VERBUND AG (VER) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the VERBUND AG Half Year 2023 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Peter Kollmann, CFO, VERBUND. Please go ahead, sir.

Thank you. I'm here with Andreas Wollein. Ladies and gentlemen, let me welcome you to the presentation of our first half year 2023 results. And let me thank you for joining today's conference call. Before we move into the analysis of our business development, let me make a few general comments. Despite easing on the energy markets already again at the end of '22, which continued in the first half of '23, wholesale prices for gas fell significantly in the first half year compared to the previous year. In addition to the heightening levels of the gas storage facilities resulted here to the weaker demand for gas. This was accompanied by a drop in wholesale price of electricity. However, the market environment is still very volatile. Let me highlight one regulatory issue at the beginning. In Austria, the capital market revenues of inframarginal generators was reduced in the second quarter. The reduction of the revenue cap was from EUR 140 to EUR 120 per megawatt hours, and that applied as of the 1st of June. However, our crediting of investments in [indiscernible] generation technologies in Austria is still permitted. Now let's move on to our financial details. At the beginning, I would like to highlight the most important influencing factors for the results development at a glance. Following the development of prices at the electricity exchanges and based on our hedging strategy for our own electricity generation from hydropower, the average achieved contract price increased by EUR 69.6 to EUR 182.1. The hydro coefficient determining the generation from our run-of-river hydropower plants was better than last year but below the long-term average. However, production from our hydro reservoirs was higher by 6.2% compared to last year. Generation from wind and PV was up compared to last year, mainly driven by the new renewable assets in Spain. Thermal generation contracts strongly decreased due to lower yields of our CCGT Mellach. The contributions from flexibility products slightly decreased, mainly due to a decrease in pumping and internal trading. Gas Connect Austria, was clearly positive for the Grid segment results. The Sales segment contributed negatively, among others, due to higher procurement costs for energy. And finally, a negative impact on our results is coming from the levy on excess profits in Austria, 0Germany and Romania, totaling EUR 172 million in the first half year. The impact of these influencing factors on the key figures of VERBUND in the first half year of '23 is as follows: EBITDA increased by 63.6% to EUR 2.25 billion; and the reported group result increased by 57.5% to EUR 1.287 billion. The adjusted group result increased by 78% to EUR 1.3 billion, and the operating cash flow strongly increased to a level of almost EUR 2.9 billion. The free cash flow after dividends was strongly positive at a level of EUR 927 million, and net debt decreased by 24.5% to a level of slightly above EUR 2.9 billion. Now let me give you our updated guidance for an average hydro, wind and PV generation in the last 2 quarters of 2023 as well as considering the opportunities and the [ risk separation ] of the group. We expect a reported and adjusted EBITDA between approximately EUR 3.8 billion to EUR 4.2 billion, and the reported group result between approximately EUR 2.05 billion and EUR 2.3 billion. The payout ratio will be between 45% and 55% of the adjusted group result between EUR 2.07 billion and EUR 2.32 billion. The earnings forecast and the information on the expected payout ratio are, as you know, contingent on VERBUND not being impacted further by possible energy policy measures to skim off some of the profits at energy companies in Austria. On the next page, let me go into more details on the hedging volumes and the hedging prices, which are, of course, highly relevant for our results. I think you all know, a EUR 1 megawatt hour, plus or minus, higher or lower average achieved price has a sensitivity of approximately EUR 25 million in our EBITDA line. As of the 30th of June, we reached an average achieved contract price for our hydro generation of EUR 176.8 and we have sold approximately 88%. For '24, we have sold 44% of our generation volumes at a price of EUR 155.6 and for '25, we have sold 37% of our generation volume at EUR 140.7. On a mark-to-market basis, with prices as of the 14th of July, the average achieved contract price for '23 are at EUR 168.8; for '24, at EUR 148.8; and for '25, at EUR 135. Now let me comment on some developments in the various business segments, and let me start with the Hydro segment. At 0.95, the hydro coefficient, which, as you know, is an index quantifying the hydropower generation of the run-of-river power plants, was 5 percentage points below the long-term average and 5 points above the level of the first half '22. Production from annual storage power plants increased by 6.2%. All production from hydropower, we have overall increased by 947 gigawatt hours or 6.7% to slightly above 15 terawatt hours compared to the first half '22. Higher average achieved prices, the main reason for our increased EBITDA. However, a slightly lower contribution from flexibility products and the levies on excess profits had a negative effect in EBITDA. In total, EBITDA in the Hydro segment increased by 62.1% to EUR 1.984 billion. Regarding CapEx, our main hydro projects, the 480-megawatt Limberg III pump storage power plant and the 45 megawatts Reißeck II pump storage power plant, both projects are on time. The 11-megawatt run-of-river project, Gratkorn, is also on time and our completion is expected in '24. In addition to the above, we started the 14.3 megawatts Stegenwald run-of-river power plant project where we have an expected conclusion in '25. Now let me continue with the analysis of our own generation from new renewables. The new renewables positions, the index quantifying the generation for wind power and PV amounted to 1.01 in the first half of '23 compared to 1.04 billion in '22. Generation from wind power increased by 6.3% or 33 gigawatt hours and amounted to 546 gigawatt hours in the first 6 months of '23. More favorable wind commissions in Germany and especially new installations in Spain more than offset less favorable wind conditions in Austria and Romania. Generation from PV amounted to 161 gigawatt hours in the reporting period stemming from PV installations in Austria of 2 gigawatt hours; in Spain, 159 gigawatt hours. Now taking a look at the EBITDA development in the new renewables segment, we see that the EBITDA increased to EUR 109.0 million. In addition to the increase in volumes, mainly from our quarters in Spain, higher average ship prices contributed positively to this development. The chart also provides an overview on current developments in the renewals sector. Now on the next page, you see our Sales segments. Taking a look at the EBITDA development here, we see that EBITDA increased to a negative value of minus EUR 143.2 million. The change in EBITDA is due, among other things, to a much better result from the valuation of energy derivatives in connection with future energy deliveries while the sharp increase in electricity and gas procurement prices had a counteracting effect. VERBUND delivered electricity and gas to approximately 510,000 end customers. That represents a decrease of approximately 18,000 customers year-on-year. Now on the All other segments. The generation from thermal power plants was down by 462 gigawatt hours to 342, due to the decreased use of our Mellach CCGT for old electricity and the strategic reduction which led to a declining electricity and district heating revenue. Positive effects from the valuation of energy derivatives in connection with future energy deliveries could not compensate for this and led to a drop in EBITDA despite lower fuel consumption as a result of the reduced generation. The contribution from flexibility products decreased by EUR 5.9 million. The contribution from KELAG, the provincial utility of Carinthia, increased from EUR 5.7 million to EUR 38.3 million as a result of better realized sales prices for the long generation. In addition, the heating and trading businesses also contributing positively. Finally, let me remind you that our CCGT Mellach was contracted from Austrian Power Grid for future concession management. In detail, Line 10 is contracted from the 1st of October '21 to the 30th of September '23 and Line 20, from 1st of April '23 to the 30th September '23. In Q1 and Q4, we used Line 20 on a market-driven basis, The district heating power plant in Mellach is contracted by APG for the period from the 1st of April '23, again to the 30th September '23. Now on the next page, on our Grid segment. As you know, the Grid segment consists of our regulated business, Austrian Power Grid as well as Gas Connect Austria. EBITDA for the first half from the electricity Grid business, according to IFRS, was approximately EUR 184 million, roughly the same as last year. As a reminder, let me also highlight that as of January 1, '23, a new regulatory period started. The regulatory system has been changed. E-Control, the Austrian regulator, has set a new WACC for '23 and it's split the WACC into the WACC for existing assets and the WACC for new assets. The WACC for -- in '23 for existing assets has been set at 3.72%. The WACC for new assets has been set at 4.88%. Therefore, the overall WACC for '23 will be 3.9%. On top of the WACC at APG, can receive an incentive-based bonus of maximum EUR 12 million a year. The WACC for existing and some new assets for '24 will be set again at the end of '23 and will definitely reflect the higher interest rate environment which we're currently in. APG has appealed against the level of the WACC, mainly because it reflects the historic development of interest rates and does not reflect the strong increase in rates since last year. The new EBITDA guidance for the electricity Grid for '23, based on the new regulatory parameters and the increasing regulatory asset base, is approximately EUR 360 million. The main reason for the increased guidance are higher revenues from auctions. The planned amount of the regulatory count at the end of '23 will be approximately [ EUR 490 million ]. Now with regard to the result contribution of Gas Connect Austria, we reported EBITDA of approximately EUR 112 million for the half year. The main reason for the strong increase were higher revenues from the commodity tariff and lower energy costs. The guidance for 2013 with regard to Gas Connect Austria is approximately EUR 140 million. On the next page, I will give you the nonrecurring effects. We encountered impairments amounting to EUR 15.4 million, stemming from an impairment of the CCGT Mellach. Devaluation of the trend to offshore gas pipeline TAG profit participation rights amounted to minus EUR 0.8 million and had a negative effect on the other financial results. But we also had impairments related to the HalloSonne participation of minus EUR 15.8 million and TAG with minus EUR 2.8 million, in total amounting to a minus EUR 18.7 million. There was also a reversal impairment related to our hydropower plant Ashta in Albania amounting to EUR 6.3 million. In total, the effects on the financial results were minus EUR 13.2 million. After considering the effects on taxes and minorities, the nonrecurring effects on the group results level amounted to minus EUR 20 million. We also show the nonrecurring effects in the first half year of '22 in comparison. Now going through the key financial figures. First of all, the aforementioned developments on the EBITDA, where we had an increase by 63.6% to EUR 2.25 billion, depreciation increased by 15% to EUR 250 million, mainly due to the acquisition of Spanish assets and increased investments into the high-voltage grid. The financial results improved from minus EUR 15.7 million to minus EUR 7.1 million. This was attributable to the higher earnings contributions from interest accounted for using the equity effort, mainly KELAG, and higher interest income, while higher interest expense is mainly caused by the issuance of a schuldscheindarlehen of EUR 500 million in November and the interest expense from the loans taken over from the Spanish companies acquired in the previous year had a counterbalancing effect. The group results increased by 57.5% to EUR 1.287 billion. The group results after adjustment for nonrecurring effects was up 78%. Finally, I would like to mention the decrease in addition to tangible assets in total from EUR 588.1 million in the first half '22 to EUR 311 million in the first half '23. The decrease is a result of the fact that in '22, VERBUND did an acquisition of a 70% share in 1 PV and for wind power project companies in Spain with a total capacity of 171 megawatts. On the bottom left, you'll find additions into tangible assets of Gas Connect Austria and Austrian Power Grid. On the next page, we're looking at cash flows and net debt. VERBUND's operating cash flow strongly increased to EUR 2.89 billion, mainly due to a significantly higher average price achieved for electricity as well as inflows from margin payments for hedging transactions in our electricity business. Those were deposited with the clearing houses to exchange as a collateral for open positions and then basically come back with the prices coming down. These positive effects were partly offset by higher income tax and higher interest payments. The free cash flow after dividends showed a positive development from minus EUR 111 million to a level of plus EUR 927 million, a significantly higher operating cash flow and lower investments in property, plant and equipment where [ we're using this ] further positive development. Dividend payments, on the other hand, increased significantly compared to the previous year. Our decrease in net debt is due to lower financial liabilities because of the retail and the short-term money market liabilities. The gearing correspondingly decreased to a level of 31.3% compared with 46.8% at year-end '22. Now I'm coming to the end of our results presentation, and would like to give you our earnings outlook. As always, at this point, I would like to highlight the sensitivities. As of the 30th of June, a deviation of plus/minus 1% in the generation from hydropower has an impact of plus/minus EUR 10 million in the group results. A deviation of plus/minus 1% in the generation from wind power and PV has an impact of plus/minus EUR 0.8 million. And a deviation of plus/minus EUR 1 in the wholesale price has an impact of plus/minus EUR 2 million in our group result for '23. Now our updated guidance for '23 is as follows: VERBUND expects a reported and adjusted EBITDA of approximately between EUR 3.8 billion and EUR 4.2 billion and a group result of approximately between EUR 2.05 billion and EUR 2.2 billion under the assumption of average hydro, average wind and PV generation in the third and fourth quarter. For the financial year '23, VERBUND plans to pay out between 45% and 55% of our group results after the adjustment for nonrecurring effects. That would be approximately between EUR 2.07 billion and EUR 2.32 billion. The earnings forecast and the information on the expected payout ratio, as I mentioned before, are contingent on us not being impacted further by possible energy policy measures to skim off some of the profits of energy companies. Now with that, I would like to move on to our Q&A.

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Wanda Serwinowska with Credit Suisse.

Wanda Serwinowska, Credit Suisse. Two questions from me, plus one request. So the first question is on the 2023 guidance. I mean the midpoint, you left unchanged despite a lower revenue coverage you would expect would have a negative impact. I know there was the upgrade to your Grid EBITDA. [ CMIC ] is clearly stronger than we expected. But was there anything else that basically surprised you on the positive on the 2023 numbers? Second question is on the recent acquisition in Spain. I remember back in March, you guys impaired some assets in Spain there, the acquisition. I mean, can you give us some financial or operational data, which basically help us to believe that this time it will be a different story; you can come back at least with some value creation there? And then we can request, as always, a situation if you could share the latest hedging in the Hydro, that will be really, really appreciated. And if you could repeat the H1 actually power price, I didn't catch that.

Yes. Sure, Wanda. I will start with the Hydro. Our current hydro coefficient is 0.93. So when we basically take the hydro coefficient and we assume 1 for the rest of the year, it would be 0.98. On the power prices, I can give you sort of like the latest hedging levels as of the 21st of July, where we are hedged for 20 -- 88% at a level of EUR 176. So when we basically assume the mark-to-market for the open position, we end up with EUR 169. When we look into '24, we are hedged approximately 53% and there we are hedged at EUR 154. And as it happens, the open position currently is EUR 154 as well for '24 forward. Therefore, the mark-to-market would be up. And for [ 2025, we are hedged ] 37%, and there, again, we are hedged at EUR 141 and the open positions are approximately at the same level. So the result of that, we see a mark-to-market level there of around EUR 140. So as you see, we see a lowering of the power curve. And that is a result of the lower gas prices and that is a certainty that the gas prices need to be carefully watched over the next few months, particularly in the wintertime to see what impact the gas prices are going to have on the power prices. Now, on our recent Spanish acquisition, in terms of the value creation, there were a number of comments on the price per megawatt hours, which we paid. The value creation for that asset, for this wind asset in Spain needs to be seen, particularly in the form of hybridization and in the form of repowering. So we have -- in our due diligence, we have looked at the assets very carefully, and we have come to the conclusion that we have significant potential for a repowering and also for hybridization. The repowering has more value effect, more value creation potential than the hybridization. But at this point, we're not going to give more details than what I've just mentioned. On the '23 guidance, the reason for the guidance has been mainly the power prices. As you know, the power prices always have the biggest impact on our results and our EBITDA. And with power prices coming down, with 12% still unhedged and with volatility which we expect for the remainder of the year, that has flowed into our discussions when we determine the guidance. Obviously, we took into consideration of the fact that we have, as you have mentioned, Wanda, a new level of EUR 120 for the second half of the year, which has come down from the EUR 114 in terms of profits came in and we able to take into consideration the slightly better results from our Grid.

Can I just quickly follow-up on the H1 actually power price, if you could just repeat it. I didn't catch it. And then on Spanish M&A, can you give us some financials of the existing assets? I mean EBITDA, D&A, generation is something that we can basically work with. And then on the 2023 guidance, is there anything which is hard to see from the outside like a revaluation of hedges, something that we cannot really see from the outside that also impacted your guidance?

No. On the '23 guidance, it's very transparent. What we have said there is there is nothing hidden. There are no surprises, which we, at this point, expect. And, Wanda, you asked me about which power price, the '24?

No, no, H1 2023. Actually, I think it was EUR 180 something. The power price that you guys, you captured in H1 this year. I think you mentioned it at the very beginning of your speech.

Okay. Let me just go back to the slide.

I can follow-up with the IR team later. That's fine.

Yes, but I can even go back to the slide and give it to you right now. Yes, EUR 176.

Okay. Brilliant.

Yes. You're welcome. Good. Thank you, Wanda.

The next question comes from the line of Louis Boujard with ODDO.

Because then I will lead to -- maybe the first one, to come back on the Sales segment, which is still significantly negative. You have only 510,000 end customers and minus EUR 143 million here in terms of performance. My question would be if you [indiscernible] to either of your finance customers, would it have any impact into your Sales segment performance? Or do you have other commitments with external suppliers that would make it being then not impacted to the number of customers that you have to sell in the end? And more precisely, if you have any commitment, what shall we expect for 2024 in terms of performance for this division? Do you have room to go back to a more normal level by 2024 with the current contractual situation that you can have in these divisions? And the second question was with regards to Gas Connect Austria. I think that you touched it in the presentation but I am not sure that I got everything. In particular, it seems that it's clearly front-end loaded in terms of performance for the year 2023 compared to your updated guidance. Can you elaborate a little bit more on the reason why it is that much front-end loaded and whether it has much cost use for the remaining of the year in this division in terms of potential performance?

Okay. Now let me start with the -- with our Sales segment. We have more linkage to external suppliers. So it is basically our own generation and the procurement is on a -- is on a basis that, similar to our hedging, the procurement of the sales -- of the sales side is done through our generation. So therefore, if we decided to have lower customers because customers, at the moment, produce losses, then that would not have an impact vis-à-vis any external supply relationships, if I understood your question correctly. On Gas Connect Austria, the key influencing factor on the results there were the high energy cost for our stations which compress the gas. The compressor stations need/require a lot of energy. And with the energy prices coming down, the cost for the compression obviously comes down as well, and that has given a boost to our results. And that is the reason why the results in Gas Connect Austria have come up. And your third question was -- post it again? Sorry.

I actually did not have a third question.

Okay. Thank you.

The next question comes from the line of Piotr Dzieciolowski with Citi.

It's Piotr Dzieciolowski. [indiscernible] Just wanted to check on Spain. Can you tell us how much money you spent on all of these acquisitions and then CapEx so far? And what is the contribution we could expect from the Spanish renewable assets in, let's say, '24 and '25? Just trying to put these few acquisitions together and coming out with a multiple on it. And then beyond the repowering and hybridization of these new Spanish assets and any synergies that you could quantify between these assets and your existing operations, and that's it while [indiscernible].

Could you repeat the second question again? I had trouble...

Sure. Is there any other synergies between the assets you bought, you announced yesterday versus their assets, and then the assets that you own already, whether this is a theme, combinations or MX synergies on the CPA providing to external customers. Are there any other synergies we could think about how this [indiscernible] portfolio.

Yes. Yes, that's an important question. We -- there are 2 aspects, which I would like to put some light on. The first one is synergies in our operations. As you rightly said, we have accumulated assets in Spain, both on the solar side and on the wind side. And we believe that the combination of the production of solar energy and the production of wind can be combined into packages for power purchase agreement. We think that is a very important feature in the future. You have seen the discussion around the [ back curve ]. And as a result of that, we also believe that a lot of the future PPAs will take that into account and we will focus that our market teams will be forced to combine different production technologies in order to structure those PPAs. So that is the one side on the -- in terms of selling the generation in the most effective way. And the other aspect is to try and develop operational synergies as much as possible between the various parts in terms of maintenance, et cetera, et cetera.

And on the first question, like, can you provide your expectations still [ as the top or ] contribution from Spain and how much money you spent on all of this and then I can combine it altogether?

Yes. Coming back, you were -- at the beginning, if I understood you correctly, you were asking about the EBITDA contribution for the assets, which we just bought, which was announced yesterday. Correct?

No, for all of the Spanish assets. So I just wanted to understand, you've been doing it for more than -- like for the last year, you've been buying a number of Spanish assets. And I just wanted to understand the end outcome of it in '25, which is how much money you spent in total? And what is the expected contribution to your P&L?

Yes. I can give you an approximate number in terms of the EBITDA contribution in Spain, which is around EUR 130 million, EUR 140 million. But what I would like to mention, which is really important, is the following. When we made our acquisitions, yes, part of it were operating assets, but the focus has been on the pipeline. So what we have acquired, for example, in our project Labrador, was a relatively small amount of operating assets that has very large pipeline of around 2,000 megawatts, which are -- which have a high probability, very high probability and around 2,400 megawatts of medium probability pipeline. As a result of that, the acquisitions which we have made were focused on development and future generation and future build-out of PV and wind and less on operating assets when you look at the volume differences. The EBITDA overall coming from Spain, and that's an estimate because it depends on power prices and other factors, would be between around EUR 250 million and EUR 300 million in '26.

Okay. And how much CapEx is going to spend to achieve these numbers?

Well, the CapEx -- that's why I mentioned before, the CapEx might be misleading because the CapEx is the acquisition...

I was just trying to understand like you're going to move your spend EBITDA from EUR 130 million, EUR 140 million to EUR 250 million, EUR 300 million, so roughly more than doubling it. You spend the money so far on acquisitions. And in order to get to the '26 numbers, you need to see [ 38% ]. So what is the roughly CapEx you're going to spend in Spain over the next 3 years? I can take it also off line with the IR.

Yes. I think it would be better to take it offline because obviously, I could give you a number now, but that number could be confusing because our acquisition numbers always include the -- obviously, the operating assets and then separate amounts for the pipeline, which we value in a different way, i.e., high probability pipeline, we obviously value higher, then more probability pipeline, as a result of that. When I can give you overall amount, it might be confusing. As a result of that, we'd be more than happy, outside this conference call, to go with you through the numbers in more detail.

The next question comes from the line of Ingo Becker with Kepler.

I have 2 questions. First, on the generation price. I think the prices that you produced of EUR 176 and also the EUR 168 mark-to-market currently are above the cap. You've mentioned the cap was lowered apparently from EUR 130 to EUR 120, but I understand that's only the lower end of the range pre applicable or renewable investment [indiscernible]. Could you just confirm what your final realizable prices are for 2023 and for '24? The hedge price of EUR 165.6, so EUR 156, I understand that's pretty sharp exactly the cap for VERBUND under the new cap rule, right, just in case the cap would get extended. And that will be my second question, or actually still the first one. Do you see a risk that the caps which are meant to expire at the end of the year, will have extended what is the multiple thinking here? And the second question would be on your retail business, which has made EUR 140 million EBITDA loss in the first half. How should we think about that? I mean first, would you expect that to be profitable again next year? And is it -- it's a retail loss, actually indicating that assuming you're not recovering the full generation cost at least in the half year now, does that mean that the generation profit by that amount that you should have actually recovered looks too good this year in '23, and that will also be down next year?

Okay. Now let me start with the extension question because there obviously is one we don't know, but where, at this point, I would like to give you a judgment. We don't think that the EUR 120 cap would be extended into next year. The reason for our assumption is that the rest of the European Union has already stopped the caps from -- by the 30th of June. As a result of that, I think Austria now is the only country in Europe that has extended the cap, has lowered the cap and extended the cap. Therefore, I don't think there will -- it will be even lowered nor extended into '24. You never know. It's a political decision. But at this point of time, we don't think so. In terms of the retail business, I mean, we are working very hard on bringing the retail business back to 0 or even sort of like getting a positive EBITDA contribution from the retail business. The challenge is that there are -- that there is a lot of political pressure on the entire utility market in Austria, so not just on VERBUND, but in all the others as well to lower retail prices. It has something to do with the inflation discussion, with the media very much focusing on the retail prices. There has been a huge political discussion around energy prices. As a result of that, we need to observe the lay of the land. And at this point in time, we need to show, like all the others, prices that are loss-making for us. Now with the procurement costs coming down, with power prices coming down, and keeping the level where we are, we should basically earn ourselves back into positive territory. Will that be in '24? At this point in time, I don't think so. It will be better in '24, but it will not be -- it will not be a plus. In '25, I actually think that we're going to see a positive contribution again for the retail business. Ingo, did I miss anything in between?

Yes. Just to your guidance of EUR 3.8 billion to EUR 4.2 billion, what net achievable generation price after all caps for the first and second half are you assuming there? And for retail just briefly, when you say maybe '25, even 0, might be fully back in shape only in '26, when you look at the power forward curve, would you say that the prices we are seeing for those years are being acceptable in the political arena? So when -- and meanwhile, while prices still are higher feeding through to customer builds and I'm talking about the energy component, not the total tariff, you're accepting those losses, i.e., when you look at power forwards have been cut from 6, they get -- I mean, they say about EUR 100, are getting closer to EUR 100 baseload at least, would you say that is an acceptable level for the political world?

Yes, that's a good point and an interesting discussion. There is a lot of uncertainty around that. The political discussion sometimes gets very emotional. It's very often driven by the opposition, which have found a topic which a lot of people are interested in, which obviously concerns every single citizen. Therefore, it is a key topic. It is also highly interesting for the media. And I'm not sure where the exact level is. I mean the only points, the only data points which we have, and I'm not just talking retail now, I'm talking industry as well, is the discussion which we had in Germany, which I also mentioned in our last conference call, where the discussion was around EUR 60, EUR 70. So basically, the German industry said in order for Germany to be competitive, power prices there need to be somewhere around EUR 60 to EUR 70 million. Now, if that is a reference point of sort of like general acceptance, the EUR 100 would still be too high. However, people also get used to a new environment where energy prices are higher. So we're coming from a very low energy environment, the [ fortification ]. Then because of the war, unbelievable numbers in terms of electricity prices, gas prices. And then, of course, also retail -- retail prices. And now it's coming down and will continue to come down. But really, it still leads to political discussions because the levels are still higher than what people are used to, before the war. It remains to be seen and very much depends on -- in my view, on opposition and very much depends on how much the media focus on it as well. And in Austria, don't forget we have elections in fall of '24.

Okay. Great. And the net price?

Yes, the price is around EUR 164.

Your next question comes from the line of Olly Jeffery with Deutsche Bank.

A few questions, please. The first one, looking at your balance sheet, I mean your balance sheet's obviously very strong and we all know you're looking to draw that opportunity to move within the space. But I'd also really deploy it. And I think anyway, are you still looking for that kind of multibillion opportunity to [ borrow ] within the platform? Or do you think you will continue to see piecemeal acquisitions to suit -- the [indiscernible] acquisition, I wonder if you actually might need to consider potentially changing dividend policies for a higher payout in order to utilize the balance sheet more effectively. So your thoughts on that would be good. And the second question is just the initial guidance was based on the negative EUR 200 million derivative valuation effect. Now, in [indiscernible] the half, there's like a massive impact around that interest and [ divis ] at the start of the year. Can you just confirm that the current guidance for basing EUR 200 million for the valuation effect? And also comment that actually if you were to recut that today, what that number would be, that transaction to EUR 100 million in reality? And lastly, could you just please explain if there -- in the first half profitable and products are going very well and you're going to [indiscernible] the start of the year. At full year results, you commented that they could be down quite materially year-on-year. Why are flex products holding up much better than the new business? Your comments and thoughts on those questions would be great.

Yes, sure. Within the split, your questions, I'm going to talk about sort of what the -- about the strategy in terms of our acquisitions in Spain and the flexibility products. And Andreas will give you sort of like the detail on the derivatives numbers, which have an impact. Now, I will start with the flexibility products. The flexibility products are now slightly better than we had anticipated when we had our last conference call. The reason for that is mainly the pumping and the tunneling. The pumping and the tunneling has been better than we had expected. We also have slightly better results on the intranet trading, given the volatility. We have not seen any changes for the control energy and concession management. Usually, you might remember sort of like previous years, where we had big swings on the concession management. Concession management has been relatively stable within the last sort of like a few months, both in terms of our view of the full year. And the pumping and the tunneling has, as I mentioned before, slightly better. So the flexibility products, we think that it is going to be obviously much lower than in '22, where we had around EUR 480 million contribution in flexibility products. It is going to be much less. It's going to be around EUR 250 million, so much less than '22. But that is still a very high number when we remember sort of like the normalized contribution from flexibility products which were anything between sort of like EUR 100 million and EUR 150 million before we had a very sharp increase in power prices. In terms of our strategy for acquisitions, it is really sort of like a combined strategy of looking at large platforms. To give you an example, we have recently looked at a very large platform, which would have covered Spain, Italy, Germany and a few other countries, but mainly Spain, Portugal, Italy and Germany. We have come to the conclusion that we would not buy a platform because we thought that to put it in was too expensive. The pipeline was [indiscernible] as 2 channels in terms of the probability of implementation. So when we look at Spain, we look at both. We look at small bolt-on acquisitions, which we think fit into our portfolio both on the solar side and on the wind side. And sometimes those can be relatively small acquisitions when we feel that they fit very well. But we continue to look at large platforms. There, on the large platforms, we look particularly not too much on the operating assets, but there, we look very much on to the pipelines and the -- and how attractive the pipeline is. And I would not exclude that, let's say, within the next 24 months, if an opportunity arises -- currently, we're not working on any deals, on any large deals, but if an opportunity arises, it's certainly something we're going to look at. And we feel that the diversification into wind and solar is an important one for VERBUND and, at the same time, as I mentioned before, we feel where the combination of hydro, solar and wind in order to be able to package interested PPAs, also is very attractive to us. With that, I will hand over to Andreas, who is going to give you other details on the derivatives valuations.

Yes. Only I think also from this side, so you know we have the impact coming from the derivatives valuations basically 0. And what we have currently reflected in the guidance for the full year, based on our current, let's say, trading positions and the long and short positions, we have is a minus of around EUR 85 million for the full year guidance.

I see, so you have adjusted that one for the new current full year?

Sorry, once again?

It was just to confirm that you have adjusted there for the previous valuation effect?

Yes. Yes.

The next question comes from the line of Teresa Schinwald, Raiffeisen.

I have one more for bookkeeping and one very general question. Can you remind us also the figure what the tax and revenue cap impact is included in the guidance? Maybe I've missed that amount in the call. The second question is what's your experience with [ in New Year's ] on hydro conditions? So given that your access to long-term lines, I'm sure you did the math already. Can you give us some info on that?

Sure. I will start with the hydro questions. We have, over the years, worked very closely with science institutes and with universities to look at the long-term hydrological conditions in Central Europe. Most studies have come to the conclusion that Central Europe is lucky in a way to have very stable hydrological conditions. However, they have come to the conclusion that there will be shifts. When there was more snowfall during the winter time and then snow melting, that will change to more rainfall during other periods. As a result of that, there will be almost like an equalization of water conditions in Austria throughout the year. But the overall level, according to those studies, will not come down. What we have recently seen, not studies, but basically, by observing what's happening in the world is that, obviously, we take one record after another, particularly now. What I have heard from scientists on that phenomenon is that they're still working on is it part of [indiscernible], is a part of CO2 emissions, what is the greater influencing factor? Most have come to the conclusion does that mean there is a higher influencing factor. But there again, and this is important, the Central European region, i.e., particularly the mountainous regions, Austria, Switzerland, and the southern part of Bavaria seems to be less influenced. As a result of that, we are -- we think that over the next 50 to 100 years, hydro conditions in Austria are going to be similar to what we are currently seeing. In terms of the first question which you have had, we -- for the full year, we have approximately EUR 410 million in Austria as a result also of the lowering from the EUR 140 million to the EUR 120 million. We have -- we have 0 from Germany. And we have approximately EUR 12 million from Romania. So overall, we have slightly above EUR 420 million for the full year. But there is one important point. There is the possibility and [ business transit ] government has already said, they have not finally decided, but they have already said that future investments, future investments, i.e., investments done in '25, '26 in Austria, can be used to balance out that figure. And if that were the case, those investments would amount to around -- the investments that can be used would amount to around EUR 180 million. And that would obviously reduce the amount which I have just given you. But that is an opportunity. That's an upside. We think there is a good chance for this upside, but it's still being negotiated with the ministry.

Today's last question comes from Thibault Dujardin with Societe Generale.

I have a question coming back to on the winter tax and on the offsetting amounts. Just to be sure if you could check the amounts consumer remaining for 2022 of the [ vesting ] amount for our investments in renewables and potentially for 2023. And second point concerning Grid returns. If you could give us some impact on the calendar for the control updates under the return and under legal challenger calendars too?

Okay. I will ask Andreas to give you the details of the quarter which we have had.

So we look at to the CapEx, which we can also do 2023. So basically, that's historic CapEx for this current regulation. I think it's EUR 350 million we can deduct, so we can balance from the [ report back ] system. So that's the number for 2023. And with regard to -- I think the second question, as far as I understood it, was with regard to the [ clinical ] terms. So as you know, the regulator has changed the system. So we had -- since the beginning of the year, we have a regulatory return in the electricity group of about 3.73% for older assets and 4.88% for new assets. So in the mix for this year, it's around -- it's close to 4% and the regulator will set up or will define the new WAAC for all the assets and for U.S. it's at the end of this year. There is no update yet, but if we would follow, it's a way of calculating the rate cost of capital, the CapEx from the investments will be more than 6%, around 6.3%. And for the other assets, that will increased to a level of around 4.3%. But as I said, it's not fixed. So as it's likely that the regulator will set the new tariff, I think, in Q3, I think that Q3, that you will see 4.

Yes. And perhaps we should you add is there are -- and with respect to some of your questions, which you have said before, there are a number of uncertainties in the political discussions. There are obviously uncertainties around the scaling of profit. There is something in the [indiscernible] in terms of the extension. Then of course, there is uncertainty and an open discussion in terms of how much of future investments we can use. That is something where, obviously, as I mentioned before, we are negotiating. But where we have -- where we don't know what the outcome is going to be. And then, of course, on the Austrian Power Grid, there is the open question around what the regulated return for new investments will be. And that is something where we are working extremely hard on making sure that E-Control, the regulator takes into consideration, number one, the huge CapEx which we have in the regulated system; and number two, the fact that interest costs have come up quite dramatically. So there's a point which -- where we have a very clear stance and where we have a very clear position. And we need to convince the regulator to react accordingly.

Since then that was the last question, I hand back to Peter Kollmann for closing comments. Peter Kollmann?

Yes. Thank you very much for a very interesting discussion, as always. And I look forward -- well, first of all, I wish you a great summer and nice holidays, and I look forward to our next conference call in about 3 months. Thank you very much, and goodbye.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.