VERBUND AG (VER) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the conference call on the full year results 2023 of VERBUND AG. I am George, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Peter Kollmann. Please go ahead.

Thank you, ladies and gentlemen, let us welcome you to our presentation of VERBUND for '23. And let me thank you for joining today's conference call. Before we move into the analysis of business development, let me make a few general comments. VERBUND achieved an exceptionally good result in '23. This positive earnings development was primarily driven by high wholesale prices for electricity, the better water supply compared to '22, the strong results from our regulated Grid business, and the increased contribution from New Renewables. However, this earnings development is not sustainable. The significant change in the energy industry parameters means that the '24 results are significantly below the '23 results. And we're well below analyst expectations. That is why we published a profit warning a few weeks ago. Nevertheless, VERBUND will invest in the future of renewable energy and security of supply, we're increasing our investment program from EUR 4.5 billion to EUR 5.5 billion over the next 3-year cycle. We're investing in domestic infrastructure, domestic hydropower and New Renewables across Europe. Now let's move on to a more detailed financial results. At the beginning, I would like to highlight the most important influencing factors. Following the development of electricity prices and based on our hedging strategy, the average achieved contract price strongly increased compared to '22. The hydro coefficient, which, as you know, determines the generation from our run-of-river hydropower plants was significantly better compared to last year, particularly in the fourth quarter, hydro levels were far above average. The generation from the annual storage power plants rose with the effects from decreasing reservoir levels and a higher inflow significantly outweighed the lower generation from turbining. Generation from wind and PV was also up. The increase in New Renewables was mainly a result of the commissioning of New Renewable power plants in Spain. We had higher contribution from Gas Connect Austria and Austrian Power Grid. Contributions from flexibility products decreased in all categories, except pumping because of lower spot prices and lower spreads. Negative impacts on our results resulted from the levy on excess profits in Austria, Germany and Romania and from the sales segment due to the higher procurement cost for electricity, which were only partially passed on to end customers. We also saw negative nonrecurring effects mainly because of write-off. The main reasons for the impairment losses included delayed commissioning of renewable power plants, updated electricity and gas price forecasts and increased investment costs. Finally, I would like to highlight the significant increase of CapEx in infrastructure and New Renewables. Now on the next page, let me go into more details, and let me start with the hedging volumes and hedging prices, which are obviously highly relevant for our results. I repeat that on every conference call, but it's important, EUR 1, plus or minus in our achieved price has a sensitivity of approximately EUR 25 million on our EBITDA line. As of the 31st of December '23, we reached an average achieved contract price for our hydro generation of EUR 167 for '24. We have sold 66% of our own generation volumes at a price of EUR 142.8. And for '25, we have sold 40% at EUR 131 per megawatt hour. Because of further falling wholesale prices, the average achieved contract price as of the 29th of February for '24 were at EUR 133 with 74% hedged. The average sales price on a mark-to-market basis is EUR 115. For '25, the hedge price for 43% of the volumes was at EUR 128 and the mark-to-market price was at EUR 100 per megawatt hour. Now let me comment on some developments in our various business segments and starting with Hydro at 0.98, the hydro coefficient was 2 percentage points below the long-term average, but 12 percentage points above the level of '22. The production from annual storage power plants increased by 9.6%, own production from hydropower, therefore, overall increased by 3,755 gigawatt hours or 14% to 30.5 terawatt hours compared to '22. Besides increased volumes, the aforementioned higher average achieved prices also had a positive effect on results. Therefore, the EBITDA in the Hydro segment increased by 62% to EUR 3.856 billion. Regarding CapEx, our main hydro projects, the 480 megawatts Limberg III pumped storage power plants, the 45-megawatt ReiBeck II, also pumped storage power plant and the 11-megawatt Gratkorn run-of-river power plant are progressing well, and we are expecting completion as we have said on the left side of our page on Hydro segments. On the next page, let me continue with an analysis of the own generation from New Renewables. The New Renewables coefficient, which, in this case, in an index quantifying the generation from wind power and PV amounted to 1.06 in '23 compared to 0.96 in '22. Generation from wind power increased by 46.3% or 442 gigawatt hours and amounted to 1.4 terawatt hours in '23. While more favorable wind conditions in Austria, Germany and Romania, in addition to new installations in Spain going online were the key reasons for this development. Generation from PV amounted to 360 gigawatt hours in the reporting period stemming from PV installations in Austria. They are only 4 gigawatt hours in Spain, 358 gigawatt hours. Now taking a look at the EBITDA development in the New Renewable segment, we see that the EBITDA increased by 78.4% to an EBITDA amounting to EUR 227.6 million. In addition to higher volumes, higher average achieved prices were the main reason for this positive EBITDA development. The chart also provides a current overview of our activities in '23 in the renewable sector. Coming to the next slide, there you will find an update of our activities across Europe. The chart outlines our renewable assets in operation and in construction in the different markets split by technology. We are also including our targets for 2030. In addition, we are providing the EBITDA contribution in '23. The historic CapEx spend as well as the planned CapEx. Please note that the additional explanations in the footnotes on the bottom left of the chart. As you can see, we have currently more than 1,000 megawatts of New Renewables in operation approximately 800 megawatts in wind and 250 megawatts in PV. The geographic split, we currently operate 600 megawatts in Spain; 19, Germany; 110 in Austria; and approximately 230 in Romania. Now let me continue with our sales segment. Taking a look at the EBITDA development, we see that EBITDA decreased strongly to a negative value of EUR 197 million. The EBITDA in the retail business, including provisions for the lawsuits was at a level of minus EUR 380 million. The lower EBITDA is due, among other things, to higher procurement prices for electricity and gas as well as a weaker result from the valuation of energy derivatives in connection with future energy supplies. In addition, flexibility products also increased -- sorry, flexibility products also decreased. VERBUND delivered electricity and gas to approximately 490,000 end customers in '23, representing a decrease of approximately 6.7% year-on-year. Now the analysis of all Other segments shows that generation from thermal power plants was down by close to 590 gigawatt hours to 677 gigawatt hours. The decline in total revenue was primarily due to the reduced utilization of our Mellach CCGT, that, of course, leading to lower electricity revenues despite higher sales prices. In addition, lower district heating generation led to a decline in our district heating revenues. This and negative effects from the valuation of derivatives in connection with future energy supplies led to a reduction in EBITDA. The contribution from flexibility products also decreased by EUR 8.5 million. Contribution from KELAG, KELAG is the provincial utility of Carinthia, strongly increased from EUR 4.3 million to EUR 78.2 million. That is a direct result of higher hydro availability and, of course, higher market prices. In addition, the trading and heating business also contributed positively. Finally, let me remind you that our Mellach CCGT was no longer contracted from APG for concession management. Therefore, Line 10 and Line 20 operated on a market-driven basis, at least until the beginning of April '25. The district heating power plant Mellach, however, was contracted by APG for the period from the 1st of October '23 to September '24. Now I'm continuing on the next slide with our Grid segment. The EBITDA for '23 from the electricity grid business was approximately EUR 372 million. That's an increase of EUR 175 million, the new EBITDA guidance for the grid for 24 million based on our new regulatory parameters and the increasing regulatory asset base is approximately EUR 220 million. Now the planned amount of the regulatory accounts at the end of '24 will be high at approximately EUR 0.5 billion. Now let me also highlight that starting from the 1st of Jan '24, a new regulatory period started. Austrian Power Grid receives a WACC of 4.16% for old assets with the commissioning date up to '22; a WACC of 4.88% for new assets with a commissioning date in '23; and a WACC of 6.33% for new assets, which are starting the commissioning in '24. So the total WACC for '24 is approximately 4.5%. With regard to the results contribution of Gas Connect Austria, we can report an EBITDA of approximately EUR 207 million. The strong increase is mainly due to a one-off increase in the commodity tariffs because of temporarily very high gas prices, gas because we need it for our compressor stations, and that will be reversed by the regulator next year. So the guidance for '24 with regard to Gas Connect Austria is approximately down to EUR 60 million under IFRS. With that, I'm handing over to Andreas Wollein. Please, Andreas.

Thank you, Peter. So on Page 10, we elaborate on the nonrecurring FX. We recognized impairments for 2023 amounting to minus EUR 482.6 million and the reversal of impairments of plus EUR 31 million. The main reasons for the impairment losses included delayed commissioning of renewable power plant projects in Spain, and updated electricity and gas price forecasts and increased investment costs. The total effect of impairments in the EBIT line is minus EUR 451.6 million. The nonrecurring FX in the financial result amounted to plus EUR 21.7 million in total and are mainly related to impairments for HalloSonne GmbH, reversal of impairments related to TAG and the hydropower plant Ashta as well as the measurement of an obligation to return an interest in a hydropower plant in Austria. The effect on taxes amounted to roughly EUR 70 million, the effect on minorities to EUR 10 million. The overall impact of the nonrecurring effects on the group result amounted to minus EUR 349.7 million. On Page 11 and 12, we go a little bit more in detail about the key financial figures. So because of the aforementioned developments, the EBITDA increased by EUR 1.3 billion or 42% to EUR 4.49 billion. Depreciation increased by 16% to EUR 537 million due to the acquisition of Spanish assets and increased investments into the high-voltage grid. The financial result improved strongly from minus EUR 94 million to plus EUR 56 million. This was due to, on the one hand, to a sharp rise in contributions from investments accounted for using the equity method, primarily KELAG, but also the increase in interest income. Increase in interest expenses on the other hand resulted in particular from the promissory note loans issued in November 2022 and repaid in November 2023 in the amount of EUR 500 million. And the interest expenses from the loans and the bonds taken over from the Spanish companies acquired in 2022. The other financial results also had a positive effect. This resulted, among other things, from the measurement of security funds through profit and loss. Taxes on income amounted to EUR 825 million. The group result, therefore, increased by EUR 459 million or 32% to EUR 2.266 billion. The group result after adjustment for nonrecurring FX was up by 49%. Finally, I would like to mention the increase in additions to tangible assets in total from EUR 1,180.9 million in 2022 to EUR 1.450 billion in 2023. This increase of close to 23% resulted in particular from the acquisitions of renewable activities in Spain. Other major investments mainly related to the hydropower plant, Limberg III and ReiBeck II+ and the 380 kilowatt line in Salzburg. On the bottom left, you will find the additions to tangible assets of the regulated business, Gas Connect Austria and Austrian Power Grid whereas on the top right, you will find the additions in the renewable business and others. With regard to the operating cash flow, we have seen a very strong development in 2023. The operating cash flow increased to EUR 5.1 billion, mainly due to the significant high average achieved contract prices for electricity and returns from margining payments for our electricity hedging transactions. Higher income tax payments and high interest payments had a counteracting effect. The free cash flow after dividends showed a positive development from minus EUR 25 million in 2022 to a level of EUR 2.1 billion in 2023. The significantly higher operating cash flow had a positive effect, while high investments in property, plant and equipment and higher dividend payments reduced the cash flow. The strong decrease in net debt to a level of EUR 1.758 billion is due to lower financial liabilities mainly because of the repayment of short-term money market liabilities, the net debt-to-EBITDA ratio improved to a level of 0.4 compared with 1.2 in the previous year. Based on the results presented, we will propose a dividend of EUR 4.15 per share for 2023 at the Annual General Meeting on April 30, 2024. This dividend consists of an ordinary dividend of EUR 3.4 per share and a special dividend of EUR 0.75 per share. The special dividend is intended to allow shareholders to participate in the group's exceptionally positive business performance for fiscal year 2023. The payout ratio, the ordinary dividend and special dividend together in relation to reported group result is 63.6% and 55.1% in relation to the group result adjusted for nonrecurring effects. So let me hand over to Peter again for explaining the new CapEx plan. Thank you.

Yes. Thank you, Andreas. On the next slide, you see 3-year CapEx plan with a total of EUR 5.5 billion, around EUR 3.8 billion growth investments and around EUR 1.7 billion or maintenance investments. The majority of the investments will go into the expansion and maintenance of the regulated Austrian electricity and gas grid. VERBUND is also investing primarily in projects in the area of New Renewables that's around EUR 1.7 billion. And in hydro power, around EUR 1.4 billion. The investments mainly relate to VERBUND's home markets of Austria and Germany that's put together around EUR 4 billion; and the Spanish market, around EUR 1 billion. VERBUND plans to invest a total of around EUR 1.67 billion in the financial year '24 of which around EUR 1.1 billion will be invested in growth and around EUR 540 million in maintenance. At the end of the results presentation, the outlook, our guidance for '24 is as follows: VERBUND expects reported and adjusted EBITDA of approximately between EUR 2.6 billion and EUR 3.3 billion and a group result of approximately between EUR 1.3 billion and EUR 1.75 billion under the assumption of average hydro, average wind and PV generation in '24 as well as the chances and the risk situation of the group overall. For '24, VERBUND plans to pay out between 45% and 55% of our group results after adjustment for nonrecurring effects and that will be a range of EUR 1.3 billion to EUR 1.75 billion. The earnings forecast and the information on the expected payout ratio, obviously contingent on VERBUND 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 into Q&A.

[Operator Instructions] Our first question comes from Wanda Serwinowska from UBS.

3 questions from my side, if you don't mind. The first question is on the retail business. I recall some headlines from Reuters saying that the Austrian government would like to see lower end customer energy prices sooner than later. And I think VERBUND already lowered the tariffs. So question #1, is it included in your guidance? And question #2, what EBITDA for [ Rico ] do you expect this year in the current guidance? And the second question would be on the renewals investment in Spain. It's the second year when you report in [ Permal ]. Can you confirm what is the capacity that you expect to commission over the next 3 years, year-by-year, that will be very, very helpful given that the market is very competitive, and you face some delays. And the last question, Peter, it would be very helpful, as always, if you could give us the latest '24, '25 and maybe '26 hedging prices and levels. And if you could give us the hydro levels seen year-to-date?

Yes, sure. I will start with hedging levels the hydro coefficients, I will comment on the impairments. Andreas, could you please cover the retail side? Great. So let me start with the up-to-date hedging levels, '24. We are 74% hedged and I'm talking per today with an average price of EUR 115. For '25, we are hedged at 43%, with a mark-to-market of EUR 100. And for '26, we are hedged 23% with an average mark-to-market of EUR 73. The hydro coefficient today year-to-date is 1.38%. Now on the impairments, we had a number of different impairments. First of all, the largest one was the Spanish renewables, the project Labrador, as we call it, then we had an impairment on [ Serolla ], the wind farm. We also have an impairment on Mellach, our CCGT. We have a small impairment on Gas Connect Austria and one impairment on [ Enora ]. So on the results basis, not on the EBITDA line, but on a results basis, the sum of our impairments is EUR 350 million. The reasons are as follows: we have several effects in terms of the impairments. And that will start with the renewables business. In the renewables business, we have -- it's almost like a perfect storm because we have so many different parameters, which basically went against the Spanish renewables. First of all, of course, we have interest rates rising. Number 2, we have higher CapEx. Number 3, we have lower prices, significantly lower prices in Spain. And then, of course, we have a difficult market in terms of getting approvals. So we have some delays in Spain. If you put it all together, those are basically the key components for the impairments on our New Renewables. The impairment of our CCGT Mellach was a result mainly of lower clean spot spread. So there is lower power prices as well. And then because of the lower clean spot spread, the utilization was lower, almost like half of what it was last year. So those are the key impairments. And then we'll hand over to Andreas for the retail question.

Yes, Wanda. As you know, we've had a pretty negative contribution from the retail business in 2023, which, let's say, excluding provisions was about EUR 298 million, including provisions, minus EUR 382 million. So this negative EBITDA effect we begun the course of 2024. However, as we mentioned, there will be a negative effect because we are not able to fully pass on the prices. Currently, I think what we have in our guidance is an assumption for the negative EBITDA contribution in the retail business is minus EUR 104 million. There are some provisions included. So I guess this is our current assumption, which also should take into account, let's say, further measures to stay or to reduce the end customer prices in Austria.

A few follow-ups. So Peter, when you gave us the hedging, is it like including the current forward curve or the forward curve as of yesterday for the open volumes, right?

Yes.

So for example, the EUR 115 includes 26% open position at the forward for the remaining of the year. Just to make sure.

Exactly.

And then on the capacity that you expect to add in Spain over the next few years per year, what would be the ballpark?

Say it again. Acoustically, I didn't hear you, Wanda.

Sorry, how many gigawatts of the renewables in Spain, do you expect to add to the -- to commission over the next 3 years in your planning?

Yes. Over the next 3 years, we are planning to add approximately 1.5 gigawatts of solar and approximately 150 of wind. So that would be in '25 and '26. In '24, the number would be much lower because of delays; here, we would add in PV approximately 100, and in wind, also approximately 100.

Our next question comes from Harrison Williams with Morgan Stanley.

Two from my side. Firstly, on the Grid business, can I confirm that you said the regulatory accounts at EUR 500 million as of the end of 2023? And as part of your guidance for 2024 for APG, how much of that do you expect to unwind in the year? And how much should we expect to unwind in kind of future years? So that would be the first question. And then the second question is on your payout ratio. We note that your kind of dividend yield is considered below some of your peers in the space. I just wanted to hear your views on what could prompt you to revise that potentially higher?

Yes. I'll start with the payout ratio. Currently, we don't see that we would change the range of 45% to 55% going forward. And on the Grid, you're absolutely right. The regulatory account has gone up year by year to EUR 500 million. We are in conversations with the regulator because lowering the regulatory account would obviously mean that the tariffs would be lower. So that would actually be an overall positive contribution to the economy. So that is something we suggested. And the other thing is it's overhanging in a way because it's profits from the past going into regulatory accounts, which we have to give back. So the best way to giving it back would be a linear decrease of the regulatory account. So we shall see if that would be possible. And coming to your point, the decrease in our guidance for the electricity grid system in IFRS does not exclude any major decreases in our regulatory account. It's basically a result of higher cost for concession management and lower auction results.

Our next question comes from Thibault Dujardin with Societe Generale.

I would have a question regarding to the hedging of the renewables, solar and PV and the exposure to merchants.

Yes. We somewhat expected the question because we're always very, very detailed on our run-of-river hydropower plants in terms of hedging. It's obviously not as straightforward on the New Renewables side because you always have a combination of feed-in tariffs, PPAs, a lot of different PPA structures. But I will give you a current assessment on the assets which we have in operation. So when you take the Spanish operation, we have approximately 740 gigawatt hours in the tariff. We have approximately 500 gigawatt hours in PPAs. In Germany, we have on our wind farms there, we have 100% feed in tariffs. In Austria, we have around 50% in feed in tariffs because the older ones less the tariff. And in Romania, we are basically 100% merchants. Going forward, we will obviously try to have an optimum combination of a certain percentage in merchant, but also the rest in contracted in various PPA structures.

And may I ask a follow-up question regarding the hedging strategy of the [indiscernible] over several months and do you have a strategy on this one?

Hedging strategy on the New Renewables?

Indeed, yes.

Yes. No, we don't have the kind of hedging strategy as we have for our baseload production. We -- obviously, we try to optimize the production in our New Renewables through merchant activity, through trading. But then, of course, as I've mentioned, we try to combine that with PPAs.

Our next question comes from Louis Boujard with ODDO.

Two on my side, maybe one, we did not focus yet on this one, all Other segments. I would like to understand if you could give us a bit more details regarding the put on sale for 2024, in particular, in light of, of course, the impairment that you took on Mellach CCGT and also the fact that some lines are going to be merchant going forward. And we consider indeed that the market environment is maybe less supportive than it could have been. So could you indicate what could be the magnitude of this kind of move in the earnings that we can expect in these divisions? And also [indiscernible] services remained good in your expectations in the current environment or not? And maybe a second question, a bit more strategic view regarding the M&A. We see that there is some operation in the market, in [indiscernible] that are taking place. You have always said that it could be a situation for you as well eventually to take some opportunities. Do you think that maybe now it could become to be a good time for an extension into your renewable external acquisition?

Yes. On the M&A side, first, it's a possibility. We obviously, like every other utility we're observing the market very carefully. We see that there is more pressure in the renewable market. On the development side, the financing side is more challenging. Then, of course, you have the entire discussion around future power prices, cannibalization, capacity markets for batteries. So there is a lot of discussion. There's a lot of uncertainty that creates -- that can create opportunities. However, at the moment, we are rather focusing on developers, if any, and less on M&A of existing operating assets. And on the second one, if I understood you correctly, you wanted to get a little bit more insight into our Mellach CCGT. There, we think that our contribution in '24 compared to '23 will be somewhere between EUR 80 million to EUR 90 million lower. That is a direct result of the hours, which we're online with our CCGT and then, of course, the lower power prices, the lower clean spot spread.

Yes, you understand me properly. Just a very quick follow-up. Is there other additional, I would say, significant element that we should have in mind for all Other segments for the prospect in '24?

No.

Our next question comes from Olly Jeffery.

2 points of clarification and then a question, please. So the clarification points are, did you say the hydro position was 1.38 year-to-date? And also with regard to the guide for IFRS APG, you said that did not include any further decrease coming from changes to the regulatory account, i.e., there could be further downside to the guide. Can you just clarify those 2 questions first, please.

Yes, sure. The 1.38 is correct. That is the year-to-date hydro coefficient. And the new guidance on the Austrian Power Grid does not include any assumptions on a decrease in the regulatory account.

And then so the question I have, beyond that, coming back to the impairment; got 2 on that. One is, can you say how much is from delaying commissioning? And then the second question related to the impairment is, can you say, obviously, from the EDPR acquisition you did how much of that has been impaired? I note in the annual report says that you've impaired EUR 280 million for New Renewable portfolio. Is it that? Or does that include other assets as well?

Well, there are -- I can't really give you exact details on the different components of the impairments. I think it would be the first utility globally to do that. However, I'm more than happy to give you some guidance on that. It really is a combination of interest rates. That is obviously always a key component because of the discount factor of future cash flows. But then you have, obviously looking at the future cash flows, impact from lower power prices. You also have higher CapEx -- the CapEx on wind has gone up; on solar, not so dramatically; but on wind the CapEx has gone up. Then, of course, you have delays. And when you have delays, a delay means that your EBITDA contribution obviously starts lower on a discounted cash flow basis that brings you -- that adds you on the tail end, but the tail end has lower power prices. So that has an impact, but also the -- with inflation and CapEx going up, those delays have an impact on that as well. So you really have a combination of a lot of different points. The other area where impairments are relevant is always on the pipelines even on the ones that are not sort of like being built within the next 1 to 2 years, but the pipeline further out. There, of course, the biggest impact is the higher interest rates combined with lower power prices.

Our next question comes from Ingo Becker with Kepler Cheuvreux.

Peter, I was wondering if you would share your views on the European TTF gas price with us? Apparently it's been leading the Russian power and interested in any view you might have on that and maybe related to that for power as well? And my second question would be on your renewables value assessment. We all know it's just assumptions, but given the assumptions that you have been making last year and with which you probably then felt comfortable with. I was just wondering has the expected IR value spreads that you've been assessing on your assumptions? Has that changed over the course of the last 3 months?

Yes. Sure. Ingo. Actually, I shouldn't say anything on gas because the last 6 months, if you remember our conference calls, I have been bearish on gas, I actually mentioned a specific number of 25. That's exactly where we are today, 25 TTF on the CO2, I thought that CO2 would come down, but it came down much further than I thought. But I'm more than happy to be brave and give you and give you my view on both on gas developments and on CO2. Now I'm not a commodity analyst, but obviously, I look at gas very carefully because it has a major impact on power prices, which again has a major impact on VERBUND. What we can see is that Russia has started much longer ago than most people think to increase their LNG production and their facilities for Novatek. At the same time, we have a climate phenomenon, which means that the Northern Route, which used to be covered with ice for a long period of the year is getting better and better in terms of passage. As a result of that, using the Northern Route, Novatek can export more LNG to Asia. At the same time, and nobody wants to talk about it, but it's a fact. There is a lot of Russian LNG coming into Europe. At the same time, during the middle of the crisis, everybody went into agreements for long-term LNG contracts, which were then also correlated to an extension of capacity. So we will get much, much more LNG capacity into Europe. And at the same time, we see that Henry Hub prices are coming down. So I think this morning, it was something like 1.68 per thermal units. So when you take the Henry Hub and you add the transport cost and you add all the additional regasification, et cetera, et cetera costs, you will have simply from LNG coming into Europe, you will have price pressure. At the same time, the storage levels are very good. So much, much less gas is bought for storage than in previous years that we have currently a pretty warm period that is common knowledge. As a result of that, I wouldn't be surprised if we see TTF going down to 20. On CO2, I think -- I mean I understand that CO2 is where it is. However, the fall has been dramatic. And there is indeed a possibility that CO2 will go up. The very interesting area on CO2, we really need to watch is the political side. And I keep saying that because I think it's important and eventually, it will gain more and more dominance in the discussion. Industry is very strongly, and I'm not just talking Germany, I'm talking all over Europe, we're strongly demanding competitive power prices. So when they have a discussion with the politicians, they basically say, look, we still have the Merit-Order. So the main input factor for our power prices is the gas price or the CO2 price, okay? The gas price has come down, but the CO2 price, if it goes up again, will have an impact on the power price, and that is something that makes us less competitive. So that is an area we need to watch. And if that were the case, obviously, giving more -- giving more supply into the market, into the CO2 market would mean that you could somehow keep CO2 prices at the current level. The one thing, and I know sort of like political memory is short, but not too long ago, we had a discussion in Germany with the prime minister and the minister of the economy, where we're discussing what would be sort of like the right CO2 price and the number was around 50 at the time. So we have seen 100 in the meantime, but that is an area we need to watch. All that has an impact on the power price. And it is very difficult to predict the power price because there's so many parameters. But as I've always said, as long as we have the Merit-Order, we will have as the price setting technology, mainly gas and coal, more and more gas in the future, but for not as many hours as in the past. It will be few and fewer hours. So when we then talk about the average power price that should, over time, have a tendency to go down. If demand increases dramatically, that would have a counter effect, but now we're already getting into too deep of a discussion.

Mr. Peter, before you might answer on renewables. Would you make a distinction between the base load price prospect and that for peak load do you see a pronounced decoupling there of the pricing behavior? For example, like relatively speaking, more optimistic for peak load versus baseload?

Yes. I see 2 different phases. I see Phase 1, where we don't have enough storage. During that phase, we're going to see a higher spread. We're going to see the influence of cannibalization combined with the need for baseload. We have very often talked about and not just for the last 2 years but literally for the last 5, 6 years about the potential baseload gap that has not been recognized for a very long time by politicians. Otherwise, they would not have been so eager to get out of nuclear. But the baseload gap will lead to an increase in the spread and then comes the second phase and the second phase will be the build-out of storage through batteries, other means, and that should then sort of like equalize again the spread between base and peak, not equalize, but make it smaller.

Yes. On the renewables question, maybe you comment?

Yes. On the renewable question, I'm not the only one. In fact, I think that I'm in that respect, the majority of the opinion for renewables the challenges are that we are going to see, as we have just discussed, we will see cannibalization. That risk of cannibalization needs to be mitigated, particularly on the solar side. On the wind side, it is less so. And as a result of that, IRRs in the future should be lower because financing costs have gone up as well. So there should be more pressure on IRRs in the future.

Did your assessment change over the last 3 months given the gas crash? Or did that not have an impact?

The gas crash did -- for me, the gas crash did not have an impact because that's what I anticipated.

Last question [ John Capelli ] with Bank of America.

First one was a clarification. So I can see you've released EBITDA guidance for Gas Connect Austria and Austrian Power Grid. Just wanted to see if I missed any of the sort of other earnings guidance you provide for those particular segments for 2024? And then my second question is you appear to have had a significant cash inflow of some sort from working capital. So I'm interested in terms of when you expect that to potentially unwind?

Okay. I will comment on Gas Connect Austria and Austrian Power Grid, and Andreas will cover the working capital question. Now 2 very different areas. I mean both are regulators and both are grid, the one gas, the other one, electricity. I will take a step back and then we'll get back to your specific question, but I think it's important to differentiate between the 2. Austrian Power Grid is a growth business. There will be huge investments going into the electricity grids across Europe. APG, we're estimating over the next 10 years around EUR 9 billion. Therefore, that is a very, very strong business with an ever-increasing regulatory asset base and with an ever-increasing contribution. I've already said that the -- on an IFRS basis, the '24 numbers are coming down for our estimate at the moment. Obviously, there are many parameters that can change, but that is a result of very, very high auction revenues, which we have had last year. We don't think that those auction revenues will be repeated this year. And then we estimate that we're going to have higher congestion management costs for '24, sort of like that is the basis for our guidance on Austrian Power Grid. On Gas Connect Austria, completely different situation there. We were supported by a commodity tariff, the commodity tariff is nothing else but a short-term contribution from the regulator for unexpected costs in relation to the compressor stations. So when the gas price went up dramatically, Gas Connect went to the regulators said, "We need to find a solution to cover that. The regulator said, okay, we give you a short-term increase in tariffs to cover the additional gas expenses for the compressor stations. And that went into the revenues of Gas Connect in '23, but that will fall away in '24. As a result of that, we're coming down. There's one thing I should say, around Gas Connect Austria. We are currently discussing a new regulatory method, a cost-plus system for Gas Connect Austria. Why? A lot of the basis for our business model has fallen away. Gas Connect Austria used to be a very, very busy highway for Russian gas going -- coming from Russia through the Ukraine into Austria and then sort of like going through the Austrian highways into Germany, but also down to Italy. Now all that has basically reduced dramatically, as a result of that Gas Connect Austria has lost a huge amount of revenues from gas transportation, and that needs to be absorbed by a new regulatory system. Right now, we are negotiating the new regulatory system, but it could mean that the contribution from Gas Connect Austria in the future, not just in 1 year, but overall, will be smaller. Would you still be -- yes, would you still be interested in the working capital question?

No.

Hello.

I would certainly be very much interested in the working capital question. It seems I've been muted for some reason. But yes.

No problem, Andreas, please.

Yes but can you repeat the question once again, please?

So from my understanding, your peers have had some sort of inflows from working capital for the full year 2023. So I'm just sort of wondering when you expect that generally to unwind?

We had this working capital development is very much driven by, let's say, the margining requirements from our trading business. We had a lot of cash outflow in 2022 with margining going up to around -- close to EUR 3 billion. In 2023, we had a lot of inflows again. So it's highly volatile. You see that. And we have, I think, now that we had a cash inflow from the margining alone of around EUR 1 billion. And then I think we still have around EUR 500 million of outstanding margin calls. So depending on price developments, we -- further price developments -- we -- of course, we cannot forecast because it's highly dependent on the development of the futures and also of, let's say, of -- and it's also a function of volatility, of course. But for the time being, I think the number has come down significantly. And yes, I think current expectation for the full year is still a further decline, but we are already now at lower levels. So volatility will not be as high as in the past going forward.

Last question.

Oh, there is one. Okay. No further questions.?

No further questions.

Okay. Well, as always, thank you very much for a great discussion. And I look forward to talking to you at the latest at our next conference call. And I wish you a good day. Thank you very much. Bye-bye.