interconnector.

Thank you, Catherine. So in the short term, the regulations are fixed, giving us a good visibility on returns and cash flows. But how do you anticipate any changes in the regulations?

Well, let me take you through the Belgian process, and I propose that Marco then explain the German process. And so I will first briefly touch on the current regulatory framework. Firstly, the regulatory framework is based on the cost + model with coverage of all reasonable costs including all fair remuneration and incentives. Secondly, we have an embedded debt principle, which is applicable, meaning that all the cost of debt is fully covered by the tariff. So the rising interest rates we are observing today have no direct impact on the profitability of Elia transmission. And finally, there is no risk on volume drops in revenue driven by lower electricity consumption due to lockdown measures, for example, are fully recovered through the tariffs. The remuneration consists of 2 elements: a fair remuneration, which represents a return on equity and which is implemented by various incentives being linked to the realization of operational objectives, hence the gearing ratio. The current regulatory framework leads to a net return close to 6%.

And how and when can we expect more clarity on the new regulation and, hence, returns?

Yes. The time line for the next tariff methodology will most probably be formalized at the beginning of 2022. It will be published on the CREG website. The first step will involve the establishment of the tariff methodology itself. In these steps, the detailed principles of the methodology are defined, which Elia needs to respect when proposing different tariffs to be applied to grid users. Those principles include the parameters of the remuneration, like the calculation basis of the regulatory asset base, the determination of the return of equity and the various incentives. It also defines the different cost types, controllable and noncontrollable, and the regulatory treatment as well as the depreciation rates. Coming back to the return on equity, as the risk-free rate is likely to be an important parameter to set this return, the increase we are experiencing in interest rates could be viewed as positive news for future return. A draft decision by the CREG on the tariff methodology is expected to be published during the second quarter of 2022. This will be followed by a public consultation and final decision from the CREG on the tariff methodology is expected to be finalized towards the second half of 2022. So today, we don't have visibility on the evolution of the regulatory framework nor the return. And as you know, the Belgian regulatory framework has a track record of stability with a regulator committed to keeping cost sustainable and striking a balance between interest of the TSO and the consumer. Elia will strive for a tariff methodology that takes into account the change years resulting from energy transition with important investment in the grid infrastructure and the digitalization of the energy system.

Thank you, Catherine. Let's now have a look at the German process. Please go ahead, Marco.

Thanks, Yannick. Before I explain the process, I would like to remind you on the situation we're actually facing in Germany as there are 2 different regulatory frameworks in place. A revenue cap regime for our onshore business and a cost-plus model for our offshore business. The framework covering our offshore regulation works in a relatively similar way to the Belgium system, with annual updates of the fair remuneration based on a 40/60 gearing, except that there are no incentives. The cost allowance mechanism differs as well as the offshore costs are determined annually. If actual costs are higher than budgeted, for example, in case of failure, they are recovered in the following year. Therefore, it entails the pass-through mechanism, with the burden shared via the offshore surcharge. In terms of our onshore operations, the costs are fixed every 5 years based on a reference year in the middle of a regulatory period. '21 is the reference year for the next regulatory period starting into '24. German TSOs can only apply for costs which really occurred in that base year. The corresponding cost data will be prepared and submitted to the regulator in June '22 and either be fully approved or partly approved with adjustments made by the end of '23 at the latest. Of course, this final decision will only be taken into several rounds of discussions between the regulator and the TSO. The approved file consists of the entire revenue cap, including costs and fair remuneration based on the rate and the gearing in the base year. The revenue cap is further adjusted annually by growth investments and inflation with positive effects on the one hand and individual efficiency as well as sector efficiency requirements are taken into account decreasing the revenue cap on the other. The last 2 elements for '24 onwards will be set by the regulator in '23 at the latest. There's currently a legislative initiative underway, leading to a factual differentiation between OpEx and CapEx in the future regulation. Whereby for OpEx, base year logic will still continue, it is foreseen to update the entire asset base on an annual basis. This would reduce administrative burden for both regulator and 50Hertz, and will lead to a more stable cash flow from asset remuneration putting 50Hertz at least in a comparable economic position as of today. The most important element will be the return on equity rate. The procedure for determining the regulatory return on equity is expected to be launched by the regulator during the second quarter with a public hearing planned over the summer. While we expect the rate to be fixed in October this year. We are in constant dialogue with the regulator about the method and potential outcome. First indication can be expected at the end of June. In summary, the German regulator and the German regulatory framework is supporting and will continue to support investments, which is consistent regarding the challenge facing the energy transition.

So some key dates to keep in mind, Marco, thank you. Now earlier today, Stefan mentioned future developments in the Baltic sea, which will see new offshore wind farms being connected to our grid. Can you give us an update on the investment program in Germany over the next 5 years, Marco?

For sure, well, for the next 5 years, 50Hertz plans to invest EUR 4.7 billion. And this is driven by the needed onshore grid expansion as well as the construction of new offshore wind connections. Compared to last year's midterm outlook, this represents an increase of around 12%, which reflects in part the preparation for the second 2 gigawatt DC connection at the end of the 5-year horizon named SuedOstLink. Due to the recent change in law, the construction of SuedOstLink became mandatory. Through the realization of the CapEx plan, we expect the German regulatory asset base to grow annually by 8% over the coming 5 years.

Let us now have a detailed look at what the investment program includes exactly over the next 5 years and which projects can be expected beyond this 5-year horizon.

The planned onshore investments mainly represents as grid extension, connecting onshore wind production slots to the load centers, like 380 kV power lines, Uckermark line and Nordring as well as the 2 gigawatt DC cable connection towards Bavaria. The latter is also known as South-East Link or SuedOstLink, which involves an investment of EUR 1.2 billion up to '25 and an additional investment of EUR 500 million the years thereafter. Also the renewal and capacity increase of the 380 kV diagonal power link running across Berlin is a major onshore project. It represents an investment of approximately EUR 170 million over the next 5 years. All these projects have been started at Uckermark line and Nordring with directions of the foundations for the cable tunnel. Recently, the drilling has begun and for South-East Link cable and converter has been ordered or are close to be ordered. From an offshore perspective, 3 offshore wind park connections are currently under construction within different phases. The wind farm connection to Baltic Eagle and Arcadis, 450, respectively, 290 megawatt, also called Ostwind 2 are due to be commissioned between '23 and '24. Ostwind 3, 300-megawatt is due to be commissioned in '26. Both projects represent investments of around EUR 580 million and EUR 380 million, respectively until '25. With these offshore connections, the total capacity on offshore will be almost doubled from 1.1 gigawatt to 2.1 gigawatt. And as such, directly contribute to 50Hertz' objective to have a total power consumption of 100% coming from renewable energy sources by the year 2032, like Stefan mentioned earlier today.

Okay. And which development can we expect beyond this 5-year horizon, both onshore and offshore market?

SuedOstLink includes, beside the extra 2 gigawatt on an existing track,also the SuedOstLink prolongation that needs to be built on an off-site. The technical solution has not been finalized and the realization of this prolongation lasts beyond the midterm outlook we provide you in the previous slide. According to current planning, the investment for this project amounts to approximately EUR 2.2 billion, which will be mainly invested in the period after '25. Like mentioned by Stefan already, the realization of Heide/West Klein Rogahn project will provide further strategic options to the group beyond 2030. Indeed, access to North Sea, and/or direct connection to 1 or 2 wind farms installed in the North Sea are tangible options to be further investigated and explored. This is of particular importance, as the potential for further expansion of offshore wind projects in the German part of the Baltic Sea seems to be limited, even though there are a couple of concrete projects to be further elaborated and specified. From an offshore perspective, 2 near-shore projects named Gennaker 900 megawatt and Testfield 200 to 300 megawatt are seen to be feasible to realize in this decade. Both require specific legislation to be passed in order to be realized. In line with our sustainability program, we support this process, as our belief is that the energy transition needs to use all of the affordable offshore wind potential. Otherwise, Germany's installed capacity objective of 30 -- 40 gigawatt by 2040 will be hard to meet, considering today's installation of around 10 gigawatt. This is one of the major reasons that lies behind our discussions with our Danish colleagues about new ways to exploit offshore wind potential in Denmark for use in Germany, in addition to Kriegers Flak. Such discussions have led to exploring projects like Bornholm Energy Island project, which encompass 2 to 3 gigawatt of installed capacity potential and will involve more deep connections between Germany and Denmark. The project is due to be realized within the next 10 years.

Thank you, Marco, for giving us a very solid insight into our German investment program and 50Hertz collaborations with your partners. I think it's now time to look at Belgium. Catherine, how is the investment program looking in Belgium for the next years?

Well, like in Germany, our new CapEx plan for the next 5 years will increase by almost EUR 1 billion, reaching EUR 3.2 billion, which reflects our commitment to society to accelerate the energy transition. Through the realization of this CapEx plan, we expect the Belgian regulated asset base to grow annually by 8% to 9% over the coming 5 years. Belgium has the most to gain from an integrated European electricity system based on renewable energy sources, under which its full domestic potential is maximized. And supplemented by electricity import is through additional interconnectors. In order to further prove our grid, our current CapEx plan is based on 3 key pillars: the first pillar, facilitating offshore energy, aims to accommodate the increasing offshore capacity needed to realize the sustainability targets. Under the second pillar, further cross-border interconnections will be established to integrate renewable energy at a European level, leading to a convergence in electricity prices, and this to the benefit of our industries. And under the third pillar, grid reinforcements to the network will be carried out to make the grid robust and reliable, which is another crucial step towards the establishment of a low-carbon society. Let me remind you that besides new investment, approximately 1/3 of the investment budget is linked to the maintenance of the existing grid. This maintenance CapEx has the same remuneration under the Belgian regulation than new investments.

Thank you. Now let's have a detailed look at what the investment program includes exactly over the next 5 years and which projects can be expected beyond this horizon.

Yes. And so first, to further facilitate the growth of offshore energy, the federal government has begun developing a second area for offshore wind in order to increase the offshore capacity from 2.3 gigawatt to 4 gigawatts. Elia will connect future new wind farms in the North Sea to the shore. The total project will cost around EUR 1.1 billion, approximately 50% of which will be invested over the next 5 years. Commissioning are due to occur in 2026 to 2028. Elia's initial plans for this project involves building 3 platforms to connect the wind farms. The bulk of the EUR 3.2 billion CapEx program, namely Ventilus and Boucle du Hainaut, both links are vital for ensuring that all this additional energy coming from the North Sea can be brought to demand centers across Belgium. Firstly, the Ventilus project involves the building of a 380 kV voltage line with a capacity of 6 gigawatts in West Flanders. It will involve a total investment of approximately EUR 750 million, 75% of which will be spent within the next 5 years. Another important grid reinforcement project is the Boucle du Hainaut project, which will reinforce the connection between West of Belgium and the center of the country. This project has a budget of approximately EUR 650 million. We plan to spend around 1/3 of this during the current period with the rest being spaced after 2025. Finally, we have the Brabo project, which is essential for securing economic growth around the Port of Antwerp and is also necessary for establishing a secure and sustainable supply of electricity inside and outside of Belgium. Over the next 5 years, we plan to invest approximately EUR 85 million to complete the third and final phase of the project.

Okay. And which developments do you expect beyond that five year horizon?

Well, Yannick, after Nemo Link, the Nautilus project is currently being explored, as a new hybrid interconnection that would link Belgium and the U.K., while also connecting offshore winds. The European Commission has already labeled Nautilus as a PCI, a project of common interest, marking its importance for Europe. Feasibility studies are currently carried out regarding the location, routing and capacity of such a project before the realization can be confirmed. Like Chris already mentioned, a potential new project that is not reflected in the figures is the hybrid interconnection with Denmark. A joint working group is now looking at the feasibility of the laying of this cable. It could become an important future investment for Elia starting beyond this 5 years horizon, and would be Belgium's first interconnection with a non-neighboring country. And like mentioned earlier today, we expect that a number of similar opportunities will emerge going forward. We will explore those opportunities, which will occur in markets beyond Belgium and Germany borders. The kind of technology and expertise that we have developed within the group will, for sure, become important for the further development of the grid in the North Sea and the Baltic Sea.

Thank you, Catherine. I think it's clear that Elia Group has a strong prospect growth for organic growth in Belgium and Germany. But what does that mean in terms of group level targets. Can you give us some guidance?

Yes, let me give some operational targets. And so giving guidance for 2021 and 2025. So the translation of the aforementioned CapEx program will lead to a total CapEx expense of EUR 1.2 billion in 2021 increasing in the following years to reach an accumulated CapEx of EUR 7.9 billion at the end of 2025. Driven by the realization of the CapEx plan, the RAB of Elia Group is expected to grow from EUR 10.4 billion in 2021 to EUR 14.4 billion by 2025. And so reflects an asset growth of nearly 30% for the coming 5 years or around 8.5% annually. I would like to remind you that this only includes 80% of 50Hertz and does not reflect our investments in Nemo Link. As mentioned at the start of this presentation, our revenues are predominantly driven by our regulated activities. Today, we have visibility over the regulatory framework for the next 3 years until 2023. The moment we have more clarity on what to expect for the following regulatory period, we will share it with you, of course. So the primary driver of our regulatory framework are at the earnings level, whereas EBITDA and revenue are not including a lot of pass-through items. This is why we primarily focus on return on equity in our guidance. For 2021, we already announced, we expect a return on equity of between 5.5% and 6.5%, and on average, between 6.5% and 7.5% as from 2022 until the end of the regulatory period. And I would like to highlight that this guidance, obviously, does not take into account any potential M&A transactions. Our conservative financial policy is unchanged towards the group. Both Elia Group and Eurogrid continue to target a BBB+ rating with Standard & Poor's. And aim to maintain a prudent financial profile through the upcoming CapEx program. In particular, the funding of the investments will be calibrated to ensure that both entities keep financial metrics at levels commensurate with the guidance indicated by the rating agencies. Eurogrid and ETB will continue to finance the investment program separately, independently from each other with no co-financing activities between themselves. Both entities do not and will not support funding activities of the group and will issue and service their own liabilities through their own resources. Lastly, the dividend policy remains unchanged and is intended not to be lower than the increase of the inflation index, the CPI, in Belgium.

Thank you, Marco and Catherine, for is detailed explanation. That brings us to the end of this third part. It's now time for an extensive round of questions.

In the meantime, we did a position switch here to be ready for the question round. Because we have to limit the number of speakers on stage, we divided the question round into 3 parts. Stéphanie, first, we will handle the questions from the first part on the growth strategy and more specific on offshore. What questions did we receive?

Yes, Marleen, indeed. Let's kick off with the first question. So here it goes. How important is digitalization for all these offshore operations?

Yes. I think, Stefan, that's a question for you.

Yes. Thanks, Stéphanie. And of course, digitalization plays a key role when we look at the first development of offshore technologies. Imagine the situation of the hybrid interconnector between Denmark and Germany, we mentioned earlier today, the Combined Grid Solution, where we need a back-to-back converter where we have a MIO, where we have different sinus curves in the grid infrastructure in the Nordic countries and Germany, and then to integrate at the same time, renewable energy from offshore wind farms. You can imagine, this is something which will only work with digital technologies. But there are much more opportunities. We just finalized the study in the offshore operations center with more than 20 recommendations where we can use digital technologies in the future. And in the group, we will just check in which one is on the priority list, the most attractive one. So digitalization and offshore technology has to be combined.

Stéphanie, second question?

Yes. What are the key buy-ins for the regulator, the trick in all investments in offshore and operations after start-up that will influence the end users' tariffs?

Catherine?

Yes. For -- let's say, for the regulator, there is no regulatory difference or no significant regulatory difference between offshore and onshore for the time being. So what we see is that on offshore will have return on equity. We have also some incentives that can be added to, like for example, on timing for realization of some investments. But once again, no significant differences between onshore and offshore.

Okay. Stéphanie. Question three?

How are -- or can you deal with the strategic securities of the installations against foreign, let's say, for example, Russian military sabotage or wars?

Chris?

Yes. Of course, we have strategic infrastructure that we build and operate. And obviously, we have in both countries a close contact with the public authorities, including the Army to ensure that we can protect this infrastructure. This is both true for the physical infrastructure that we operate as well as cybersecurity. This is, of course, something that we cannot do as a company alone because some of these threats are things for which you need intelligence that we don't have as a company. But the strong collaboration so far has led to the fact that we could fairly well do this, and we are quite confident that we can continue to work together with our public authorities going forward.

Okay. Thank you, Chris. Stéphanie?

There are a lot of talk about production and distribution of energy. What about storage? What kind of role can Elia play in this field?

Stefan?

Yes, I think it's obvious that in a system, which is more and more based on volatile energy, it is a need and a high demand for storage capacities. And please remember, we discussed earlier today about e-mobility, about heat pumps. Both of these options are also storage capacities in the new system, but there are much more storage capacities, and most of them are linked to sector coupling technologies. 50Hertz realized a lot of power-to-heat projects together with local utilities in the northern part of Germany to use renewable energy if there is a surplus of renewable energy in these power-to-heat technologies. We will see more storage capacities in private households. And for example, we see a lot of investment interested in investing in data warehouses. And also data warehouses, for example, can play a role in a storage capacity in a volatile system in the future. So I'm sure we will see a lot of innovations in this process and a lot of business opportunities.

Okay. Thank you, Stefan. And Stéphanie, I suggest to go to the last questions for this first part on the growth strategy of Elia Group?

Okay. Will you also envisage offshore project outside of North Europe?

Chris?

Yes. So at this moment of time, the focus is, of course, that we make sure that we can be part of the future developments in the North Sea and the Baltic Sea. That being said, already today, we are participating in a tender procedure that is happening in the Middle East. We're also looking at a potential project in the U.S. Those will be, for the time being, more in an opportunistic mode where we see where there are opportunities for our skills and our competence that we can valorize them in these specific projects. But going forward, one that we have established a strong position into the North Sea and to the Baltic Sea, it is obvious, of course, that we will further contribute to the energy transition, and that can happen wherever that is happening in the world.

Okay. Thank you, Chris. Let's conclude the first question around. So thank you, Stefan and Chris. Catherine, you are staying with us. And in the meantime, Olivier is coming on stage. We move to the questions about Elia Group's sustainable business strategy. Stéphanie, what are the questions for Catherine and Olivier on this topic?

The first question is what are the synergies between your 2 entities that you can leverage on?

Catherine?

Let me take the question. Thank you. So first element, I think, in terms of sustainability, all TSOs are more or less facing the same kind of issues. But indeed, 50Hertz and Elia can put together the resources in order to accelerate the learning curve. And so as for an example, we try to define together a number of technological improvements we can give. Olivier gave the example of the test, which is currently going on in Germany regarding a new gas, g3 gas for SF6. And of course, based on the learnings we'll have in Germany and provided, of course, that the learnings are positive, will be in the situation where we will implement the same type of solution in Belgium. So first element, building on technological knowledge and experience that we are doing in one entity to extend those learnings to the other entity. Second element where we can, of course, build together in terms of diversity, in terms of inclusion, we are a European group. We are working with a lot of nationalities. We can exchange people between both organizations, and we do that. We do that on a regular way, regular basis, so to learn to work together with different cultures, different, different people. And that's, of course, something that all people appreciate a lot.

Yes, even in COVID times, we work together. Stéphanie, do you have a question for Olivier?

How is sustainability embedded in the Elia Group organization?

We do have dedicated CSR officers, so in both companies. And on top of that, you have seen today, we presented you our internal Act Now program. That is embedded also in a structure running these projects with a steering committee and ensuring that all the activities that are happening there and that are coordinated there flow into the processes of the company. And very important element also to properly embed it into the group because, in fact, in the EGMB, which is the Elia Group Management Board. These are the directors that are directly accountable for what is happening and that ensure that everything we're doing in our strategy is done in a sense that it leads to our sustainable business strategy. So that's why we ensure the consistency within the group and ensure that we roll it out. And even if, Stéphanie, it was not precisely the question about other elements that are important is to make it happen, you saw our people in the movies. So we have the formal structures to ensure it works, but you have seen, I think, a couple of people where you feel even in those digital movies, how much they want the sustainable activities to happen and how they connect them to their daily reality.

We have very passionate collaborators in that regard as well. Stéphanie, next question?

How do you ensure security of supply when, at the same time, implementing this ambitious sustainability road map?

Indeed, a couple of years ago, we heard many times that, in fact, you have to choose either you want to be safe or you want to be sustainable. And we see today that we have launched so much how it works to integrate sustainability into our daily activities, how we integrate renewables in a sustainable way, but a safe way, and those elements concerning market evolution, for example, pave the way towards a market that is supporting also a sustainable and stable way of running the system. And so on the ecological eye management, you have the example as well, how we found a solution to first run on a safe way our grids, but allowing for diversity under our corridors. And this is why I don't see that much the dilemma anymore. And I think that sustainability goes perfectly with security of supply and with the safe system. And by the way, I think it is extremely sustainable to have a safe and reliable electricity system.

Indeed. Stéphanie, next question. Maybe one for Catherine.

Why do you put such an emphasis on your societal challenge if the GHG protocol doesn't account for it?

Yes. Thank you. I would say 2 elements. First one, like we mentioned, at different times during the presentation, it's at the very heart of our mission that we decarbonize society to enter stable future for Europe. It was in one of the charts shown by Olivier, the emissions linked to all activities are indeed contributing to less than 1% compared to the emission of the power sector. And so it shows also that's where we can have impact. That's by decarbonizing the power sector that we will have an impact on the level of emissions for society. So that's one element of answer. The second element of answer is, in fact, it's a win-win. It's a win-win because most of our emissions, they are linked to the use of electricity that we are doing by transmitting the power. So by decarbonizing the system, we are also decarbonizing our own emissions.

Okay. Thank you, Catherine. Maybe last question, Stéphanie?

We see that the impact you will have with your societal challenges will be very big. So why even invest money and resources in decreasing your own footprint?

Yes. That goes a bit in the same direction, that Catherine was just answering. We are happy, in fact, that those questions show us that our audience has understood how important it is as a TSO to act on this societal challenge because this is what we can bring to society what maybe other companies cannot do. On the other hand, if you want to be coherent in your own culture, if you want to be consistent and convincing in what you're doing, like other good companies that are acting as role models, then it's important, in fact, to behave in the same sense for your own backyard. And this is what we are trying to do or what we are -- that's why we're integrating everything we're doing in our strategy. In fact, in order to ensure that we are consistent, coherent and maybe we inspire a few others to go in the same direction. And maybe a last point because Catherine also mentioned that on SF6, for example, here is something -- I mean, if we do not send clear messages to the market that we need here alternatives, that we want these alternatives, who will do that? But here as well, we work together with the other European TSOs, with other grid operators in order to convince that here, it's on our own footprint, and we have to do something.

Yes, indeed. And that makes it also attractive for investors, of course, for investing in the projects of the future. Thank you, Olivier. Thank you, Catherine, for answering the question. Catherine, you stay with us, sorry. Marco is joining us for the final question around on the financial outlook. Stéphanie, what questions do we have for us?

What is your expectation on the return in Germany for the next regulatory period?

So immediately the hard stuff. Of course, we are keen to learn on that rate as well as soon as possible to make our plans on their behalf. Please note, the rate itself, it's hard to predict from today's perspective as we need to fix it in a way that it fits to 1,800 grid operators, to the need of them. So gas operator, electricity, grid operators, TSOs and DSOs. That's why it's been launched a process, and we stated on the time line to some extent. And they started with a survey, including consultants which has been appointed recently and we are keen to get information, and we are in constant dialogue, of course, to discuss potential outcomes of that survey and of the fixing the BNetzA is going to make. But for the time being, we cannot directly answer that question in a way you hope for. So sorry for that.

Stéphanie?

Do you expect to need to do a capital increase within the next 5 years?

Given all the projects? Yes. I will take the question. So indeed, if you look at the amount of the CapEx plan we have, and think in terms of how will we finance the CapEx plan, we see 3 elements. The first element is that we will continue to reserve an important -- a significant part of the profit of the company. That's 1 element. We have today a payout, which is below the 50%. In the long run, we don't expect this payout to significantly change. Second element, of course, by going into the debt markets like we did in the past. And the third element is indeed by raising equity in order to keep a sound financial balance until the end of the regulatory period. In Germany and in Belgium, we are committed to the BBB+ rating. And that's the combination of those 3 elements that will finance the CapEx plan in Germany, in Belgium, in the future. On top of that, of course, we have the inorganic growth. So the investment going beyond what we do currently in Germany and in Belgium. For those investments as well, we'll finance them by a mix of debt and equity. Okay. So it will be interesting to follow with, I would say, in the coming years. Stéphanie, your next question?

In 2020, Eurogrid issued a green bond. And today, you mentioned the rollout of our sustainability strategy. Why didn't Eurogrid issue a green bond or a sustainability-linked bond?

Yes, that's a very fair question. Please note, last time in 2020, we had 2 dedicated projects to be financed. This wasn't the case this time as we had a bundle of projects, and we couldn't give evidence that no [ group electron ] is being transported by these lines and substations, which were surely financed by that. That was an ambiguous feedback we received from the investors as we listened to them. It could be solved in a way that there's a legislation in place like EU taxonomy, but unfortunately has not been the case at this point of time where we prepared that issuance. So this time, we went in a way, in a conservative way, in accordance to our strategy with a product to the market where the investors know what they are buying and they receive something more than this as this was the feedback as well. The company is seen as well advanced on ESG matters. So in principle, it was comparable, but there was no branding on it this time.

Okay. Stéphanie?

What are the financial ability for the Elia Group to engage in nonorganic growth opportunities?

Yes, I think it comes back on the question regarding the financing of all the CapEx and all the investments we have. So in financing the inorganic growth, first, we really want to maintain the financial health of the company. And so that's the reason why you're looking at financing sources. We will finance these developments by a combination of debt and capital increase.

Okay. And the last question, Stéphanie?

How to explain the difference between the average return on equity for Belgium and the one with Germany for the current period? Is that just the difference between regulatory models?

Yes. Of course, the regulatory models are different. The countries in which we are operating are different as well. Usually, what regulators tend to do s base the remuneration off the equity on the evolution of the interest rates. And then to add a number of elements being efficiency, being incentives in order to come to the total remuneration of the TSOs. Each regulator has its own appreciation on possible evolution of the interest rates, depending also of the country where the regulator is based and also on the element that has to be added. And that's for this reason that there is a variety of regulatory regime in Europe. There is a variety of remuneration linked to those regulatory regimes. And that's also one of the reasons why we are always saying that we look for diversification of the regulatory frameworks at Elia Group.

Okay. Thank you for this comprehensive answer. Thank you, Stéphanie, for being our community host today. Thank you, Catherine. Thank you, Marco. We are nearing the end of our first Capital Markets Day, but we haven't yet heard from any of our main shareholders. How do they view the Belgian German corporation, which began over 10 years ago? And more importantly, how do they see our future? We have short statements to share with you from Lutz-Christian Funke, who is speaking on behalf of the German state-owned development bank, KFW, which holds a 20% stake in Eurogrid. And the second statement is from Bernard Gustin, who is President of Elia Group.

Ladies and gentlemen, warm hello from KFW from Frankfurt, Germany. Unfortunately, we're not able to do all this in person. So just a brief statement at the end of your Capital Markets Day from the German side. Our participation in Eurogrid is now around 3 years old, and it has developed a very trusted partnership with Elia Group. It's 2 highly complementary European companies, a true European joint venture, focused on European energy transition. And both companies have shown in the meanwhile, very highly innovative projects. And the idea is bringing all those projects together. And just putting the best of it altogether on a growing European scale. In all this time, we have established a very trustful partnership. We had a lot of discussions, meetings. And even though we're the junior partner, we have very clearly always taken unanimous decisions on all the parts which are important, on the growth strategy in Germany and Europe, on capital expenditure, on -- but also things like digitalization, sustainability, all those goals, all comes in together. And we have found Elia Group as a very professional, highly professional, a very reliable partner.

Our strategy that has been presented to you today, focused on some important societal trends that have been strengthened by the recent COVID crisis. These are European integration while leaving some room to local initiatives and decentralization, reunification of the economy and digitalization. At Elia, we feel encouraged by the fact that we've embraced those challenges a few years ago already. This allows us to better grasp opportunities and prepare the future growth of the group. Elia's Board of Directors heavily supports the chosen strategy. And in the coming years, we will continue to work in strengthening the group and creating value for our investors and the society.

So all in all, it's all going in the right direction. We're happy to be there. We're happy to stay with our participation. We are happy to look into a more German European energy transition. We're looking at the ultimate goal, 2050, a society, which is climate neutral. Let's do our first, the first steps. And I think with the first steps, we're going in the very right direction for the moment. We're very happy with our participation. We trust in our participation, and we hope you do too.

I want to thank you for joining today, and I really hope that in the near future, we will be able to see you in person.

And I'm happy to come next time to Brussels, and we can share a glass of wine after some Q&A. Thank you.

Having a drink, quite a good idea. But before we do so, Chris, I would like to wrap up this first Capital Markets Day with you, we run out a little bit of time. What would you like our audience to keep or to retain from today's events?

Well, first of all, I hope that they see that this group has developed in an important way. It almost has transformed. A few years ago, we took the decision to make the collaboration with Germany with 50Hertz, much stronger than it was before. And secondly, we fully inscribed our strategy as part of realizing the energy transition and support society in making sure that we evolve towards a carbon-neutral society by 2050. This has created a lot of investment opportunities for us because we have to build new infrastructure, integrate more renewables. And by doing that, we created a lot of societal value. We help to reduced CO2 emissions in the 2 economies that we support. But not only that, we also have created an organization that is ready for the future. We have brought together competencies, we have learned from each other, and we're ready now to go to more strong challenge that we see as likely for offshore light digitalization. This group is ready for the future. And meanwhile, over those last years, if we look at the return that we have delivered and if you compare that to period, if we can compare that with other companies on the stock market, you see as well that we have created successfully a lot of value for our shareholders. As you can see here, you see the return that you see for our shareholders compared to the peers in the sector, which is substantially higher, but also substantially higher as what we see with the average sectors in the BEL 20.

Okay. This is what Elia Group is today, but what would you like the audience to keep in mind for the future?

Well, the future will be more of that, probably even accelerated. So we will continue this strategy where we support society to decarbonize at high speed. For that, we have to do -- continue in the investments that we have in the regulated space. We have to innovate over that, and we have to make sure that we'll become a digital company fast. On top of that, the social context around us only calls for more acceleration in terms of infrastructure investment. That is an environment where we see that, as we have seen in the figures that we have to multiply by 5 by 2030, the offshore development and multiply by more than 20 by 2050, the offshore development, and a lot of infrastructure will be needed to integrate this offshore into our grids. That, of course, will create a lot of investor opportunities. Some of them will not remain only in the regulatory space, but we're ready for that. We're now preparing and gearing up that we can as well not only develop organic growth in our 2 entities, but also go outside of that in the Far North Sea, in the Far Baltics and to continue to deliver the infrastructure needed for this energy transition.

Okay. Thank you, Chris, for these closing words. And with this message of opportunity, I would like to conclude today's event. Ladies and gentlemen, we would like to thank you for attending the very first Elia Group Capital Markets Day. We worked hard on it, and I hope -- and we hope that you enjoyed it. The full recording of the events and slides used throughout today will be made available on the Investor Relations pages of the Elia Group website. On behalf of Elia Group, I wish you good health, stay safe and see you soon.