VERBUND AG (VER) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the conference call of VERBUND AG. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Peter Kollmann, who will lead you through this conference. Please go ahead.

Thank you. Ladies and gentlemen, Andreas Wollein and I would like to welcome you to our presentation for the full year 2020 numbers. And let me thank you for joining today's conference call. Before we move into the analysis of our business development, let me make a few general comments about the business year 2020. The year 2020 was characterized by obviously COVID-19 pandemic issues and severe repercussions on the economy and the markets. The energy market environment drastically deteriorated due to low demand; oversupply of CO2 certificates; and decreased prices for coal, gas and oil. However, the situation improved. And in the second half of 2020, VERBUND was able to present very respectable numbers despite the crisis. We saw an increase of 56.1% in our share price in 2020, making VERBUND by far the most valuable company in the Austrian stock index ATX. This confirms the positive effect of our measures taken in the past, which as you know focused on strengthening the free cash flow and reducing debt levels. The rating agencies S&P and Moody's recently affirmed our rating at A stable and A3 stable. With these ratings, VERBUND is among the top performers regarding its rating levels in the utility sector. Because of our very clear, sustainable position; and consistent implementation of comprehensive measures in the past, VERBUND was able to prove the resilience of our business model to cope with prices and volatility. As a beginning, let me highlight the most important influencing factors for our results development in 2020. The water supply determining the generation from our run-of-river hydropower plants was 1 percentage point higher than the long-term average and exactly the same as in full year 2019. The contributions from the hydro and sales segments were higher than in 2019, whereas the contributions from the grid segment, the renewable segment and all other segments were lower compared to last year. The last influencing factor I would like to mention are slightly higher contributions from our flexibility products. The impact of these influencing factors on the key figures of VERBUND in 2020 are as follows. Reported and adjusted EBITDA increased by 9.2% to EUR 1.292 billion. The reported group results increased by 13.8% to EUR 631 million, and the adjusted group result increased by 11.2% to EUR 610 million. The operating cash flow is very strong at a level of EUR 1.19 billion, being only 1.1% lower than in full year 2019, so basically the same. The free cash flow after dividend was positive at a level of EUR 299.5 million but 53% lower than in full year 2019. The change is mainly due to higher investments into tangible assets and higher dividend payments compared to 2019. The free cash flow allowed us to reduce the debt level further. Net debt decreased by 16.6% to EUR 1.88 billion. Based on the strong results, we will propose a dividend of EUR 0.75 per share in our AGM on the 20th of April, which reflects a payout ratio of 41.3% on our reported group results and a 42.7% on the adjusted group results. In the following charts, I will explain the influencing factors on our results development in more detail. Let me start with the analysis of our generation volumes. After a good first quarter in 2020, we saw very low hydro volumes in the second quarter, followed by above-average levels in Q3 and Q4. For the full year, at 1.01, the hydro coefficient was exactly the same level as in 2019 and 1 percentage point above the long-term average. The generation of annual storage power plants increased significantly by close to 15% in quarters 1 to 4 2020. Therefore, our own production from hydropower slightly increased by 864 gigawatt hours or 2.8% compared to 2019. Generation from thermal power plants was down by 34% to 536 gigawatt hours. Our CCGT Mellach produced 201 gigawatt hours less electricity in the reporting period due to lower congestion management. The Mellach district heating power plant, which has been used exclusively in gas operations since the end of the first quarter 2020, reported a reduction of 335 gigawatt hours. Now the generation from wind power slightly decreased by 5 gigawatt hours or a very small 0.6% due to less-favorable wind conditions in Austria. Generation from PV amounted to approximately 1 gigawatt hour in 2020. Now the second important influencing factor on our results are the average achieved contract prices in 2020 based on our hedging strategy, which is an average contract price for hydro generation of EUR 44.6 compared to EUR 39 for 2019. Please note that, based on our hedging strategy, we price the majority of the volumes up to 1.5 years in advance. And as you know, EUR 1 plus or minus in the power price is a sensitivity of approximately EUR 25 million in our EBITDA line. Now on the next page, we talk about our flexibility products. That is, of course, one of the major trends in the new energy world, and volatility in the European grid system is exacerbated by the massive build-out of renewables. With our very flexible asset base consisting of CO2-free, low-cost pumped-storage power plants and the most modern CCGT in Austria, we're very well positioned to benefit from these trends. 2020 ended slightly higher than 2019 in terms of flexibility products with the results contribution amounting to approximately EUR 122 million. We saw lower contributions from congestion management and provision of control reserve energy but higher results from pumping and intraday trading. Please also note that, since October 2018, our CCGT Mellach has been put into a strategic reserve mechanism in Austria, under which we receive a fixed capacity payment and a payment for the generation. As a consequence, we have changed what used to be an unpredictable, volatile cash flow against a secure stable cash flow for a period of 3 years. For 2021, we guide on a relatively conservative basis an EBITDA contribution of approximately EUR 90 million from flexibility products. Now next page, on the grid. The Austrian high-voltage grid with a system length of 7,000 kilometers and interconnected capacities with 7 neighboring countries is strategically of high importance for the group because of its growing importance in the European grid system and, of course, because of its regulated character. However, under IFRS, in contrast to local GAAP, we have a volatility in our results contribution which we cannot avoid. What are the main differences? Revenue surpluses or shortfalls under IFRS are not utilized or compensated via the so-called regulatory account. Under IFRS, no rate provisions or asset line items are recognized. And IFRS uses different depreciation and amortization basis, useful lives and capitalization of borrowing costs in comparison to local GAAP. So what you see here is we show you the comparison between local GAAP and IFRS so that you have the numbers in the most transparent way. Please note that the current regulatory period started on the 1st of January 2018 with WACC of 4.88% pretax for existing assets and 5.2% pretax including an investment mark-up for new assets, therefore on average approximately 5%. The regulatory period lasts from 2018 to 2022. And the regulatory asset base for '21 is approximately EUR 1.9 billion, with a very strong increasing trend. The next slide shows the nonrecurring effects in 2020. There were no one-offs in the EBITDA section, neither in 2019 or in 2020. In 2020, we had negative nonrecurring effects related to impairments of our Mellach CCGT and the Austrian hydropower plants Gries and Graz that amounted to EUR 25 million in total, the reversal of impairments related to our wind power plants in Romania with positive EUR 32.9 million. In total, the operating results showed nonrecurring effects of EUR 7.9 million. Then of course, we have the initial consolidation of SMATRICS mobility+, which caused a positive nonrecurring effect of EUR 1.9 million. And in other result from equity interests, we have a nonrecurring effect of EUR 4.3 million related to retrospective revenue received from the sale of Sorgenia, our Italian participation which we sold years ago. We also had a large positive nonrecurring effect in the other financial results related to the measurement of an obligation to return an interest in the hydropower plant Jochenstein which amounted to EUR 32.9 million. There was also a reversal of an impairment for hydropower plant Ashta in Albania amounting to EUR 3.4 million. In total, the financial results showed nonrecurring effects of EUR 41.8 million. [ Then we had a ] change in the tax qualification of an electricity purchase right, and the effects due to the nonrecurring effects mentioned before led to an overall effect of EUR 29.3 million in taxes. After considering the impact from the nonrecurring effect from minorities, the nonrecurring effect on the group result level amounted to EUR 21 million. Now I would like to hand over to Andreas, who will take you through our key figures and our financial liabilities. Please, Andreas.

Yes, thank you, Peter. So going quickly through the development of the key figures, let me first start with the EBITDA. So as highlighted, reported EBITDA increased by 9.2% to EUR 1,293 million. The reported group result increased by 13.8% to EUR 631.4 million. The group result development were influenced by one-off effects. Adjusted for these one-off effects, the adjusted group result increased by 11.2% to EUR 610 million. The positive overall development is mainly a result of the higher contribution from the hydro segment due to higher average achieved contract prices stemming from increased forward price levels at the wholesale market. In addition, the increased production from hydropower contributed positively. The sales segment also showed a positive development mainly due to some extraordinary valuation effects. And the contributions from the grid segment and from all other segments had a negative effect due to the reasons mentioned by Peter before in the chart. The EBITDA margin is very attractive. It increased from 30.4% to 40%. The EBIT margin increased to 28.5% from 22%. Based on this positive development of results, we will propose to the shareholders in our AGM on April 20 a dividend per share of EUR 0.75, so 75 cents, which corresponds to a payout ratio of 41.3% on the reported group result and a payout ratio of 42.7% on the adjusted group result. If we move on to the next slide. Let's turn to the development of the cash flow. The operating cash flow in 2020 are slightly decreased to a level of EUR 1.191 billion. The reason for the slight decrease was higher tax payments compared to last year, whereas lower interest payments had a positive effect. The additions to tangible assets also increased to EUR 628 million. This increase was caused by CapEx for grid projects and maintenance CapEx related to hydropower plants. The main projects are the 380-kilowatt line in Austria and the hydropower plant in Töging in the southern parts of Germany. The free cash flow before dividends was highly positive. It -- before dividends, it was at the level of EUR 590.9 million; after dividends, at EUR 299.5 million. And of course, these are positive development -- or this positive free cash flow after dividends was the reason why we again could improve our leverage situation. So the net debt figure decreased from EUR 2.30 billion to EUR 1.9 billion and corresponding net debt-EBITDA went down to 1.5x. Next slide shows the development of the financial liabilities. So the debt maturity profile shows only a very small repayment this year of around EUR 30 million. The next peak is in 2024, where we have to repay an outstanding bond in the amount of EUR 500 million. As always, we have sufficient liquidity backup with a EUR 500 million syndicated loan facility which is undrawn, and we also have a substantial amount of uncommitted lines. The total amount of the financial liabilities went significantly down. It's now far below EUR 1 billion. So at the level of EUR 859 million. The average interest rate on our debt is 2.31%, still a declining trend, of course. And we have -- 100% of our financial liabilities are denominated in euros. A last word on the rating levels. So I think we had 2 confirmations. So S&P as well as Moody's confirmed the rating, the attractive rating levels, of VERBUND at a [ A/stable ] outlook and A3 stable outlook, so we are still among the best-rated utilities in the sector. And I think this was clearly a positive signal confirming, let's say, our current positioning and strategy. Let me pass on now to Peter again for explaining the CapEx plan.

Yes. Thank you, Andreas. This is an important page. As you can see, we have increased our CapEx plan to almost EUR 2.3 billion. The main part of the growth CapEx, approximately EUR 728 million, will be invested into the regulated grid business, especially into our 380-kV Salzburg line, in order to increase the capacity to integrate new renewables and better address the volatility and congestion in the grid system. In addition, VERBUND is also investing into new renewable projects and selected hydropower plants, the investments related to Austria and Germany basically the new renewable projects and hydropower. In addition to the growth CapEx, we are planning to invest around EUR 884 million into maintenance and substance CapEx between 2021 and '23, so that's approximately EUR 300 million per year. Now on the next page, to our acquisition of Gas Connect Austria. As you know, Gas Connect Austria is the Austrian gas transmission operator, where we are acquiring 51%. I'd like to mention that we expect the closing of the transaction to take place in the first half year of 2021. We discussed the strategic rationale for the acquisition in previous conference calls but can certainly do it again if you were interested. On the next slide, you will find the expected financial implications of the transaction. It's very important, that these implications are not yet reflected in the figures for VERBUND. They will only be considered after the closing. So when we come to the outlook at the end of our results presentation. As you know, key parameters for the development of our operational business are prices and hydro volumes. At the end of 2020, we have hedged approximately 66% of our hydro generation at an average price of EUR 44, which is slightly below the level of the full year 2020. However, on a mark-to-market basis, as of February 24, the average achieved price would be at a level of EUR 46.2, approximately EUR 1.6 above the 2020 level. We have also hedged approximately 15% of our hydro generation at an average price of EUR 44.6 for '22. The mark-to-market valuation shows a level of around EUR 53 for this year. With regard to the year-to-date hydro situation, we have to report a hydro coefficient of 1.03 per today, which is 3 percentage points above the long-term average. Now on the basis of the aforementioned developments, the guidance for the full year '21 is an EBITDA of approximately EUR 1.08 billion to EUR 1.3 billion and a group result of approximately EUR 450 million to EUR 590 million, this of course under the assumption of average hydro and wind generation for '21 as well as the chances and risks, well, which we have within the group being dependent on the number of external factors which we cannot influence. For the financial year '21, VERBUND plans to pay out between 45% and 55% of the group result, after adjustment for nonrecurring effects, of between approximately EUR 450 million to EUR 590 million. Now again please note that this guidance does not reflect the financial implications from the planned acquisition of the 51% stake in Gas Connect Austria. Now as always, at this point, I would like to give you the sensitivities. A deviation of plus, minus 1% in the generation from hydropower plants has an impact of around EUR 8 million on the group results as a consequence of the fact that we have already hedged quite a lot for '21. A deviation of plus, minus 1% in the generation from wind power has an impact of relatively small EUR 0.5 million. And a deviation of plus, minus EUR 1 in the wholesale price has an impact of plus, minus EUR 5.8 million in the group results. Now with that, I would like to hand over to the conference organizers and to the Q&A.

[Operator Instructions] And the first question is from Wanda Serwinowska, Crédit Suisse.

Wanda Serwinowska, Crédit Suisse. 3 questions from me, if I may. The first one is on your 2020 -- EBITDA guidance, which seems to be a bit large because, if I take 2020 as a starting point, I -- adding EUR 50 million from higher achieved power price if you mark to market, EUR 50 million from GCA. I know there is an EUR 50 million headwind from the lower grid earnings and EUR 30 million headwind from the flexibility, but I just struggle to see why EUR 1,300 million is the top end of your guidance. Am I missing something? Is it higher corporate costs? What I'm missing here. The second point is on your dividend. You decided to pay only 33% payout ratio for 2020. So at the kind of lower half of the guidance. At the same time, you're rising the payout ratio for next year, so my question is, why didn't you increase the payout ratio to 50% for 2020? I mean it wouldn't be a massive impact on your cash flow. If you could help me to understand that. And the third one is on the renewables law in Austria. Has there been any update? When -- or when can we see any update? What do you expect? And when can we see finally VERBUND building more than a few megawatts of the new capacity given your 2030 targets?

Yes, Wanda. Thank you. I will start with the first one, which is a very logical question. And I will go through the items why we have decreased our guidance. First of all is something you already mentioned. On the grid, we have a lower contribution. There are basically 2 reasons. The first one is that we have a very large regulatory account of around EUR 315 million per today. We are decreasing the regulatory accounts to around EUR 280 million, so that is EUR 35 million right there which has an impact. At the same time, we will have a lower contribution from the grid because of congestion management. Let me remind you that in 2020 we had lower expenses on congestion management. As a result of that, the IFRS numbers were higher than we had originally expected. Now we also think that flexibility products are going to come down by, as you have seen before, quite a significant number. And then of course, as we have a very large plan in terms of growth and CapEx and investments in a lot of different areas, the grid side, then of course, hydro, new renewables -- we are working on a number of hydrogen projects. Our cost OpEx has gone up by approximately EUR 40 million between personnel and other operating expenses. So when you take all that together, you get to the delta which you are looking for. Now in terms of the dividend. We have increased our dividend for the year 2020 to EUR 0.75. You might remember that the previous dividend was at EUR 0.69, so we were basically guided by giving you a linear development in our dividend payments. So when you go all the way back to 2016, you will see that, every year, we have paid higher dividend in absolute numbers. We have increased again here between '19 and '20. And we also want to show you a dividend increase in '21, which is the reason why we have increased our payout ratio from the original range of 40% to 50% to 45% to 55% to give us more flexibility to increase the payout ratio if necessary. The third point was on the renewables. If I understood you correctly, you were looking for an update in terms of the renewables framework. I cannot give you an update because the entire law still has to go through parliament before it will finally be published with all its specifics and details. Will probably be around summer, so please bear with us on the law, but I can tell you, and this is something I've already said last time, I don't think that the law will have huge impacts on us in terms of renewable build-outs. We could get -- we could have some impacts on pumped storage and possibly on smaller hydro, but there we don't have any details. But in terms of PV and wind, as far as I see it today, it is a lot is focused on the smaller PV installations. I think retail and smaller companies should be incentivized to build small PV on the roofs.

Just one quick follow-up. When you said OpEx is going up by EUR 40 million, is it something that we should incorporate into our models for the next few years? Or is it just a one-off this year? And sorry. I missed the hydro levels year-to-date. If you could just repeat that, I will be very grateful.

Yes. The hydro levels per today are 1.03. And you should account for the EUR 40 million OpEx increase in your models going forward.

[Operator Instructions] And the next question is from Lueder Schumacher, Societe Generale.

My first question is also on the great mystery that is your full year guidance given at the beginning of the year. Did I understand correctly that you have not included Gas Connect Austria in the guidance numbers you gave us? That's...

Lueder, you have only one question. Is this possible?

Only one question. Okay, I can come up with...

Only one for now. I get it, only one for now. [ There will be more ].

I can up with many sub questions.

Okay, okay...

So basically, is Gas Connect Austria, which you say the expected EBITDA contribution is 65 million -- so that is not included in the guidance, the full year guidance you have.

Right, yes. It's not included in the full year guidance.

So we should really think about the mid range of your guidance as EUR 1.25 billion instead of the EUR 1.19 billion.

You can, Lueder, but what we will do is, as soon as we have closed and come out with the consolidated numbers, we will give you a new guidance which basically encompasses both Gas Connect Austria and the additional data points which we have at that point in time.

Okay. I mean that's still -- that's helpful. It's still, I mean, power prices, carbon, of course, being the main driver here, have moved ahead quite sharply. You're still relatively open for 2021, only 66% hedged. You already gave the mark to market there. I would have thought actually it had slightly bigger impact. It still seems -- even the midpoint seems quite conservative given that, I think, you also said on the flexibility products that your guidance is quite conservative. I mean also I'm not quite sure why you expect flexibility products to come down in the year where we would, hopefully, see demand recovery, so maybe you can elaborate a bit on this and then, of course, your view on current power prices and CO2 prices. That will be [ quite interesting ].

Yes, sure. Well, first of all, on the hedging levels. The hedging levels, if I include today, sort of like the situation per today, is slightly higher. It's already above 70%. And there the mark to market would be around EUR 46. Now you're right, Lueder. If CO2 prices go up further, if power prices go up further, i.e. the short forwards and the spot prices which we will then use for '21, then of course, there is an upside. However, we have seen a lot of volatility within the last few years. We have seen major moves upwards, but we have also seen huge moves downwards, so that is something where it remains to be seen. And what we have taken is we have taken the current forwards in order to come up with the EUR 46, but yes, there is an opportunity. Then in terms of flexibility products, it is very hard, and I'm perfectly fine to admit that. It is very hard to really determine what congestion management would be even for the next 4 to 6 weeks, let alone for the entire year. That is, as you can imagine, a discussion we're having with our experts in terms of congestion management, but it depends on so many variables that it is very difficult to say. But what we see is that, with the grid build-out which has happened over the last few years, with the 4,900 megawatts electricity frontier between Germany and Austria, we have seen that there is slightly less pressure on congestion management. That is a reason why we think that flexibility products will come down slightly, and we're also predicting slightly lower pumping and turbining for this year. So in a combination between those two, this is where our assessment is coming from. And then we think that in terms of storage we have used -- in terms of our optimization of our storage content in the alps, we've done quite a lot in the last quarter of last year, which you have seen in the -- in that increase which I have described before of between 14% and 15%. And we are estimating for this year that we will use slightly less from our pumped storage. I can't give you a specific number, but if you take all that together with the points I made to Wanda before, this is how you come up with the guidance which we have given. But what you said is very important. Those numbers do not include Gas Connect Austria.

Just one follow-up question, if I may. You said on the grid EBITDA that the regulatory account has come down by EUR 35 million in -- or will come down in 2021. Is that something we should expect on a regular basis, i.e., every year, there should be these headwinds of EUR 35 million?

Yes, we have discussed that the regulatory account will be decreased, and I wouldn't say that we have to account for EUR 35 million every year. We think that -- because it has gone up so much higher than we expected because the regulator has not included the regulatory account in the last few tariff runs, we actually want the regulatory accounts to be decreased. So we think that -- possibly. I mean we don't have an agreement yet with the regulator, but we assume this year EUR 35 million. It could be less. And then going forward, what we would like to do is decrease the regulatory accounts by between EUR 20 million and EUR 25 million.

EUR 20 million to 25 million, that's great.

The next question is from Teresa Schinwald, Raiffeisen [ Bank International ].

As I can hear some reluctance to comment on the renewables expansion law, I'd rather focus on renewables in general. Your CapEx plan shows a marked increase in expenses for new renewables in 2023. Could you shed some light on the pipeline as these assets are now under high demand? It's quite a seller's market. Just to give us feeling. This will be my first question.

Yes, yes, sure. The organic pipeline, as we in this round have discussed before, is very challenging. This is not just true for Austria, but it's also true for Germany. Just to give you an example: In Germany, around 100 gigawatts of solar, at least, should be built until 2030. And if you look at the annual progress that has been made there, it is not a 10 gigawatts per annum, but it is much, much less. I think we're going to have a similar issue in Austria. I think that the 12,000 megawatts that need to be built in Austria until 2030 in PV is a very, very significant number. We are currently at 1,700 megawatts, so that is a dramatic increase. And when you know Austria and the Austrian topographic situation, you will see that this is challenging. As a result of that, we think that our organic growth in Austria in PV is not going to be a huge number. It's not going to be very significant. However, we think that on the [ inorganic ] side in Germany but also outside Germany we will make acquisitions within the next few years. And those acquisitions should increase our installed capacity significantly.

And another, maybe a bit general and philosophical question as well. On its power day this week, [ BW ] announced that charging EVs, electric vehicles, someday will be for free. How would you see VERBUND in such a potential world, also with respect to ongoing engagement in SMATRICS and also the consensus for Austria that actually 330 charging stations would have to be built each state to achieve the 30% electric vehicle target by 2030?

Yes. I think that the plans in terms of charging stations, when you look across Europe and the reality, with a few exceptions, Norway being a very well-known one, the Netherlands also doing extremely well -- but then there are many parts of Europe where the buildout of charging stations is very slow. The reason is that the business model only works if you can really have huge scale, which is why I think that, over the next 5 to 10 years, we are going to see a relatively small number of players that are going to run charging stations across wide geographic regions in order to take advantage of scalability. Our business is a regional business very much focused on Austria and Germany, and we have 2 components to the business. One is the managed infrastructure, which is basically everything you need on top of the hardware. And then we have a joint venture together with EnBW for charging stations.

The next question is from Martin Tessier, Stifel.

I have 2 questions. The first one is the following. You indicate EUR 65 million of EBITDA and EUR 13 million in group result in 2021 from GCA. All right, can you confirm that these numbers factor in the returns of the new regulatory period that started this year and until 2024? Just to be sure that we don't have to adjust in another time with lower returns, I guess. And the second question: You just said that you still consider M&A in renewables. It's still on your agenda, but could you give us your view on the current valuations on the sector? Do you think that you will need to wait until there is a further correction of valuations? Or do you think that some deals could be seen and -- could be seen as attractive even today?

Yes. On the first one, the regulatory framework is going to be stable. We have -- for the gas business, we have a regulatory period that is actually longer than the one for APG, until '24. So within the regulatory periods, there will not be any changes. On the second one, that is a very difficult and highly philosophical question. The valuation of renewables is complex, if I may say. The key driver for calculating returns on renewables, both onshore, offshore and PV and of course hydro as well -- but hydro is a little bit different. I can explain it in a second -- is, of course, the power price, the captured price. We know in different regions -- we know exactly in different regions how many sun hours we have. In Central Europe, it's around 1,000. In Spain, it is around 2,000. That has a significant impact on the profitability of solar. On the wind side, we have highly sophisticated measurements. And we don't have as much history as with PV, looking back, but it is pretty good science to look at wind and wind hours. As a result of that, the key parameters for the IRR calculations are obviously the power price, which determines the cash flow in the future. Then it is the length of your investments. You might remember that we had a time not too long ago when we looked at 20 years. Then it was increased to 25 years. Now it is everybody is looking at a life cycle of 35 years. In PV, some people argue that it should be 40 years because of technical progress and quality of the panels and installations. I think 40 -- me personally, I think 40 years is too long. We use 35 years now. So -- and then of course, it's the discount rate. It's the WACC, and the WACC for everybody has come down a lot. And then all that is framed in a trend which is massive and which is going in only one direction, and that trend is that every utility and a lot of financial players are buying renewables. So you're right. The prices have gone up. They have gone up a lot, but it is very, very difficult to predict what they're going to be in the future. As a result of that, everybody needs to rely on their own models and their own calculations. As we have discussed on this very conference call a few times, we are trying to take a very entrepreneurial approach. We don't just look at our model and future cash flows. We do a lot of simulations. We look at a lot of different scenarios and then we come up with numbers which we think are the appropriate ones in terms of risk-return relationship. As a result of that, we have participated in the past in a number of M&A situations. Sometimes, we have come close to winning, but so far, we have not acquired a big [ inorganic ] situation. In the future, we will continue to do so. And if it takes longer to buy because we stick to what we think is the right price, we have many -- as you can see from our CapEx numbers, we have many opportunities to invest; i.e., into hydro, into the grid, into substance at our hydropower stations and then, of course, into the organic growth in Germany and Austria.

The next question is from Mikel Zabala, Bank of America.

So I just wanted to ask you about these Limberg III projects, this 480 megawatts, EUR 480 million investment that you discussed in your report. And on the topic of returns, I just wanted to ask what investment signals are you seeing to support the FID on this quite large investment. And is -- should we think about a certain pump spread range that makes this kind of pumped-hydro projects economical? And also, if you have more projects of this size in the pipeline for the next few years, or actually this is perhaps a special one. And the final one is what the completion date is for this particular project. I think you're expecting to take FID this year, but presumably it will take a few years to complete. And whether this is in your '21 to '23 CapEx budget or actually falls beyond that horizon.

Yes, those are very good points, and I will go through them line by line. First of all, just to give you the bird's eye perspective: Limberg III is a project we have been working on for a very, very long time. I'm not talking sort of like 5, 6 years, rather decades. Limberg III is, you're right, very complex in terms of building it. It is part of a set of reservoirs and pumping stations that are all building one huge complex in 2,000 meters up in the alps. And at the same time, this is exactly where VERBUND excels. Doing those complex hydropower projects, without being arrogant, I think we are among the best in the world. And this is something where I'm extremely confident that we're going to build it within the time frame which we have given you. Now why does it make sense from a business point of view? It is part of this complex system. And it allows us, with the newest pumps which we're going to use for this 480-megawatt project, to take advantage of low prices and high prices every second of the day. So we have a capacity also -- by creating 13 million cubic meters more reservoir which comes also with the Limberg III project, we are going to -- we will be able to take advantage of the pump spreads 24/7 at a high volume. That is going to optimize our entire Kaprun fleet, which also includes Limberg I and Limberg II. And the project, as a result of that, particularly within the framework of the energy transformation we're going through, we think, is a very significant one for VERBUND. And it will make sense from a system point of view, from the fact that -- what the future is going to look like in terms of meeting pumped storage but also in terms of its cash flow contribution to the business. Did you have an additional question with regards to Limberg?

I think it was on completion and whether the CapEx is in your 3-year [ projection ] or falls beyond that.

Yes, yes. No, in terms of the CapEx, only part of the CapEx is included in our figures. I can tell you why. Limberg III has only been approved yesterday afternoon. We had a Supervisory Board meeting yesterday, and we have received approval for building Limberg III. As a result, it has not been fully included into the numbers. So when you look at the numbers of 3 -- EUR 2.3 billion and if you include Limberg III, the numbers will go up. However, those are 3-year figures. And some areas might not be as high as we have originally anticipated because of Limberg, so I would not add the full EUR 480 million on top of the existing figures but a smaller amount.

And there are no further questions, so I hand back to the speakers for closing remarks.

Okay, thank you very much. Those were very good questions and very good discussions, which we would like to thank you for. And I wish you all the best. Stay healthy. And look forward to speaking to you soon. Thank you.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.