EnBW Energie Baden-Württemberg AG (EBK) Earnings Call Transcript & Summary

Welcome, ladies and gentlemen. Thank you for joining us for today's investor and analyst conference call on EnBW's figures for the first 9 months of 2022. At the moment, our CFO, Thomas Kusterer will provide you with details about the latest developments for our business and the environment we operate in and guide you through the figures for the first 9 months of 2022. Afterward, as always, we look forward to your comments and questions. And without further ado, I'll hand it over directly to Thomas to take you through the presentation. Thomas, over to you.

Marcel, thank you a lot. Ladies and gentlemen, welcome also from me. I would like to start with an overview of key events during Q3 and in the past weeks on Slide 2. In the first 9 months of this year, adjusted EBITDA was at the prior year's level. the curtailment of Russian gas supplies at subsidiaries and resulting high replacement costs for the missing gas volumes as well as higher expenses for network, security of supply measures had a negative impact. These effects were largely offset by higher earnings contribution from renewable energies and trading activities. Besides the war in Ukraine, you are facing some other uncertainties in the current environment, possible gas shortage, high market volatility, and the still unclear structure of the windfall profit level. Against this background, we reduced our full-year guidance at group level by up to about 10%. I will provide more details at the end of the presentation. However, I would like to point out that the overall uncertainty regarding statements about future developments in currently are currently higher than usual. Hence, we continuously monitor and evaluate the conditions regarding the potential impact on BW Group. In particular, since the start of the war against Ukraine, liquidity movements have been elevated, but have stayed well within scenarios analyzed.  We proactively strengthened our liquidity position substantially by entering into additional bank lines by issuing commercial paper and by actively managing our hedging position. As of September 30, we had a comfortable liquidity position with cash and cash equivalents of EUR 3.1 billion and available credit lines on a group level of more than EUR 7 billion. Division of our debut U.S. private placement in November, we successfully expanded our investor base again after issuing our first promissory note with a volume of EUR 500 million in July of this year. U.S. private placement transaction, the total volume corresponding to USD 850 million includes amounts in euros, U.S. dollars, and pound sterling with maturities of 3 to 12 years. For the majority of the transaction volume, the maturities are 10 or 12 years. This long-term financing is a perfect match to our investment projects in grids and renewables. The tight situation on the energy markets continue. For this reason, the term Cabinet approved the draft of another amendment to the Nuclear Energy Act on October 19. This lays the foundations for a limited extension of the operation of the remaining 3 nuclear power plants, Emsland, [ SAI and Necavestam2 ], until April 15, 2023.  The use of new nuclear fuel rods is not permitted. In other words, only existing fuel rates may be used in our plant, negate 2 in addition to the nuclear fuel rod in the reactor core. They are further powerfully used fuel rods in the storage pool. As an optimization step, these existing fuel rods will be reassembled in the reactor core. This will enable us to run the plant until mid-April 2023, thereby making an important contribution to the security of supply and castability during this winter. Lastly, as you are well aware, our subsidiary, VNG, applied for stabilization measures under Section 29 of the Energy Security of Supply Act in early September in order to keep financial flexibility and speed up negotiations on covering replacement costs for back-then-to-gas supply contracts for Russian gas. Following this, both rating agencies issued a note on BW Moody's published an issuer comment on the group's Ba1 rating, leaving the rating evaluation unchanged, while S&P confirmed the rating at A-, but lowered the outlook to negative. S&P stated the rating outlook could be revised back to the stable after gaining clarity on VNG's full-year losses and sufficient visibility on the German gas market. Ladies and gentlemen, let me reiterate that we remain fully committed to maintaining our solid investment-grade ratings.  Let's now turn to our results in the first 9 months of 2022 on Slide 3. I would like to start with a brief look at adjusted EBITDA and adjusted group net profit. Our adjusted EBITDA for the first 9 months of 2022 amounted to EUR 1.68 billion and is virtually unchanged compared to the prior year. This implies that we have managed to compensate the significant headwinds that we faced in parts of our portfolio when it comes to our operating earnings. As just mentioned, the polling effect had a negative impact, curtailment of fresh and gas supplies at subsidiaries, resulting in high replacement costs for the missing gas volumes and higher expenses for [ Priteserve ]. This development was largely offset by higher earnings contributions from renewable energies and trading activities. We you look at the details in a minute. Having said that, adjusted group net profit attributable to the shareholders of EnBW AG nearly half million to EUR 397 million in the first 9 months of 2022. This decrease is in net profit is mainly attributable to IFRS 9 effects. Before we dive into the development in our operating segments, I would like to give you an update on the latest developments at our subsidiary, BNG, which brings me to Slide 4. On October 10, NGN, the subsidiary of former Gastonia, now operating SEF, concluded a settlement that stipulates that we hail bear the full cost of replacement procurement in 2022. Furthermore, the contract covering a supply of 65 terawatt-hours per annum, which would have run originally until 2030 will be terminated effective end of 2022. Given VNG has not sold any gas volumes resulting from this contract at fixed prices beyond 2022, we archiving no longer any exposure under this purchase contract from the beginning of 2023 onwards. The settlement of the -- what contract was a major step for B&G and significantly reduced the risks resulting from gas replacement procurement. Vinci's second supply contract with freshers gas from export covering 35 terawatt hours also expires at the end of 2022. However, since VNG itself is the importer under this contract, and had particularly sold gas to its customers at fixed prices for 2022, replacement procurement costs continue to be incurred by VNG. In our results for the first 9 months of 2022, we reflected a total charge of almost EUR 1.2 billion for replacement procurement costs already incurred until the end of September and an assumption about VNG's residual contribution for the costs until year-end. The remaining replacement procurement costs for Q4 2022 of almost EUR 600 million have been taken into account as part of our nonoperating results. Two important aspects should be taken into account here. First, these estimates were based on the market forward prices as of September 30, 2022.  In the meanwhile, these have reduced significantly, thereby decreasing the expected negative impact by a 3-digit million amount. Secondly, we expect the residual cost to reverse to a large extent once we have reached an agreement with the federal government to compensate VNG for the canceled gas levy. What is important to take away is that from the beginning of 2023 onwards, VNG will no longer have any risk under either of the 2 purchase contracts. When it comes to the [ certified tariff contract ] we've got from export, talks with the federal government and the relevant ministries are progressing very well. We are confident of reaching a satisfactory agreement for both sides in the near future that will at least particularly compensate PNG for the expenses it has incurred to ensure the security of supply. As we certainly understand, we are not yet in a position to comment on the details as disagreement is subject to pending official and court proceedings. But let me be clear from today's perspective, we expect that the government will not take any equity stake in VNG. Ladies and gentlemen, let us now look at our 3 business segments in detail, starting with smart infrastructure for customers on Slide 5. Adjusted EBITDA in this segment, the first 9 months 2022 was on the same level as the prior year period at EUR 321 million. The short year-on-year increase in procurement cost for electricity and gas was offset by positive earnings contributions from newly acquired subsidiaries at our home storage provider, Senex. Adjusted EBITDA of our segment system-critical infrastructure on Slide 6, accounted for nearly half of our operating earnings overall.  Compared to the previous year's period, it increased slightly by 3% to EUR 944 million. As a result of the sharp rise in the number of deployments and market prices, we see a significant increase in expenses for free reserve measures, including redispatch to maintain the security of supply. On the other hand, concession revenues were higher due to a higher electricity price differential between Germany and the neighboring countries, France as well as Switzerland. On Slide 7, let me turn to sustainable generation infrastructure. Adjusted EBITDA in this segment slightly increased by 3% to EUR 878 million in the reporting period compared to the previous year. Let's look in more detail as a result of the 2 components of this business segment, starting with Renewable Energies business. Here adjusted EBITDA rose significantly by more than 50% to EUR 839 million, mainly due to the following 3 effects. First of all, IBW commissioned new solar farms, which contributed to the increase in earnings. Secondly, we benefited from higher market prices. And finally, wind yields were above prior year's level, which was in historical comparison, well below average. With regards to fermegeneration and trading, adjusted EBITDA dropped significantly by 88% and to EUR 39 million compared to the prior year period. The curtailment and suspension of gas supplies due to the Russia-Ukraine war and the negative valuation effect on derivative financial instruments had a significantly negative impact on earnings in this part of the business segment. These were particularly offset by higher market prices and a positive earnings contribution from trading activities. Let's now briefly look at the development of our retained cash flow on Slide 8. Our retained cash flow rose significantly by almost 70% to EUR 1.56 billion. Noncash items include, amongst others, the valuation of raw materials, consumables and supplies mostly gas and storage. The dividend to BW shareholders for the financial year 2021 was EUR 1.10 per share. Adjusted for the valuation effect of IFRS 9, this corresponds to a dividend payout ratio of 36%. This brings me to the development of net debt on Slide 9. As of September 30, net debt amounted to about EUR 9.4 billion, which is some EUR 600 million above the level end of 2021.  Working capital increased by EUR 2.3 billion due to an expansion of inventories and the reduction of net margin payments received since the end of 2021. Net investments amounted to about EUR 1.5 billion, almost EUR 1 billion were attributable to investments in our grid infrastructure. is mainly related to projects under tricks development plans and to the expansion of renewal of the distribution grid. Moreover, we invested some EUR 477 million in our renewables business to complete our [ Mortein and Goreski ] solar parks and to secure a lease option of the East Coast of Scotland to develop a 2.9-gigawatt offshore wind farm together with BP. On the other hand, we divested 49.9% of a 600-megawatt solar portfolio, which also includes the new large-scale solar farms [ VoCotescabe ] and Altice. About EUR 217 million were allocated to investments in our segment smart infrastructure for customers, predominantly for rolling out our emobility, fast-curing infrastructure. repayment of 2 subordinated bonds with a nominal value of EUR 725 million and USD 300 million, respectively, at the beginning of January 2022 was an increase in our net debt by about EUR 500 million. At the same time, pension provisions decreased significantly by about EUR 2.4 billion given a substantial increase in the relevant discount rates from 1.15% by the end of 2021 to 3.75% as of September 30. Liquid funds deriving from the Renewable Energies Act increased by EUR 955 million compared to year-end 2021. Since these funds are restricted and cannot be used to repay debt of EnBW Group. We also show net debt adjusted for these effects, adjusted net debt increased by 15% and in the first 9 months from EUR 10.4 million to EUR 11.9 billion. Let me illustrate our revised outlook for the full year 2022 on Slide 10.  As already mentioned at the beginning, the level of uncertainty increased, namely the war in Ukraine, the high market volatility, and the process gas shortage plus the still unclear structure of the windfall profit levy. Against this background, we reduced our full-year guidance at group level by up to 10% and now expect adjusted EBITDA for the full year to amount to between EUR 2.7 billion and EUR 2.9 billion. The segment level, the earnings guidance for smart infrastructure for customers remains unchanged. And -- in system critical infrastructure, we expect the segment result to fall significantly short of the forecast range stated in the integrated annual report 2021 and to also drop below the prior year level due to the expected further increase in expenses for [ CridReserve ], including redispatch to maintain security of supply in the fourth quarter of 2022. This will be offset in subsequent years, but will still impact earnings in 2022. And lastly, we also expect sustainable generation infrastructure to fall short of the initial forecast range with the results ultimately depending on the fine solution at VMG, still under discussion with the federal government, and the final structure of the announced [ Penford ] profit level. Having said that, I would like to point out that against all the challenges in the market environment, our business model proved its robustness again. We firmly expect to close this year very well despite the above-mentioned negative effects.  The unexpected impact from reduced gas supplies from Russia is limited to 2022 and will be a thing of the past from 2023 onwards. Hence, we believe that we are excellently positioned for the future with our integrated lineup across the entire energy value chain and that our business model is experiencing significant tailwind from the accelerated transition of the energy system in Germany. And with this, I would like to hand over to operator to kick off our Q&A session.

[Operator Instructions] First question is from the line of Calum Emslie with Fidelity.

I've got a few questions, but just first one, looking forward to next year and the sale of Transnet BW, I was wondering if you can give us some indication of the potential cash inflow from that? I've seen press articles suggesting an EV of 2 billion. But I think the S&P recent S&P report suggests 2 billion to 3 billion cash inflow. So I was wondering if you could comment on that or the impact of -- on net debt from that potential transaction? And maybe any indication around timing as well? And then also, I was wondering on second question, net debt, can you give us any indication what you're looking at for year-end? And perhaps how much of that working capital increase you expect to reverse? I noticed there was talking about gas bills and so on. I guess, is that going to continue into 4Q? Or should we see some reversal by year-end? And then yes, just finally, can you give us a breakdown of the private placement tranches that you did basically or an indication, say, of how much you did in each currency and what coupon you paid for each currency and maturity, if possible?

Calum, let me get started with your question as regards to Transnet. First of all, the process as such is very well in the timeline we've anticipated. So we assume that by year-end or in Q1, we will be able to finalize the transaction, and we do have good competition around this asset. So that's the timing. Regarding cash flow and cash inflow -- sorry to say that we do not give any indication at this point in time given that we're in the middle of the sales process, I hope you will appreciate that. As regards to net debt, by year-end, we assume the net debt level being between EUR 12.5 million and EUR 13 billion. As regards to working capital level, the working capital is extremely high for the time being 2 reasons predominantly, first of all, our gas storage is at almost 100% levels. And secondly, when you look at our hard coal inventories, we do have significant hard coal inventory currently at our power stations to ensure security of supply through this winter. So I would assume very much depending on the weather and how cold wind is going to be in the next 6 months that these levels will go down slightly for Q4. What I would assume is actually that working capital will go down significantly in Q1 because we do assume that gas storage levels will be significantly below current levels and also that our inventories in hard coal will go down at this point in time. When it comes to U.S. private placement, very briefly, around 50% is actually in euros, and the rest is U.S. dollar and pound in. I hope that kind of answers your question, Kevin. Yes, mostly.

I just wondered -- I mean, I guess, if I may, I have a follow-up on that. I mean given you went for the private placement market, and I guess you haven't said the coupon level or indicative levels. I suppose should we assume that, that is cheaper than what you think you could have funded in the bond market? Or was there another reason for going for the...

Tom, I think it's a fair underlying assumption, actually. That's what we currently do. We are looking at various instruments and we go in the market, which seems to be the most preferable for us as a company. So a fair assumption.

[Operator Instructions] Next question is from the line of Andrew Moulder of CreditSights.

Calum actually asked quite a few of the questions I was going to ask myself. But maybe I can just follow up on some of those. On the Transnet disposal, I know one of the things S&P is perhaps a little bit concerned about with the ENBW, is the size of the minorities that you have. And obviously, if you sell 50% of Transnet, you're going to have significantly larger minorities. I mean, do you believe that your rating could potentially be under pressure if you do sell Transnet? I mean, obviously, you're reducing your percentage of regulated income, plus you're increasing the minorities. I just maybe a little comment around that. Also, I just wanted to clarify the net debt number. You said 12.5 billion to 13 billion. Is that pre or post the EEG adjustment? And perhaps now a couple of other questions. I wanted to try to understand where we are exactly. You talked about the windfall profit levy. And I understand it's uncertain, but perhaps you could just update on sort of what are the latest proposals that have been put forward. I mean, is it purely a sort of power price cap on the inframarginal technologies, which I've seen figures of maybe EUR 180 per megawatt hour, which stinks EUR 100 per megawatt hour. So perhaps you can comment where we are on that. And is there also going to be a price cap on gas and how is that going to work? And finally, sorry, on the windfall profits, I've also heard that there's supposed to be some sort of decision at the legislative level on the 18th of November, where we might get some clarity. Do you believe that that's a reasonable date? Or do you think that's optimistic? And sorry, my final question, just on the VNG effect, you had EUR 1.2 billion in adjusted EBITDA, which I think you said was the cost that you've incurred up to the third quarter, plus an assessment of what you would incur in the fourth quarter. But then you had another EUR 600 million in the non-operating result. I don't quite understand why you're putting it in 2 different categories. And I don't quite know why you're saying there's only a 1.2 billion effect when that seems to me like a 1.8 billion effect. Could you just perhaps clarify exactly why you've got those 2 numbers there and why you've categorized in that way? I'll stop there, I think, for the moment.

Andrew, good to hear you actually. Andrew, let me get start with your final question, the BMG question. Yes, we've recorded EUR 1.2 billion in our operating results. And as I just said, it's everything we've incurred until the end of September, including underlying assumptions what we would have incurred under the gas levy because you may recall in the guess that we would also have -- would adjust at cover 90% of the cost for the fourth quarter. So in this EUR 1.2 billion, we assume that we will get a reimbursement from the state for the fourth quarter. So it's -- all -- it's the gas from exports, everything in the third quarter, including EUR 200 million for which we agreed with the government and an underlying assumption, actually what we might incur for Q4. The EUR 600 million is actually what could be the max risk we are facing in case that we will not get any kind of compensation for the fourth quarter. However, we need to reflect on that because it's the price levels of the forward prices as of September 30, and prices went down significantly since then. So we can reduce the EUR600 million already by a couple of EUR100 million. And the rest, we assume, will be covered by the hopefully soon-to-come agreement with the government as regards to the compensation for the 35 terawatt gas from the export contract. Does that answer your question?

Yes. So I mean it seems to be counterintuitive to me because I didn't assume with the gas levy being canceled, that your EUR 1.2 billion would have assumed you actually received compensation when actually you're not getting compensation at the moment. But I understand where it's coming from.

We split it deliberately because our underlying assumption is that our maximum risk or a maximum charge for B&G by the end of the year will be the EUR 1.2 billion, very clear. And we also do not assume that actually that government is going to take a stake of -- within VNG. So we are just short of finalizing agreements, but it's too early to be more precise on that, Andrew. And now let me get started with your first question as regards to Transnet BV. Your quest was around rating and whether or not our reading is going to be under pressure due to the fact that we are increasingly looking at the minority stakes within our business. That's at least how I'm reading your question. And no, Andrew, because we're already steering our rating prorata. So it's already in our underlying assumption. It's already reflected in our ratings. Does it answer the question?

I don't know. I mean I'm not sure that the extra minorities that you'll have when you sell Transnet, that's already reflected in the ratings that you're getting from S&P?

Yes. We're already looking at 4 later numbers, actually. So we are already looking at numbers reflecting minority stakes. And S&P is fully aware of the sale of [ 12 billion ]. So we do not expect any additional pressure due to the sale of [ 1 billion ]on our ratings. To your second question, actually regarding the 12.5 billion to 13 billion guidance as regards to net debt, that including the EG account means we are looking at 15 billion if you look at the adjusted net debt number. And your final question was around the windfall profits and how it's going to be set up. Indeed, Andrew, contrary to the -- on the European level with EUR 180 per megawatt hour across all technologies. What we are currently seeing here in Germany is technology-specific power price caps. However, just on the inframarginal technologies, which means that the hard coal and gas will not be included in this 74-profit levy. So it's quite similar to what we have seen on ELIV. However, this technology-specific caps. And the exact cap level is not decided yet, so it's still under discussion. However, we do assume that we will get some clarity. You refer to the 18th of November. That's what I've heard to -- but I do not know actually if we do have the clarity at that point in time. Right.

So that cap is on the inframarginal generation technologies. There's not going to be a cash on gas prices?

Exactly on gas and holdcos -- no cap on gas and no carbon on HoCo.

Okay. And no cap on gas that's sold into the general market to your consumers to businesses or anything like that?

Yes, no cap at all when it comes to gas and hard cost. And it's predominantly in our case, renewable energy.

And it's going to be different prices you think for each technology?

Exactly. That's currently the way the government is looking at it.

Maybe just a quick question on that. Are you expecting that there'll be any sort of cap on the nuclear generation, the extra 3 months that you're going to be doing?

Yes, absolutely. If nuclear is part of the in-for-profit levy. So from today's perspective, we need to see actually what it really means in terms of profit for these 3 months very much depends on the level of the cap.

Right. And sorry, just on the nuclear is it definitely going to run for those 3 months? Or are we still waiting for a decision at the beginning of December?

No further decision needs to be taken. It's clear. The 3 power stations are allowed to run until the 15th of April next year.

Yes, sorry, I knew they were allowed to run, but I thought the government was going to take a decision at the start of December over whether they would be required.

No, that's clarified, meanwhile. No further decision needs to be taken and will be taken by the government as regards to the fact whether or not the power stations are allowed to run or not.

If you will allow me, I just have one more question then. On the gas contracts, you've got 100 terawatt hours of VNG ending at the end of 2022, right? So what's going to happen beyond that? Do you have replacement gas that DNG can then still supply to its customers? Or are the volumes at VNG going to reduce by, I don't know, 50 or 60 terawatt hours in 2023?

Actually, we are replacing the volumes in the wholesale market. We are looking at further contracts, let's say, in Norway, and potentially and going forward, LNG, however, it might well be that we do have less volumes available for our customers beginning next year. Yes. We do not have any kind of -- I mean, for the obvious reasons, long-term contracts anymore from Russian gas, and that's the 100 milliwatts you're referring to.

And you can't give any clarity on how they're actually going to pay the compensation. I mean, you seem pretty definite that there's not going to be a government stake taken in VNG. But I mean, that would seem to me to be quite a neat solution. They take a 10% stake, which gives you, I don't then 200 million, 300 million, 600 million of compensation through an equity injection, but that's definitely not what's going to happen.

It's definitely not what's going to happen actually. The state does not intend to be a shareholder or take shareholdings within VNG will find a different solution. And I hope that we will be able in the next days, not weeks, to provide a bit more clarity around that.

Next question is from the line of James Sparrow with BNP Paribas.

Really, just one follow-up question. Just on the transit sales. You talked about closing it by the end of this year or Q1 next year. Would that actually be agreeing the transaction or actually closing the transaction? And I'm thinking receipted proceeds, whatever they might be, are you expecting those to come in? In call it, Q1, I'm thinking clearly around liquidity grounds.

We assume that all the cash inflows will be next year. So that's the underlying assumption. I think it's also in line with the process where we are currently in. So that's how we initially planned it actually. Does it answer your question?

Yes, that's fine. I mean, I say, I kind of think of it from more from liquidity given that rating comments.

Next question is from the line of [ Lando Sense ] with M&G Investments.

Can I just check a few sort of little list of questions, if I can. I throw them and maybe just whiz through them. You mentioned on the price cap is devils in the details of implementation. And I just -- I guess what I'm curious there is how reassured you are given interactions and I guess how sort of front foot government has been on this, that the details can be worked out and there won't be any sort of collateral damage from that. A separate question just on VNG. Andrew touched on the sort of portfolio game forward. I'm just sort of curious, maybe just isn't time you can answer, but in terms of the state not taking the shareholding, what drives that decision? Why that's different from Uniper? Is there something obviously you can just be aware of in maybe the situation was less fragile than Uniper, but just to understand it be helpful. I guess just on credit ratings. You mentioned a very strong commitment, Thomas, to strong investment-grade credit ratings, and that's really appreciated, obviously. I just reminded with that, given the pressures you're under this year, and obviously, the energy price isn't sold yet is fixed. We have to live through and see how -- what sort of shape it has, whether there's any other sort of -- if you need other credit support, whether your main shareholder is in a position or shareholder position to help or whether reverse is true given the cost of energy prices, they're actually pressuring you for dividends. So just how that dynamic works? And maybe last question is to throw in there. You've obviously seen the announcement from RWE on 2030 target to exit lignite. Just in terms of your coal lignite assets in terms of when do you expect to update on those in terms of conversion, we patient or closure, is there a natural point where you'll be able to update us more on that?

Alan, let me get start with your last question regarding our coal assets. We will update you next year on that. We need to get some more clarity on some aspects. But from my personal perspective, I would assume that we will close our power coal power stations earlier than we have curve indicated so far. Let me now to your question regarding price caps. I think we're in a good progress with the government in terms of how the overall framework is set up. There are some concerns from our perspective, one being that the government might be looking at kind of retrospective application starting September 1. I think we need to be very mindful in doing so. So it's always a question of investors, let's say, trust into frameworks. So I think you need to be mindful -- when it comes to capital levels, a lot has been done, and we have been working with the government on ensuring that we've been heard what is needed to ensure that merit order is still in place and the market itself is working even with this price cap. So I think we are in good progress here to come up with a sensible solution. I would hope also when it comes to administrative processes because what we should be avoiding is a lot of bureaucracy and the kind of very critical monster. But that's a concern, but I think we will find a solution here too. Regarding VNG. When it comes to VN indeed, from my perspective, we know what we currently see and what is very clear. we will not have an equity stake by the government within VNG. It's about compensating VNG for the fact that they were -- that they ensure security of supply in the gas market, and V&J did not forward any kind of increased price levels regarding the replacement procurement costs to its customers. So we are talking about a compensation here for not forwarding increased price levels to the customers. And that is just that doing so ensuring security of supply in the German gas market. And to your final question, as regards to ratings, yes, indeed, I mean, we've just lowered our guidance by up to 10% for year-end. However, we are still within the guidance we need for our solid investment-grade ratings. And to your second part of this question, of course, as always, I mean, our shareholder base is extremely stable long-term shareholder base. And if and when needed, we will get any support from our shareholder base, but it's not needed for the time being, to be very clear. I hope that answered your question, Orlando.

Next question and a follow-up question from Calum Emslie from Fidelity.

I just wanted to follow up on the nuclear. I guess a 2-part question. I mean, the first thing is if you did need to run beyond April, how easy would it be to get the fuel rods required? I mean, is that actually a physical possibility? And I know it is legally it's meant to ended in April, et cetera, et cetera. But looking forward, sort of conceptually like how EnBW and actually within Germany, how are you looking at the capacity margin, i.e., the amount of electricity production, you've got available looking into sort of winter 2023. I mean, we've all seen EDF nuclear forecasts. We know that the capacity margin isn't great in a lot of other European countries. And so it seems odd that, that would unless you're expecting is Germany or EnBW expecting that you're going to get material volumes of Russian gas back in 2023? Or basically, you're going to have to keep running coal plants at full pelt maybe for the next 2 or 3 winters so. Can you just sort of give us some color on how you're thinking about that and maybe the places of nuclear within that?

Calum, I mean, I think the political will is very clear, and it's a political decision that's been taken to really close down the 3 nuclear power plants by mid of April next year. So as you just said, conceptually or theoretically, it's all theory beyond this date. I would -- from my perspective, I would not assume that the power stations will run beyond mid of April. We are not allowed to buy any new fuel rods. So I think this decision is quite stable. And it's a fair point as regards to the power generation for next winter, we do not assume that we will get gas from Russia next year. However, having said that, your final comment on hard quarter, I think, is very topical. I would assume that our hardcore power stations are going to run full power over the next window, meaning winter 2023, '24. And that is hopefully actually sufficient to ensure security of supply in Germany. But there's no more I can add to the discussion at this point in time, I'm afraid. I hope I could particularly answer your question, Carlo.

Next question is from the line of Alessandro La Scalia with BlackRock.

We have a few questions, mostly to clarify a few things that you said during this presentation. One is on your guidance. So if I write comparing what you had in H1 in terms of overall yearly costs of the shortfall of Russian gas. You're now adding around EUR 600 million, EUR 700 million of more costs. But there is only EUR 200 million impact on your guidance in terms of EBITDA. I mean you were reiterating your guidance in H1. Are you saying it's essentially well, EUR 200 million below the level of 2021. So I mean, I'm just trying to understand how -- why is that? Why your guidance didn't go down more. The other question is on your debt outlook for 2022. If I'm right, you are essentially saying that you're going to have EUR 3 billion to your net debt in Q4. I'm not entirely sure I understand from where that would come. Also considering that I imagine that part of your additional gas search costs are going to be reversed once the gas is injected, and that's going to happen at some point also during the winter. So I'd like to hear from you about your assumptions around that. And then -- last question, possibly, and that's on 2023. Now again, something that I find striking is that at the end of the day, despite what happened despite this EUR 1.2 billion hit that you're going to take -- you are already taking at EBITDA level. Your EBITDA in 2022 is, again, only 200 million lower than 2021, which seems to imply that without that, you would have had an extraordinary good here. Should we imply something about that for your 2023 results? I know that that's -- I mean, we're not necessarily company apps, and at, there are a number of moving parts. But possibly, the question is, would you expect to resume a more normal growth rate in 2023? I mean, I'm not going to ask you to guide us what you see. But again, it would be interesting to understand for you what are the main moving parts in terms of operational performance for next year.

Alessandro, actually, let me get started with the first question and perhaps actually also allow me to include your final question into my answer. Indeed, your math is absolutely right. We increased by 700 million the charge due to VNG, and we lowered our guidance by roughly EUR 200 million, which shows very clearly the robustness of our overall business model, and that portfolio effect, you can see here, paid off. So we had positive earnings in other areas in renewable energies in trading predominantly. So that's actually compensating for the additional losses we have incurred between the second quarter and by year-end. That's why we only have to reduce our guidance by the -- yes, you indicated 200 million-ish number. And when it comes to forward-looking statements, I mean, as you already said, I mean, we would certainly not provide any guidance for next year. However, I mean what we said, and I think that's obvious, the EUR 1.2 billion is a one-off. And to a certain extent, we would assume that positive tailwinds we are currently experiencing in the markets will sustain for a bit longer than just 2022. But that's all I can give you at, let's say, guidance for the time being. When it comes to our net debt, indeed, it's an increase of roughly EUR 3 billion, and it's linked to gas storage and an underlying assumption as regards to levels of gas storage by year-end, but also prices. And the same is true for our inventory -- our hard coal inventory. We are still increasing, by the way, our hard coal inventory as we speak. So yes, the main factors for the EUR 3 billion are gas storage and coal inventories by year-end. Does that answer your questions?

No, no, no. I understand again your prudence about looking into 2023, but it is going to be interesting. Yes. And again, thanks for explaining the fat, yes, of course, imagine that you're still into a phase of increasing storage in October and therefore, I mean, that balance is going to probably increase economically in Q4.

Next question is a follow-up question from Andrew Moulder with CreditSights.

Yes. I bet you thought I had so many questions before I couldn't possibly ask anything else. But yes, I just wanted to check on a couple of things. You talked about the private placement, I think in answer to the first question or so. And I just wondered, obviously, you have a hybrid with the first call date in 2024. And I mean, really, what we've seen this year, the hybrid markets essentially closed. And I just wondered whether you would consider refinancing a hybrid, if you needed to in the private placement market, given how you seem to be quite attracted to that market at the moment. The second question, I just wanted to ask again on the technologies and different prices, the different technologies, and so on. And I just wondered how that's going to work for something like pump storage in Germany. I mean, clearly, pump storage is usually used when prices are really high, and it's very economic for them to do that, very profitable. But if you start imposing a price cap on that, there could be a danger that pump storage plants would be used just almost as run-of-river plants and used during base load times. It would not be available when they were actually needed. I just wonder how the German government is thinking about tackling that? And my final question Obviously, you've got a new CEO, and I'm just wondering if there's some big strategic update coming next year because I presume he will want to have a look at the business and kind of reevaluate business priorities. So can we look forward to some sort of strategy update next year?

Let me get started with our U.S. private placement and your comment on hybrid. So give me but no comment on the instruments we are going to use in 2024. So it's a long way out, and we'll see actually what is the right market for this product at that point in time. As regards to pump storage, I should have added that actually to the exclusion list earlier. So it's not -- it's coal, it's gas, and also pump storage is excluded from the cap contrary, by the way, to run off the river, which is included in the price cap, so included in the windfall profit levy. And regarding to our new CEO entering effectively next week. Yes, I would assume, too, that we'll get some strategy guidance next year. Normally within ENBW, we do have a strategy Supervisory Board meeting by mid of year. So I would assume it's the same next year. And I -- certainly, we will see -- we'll get some update here until providing some update on our strategy. It's at least my underlying assumption.

Maybe I can just ask one more question. I always do. I guess really -- a lot of clients I speak with are actually fairly comfortable with the gas situation this winter. But I just wonder what you -- what are sort of MVW's expectations for next winter? I mean, with VNG, you're obviously fully involved with the gas market in Germany. Are you thinking that there's going to be a real concern about gas supplies for next winter rather than for this winter? How do you see that situation evolving?

I think very fair. I think it's a challenge next year when it comes to gas. It very much depends, of course, on this window already. If we do have a mild winter, and we will get out of this window with higher levels in the gas storage. I think it's very much done. If we have low levels, it's going to be a challenge to fill the gas storage to a level we have seen this year. I mean, we do have the new FSRUs coming in, the floating storage and regasification unit. If they are on time, there's also the likelihood that it's doable. However, I mean, it is a challenge from a model perspective. Very clearly.

Sorry. Even if the German sort of population and the economy manages to reduce demand by the 20% that I think they're targeting, do you still think it will be a challenge for next winter?

I think it's not so much the 20%. It's more actually the better actually, that's microns -- because the rate-related impact is what is decisive actually for gas consumption.

There are no further questions registered at this time. I would like to hand back to Marcel Munch for closing comments.

Thank you, Thomas, for your answers and comments, and thanks to all of you on the call for making the time. We now wish all of you a nice and peaceful end-of-year season and look forward to welcoming you again will present our full year figures of 2022 on our next conference call on March 27. Until then, all the best and goodbye.