VERBUND AG (VER) Earnings Call Transcript & Summary

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

Thank you very much. Ladies and gentlemen let me welcome you to our presentation and let me thank you for joining today's conference call. I hope you're all well and healthy. Now before we move into the analysis of our business development, let me make a few general comments about the first 3 quarters '21. The energy business environment continued to be very favorable for VERBUND. Prices for primary energy sources increased strongly. The reasons for the increase in gas and coal prices included, as most of you know, the low average gas storage levels, unfavorable weather conditions and supply disruptions in an environment where demand is recovering from the repercussions of the historic lows coming from the COVID-19 crisis. In addition, demand from China strongly increased as well, for example, for LNG. At the same time, prices for CO2 certificates increased alongside the above-mentioned developments as did wholesale electricity prices, which had new record highs. The wholesale energy prices are an important factor for the business performance of VERBUND. Thus, we were able to strongly benefit from these developments. VERBUND shares ended the first 3 quarters '21 with a value of EUR 87.7 representing a performance of 25.6%, with the corresponding market capitalization of more than EUR 30 billion, VERBUND is by far, the number one in the Austrian Stock Market Index, ATX, and among the bigger utilities in Europe. Against this background, let me now present the figures for the first 3 quarters. At the beginning, as always, let me highlight the most important influencing factors for the results development in the first 3 quarters. Following the development of prices at the electricity exchange and based on our hedging strategy, the average achieved contract price increased by EUR 7.4 to EUR 51.3. The hydro coefficient determining the generation from our run-of-river hydropower plants was 1 percentage point below the long-term average, but 1 percentage point above the first 3 quarters of 2020. Production from hydro reservoirs was much lower compared to last year. On the other hand, the contribution from flexibility products, especially control energy, pumping and intraday trading strongly increased by 28.6% compared to last year. Finally, there was a positive contribution from the full consolidation of Gas Connect Austria. Now the impact of these influencing factors is as follows: EBITDA strongly increased by 16.3% to EUR 1.150 million. The group result increased by 23% to EUR 587.4 million. The adjusted group result increased by 20.9% to EUR 566.2 million. The operating cash flow was lower at a level of EUR 510.6 million. The free cash flow was negative at a level of EUR 595.8 million due to the lower operating cash flow, the acquisition of Gas Connect Austria as well as higher CapEx and dividends. Net debt increased by 47.6% to a level of EUR 2.77 billion. Based on the strong figures and the good market environment, we increased our outlook for 2021 on 12th of October of this year. VERBUND now expects for '21 a reported and adjusted EBITDA between approximately EUR 1.49 billion and EUR 1.59 billion. And the reported group result between approximately EUR 740 million to EUR 810 million. The payout ratio will be between 45% and 55% of the adjusted group results, which are between EUR 720 million and EUR 790 million. On the bottom right side, you will also find our guidance for APG, which is approximately EUR 210 million; for Gas Connect Austria, approximately EUR 70 million; as well as for our flexibility products, which is approximately EUR 140 million. Now on the next page and before I talk about the different segments of our company, I will give you an overview of the hedging volumes. As you can see, we have created a new chart because the average achieved contract prices are always of great interest to you. I hope you'll find this overview helpful. At the end of the first 3 quarters '21, based on our hedging strategy, we achieved an average achieved contract price for our hydro generation of EUR 51.6 for '21; EUR 62 for '22; and EUR 60.9 per megawatt hour for '23. Please note that we have already hedged approximately 96% of the volumes for '21, 60% of the volumes for '22 and approximately 21% for the volumes of '23. Now on a mark-to-market basis, as of the 26th October, we calculate with a price of EUR 58 for '21, EUR 88.8 for '22 and EUR 82.1 of '23. As most of you know, EUR 1 plus minus has a sensitivity of approximately EUR 25 million in the EBITDA line. Now on the next few pages, we have slightly changed the reporting which we're providing to you -- we give you more insight into the segments. And the first one is the hydro segment. And there, I will go into the key influencing factors. At 0.99, the hydro coefficient, an index quantifying the hydropower generation of the run-of-river power plants, was 1 percentage point below the long-term average, but 1% above the level of the first 3 quarters 2020. The production from annual storage power plants decreased by 10.7%, mainly due to less turbining. Own production from hydropower, therefore, overall decreased by 589 gigawatt hours or 2.4% compared to the first 3 quarters of 2020. Higher average achieved prices and an increase in the contribution from flexibility products overcompensated the reduced volumes. Therefore, the EBITDA in the hydro segment increased by 17.8% to EUR 841.8 million. Our main hydro projects, the 480-megawatt Limberg III pumped storage power plant project and the 45-megawatt Reißeck II pump storage power plant projects are both on time and progressing well. Now let me continue with an analysis of the own generation from new renewables. The new renewables coefficients, an index quantifying the generation from wind power and PV amounted to 0.88 in the quarters 1 to 3 '21 compared to 1.02 in the quarter 1 to 3, 2020. Generation from wind power decreased by minus 13.7% or 93 gigawatt hours and amounted to 587 gigawatt hours. Less favorable wind conditions in all markets, i.e., in Austria, Germany and Romania were the reasons for this development. Generation from PV amounted to 1.6 gigawatt hours in the reporting period. Now when we look at the EBITDA development in the new renewables segment, we see that EBITDA decreased by 37.3% to an EBITDA amounting to EUR 26.8 million. Higher prices could not compensate for much lower volumes. In addition, higher procurement expenses in Romania due to low output to cover for electricity delivery obligations took its toll on the EBITDA development. Let me continue with an analysis of the sales segment, comprising trading and sales activities of VERBUND. Taking a look at the EBITDA development in the sales segment, we see that EBITDA increased by 44.6% to an EBITDA amounting to 82.0%. The improvement in EBITDA results from high contributions from flexibility products as well as higher sales to end customers due to higher volumes and higher prices. VERBUND delivered electricity and gas to approximately 535,000 end customers, representing an increase of 3% year-on-year. Now let me continue on the next page with the analysis of the other segments. Generation from thermal power plants was down by 61.3% or 495 gigawatt hours, stemming from the decreased use of our CCGT in Mellach for congestion management and the decreased use of the Mellach district heating plants due to the discontinuation of our coal-fired generation. However, the EBITDA development more or less remained equal to the corresponding lower use of fuel. The EBITDA contribution from KELAG, the provincial utility from Carinthia increased by 17% to approximately 39.5% due to a better hydro situation and higher achieved sales prices compared to last year. Finally, let me inform you that our Mellach CCGT was contracted from APG for future congestion management starting with the 1st of October '21. In addition, CCGT Mellach is providing district heating for the city of Graz. The district heating power plant Mellach not contracted by APG and is, therefore, mothballed as of the 1st of October '21. Next page is on our Grid segment. As you know, the Grid segment consists of our regulated business, which is Austrian Power Grid as well as Gas Connect Austria. First, contribution from APG. As you know, there is a difference between local GAAP and IFRS. Under IFRS, in contrast to local GAAP, volatilities in the results contribution cannot be avoided because the so-called regulatory account cannot be applied. So the EBITDA for the first 3 quarters '21 from the Grid business according to IFRS was approximately EUR 161 million. The guidance for the Grid is approximately EUR 210 million, which is an increase compared to our last guidance, which was at EUR 170 million. Gas Connect Austria operates and construct natural gas, high-pressure pipelines in Austria. The company is also responsible for the marketing and provision of transport capacity at border points, so-called entry and exit capacities and the transport capacity required for domestic natural gas demand. Gas Connect Austria operates approximately 900 kilometers natural gas, high-pressure pipelines in the Grid. There are 5 compressor stations positioned along the pipelines, which guarantee the relevant pressure. And in addition to operation maintenance and repairs, all these are also important task, which Gas Connect Austria has to pursue. The company plays a pivotal role in the supply of natural gas in Austria and Europe. The natural gas is transported to the Austrian federal states, but also to Germany, France, Slovenia, Croatia and Hungary. Now with regard to the result contribution of Gas Connect, we only report June to September '21 on an isolated basis, amounting to approximately EUR 36 million. Please note that we do not provide values from last year as we did not own the asset by then. The guidance for '21 is approximately EUR 70 million under IFRS. The guidance relates to the months June to December '21. On the right side of the slide, you will find information regarding the regulatory system. Andreas will now take us through the key financial figures. Please, Andreas.

Thank you, Peter. So the next slide shows VERBUND's consolidated key figures for the first 3 quarters 2021 on a reported and adjusted basis. So the EBITDA increased by 16.3% to EUR 1,150.6 million. We have already mentioned the most important influencing factors, the sales prices, the water supply, the flex products and the positive contribution coming from the full consolidation of Gas Connect Austria. The financial result improved by EUR 45.4 million from EUR 16.8 million due to a significant increase in the other results from equity interest mainly due to a one-off effect relating to the full consolidation of the e-mobility providers metrics, a higher equity interest coming from our participation in Austrian provincial utility, KELAG, and a further reduction in interest expenses. The reduction in interest expenses was mainly due to the decrease in interest payments for bonds. The group result increased by EUR 109.6 million to EUR 587 million. The adjusted group result was up by 20.9% to EUR 566 million. EBITDA margin increased strongly to a level of 64.3%, which is not only driven by the increase in wholesale prices. It is also driven by a valuation effect in the electricity revenues according to IFRS. Finally, I would like to mention the additions to the tangible assets which were above the previous year's level at EUR 430 million. The additions concerned mainly investments into hydropower assets as well as into the Austrian high voltage grid. When we move to the next slide, you see the key financial figures relating to cash flow and debt. Here, you see a big influence by the -- coming from the strong increase in electricity wholesale prices. So the operating cash flow showed a decrease by 40% to a level of around EUR 411 million (sic) [ 511 ], mainly due to changes in the working capital, higher tax payments and also -- and this, I think, is the most important influencing factor the margining payments for the energy trading business due to the strong increase in electricity wholesale cases. Let me mention that this is only a temporary effect once these contracts are closed the margining payments, of course, will be paid back to VERBUND. Due to the decrease in the operating cash flow and increase in investments in hydropower plants in the Austrian high voltage grid, the acquisition of Gas Connect Austria as well as higher dividends, the free cash flow after dividends is negative by about EUR 600 million. Net debt increased to around EUR 2.8 billion. This is mainly driven by the fact that we have issued a bond agreement sustainability-linked bond for the acquisition of Gas Connect Austria. So the corresponding figure for the gearing is therefore at the level of 41.9%. A few last words to the financial liabilities. I think when you look at this chart, you see on the left side at the debt maturity profile, which is characterized by 2 peaks, 1 in 2024 and 1 after 2028. As I mentioned, financial liabilities have increased because of the acquisition of Gas Connect Austria. So the total number of financial liability is currently EUR 1.848 billion. Yes, we have committed and uncommitted lines in order to secure our liquidity needs and the interest rate mix in our financial liabilities is around 68% is fixed interest rates and 32% is floating. The rating of VERBUND AG currently unchanged. We will have our annual rating meeting soon. We can confirm currently the rating of Standard & Poor's at single A/stable outlook, and Moody's at A3/stable outlook. Now I would like to hand on to -- pass on to Peter again, for giving us the final outlook.

Thank you, Andreas. Yes, as always, at the end of our presentation, we give you the outlook. Also, we would like to highlight the various sensitivities. Now a deviation of plus/minus 1% in the generation from hydro has an impact of plus/minus EUR 6.2 million in the results, a deviation of plus/minus 1% in the generation from wind has an impact of EUR 0.3 million. And a deviation of plus/minus EUR 1 in the wholesale price has an impact of EUR 0.6 million in the group results as a result of the high hedging level, which we have already this year. On the basis of the aforementioned developments, we increased our guidance for the full year '21. As I mentioned before, on the 12th of October, we now expect a reported an adjusted EBITDA of approximately between $1.49 billion to EUR 1.59 billion and the reported group result of approximately between EUR 740 million and EUR 810 million. All this under the assumption of average hydro and wind generation for the last quarter '21 as well as the chances in the risk situation of the group. Now for the financial year '21, VERBUND plans to pay out between 45% and 55% of the group results after adjustment for nonrecurring effects of approximately between EUR 720 million and EUR 790 million. With that, we have come to the end of our presentation, and we are happy to start with our Q&A.

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

Yes. 3 Questions on my side, if I may. The first one, I mean, Peter, you referred to it, is quite extraordinary what is currently happening in power markets at the moment. A few commodities going crazy. Power prices going with them. How this -- what's the general view of how this will play out over the winter and into 2022? Is that a short-term spike that will all normalize by 2022? If you stare onto your crystal ball. And also, if you already expanded your normal hedge path to take advantage of these prices, can you see this increasing further, if we're going to see further price spikes. And the second question is, I mean, we all see the reasons why your hydro EBITDA keeps rising. But your regulated earnings are also increasing quite nicely between flex products, APG, Gas Connect Austria, you're now expecting EUR 70 million more for the full year. Can you run us through the drivers behind it? Is it volume? Is it price? Is it volatility? And if all of this is linked to the quite extraordinary conditions we are seeing now, should we expect much lower numbers for 2022? And lastly, Andreas referred to it, when he mentioned the net debt level and the operating cash flow. How much exactly was the cash outflow from variation margins?

Thank you, Lueder. On the first one, extraordinary, yes, I think there are so many different words to describe what we are currently experiencing, I'm perfectly honest by saying I have not in my wildest dreams expected the kind of rise in which we have seen. It is a situation which requires a fundamental discussion on many different levels. As we are in the midst of the energy transformation as we're in the midst of the climate discussion. So this is a very, very important point. But you were more specific. You basically said what are our expectations through the winter and coming into spring. We think that we are going to have a similar kind of situation, which we're currently seeing throughout the winter. If the winter is very cold, we could even see a further increase. We currently think that Nord Stream 2, which would help the situation will not go online before the end of the year. That was the original expectation. Now we think it's rather going to be spring next year. As I say, this is our expectation. Also on Nord Stream 2, we don't have a crystal ball. But when we come to spring, particularly when we come towards summer, we think that there is going to be a normalization, particularly on the gas price front. We also think that coal prices will come down. The same is, in our view, not true for CO2 prices. We think that they will probably remain around the level where they currently are. But with the input prices for gas and coal coming down, we should see what I would call a normalization of electricity prices. And we think that the forward curve, the backwardation of the forward curve in all the commodities and therefore, also the electricity prices is a pretty good indication where it could move towards to. Now in terms of your subquestion, the expanded hedging, yes, you're right. We had specific points, which we carefully calculate also statistically. And whenever we reach those points, we increased our hedging because we would then have come to the conclusion that this is an extraordinary move upwards, and therefore, we should take advantage of that, but being loyal to our long-term hedging program, we never go overboard. And the reason for that is very simple if you think back 6 months, you would have thought at the time that we have seen such an extraordinary increase in prices that at that point in time, we should have really gone out and hedged like there is no tomorrow. If we have done that, we would have left a lot of money on the table. And that again has shown that it is very, very difficult to predict markets. It is very difficult even short term to predict developments. And the result of that, I think that we should be quite happy with our hedging strategy. The next point on the drivers. I will go through it step by step. On the flexibility products, you're right, we have increased from our original guidance, we have seen interestingly less on the congestion management side. But we have seen actually the first time for many years, much better revenues on control energy. The control energy side has been very stable over like 4, 5 years. And all of a sudden, we have seen much higher prices for control energy. At the same time, congestion management which has always provided us with very generous revenues, has come down. Congestion management coming down has actually helped the grid, APG because on the APG side and the tariff they were originally budgeting for higher expenses in congestion management since it was lower, they have additional revenues. The same is true for the auction side and some other areas. As a result of that, we have -- and again, this is the IFRS not the regulatory account. This is the IFRS. So everything where the tariff is more generous than the actual costs, which we have in IFRS goes directly to the results. And there, we were able to increase from our original guidance of 170 to 210. Yes. So this is on the regulatory side and on the flexibility side. Now we had a question with regards to our net debt. And then I would like to hand over to Andreas.

One additional remark to the regulated business. I think you mentioned this is increase in the result from Gas Connect Austria to EUR 70 million. I think this is only -- it is a one-off effect coming from an insurance payment coming out of a court, the court proceedings with regard to the [indiscernible] accident a couple of years ago. So it's a slight increase, and as I said, it's only the one-off effect. With regard to, I think, the question was with regard to the variation margin. This is correct, Lueder. We had a strong cash outflows based on the price development. I think that this development could be seen for all the utilities being active in long generation, I will say, and we expect figure here. But of course, it's highly volatile, but at the end of the third quarter, there was an additional year-to-date payment for the variation margin of around EUR 350 million, which, of course, is directly going into the operating cash flow is negative -- it's a negative effect on the operating cash flow. But you have to take into account that we are basically a short-term hedge. And based on this effect next year when these hedges are running out, basically, this variation margins will be repaid to VERBUND. So it's basically a time effect. So we expect next year that we will have the opposite effect in the operating cash flow.

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

So 2 questions from me. First one on the Limberg III plant. I understand you still have to take financial investment decision on this one. Could you give us an idea and also on how the CapEx profile look like? I think it was a sizable investment EUR 0.5 billion, if I recall. It doesn't seem to be in your CapEx plan at the moment. And then the second question, thanks for the new hedging slide. So I think you've been taking advantage of those high prices ahead more or less 10%, having 10% more of your generation ahead for years 1 and 2. Is that the most you can do? Should we expect that 10% to be 15% or maybe a bit more? Or that's all you're willing to deviate from your normal hedging strategy?

Yes. I will start with the hedging, and Andreas will give you an overview in terms of the slides, the slices -- CapEx slices into Limberg III. Yes, maybe I should quickly sort of like summarize again where we stand in terms of our hedging. And then I will explain under what circumstances we would increase our hedging. Again, for '21, we are literally per today, we are 97% hedged. Therefore, because the power prices are so high, even a few percent can make a difference, yes? Which is why on the mark-to-market, we are getting to something like approximately EUR 58. On '22, the outstanding prices because we have, as I mentioned before the backwardation the effect is not as high as it is in '21. But still, we have much higher prices for the outstanding volumes than we have for the hedged volumes. So when you look at the 60%, 63%, 64%, which we have hedged for '22, the hedging level is at EUR 64.7. What we have, what we currently see for the period in the market is around EUR 130, therefore, mark-to-market for today, we get to something like EUR 88.8. And for '23, again, since we have further backwardation, we see something like EUR 82.1 for the mark-to-market. So you already see how the normalization of power prices, what we discussed before, obviously has an impact on the overall prices where we can sell our electricity into the future. We have further points defined. So we have -- because of the very sharp increase, we have increased our hedging when we reached very high points. We have additional points defined, which are even higher. So should we have a very cold, a very strong winter. As a result of that, we see a further increase in commodity prices and therefore, in power prices, then it could be that we have an additional trigger in terms of accelerated hedging. Now with that, again, over to Andreas on the slices for Limberg III.

Yes, Limberg III, a big project, Mikel, currently not reflected in our CapEx program. Also, I think the additional CapEx in our high voltage is still not reflected. So please be a little bit cautious with our current CapEx plan, which will be soon updated. With regard to Limberg III plant, so the total CapEx is around EUR 500 million. The CapEx will be split over 4 years. So between 2022 and 2025 and the peak of investment is in 2023 and 2024. As a last indication, we will spend around EUR 50 million in 2022, a little bit less than EUR 200 million in 2023 and a little bit more than EUR 150 million in '24 and around EUR 100 million in '25. So this is the rough split of the CapEx.

And the next question is from Louis Boujard of ODDO BHF.

Yes. Just a follow-up then on Limberg. Is it possible since you provided the EUR 500 million CapEx envelope expected. Is it possible to provide as well what could be the load factor to be expected on this plant going forward? And then my questions were more regarding the flexibility products first. Could we have the actual figures of the 9 months? I'm not sure that I was able to find it? And more precisely, is it possible to have the split into the disclosure that you provide now -- you provide indeed a split, which is a bit more detailed. And it could be interesting to find the flexibility project underlying element in each of these items, if possible. My next question is regarding Mellach. I see that you mothballed the plant, which is understandable, but why don't you decommission it, in fact, why do you prefer to mothball it? Is it just a first step or is it because there is any other reason on it? And then my last question regarding renewables. The traditional renewable, I would say, solar and photovoltaic and wind. You have a very limited contribution of this kind of activities for the time being in your activity. Probably one way to speed it up quite strongly would be to make some acquisition. And in the meantime, the price on the market lower at this stage. So do you see a room for significant development in this field in the next few years?

Yes. Thank you very much. A number of interesting questions. I will start with the renewables. Yes, I agree. If you compare it to hydro, the renewables installed capacity is relatively small. And yes, we have participated in a number of M&A processes this year, last year and we continue to participate in such processes. And yes, it is possible. You could even say it is likely that within the foreseeable future, we are going to increase our generation capacity on the renewable side, on the wind and the PV side through M&A. On the load factor, it would be very misleading if I gave you a specific load factor because the beauty of Limberg III is that it is part of the system of reservoirs. So the fact how we -- to give you a little bit of insight, the fact how we calculate our IRR for Limberg III is not on an isolated basis. but we always have to see it in comparison to the system within which it operates. Also as part of this project, we are increasing one of the reservoirs by increasing the height of the wall. Therefore, we have much more volume in there. And the reason why we think that this is going to be a very interesting investment is not just that together with its sisters and brothers within the system, it is one of the largest batches in the world. It is also -- it also has the opportunity to very flexibly faster and more efficient pump when the price is low and turbine when the price is high. So it is more a function of the best hours, the cheapest hours, the efficiency of the turbine and less what you know from the classic generation in wind in run-of-river power plants in CCGT where you have a load factor. The next question was on Mellach. Mellach, yes, you said it yourself. The first step is the mothballing. There are certain reasons why we didn't go first or directly into decommissioning. We thought about it, but we consider it would be better to mothball first. But you have done a number of other questions.

I think one -- another one was the split of the flex product.

Oh, yes, The split of the flex product. We have not given the specific split of the flex product. We've always given the entire number for flexibility products. Just to remind everyone, in our terminology that would include intraday trading that would include pumping and ironing -- pumping and turbining. The third one would be control energy and the fourth one, congestion management, and we have always sort of like given you more granularity like we have done before, that's why the changing -- it is changing because control energy has gone up, but we don't give a specific split.

[Operator Instructions] The next question is from [indiscernible], Citibank.

Just maybe 3 questions from my side. I wanted to ask you the first on your -- how you think about capital allocation in light of the success profits which you made. As you mentioned yourself, you didn't expect this type of power prices. I just wonder at what point we should see either dividend increase or update on the CapEx plan and how you think about this excess profits and the allocation of it? And second thing on the Gas Connect Austria, I wanted to ask you, what is the kind of a medium-term outlook for the profitability of it? Is there anything in the -- in your contract that would undermine the profitability like some of the contracts expiring. And if so, what would be the year? And finally, I wanted to ask you on the flex product. Do you expect any -- an impact on the profitability of this activities based on the upcoming switching off the plant in the German market, the nuclear lignite imminent shutdowns, there's quite a few capacity going off? Is this changing any dispatch across you -- to Austria?

Yes. I will start with the flexibility products. We don't foresee any specific changes there because of the shutdown of the nuclear, the remaining nuclear power plants. On dividend and CapEx, well, we have not too long ago, increased our payout ratio by 5 percentage points. Now with the improved profitability as a result of the power prices. Obviously, the number, the absolute number, which we are paying out as a dividend is going up and currently also because of our large CapEx, which we are planning, we are not foreseeing any changes in terms of the payout ratio. On the Gas Connect Austria, I would like to sort of like to share the answer with Andreas Wollein. First of all, the Gas Connect Austria, as you know, is a regulated business. We have a regulated system, which runs until '24, then we are going to have, obviously, already starting earlier, there is going to be a regulatory review and as a result of that regulatory review, it is possible, I mean, this is still far away, but it is possible that the regulated return could come down. Now there is one difference between Gas Connect Austria and the APG. APG has tremendous growth. Why? Because in order to integrate renewables we have to make huge investments, by the way, like the rest of Europe into the grid into transformer stations. So we have recently increased our 10-year plan to around EUR 3.5 billion. Now EUR 3.5 billion is an investment, which obviously goes directly on top of the regulatory asset base. and our return is a return of our regulatory asset base. Now in Gas Connect Austria. The only additional investments because there we have an existing very high-quality pipeline. The only additional investments would be into hydrogen. This is something we would very much like to do in order to support the regulatory asset base on the gas side. We are -- like the rest of Europe, we are currently waiting for a regulatory framework, which we consider very important, a regulatory framework that every investment into hydrogen, into the refitting of the pipelines, into the refitting of the compressor stations not only get a regulatory return but hopefully get the regulatory return with the premium because hydrogen is considered to be a very important factor within the energy transformation. Andreas will give you a little bit more insight on the capacity side, which you also asked about.

Yes. So with regard to profitability, you know that we have currently a regulatory system of a new regulatory period, which foresees a 5% return in Gas Connect Austria. So we will have that regulatory return, as I said, within or in the next 4 years. There is a certain volume risk. This is correct in Gas Connect Austria. But I think that's compensated in the regulatory tariff. There will be a decline, I think, in contracts in long-term bookings between 2025 and 2030. But of course, that was well known when we took over the asset and it's very transparent. And I think, as Peter mentioned, we see basically 2 developments. One is we are convinced that, let's say, [ fossil ] gas, will further play an important role within the next decade. But we will see basically a trend from long-term bookings towards shorter-term bookings, so there will be more -- there is, I would say, a structural shift in the next 5 to 10 years. But shorter term bookings have a higher revenue multiple so that's not necessarily negative. And of course, we see this higher CapEx requirements for hydrogen, for making the gas grid H2 ready. And this is something where there is a lot of discussion. We have, of course, also our plans here with regard to Gas Connect Austria because it is a long-term target to, let's say, to make sure that the future everything will be -- will also go across Austria. We have a very central position here as a gas hub. It's basically a little bit comparable to the electricity system. Austria based on its location within Europe plays a very important for the exchange of electricity and also for gas and maybe also in the coming years for hydrogen.

And there are no further questions in the queue. So I hand back to the speakers for closing remarks.

Yes, I would like to thank you all for your interest, and as always, a very interesting discussion. And I look forward to seeing you either during our next conference call or maybe during upcoming road shows when we are allowed to travel again. So with that, all the best, and have a nice day. Thank you.

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