Welcome to ENGIE's Nine Months Conference Call. For your information, this call is being recorded. It will take place in a listen-only mode, and you will have the opportunity to ask questions after the presentation. Anyone who wishes to ask a question may press star and one on their touch-tone telephone at any time. To remove your question, please press star and two. I will now hand you over to Ms. Delphine Deshayes, Head of Investor Relations. Please go ahead, madam.
Thank you, and good morning, everyone. It is my pleasure to welcome you to ENGIE's Nine Months Conference Call. Shortly, Catherine and Pierre-François will present our nine months performance, following which we will open the lines to Q&A, with my polite request of limiting your questions to one or two only, please. With that, over to Catherine.
All right. Thank you, Delphine, and good morning, everyone. Welcome to our nine months 2026 results call. I am very happy, very pleased to report that ENGIE has maintained its dynamic performance in Q3, and we now expect us to achieve the upper end of our full-year guidance. All of the regular hallmarks that you have come to expect were on display in Q3.
Strong focus on execution of our growth strategy, with expansion on a global basis in Renewables & BESS, , in batteries, in networks, plus significant progress on performance, notably through operational excellence and initiatives that are focused on culture and competitiveness efficiency. The key takeaway for me is that we have built a fantastic engine that is thriving in what is a new paradigm, a world with constant political, geopolitical, macro changes.
We have optionality, both in the technologies that we deploy and in the geographies where we invest, in the business models, and importantly, we have the agility to allocate capital where we see the most value. A few words on Belgian nuclear. Given the current circumstances, the complexity of the negotiations, and the determination to leave no stone unturned in our efforts, we and the Belgian government have agreed to a further extension of negotiations up until December 12.
While we have made progress on some aspects of the negotiations, there are significant divergences related to the valuation of the transaction, notably of the liabilities, that we want to try to resolve. Before I move on to my review of Q3, a few words on why macro risks, including the French ones, should not be confused with ENGIE risk. First, our financial structure. 78% of our net debt is at fixed rates, 79% of our euro debt, and 90% of our sterling debt.
That gives us strong protection against rising rates on our existing debt. The market recognizes it. Our spread over the Bund has stayed contained and in line with the sector, as you can see against the iBoxx Euro Electricity Index. Second, our earnings. Remember that our asset base provides a substantial natural hedge against the effects of inflation and higher rates.
With UK Power Networks now on board, we are well on track for our 2028 guidance of two-third of EBIT from regulated or contracted activity, with almost EUR 50 billion of RAB or RAB equivalent, with indexed and/or inflation-protected revenues. When I look at France on its own, the majority of our EBIT comes from gas networks and pass-through contracted local infrastructure. One message as a summary, remember, we are long inflation at ENGIE. Third, our growth story.
Because if you look at our growth markets, the overwhelming majority are outside France, and they are underpinned by strong fundamentals. Whether you look at actual power demand, with year-on-year rises of 2% in Europe after years of declines of stagnation, 3% in the U.S. in the first nine months of this year. Whether you look at supportive policies, with the EU, for example, targeting a doubling in electricity share in energy consumption to 46% by 2040.
This translates into growth. With clear evidence, network investment is accelerating, renewable generation is growing, and the need for flexibility is increasing, and we see these trends holding across all of our key markets. Of course, when it comes to new investment decision, for example, in Renewables & BESS, we do take into account the new interest rates and inflation environment.
But we are in a very good position to navigate this backdrop, thanks to our supply chain and our execution capabilities, thanks to the size of our portfolio, that geographical optionality that we have built, as well as our energy management and commercial franchise. Turning to the next slide, some highlights numbers at the nine-month stage. EBIT excluding nuclear reached EUR 7 billion, up 9.7% year on year, underpinned, of course, by the inclusion from May of UK Power Networks, and growing by 3.3% organically.
In fact, when you just zoom on the third quarter, EBIT excluding nuke increased by 10.9% organically. Economic net debt amounted to EUR 62.5 billion, and we achieved another substantial contribution from performance improvements at EUR 406 million at nine months, over EUR 100 million in the third quarter alone.
This was half from operational excellence with initiatives such as asset efficiency, contract portfolio cleaning, cost optimization, quarter from culture and competitiveness actions such as improving span and layers of control, and the remaining quarters from loss-making entities with disposals and turnaround measures. Let's now turn to our first growth pillar, renewables and flex power, where we achieved a significant milestone in this quarter as we passed 60, 6-0 GW of operating capacity in BESS, solar, and wind.
We commissioned 3 GW of new capacity over the first nine months, with 6.6 GW under construction at the end of September. As usual, we have been active worldwide on markets that we know well. In the second half of 2026 so far, we have announced our largest BESS at 500 MW in Saudi. We brought on stream 450 MW of solar in India and 250 MW in Australia.
Commercially, we maintain a high level of PPA signings with 3.2 GW at the nine-month stage of 2026, similar level to 2025. Most recently, we signed a renewable energy supply agreement to provide up to 568 MW of wind power for Oracle's expanding AI and cloud data centers in Texas. There is plenty more in the pipeline for further substantial data center expansion. Our B2B supply business is building up strong momentum in bespoke 24/7 supply contracts to customers such as Legrand in France and Aker BioMarine in the U.S.
We are far ahead of schedule to meet our 2030 objectives on volume supply to the tech and data center sector. In the third quarter, we achieved a milestone in storage capacity, reaching more than 10 GW in operation or under construction. Out of this, 7 GW is in BESS, an activity that didn't even exist at ENGIE five years ago. Quite an achievement and demonstrating indeed the urgent need for flexibility in power production.
We made big strides in Europe over the third quarter, entering the Polish market through the acquisition of a 758 MW portfolio, acquiring projects in Romania and Spain, starting constructions of facilities in Belgium and Portugal, and commencing operations at Maxima in the Netherlands and our first two batteries in the U.K. On our second growth pillar, networks, where the acquisition of UKPN has added a major new dimension, we are delighted at the smooth and rapid process of integration.
We have been particularly impressed by UK Power Networks' strong data-driven culture, its operational focus, and the close connection between management and field operations. Over the first three years of the ED2 price control period, in other words, between April 2023 and March 2026, UK Power Networks achieved a return on regulatory equity of 11.2%, maintaining its outstanding operational track record. UK Power Networks is now finalizing its ED3 business plan for Ofgem.
While the political and regulatory debate has become more focused on affordability, we do not see any credible pathway to deliver the UK electrification, economic growth, and security of supply objectives without materially higher distribution network investment.
We are confident that a significant step-up in ED3 investment will be needed. Very relevant for our gas network is the development of biomethane in Europe, and particularly in France. In October, we signed a framework agreement with CMA CGM to develop a biomethane production unit in the industrial port area of Le Havre that will supply 100 GWh of biomethane annually for their fleet from 2029 onwards, subject to FID. With that, I will pass over to Pierre-François.
Thank you very much, Catherine. Good morning, everyone, and thank you for joining us in a busy day with another two releases. EBIT excluding nuke reached EUR 7 billion, up 10%, including five months of contribution from UK Power Networks. We are delivering a second quarter in a row with double-digit organic growth, despite absorbing EUR 54 million of support to vulnerable households in France in Q3. Our 2026 earnings offer a very solid base from which we are growing as promised.
Cash generation remained robust with CFFO at EUR 7.5 billion, despite a material but temporary working cap headwind from higher energy prices and margin calls. You know that our working cap tend to increase when energy prices go up. I will come back to it. CapEx reached EUR 26 billion, including the acquisition of UK Power Networks. This transaction, together with the working cap variation, explains the increase in net debt and leverage.
Based on year-to-date delivery and current visibility, we now expect 2026 to land at the upper end of our guidance range. Let's turn now to the evolution of EBIT excluding Nuke. Forex was broadly neutral, and scope excluding UK Power Networks had a limited negative impact. UK Power Networks contributed EUR 452 million over five months. On an organic basis, EBIT excluding Nuke increased by EUR 205 million.
Price and volatility effects were negative overall, mainly due to the roll-off of high-price hedges put in place after the Ukraine crisis in European gas generation. We also saw continued price normalization in B2B. Supportive prices on unhedged generation volumes partly offset these headwinds. Volumes were down due to warmer weather, lower hydro generation in France, and lower gas consumption in regulated networks.
Against this, commissioning and investment contributed strongly through new renewables and battery capacity, and the continued expansion of power networks and regulated assets. Performance added EUR 406 million, confirming that operational excellence translates into earnings. Modest negative others reflect variation of one-off from one period to the other. Nuclear EBIT declined to EUR 113 million, reflecting the Belgian nuclear phase-out that is now completed.
Looking now at the three reporting segments, Renewables & Flex Power EBIT reached EUR 2.6 billion. Renewables & BESS grew organically by 5.5%, supported by new capacity and operational performance, and partly offset by lower hydro volumes and lower capture prices in Europe. Gas generation normalized as expected, reflecting lower capture spreads in Europe, partly offset by good prices in Latin America and commissioning of Flémalle in Belgium.
The conjunction of geopolitics-driven volatility and record extreme weather require constant adaptation of the optimization of the assets to mitigate risk and extract value from the fleet. Infrastructures delivered strong growth, with EBIT reaching EUR 3 billion, including EUR 452 million from UK Power Networks. Gas networks benefited from performance and tariff increases, despite warmer weather and lower volumes in France.
Power networks grew organically in Latin America, while LEI, Local Energy Infrastructures, delivered close to 20% organic growth, driven by performance and development in district networks and EV charging. Supply and Energy Management EBIT reached EUR 1.8 billion. B2C increased strongly, supported by active portfolio management and the non-repeat of negative timing effects, partly offset by milder weather and EUR 54 million of support to vulnerable households in France.
B2B declined as expected, with high-margin legacy contracts phased out, compounded by positive one-offs in 2025. Commercial performance is on track. Energy management performed strongly in gas, supported by market conditions and contracts negotiation. It was in H1, while power remained more challenging. Turning now to cash generation, CFFO amounted to EUR 7.5 billion in the first nine months, compared with EUR 11.4 billion last year.
The year-on-year decrease is explained by a EUR 3.6 billion adverse movement in working cap requirements. Three items matter. Gas inventories had a EUR 1.1 billion negative impact from higher prices and injections. Operational working cap reduced CFFO by another EUR 1.1 billion year-on-year due to higher customer receivables. Finally, margin calls had a EUR 1.5 billion adverse effect, reflecting reduced use of letters of credit and higher collateral requirements in volatile energy markets.
These are temporary working cap effects, not a deterioration in underlying performance. The group continued to generate solid operating cash flow. Maybe, by the way, you have noticed that the operating cash flow is stable despite the phase-out of nuclear. But it is a fact that more cash has been tied up in the energy cycle. This is something we have seen, you remember, in 2022 and 2023, with the reversal in 2024 and 2025.
We hence expect at year-end, subject to market condition, of course, some moderate increase in the working cap requirement. Let us now move to net debt and credit metrics. Economic net debt rose from EUR 45 billion- EUR 62 billion, mainly reflecting the EUR 13 billion net impact of the UK Power Networks acquisition, net of capital increase and hybrid, and the EUR 3.6 billion working cap increase I just mentioned.
Adjusting for the temporary working cap headwind, it is good to note that CFFO covered both the dividend paid to shareholders and CapEx, excluding, of course, the strategic acquisition of UK Power Networks. Economic net debt to EBITDA stood at 4.2x , including the full UK Power Networks debt impact, but with only five months of EBITDA. We expect the ratio to improve at year-end, despite increased pressure on working cap due to high energy prices, targeting around four.
Now, a word on Belgian nuclear provisions. Catherine walked you through where we stand with the Belgian government and mentioned a significant gap in respective views on valuation, particularly regarding nuclear obligations. So, before I wrap up with the guidance, we thought it could be useful to share with you what we plan to do at year-end with regard to nuclear provisions, notwithstanding any transaction.
Until the end of 2025, the views of the CPN and ENGIE were compatible, and our provisions were therefore based on the CPN estimate. As these views have since diverged, group provisions will be based on our own best estimate in full compliance with IFRS. The chart on the right shows what this would mean for the provision. Starting from EUR 8.6 billion at the end of 2025, we currently expect it to remain broadly stable by year-end 2026. There are three main effects at play.
One, we are taking a conservative view on cost using the ONDRAF assumptions for overnight costs. Two, we adjust 2022 contingencies given changes in scope and factor in the impact of higher costs, which mechanically increase the contingencies. And three, we are increasing the discount rate to reflect partly the rise in long-term interest rates observed in all capital markets over the last four years. The discount rates used in 2022, respectively 2.5% for backend spent fuel and 3% for dismantling, are clearly out of market range.
Overall, while the underlying assumptions are moving, we currently expect the provision to remain broadly stable with no significant impact on economic net debt. Of course, Synatom, our wholly owned subsidiary managing provisions and related financial investments, will keep using CPN assumptions, and funding in the years to come will be fully compliant with Belgian law. Let me conclude now with our outlook for 2026.
Based on the performance achieved at the end of September and our current visibility, we now expect to land in the upper end of the guidance range. This confidence reflects investment contributions, continued performance plan delivery, and Q3 momentum. We remain focused on delivering in a fast-changing environment, monitoring effects, financing costs, weather events, commodity prices, and of course, the broader economy.
In summary, ENGIE is delivering on its strategic priorities, investing in attractive regulated and contracted assets, executing operationally, generating solid cash, and maintaining financial discipline. I now hand over to Catherine for the final words.
Yes, indeed. Thank you. A very strong nine months for ENGIE. The second point is about the strength and the breadth of our industrial model that is showing its relevance in this world of constant geopolitical market and weather uncertainty. And third, we continue to have a strong focus on execution, continued effort on performance, commitment to maximizing the value from our existing asset base, and of course, strict financial discipline in our new investment.
All of this aimed at supporting our customers by supplying the affordable and reliable sustainable energy whenever they need it. And this is why I am very confident about what lies ahead. A strong performance over the first nine months shows that we have all the building blocks in place to perform, to capture the ahead, and to deliver on our ambition to become the best energy transition utility. Thank you very much.
Thank you, Catherine. Operator, can you please open the lines to Q&A? And to all, please make sure to limit your question to no more than two. Thank you.
Thank you, madam. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove your question, please press star two. The first question comes from Harry Wyburd of BNP Paribas.
Hi, good morning, everyone. Hi, Catherine. Hi, Pierre, as well. Two for me, please. Firstly, inevitably, on the Belgian deal, can you give us any kind of flavor on the range of negotiation on the liability? You guided us on where your assumption's going to land by the end of the year. Where's the Belgian or Synatom assumption going to land by the end of the year? Have you got any color on that which can just give us an idea of the range of negotiation that we're thinking of?
Then just a sub-point on that, you've given us kindly the liability guidance end of the year. There's an associated sort of dedicated asset fund, as I understand it. Would that also be broadly flat, or would you expect the value of that to have gone up or moved a little bit? So, question one.
Second one, totally different. On the thematic of rates in France, as I understand it, when your networks review for gas comes around in a year or two, you should be getting an increase in allowed returns because the returns are partially iBoxx-driven, partially OAT yield-driven. Are you able to give us any kind of flavor as to what kind of movement you'd expect there? There's also a consultation suggesting they might move to full nominal, which presumably would also give you a revenue uplift.
Would you expect any delta on volumes as well? I know there's a lot in that, but basically, overall, trying to understand whether we should be upgrading our French gas networks estimates a couple of years out because of what's going on in France. Thank you.
All right. Maybe, Harry, what I'll say, I'll start with the nuke story because I think it's important to comment a little bit. As we had said at the end of July, we have entered into these discussions that are dense, they are rich, they cover all of the aspects of the transaction. As you know, it's really a complex transaction, especially when it comes to valuation. Valuation of the liabilities, but also, of course, the asset side. Indeed, we have progressed through the discussions, very constructive engagement.
We have also uncovered significant divergences of positions related to the valuations, and I would comment specifically when it comes to the liabilities, a divergence about estimating the whole risk profile of dismantling activities. These activities of dismantling, and we had many opportunities to discuss that, as an industrial player, we have experience in. This has an industrial nature. It is very different, obviously, from the long-term waste management. It is really an industrial project.
By the way, we conduct dismantling activities in many parts of the world. We are doing that when we dismantle coal. We even have, as you guys know, mining, dismantling, or decommissioning a project in Australia. So, we know how to do dismantling. It is manageable in time. Well, I think it is fair to say that a government that would take on these activities might not be looking at this risk the same way as us. That is, I think, fair to say.
Given the current circumstances in Belgium, as well, of course, as the strategic nature of the deal for the government, this is why we have decided to give it a bit more time to see whether these divergences can be reconciled with the principles, of course, of financial neutrality, which remains core to the whole transaction. So, let us see how that goes, and what we will see after on December 12.
Maybe you want to say a few comments on the provision, and maybe, sorry, before passing it on to Pierre-François, of course, the situation is that if we are able to land a deal, eventually there will be no more provisions. I think it is also important to give you clarity, and this was the purpose of the slide that we put there and the comments on the provisions. We also want to give and share with you the view of what it would look like for us should a deal not be reached.
Yeah. I am not going to dwell too much more on the provision. I think that since in our own books, we use the ONDRAF assumption for overnight cost, that the plan, I think the key criteria will be around the contingency that you put on top of the estimate of cost, and that the second point is about discount rate. I make a link with your second question, which I think is somewhat linked to it, which is the performance of the dedicated assets in Synatom.
I am not going to give you any number for year-end, but what I can tell you is that at the end of September, the performance was 5.4%, which reflect, of course, the trend in the market. So, I think it is a very good point. Then maybe on the gas revision, well, we do not like to comment too early on these kind of things, which are super sensitive. You know that we will file our first tariff proposal, I think, at the end of Q1 next year, so still a bit of time.
Yes, I mean, the interest rates have gone up, and you could expect that there would be an impact that would come, everything being equal. But of course, in the revision, there will be many things that we need to discuss, including potentially some significant decrease of risk. We need to take in account volume trends. We need to take the risk of stranded assets. So, this could trigger a broader discussion with the regulator, and of course, we get the benefit of the increase in rates. Now, you also refer to volumes.
Historically, what we have seen is that the volumes which are used for the assumption on tariffs are usually rather ambitious. You know, and that is something we discuss sometimes, we do not use the same assumption for our own forecast, so to be discussed. I guess that behind this question in the volumes, you had also the question about the CRCP, which is the volumes which are actually recovered from the previous period.
I am sure everybody remember that in the current revision, we are recovering volumes which were short in the previous period. It is likely that in the next period, given what we see today, we will have also to recover on various operators some of the volumes. So, you should not expect a big cliff effect on that one. We discussed that a year ago and 18 months ago, and this is more or less confirmed, of course, depending on winter volumes, which are the main driver of this potential clawback.
Super clear. Thank you. Just one rapid clarification on going back to the provisions. If the liability leg of EUR 8.6 billion is roughly flat, and you are saying you have had good progress on the dedicated assets, presumably the net liability, which I think is around EUR 3 billion, is on track to shrink a little bit, if I got that right.
Yes, but the vision of the liabilities may differ from one party to the other. I think we feel very strong about the value of the liability as an industrial operator for plants that we have been managing for tens of years, and with dismantling that we are familiar with. We dismantle in many places in the world, in Australia, in the U.S., and in Chile, so we are used to it. Now, of course, for government that would take over, they may come with a different opinion. You can imagine the nice discussion that we can have around that.
Yeah. Understood. Thank you very much.
The next question is from Ajay Patel of Goldman Sachs.
Good morning, and thank you for the presentation, but a couple of questions, please. Firstly, I think previously, last set of results, you indicated a guide of EUR 1.7 billion on B2B EM. I just wondered if you could give us an update on what that looks like at the nine month.
I was wondering, just on the nuclear provisions again, what would be the difference if you would just continue with the existing practices that you were doing in 2025 into 2026, relative to what you are pointing to now? I just wanted to understand what a change it would have made.
Maybe to start with the provisions, we are compliant with IAS 37. It means that we need to use our best estimate when we close the books. So we did in 2022, so we did in 2025. What we did in 2022 when we booked the provision, we used the same set of assumptions that CPN, and we have kept that assumption, and that was the practice as a good proxy of our best estimate.
What happened today is that we have different views, and when we have different views, of course, it means that we have to use our own best estimate, and that's the number that we are reflecting here. The other route was to take the CPN valuation, and probably at some point, CPN will issue its own notification, and that's what they have to do. But of course, it's suspended due to the transaction discussion, but that should come.
Then there will be a number pushed by CPN, and that number, we expect to see a different number based, again, mainly on the contingencies and the discount rate. So I cannot talk on behalf of CPN. What I can tell you is that we have to use our best estimate, and this is what it is. And sorry, and the other question was about B2B EM, and we are indeed on track, and we keep to the target.
Thank you very much.
The next question is from Arthur Sitbon of Morgan Stanley.
Hello. Thanks for taking my questions. The first one is on your 2026 recurring net income guidance. I think the midpoint of the new indication is roughly EUR 450 million above the midpoint of your initial guidance at the start of the year. I was wondering if you could help us understand, out of these incremental profits of EUR 450 million, what is the share of that that you would consider as recurring, sustainable, and what is more one-off, in a sense? That's the first question.
The second one is, I noticed that the TTF and Henry Hub spread is up very significantly compared to earlier in the year, even for the medium term, even when you look at forward prices for 2028, 2029. I was wondering if that makes a difference to your kind of normalized former GEMS EBIT guidance of EUR 1.5 billion, if we think medium term.
Does that make it more of a, in the current condition, does that make it more of a ceiling than the actual level we should expect towards the end of the guidance time horizon? Thank you very much.
Sorry. On the first one, I think the upgrade of the guidance, we commented that in H1, and now being at the other part, it's always a bit the same story. Of course, when we upgraded in H1, you remember that they were also taking in account the early close of UK Power Networks, but this is not, of course, not going to go away, so it's a part of it. It's clearly we have good level of performance, which is another point that we mention, which is there.
At the end of the day, the growth of the net income is driven by good level of performance, good contribution of our CODs. In one word, it means that it is recurring, and you should not see that as a one-off or especially boosted. I think that we are pleased with the quality of earnings that we will deliver in 2026. Now, you are mentioning, yeah, that we have also, of course, some spread in TTF and Henry Hub. You know that we are very careful, and we don't speculate on Henry Hub.
So, when we are sourcing in the U.S., we have a hedging policy to make sure that we protect ourself of that kind of spread in quite a few years, not for the full duration of the contract, but for quite a few years. So, we are, of course, not sensitive to that in the direct years to come. So, we are not directional. We never do that.
We are not going to play games whereby we would be buying a Henry Hub and selling TTF, that kind of thing. We don't do that. We are always hedging at inception, so that's super important. So, you should not see a drive in there and us looking at that kind of profit, which would be super volatile and, of course, super risky.
Okay, thank you.
The next question comes from James Brand of Deutsche Bank.
Hi, thank you for taking my questions. The first is a little bit political, obviously, and a sensitive topic, but just there has been press reports related to the Belgian discussions that the Belgian government might be threatening to nationalize the assets, and I was just wondering whether you had any comment on that. It seems like that may be inconsistent with EU energy rules, and therefore might not be able to be achieved, but it was interesting. Any comments on that?
Then secondly, just to follow up on the earlier comment around the French regulatory review, and I appreciate you said that that is also sensitive and obviously very early stages, but I think the approach that was used last regulatory review was a mix of waiting on kind of current forward-looking bond yield expectations and trailing expectations, and with quite a high weight on the trailing, that might not fully take into account quite how much the cost of capital has gone up in recent years.
So, I was just wondering whether you thought there might be an opportunity to kind of revise the framework and maybe get a fuller reflection of the rise that we've seen in rates. Thank you very much.
Yeah, I mean, on the methodology, to be honest, it's really too early to comment. As you know, there is a lot of things that come in play on this whole regulatory parameters, and so it's really very, I mean, it's too early to comment on exactly how we will engage on calculating the WACC and the formula. So, I think we will for sure take into account what's happening in the rate environment today, but to get into the formula detail is a bit too early, James.
On the noise, remember we always said, and we told you, please be careful about the media noise because there is always media and press noise to very nicely accompany some of the discussions that can happen. On the nationalization noise that you are referring to, it's really press rumors.
We are very confident that the Belgium government is very seriously negotiating with us in good faith, and nationalization is definitely not on the agenda. By the way, nationalization of nuclear operations would be really something, but that's a side comment. So yeah, no, just noise, rumors, and not on the agenda.
The next question is from Bartek Kubicki of Bernstein.
Thank you, everyone d morning. Two things from me as well, please. Firstly, I would like to ask you about the U.S. and the latest political change, and how do you see this, whether there will be more opportunities to grow or less opportunities to grow for the time being. Secondly, if we look at your batteries exposure, growing batteries exposure, you are also expanding the coverage in terms of the markets.
You are moving into different markets. If you can just maybe give us a little bit of color how the attractiveness of particular markets you are exposed to look like in comparison to other. So, what are the most attractive countries? What are the least attractive countries you are exposed to? I am hearing from some of the industrial players you can even get 20%, 30% IRRs in some countries, whether you think this is the actual number.
Lastly, of course, how long do you think the El Dorado in terms of batteries will last? Because I suspect there is a lot of batteries coming on the market, so consequently, the potential arbitrage opportunities you may be utilizing right now will be shrinking in the future. Thank you very much.
Okay. The U.S., it is obviously a bit early, but what I think is fair to say is that there was quite a lot of pausing in momentum pre-elections, and I can think of in certain states there were pauses made on, for example, permitting data centers. There was a little bit of a slowdown in momentum pre-election, so elections are always a bit of a catalyst where things can resume. I think what is happening on the data center side, and potentially push back and slow down, we will have to see what the new elected want to do about that.
But I would think, hopefully, we will see eventually in the U.S. more all of the above energy policy. In other words, some technologies not being isolated or as we have seen in some circumstances. So, hopefully, we can see permitting resuming, but again, we will have to see. It is a bit early to say. That is what I would say on the U.S. On the batteries, we see batteries frankly thriving in many markets where renewables are being developed, which is many markets actually.
India, for example, does not do solar anymore. They do solar and batteries. Obviously, anytime you have only renewables gigawatts as an objective, you will fall into trouble at some point because you are going to have too many negative hours. So we see many markets now catching on flexibility, and within that flexibility realm, you see batteries. We are going to see that even in Brazil, which was not so much a battery market before. We are starting to see that.
We have seen that in Chile. Anywhere you have also obviously grid congestion, a lot of renewables penetration, you see batteries thriving. So, that is some of the commentary I can say about batteries. 2030, 20%-30% return, we see double-digit return for sure. I am not sure that we can say 2030. But we see indeed, because part of the BESS are exposed to merchant exposure, so obviously you will expect to have double-digit returns. Again, as long as renewable penetration continues, in Europe, we still have a long way to go.
We expect batteries to be able to capture value. Remember, the payback of batteries is typically quite short. So, while in some cases when batteries get developed very quickly, you can see a little bit of the collapse of the intraday spread. But because you add more renewables, then batteries become important again. Speed to market is really important, by the way, which is why we like our positioning.
We have been quite fast in moving in batteries, and that is important because cannibalization can happen, but only if you come a bit too late. Maybe the last point I said on batteries is, what we have seen in the United States is that battery costs have increased quite a bit, and that will probably put pressure on battery development. If battery development gets a bit slowed down in the U.S., you will see it again in the spread, and that should be actually positive for existing assets, for sure, and potentially help and facilitate new developments.
Thank you very much, Catherine. Thank you.
The next question is from Juan Rodriguez of Kepler Cheuvreux.
Thank you for taking our questions. I have two on my side, if I may. The first one is again on Belgium discussions and provisions. First is, what is the red light for you? I said you signaled that you expect neutrality on the deal, but what could be the level that you can say into this, like a very low single-digit billion level for additional provisions? What will be your plan B on your side if no risk is, or if no deal is reached by the 12th? Why the 12th?
Can we expect a further update if no deal is reached on that date? Or there is a specific timeline that needs to be reached by that date? That is the first one. The second one is on the asset management and the expectations of power improving.
We see that power has been relatively calm until Q3, and then we see that future prices have started to tick up. Can we expect the positive gas effects as well to be extended until 2027, 2028 on new contracts? Or this is mainly going to be a 2026 effect on the gas side? Thank you.
Look, on nuclear, again, what we said is that indeed, we want to do a deal that allows us or gives us financial neutrality that needs to be looked at as a package, assets, and liability. Of course, given the sensitivity of the discussion, I am not going to go into more details. What I think is important, what we try to do today, is to give you the realm of possibility.
Either we have a deal, and it will be a good deal for ENGIE in the sense that it will, one, allow us to meet the strategic goal for the government, two, have a financially neutral deal, and third, it will, in a way, de-risk us from future nuclear exposure. By exposure, I mean, some of these discussions that we are having, are we prolonging or not, et cetera. So, that is what is today at the table.
If we do not have a deal, it is okay as well. We had, as you know, a framework which is called Phoenix, very famous Phoenix deal, and we will go back to some sort of Phoenix deal with the two. By the way, we did not comment, but our plants have restarted after the LTO on time, one mid-October, one November the 1st, so the Phoenix deal is working. Very importantly, the purpose of that slide was to say, we also have a view, very clear view, of the provisions that we will have on the balance sheet of the group.
So, that is the two, if you like, possible situations that we will land in. When you look at them, both actually are really, really good for ENGIE. So, now it is, how do we lift or give more clarity on whether we will be on the left or on the right? Indeed, let's see on December 12th. That's the day that we have given ourself with the government to get to that clarity, because we have indeed this divergence in valuation that we need to bridge, and if not, we will fall into the other side. Let's see on December 12th.
On prices, maybe, yes, on power, of course, there will be an impact, because even if we have decreased our merchant exposure in power, we still have some. We have some residual merchant position in wind and solar. We have, more importantly, some hydro, as you know. We have the French drawing rights in nukes. These are our power position, and we have a rolling three years hedging policy.
That means that indeed some of the benefit of the higher prices, to the extent that they are affected into the forward curves, would reflect in 2027 and to a lesser extent in 2028 based on the curve. That should come through. When it comes to gas, it's a bit of a different story because, as you know, we are not a gas producer. We are hedging at inception, so there is not such an exposure. However, when gas prices are higher, indeed, there are deals that you can enter into.
Some of these deals can go a bit further indeed that the quarter, and that could bring a bit of value, but that's not to the same extent. What we could expect if gas prices start to decrease is that we would have a better environment for clean spark spreads, which today are a bit squeezed, as, of course, the power prices are going up, but they are pushed by the gas prices. We can expect that if gas prices come down, there might be a bit more room for locking in better spreads for our CCGTs. That's what I can say when I look forward.
Quite useful. Thank you.
The next question is from Piotr Dzięciołowski of Citi.
Hi. Yes, good morning, everybody. I have two questions, please. I think we understand the liabilities part of the Belgian discussions, but can you tell us what is your view on the asset value? Is there any meaningful value remaining in the connection points of the five reactors that were closed, and how you think about it? Is there a divergent view on this side as well, or how shall we think about this?
As I understand, both sides are discussed. The second question, I wanted to ask you about the impact of the increase in rate on your future projected financial results. How does this impact 2028 guidance, or by the end of the decade, how much of the extra financing cost you will have? Thank you very much.
Thank you. I'm not going to comment on the details of the transaction again, but you're right, there is a liability side and there is an asset side. Of course, it's here in that case a kind of an M&A transaction, so you need to agree on both. As you can imagine, we don't necessarily agree at the first discussion. Yes, there is also a topic that we need to dig in in the valuation of assets. When it comes to the long-term rates, I think Catherine shared a few elements about the structure of our debt, and you can see that we are fixed to a large extent.
We do have also a cash position, which is offering a natural hedge on the short-term part of the curve, and that we have seen at work, you remember, when the long-term rates started to go up a couple of years ago, and you've seen that we have been pretty resilient. Now, this being said.
We do have bonds which are maturing every year, pull back EUR 3 billion-EUR 4 billion of bonds which are maturing every year, and these bonds are carrying a historical rate which is lower because they were secured, many of them they were secured at a time rates were more lenient to borrowers. So you should see on this EUR 3 billion-EUR 4 billion a year which are lapsing, you should see a gradual increase in the rates based on the market expectation that you can build by yourself.
So that, I think, is a good way to look at the potential exposure going forward. The key point here is that it will take time because we are fixed, because we have long-term maturity, and the average maturity of the debt is north of nine years. Of course, we have a lot of inertia in the way the rates will be reflected in our books.
Thank you very much.
The next question is from Louis Boujard of ODDO BHF.
Yes, hi. Good morning, and thank you for the presentation. I appreciate that most likely there is not much to add on the nuclear deal, so I will go to other topics at this point in time. Maybe the first one would be regarding the net debt level.
Of course, with the rising power market price environment and the volatility into the systems, could you, in the end, maybe provide us with some visibility regarding how you see the economic net debt landing by the end of the year, considering also the uncertainty that we should still take into consideration and the working CAP level that might be partly at least reversed in 2027 and maybe 2028 as well? And the second question, maybe a bit more onto the business line and a specific aspect on the B2B.
I think that we've seen that the EBIT decline is 30% organically at nine months, but the short quarter is a kind of improvement. I would like to know if when you sign your 24/7 renewable supply contract into these divisions with large customers, is it only to retain these customers, or is it also something that could potentially enable you to improve the margins going forward into this B2B division? Thank you very much.
No, think of the 24/7 contract as quite a differentiated product that we provide to our customers. Behind the 24/7 concept, there is a different flavor. You have the ones that are super demanding, that are 90%+ hourly matching, and you have the ones that are a bit more, let's say, democratic, more affordable, more reachable, which can be at 60%, 70% hourly matching. But those ones, obviously the big ones, the 90%+ are premium, but the 24/7 now is becoming a bit of a medium-tier product, so we are able to do more of those.
It's less selective. It's for more medium-sized customers or customers that want to greenify, want to decarbonize, want to have better predictability on their power price, but can't afford the 90% + hourly matching.
The beauty of this product is that it is both higher margin, and we can do much more of that because the customer base is larger. That's really what we like. It's a bit of a sweet spot between customer base and as well as indeed better margins than your normal supply contract, and it really meets a customer's demand. We see good traction this year for the first time actually with this product.
Thank you, and good question. Thank you for the working cap. There are three components you've seen on the variation. Gas storage, well, you should expect this actually to slow down in Q4 because at the end of September, we have the peak period in terms of gas storage, where at the end of December, we have been starting to use it. So, you should see less of an impact at year-end.
When it comes to receivables net of payables, that depends, of course, on the level of prices that we have at the very end. But of course, a lot of this is already hedged, so we know that is a real trend in the business, and clearly that's where we expect to see a bit more of working cap in the business.
Margin calls, we have tools, we have the toolbox, and of course, at year-end, we will use the toolbox to minimize the impact of margin calls. This is something that we have been developing in 2022, 2023, so pretty used to that. We can do that. You should expect a lower impact on that side. Then indeed, the reversal will come when prices stabilize or even start to decrease. You know that could mean that if the prices were to stay high, clearly that would mean locking in this money for longer.
But if the prices are high, it is not necessarily bad for the operating cash flow. You remember that there is a direct link, and again, we would of course cover that in 2027 with a strong operating cash flow. All in all, we again, based on the experience of 2022, 2023, we are pretty relaxed that there might be a bit more working cap due to high prices. For the rest, we are in control of the mechanics.
This is the end of the Q&A session. Thank you for joining the call today, and of course, if you have any follow-up questions, do not hesitate to call the IR team. Thank you.
Ladies and gentlemen, this concludes today's conference call. ENGIE thanks you for your participation. You may now disconnect your devices.