Good afternoon, ladies and gentlemen. Thank you for joining us for today's conference call on our results for the fiscal year 2023, our outlook for 2024 and beyond. It's my pleasure to welcome our new CEO, Georg Stamatelopoulos, and our Deputy CEO and CFO, Thomas Kusterer, who will guide you through our presentation before we start the Q&A session. As an early heads-up regarding Q&A, please note that in order to ask a question live or in writing later on, you must register for the Q&A tool and the session beforehand. And with that, I'd like to pass the ball to Georg.
Thank you very much, Marcel. Good afternoon also from my side, and a warm welcome from me to all of you. As Marcel already mentioned, I took on the role as CEO of EnBW not long ago. I feel really privileged to have been chosen for this role, and I'm passionate about the work and mission of our company. I've been at EnBW for almost 15 years now, and I'm proud of how successfully we have mastered the transformation of the group to date. I would like to continue to work on this in my new position with all my strength, bringing in my experience in the energy sector. All this to shape the future of our company together with a greatly committed and experienced EnBW team.
Needless to say, I'm looking forward to our conversation today to shed some light on last year's performance and our outlook for the coming year. In a constantly shifting and ever-changing market environment, I'm happy to report another year of strong growth for EnBW. We delivered an exceptional operating performance, reaching the upper end of our earnings guidance range, which we upgraded in October. On top of that, we made good progress in major aspects of our strategy and our ESG targets. We maintain our strong momentum in advancing the energy transition by expanding renewables and grids, and by building much-needed hydrogen-ready dispatchable power plants. I want to take the opportunity to thank all of our teams for their outstanding effort in executing our strategy and delivering on our targets. Our financial results are a reflection of their ongoing dedication and commitment.
Let's now move on to page 4 of the slide deck. 2023 was a very good year for EnBW. Summarizing a few headline numbers: Adjusted EBITDA grew by 60% to EUR 6.4 billion, contributing to a rise in adjusted net profit of EUR 2.8 billion. The main reasons for this improvement year-on-year were higher earnings, mainly from power generation, and the absence of negative one-offs, which we encountered in our business in 2022 as a result of the war in Ukraine. 2023 was also an exceptional year in terms of investments, which reached a level of almost EUR 5 billion. To advance the energy transition in Germany, we mainly invested in grids and renewables. At the same time, we have managed to get long-term first-class co-investors on board for some of our most important projects in 2023.
Ladies and gentlemen, moving to the next slide, let me now dive into more details on how we progressed in driving forward the energy transition. Here we have a strong focus on our well-balanced portfolio with a clear path to climate neutrality. In line with our integrated setup along the entire energy value chain, we successfully increased our renewables portfolio by commissioning solar parks and wind farms in Germany and in France. The installed capacity of renewable energies increased by another 300 MW to 5.7 GW. Moreover, our electricity distribution and transmission grids have now reached an overall length of 148,000 km. We also strengthened our leading position in the e-mobility business as the operator of Germany's largest fast-charging network, with more than 1,100 fast-charging locations across the country. Furthermore, EnBW's HyperNet now provides our customers with seamless access to over 600,000 charging points in 17 countries.
As you can see on slide 6, we are delivering on our decarbonization pathway towards phasing out coal in 2028, ten years ahead of the current legal deadline in Germany, and towards reaching climate neutrality by 2035. Starting with the share of renewables in 2023, as already mentioned, our renewables portfolio increased to 5.7 gigawatts. Consequently, the renewable share of EnBW's installed capacity rose to 47% and in generation to 48%, respectively. The ramp-up in wind and solar, higher generation from hydropower, and lower utilization of our coal-fired power plants contributed to a 37% reduction in our own CO2 emissions compared to 2022. Our transformation journey is acknowledged by the Science-Based Targets Initiative confirmed one year ago. We are well on track, and we will become climate neutral by 2035 with respect to our own carbon emissions. Be assured, we are working intensively on all relevant sustainability topics.
This was rewarded at the beginning of 2024 when CDP raised our climate rating from B to A-, which means we have moved up into the leadership level. As you can see on slide 7, our lighthouse projects clearly underpin our ambition to drive forward the energy transition. Let me give you a brief update on the status of these major projects, which are now all under construction. In our grids business, the construction of SuedLink has started, and our goal is to have COD in 2028. The 700 km underground high-voltage transmission line is the largest project of the energy transition to date and will eventually stretch all across Germany. In our offshore business, we made further progress with He Dreiht, our 960 MW offshore wind project in the German North Sea. Manufacturing of all components has begun, and installation at sea is expected to start in May this year.
About half the capacity of He Dreiht, one of the largest subsidy-free offshore wind farms, is already secured via long-term PPAs. He Dreiht is due to be commissioned by the end of 2025 and will instantly double EnBW's offshore portfolio to almost two gigawatts. And finally, construction has started for our three flexible, low-carbon fuel switch projects located in the state of Baden-Württemberg. Replacing coal-based generation, these new combined-cycle gas turbines with an overall capacity of 1.5 GW are scheduled to go into operation in 2026 and will help to manage supply and demand imbalances and thereby contribute to the security of supply in southwest Germany. All of them meet the European Union Taxonomy criteria for hydrogen-ready gas-fired plants and are expected to run on green hydrogen from the mid-2030s onwards.
With this, let me hand over to Thomas, who will give you a bigger insight on the numbers of 2023 and an outlook for 2024.
Many thanks, Georg, and also good afternoon, actually, from my side. As Georg just mentioned, EnBW's financial performance was very good in 2023, with strong earnings in line with our upgraded guidance. Adjusted EBITDA for the group reached EUR 6.4 billion, 60% more than in the previous year. This puts us in a good position to successfully manage larger investments in the energy transition in the coming years. We will do this on our own, but also together with partners. In 2023, we took on board long-term Tier 1 partners like KfW and a consortium led by Savings Banks for minority stakes totaling 49.9% in our TSO TransnetBW, and the consortium of Allianz Capital Partners, AIP and Norges Bank for 49.9% in our offshore wind park, He Dreiht. And we successfully issued green bonds, meeting the requirements of high-quality and strong ESG investors to finance our growth.
Overall, EnBW has a rock-solid financing structure and a strong balance sheet, with high credit ratings supported by our integrated setup and strong financial performance. Looking ahead into 2024, we expect to deliver robust earnings as well. Having said that, earnings will be lower than 2023 due to falling energy prices and a normalized market environment. Nevertheless, our solid earnings outlook allows us to continuously invest in climate-friendly energy supply and infrastructure. Let's now dive into the details, starting on page 10. In October, we upgraded our 2023 guidance for Adjusted EBITDA at group level from EUR 4.7 billion to EUR 5.2 billion to a range of EUR 5.9 billion-EUR 6.5 billion. With EUR 6.4 billion for the group, Adjusted EBITDA was eventually at the upper end of the adjusted forecast range and significantly above the original forecast, as well as the prior year.
This development was mainly due to positive developments in our segment, sustainable generation infrastructure. A very important metric for us is the earnings contribution by regulated or quasi-regulated low-risk activities. These comprise our grids as well as renewable business and account for EUR 2.8 billion in adjusted EBITDA in 2023, which marks a strong increase by some 31% compared to 2022. While the earnings share amounted to 45% in 2023, on the back of very strong results in thermal generation and trading, we expect this to increase to a level exceeding 70% from 2024 onwards again. Let's now take a look at our business segments, starting on slide 11, with sustainable generation infrastructure in which we achieved an adjusted EBITDA of EUR 4.6 billion. Starting with renewables, where adjusted EBITDA remained flat compared to the previous year at EUR 1.1 billion.
Higher earnings from run-of-river plants, as well as roughly 300 MW of new capacity additions from wind and solar, were offset by lower realized electricity prices from wind and solar. The major driver for the significant earnings increase in the segment was thermal generation and trading, which achieved an Adjusted EBITDA of EUR 3.6 billion, mainly on the back of higher margins from selling the generation from our power plants and the fact that, contrary to 2022, we did not incur negative one-offs related to the curtailment and termination of gas supplies from Russia anymore. Looking ahead, I would like to emphasize that we have not changed our conservative hedging policy. As such, at the end of 2023, we were almost 100% hedged for 2024, 60%-90% for 2025, and 20%-50% for 2026.
In the segment system-critical infrastructure, Adjusted EBITDA increased by 68% to EUR 1.8 billion on the back of higher grid revenues. More specifically, this was a result of increased investments in grid expansion and factoring in the higher expense for grid reserve, including redispatch, to maintain security of supply in grid charges for 2023, unlike the previous year when these expenses were not fully reflected in the respective grid charges. Our third segment, smart infrastructure for customers, achieved Adjusted EBITDA of some EUR 240 million, which was meaningfully lower year-on-year as a result of two one-off effects, one being the deconsolidation of a gas supply subsidiary and associated write-downs on receivables, and the other being related to incidents at a handful of solar home storage units at our subsidiary, SENEC. All storage systems potentially exposed to such incidents will be replaced from summer 2024 onwards.
Excluding these one-offs, the underlying performance was good, in particular from the B2B business at our subsidiaries. Ladies and gentlemen, moving on to the next slide, gross investments amounted to EUR 4.9 billion in 2023. This was 56% above the previous year's figure and substantially higher than in any given year in EnBW's history. We invested about 1/3 of our gross investments in the segment sustainable generation infrastructure. Mainly, this includes investments in our offshore wind farm He Dreiht and our three hydrogen-ready fuel switch projects. Over half of our gross investments were made in the segment system-critical infrastructure. As in previous years, the focus was on the expansion and modernization of our electricity transmission and distribution grids. The remaining investments went into our segment smart infrastructure for customers, mainly into the further expansion of our high-speed charging infrastructure.
In total, 87% of our expanded CapEx was Taxonomy aligned, which marks an increase by another four percentage points compared to the previous year. With EUR 2.2 billion, divestments in 2023 were significantly higher than in the previous year. In particular, this is due to selling down minority stakes and bringing financial partners on board for TransnetBW and He Dreiht, as already mentioned. These partners will also jointly share upcoming investments with us together. As a result, our net investment in 2023 amounted to EUR 2.7 billion. Having spoken about our investments, let's move on to our funding activities. Our well-balanced portfolio of debt financing instruments provides flexibility to target different markets and investment groups at the best possible time, allowing us to achieve very favorable financing conditions.
In the past year, we have further progressed in diversifying our financing instruments and raised an equivalent of around EUR 1.7 billion in the euro and Swiss franc markets, as well as EUR 1.5 billion via green bonds, end of last year. Furthermore, we issued another EUR 500 million in green hybrid format, beginning of 2024. This demonstrates our strong presence in the Eurobond and Swiss market. Looking ahead, we expect long-term funding needs in the capital markets of EUR 2.5 billion-EUR 3 billion on average per year, including refinancing. Sustainable finance is an integral part of our corporate growth strategy. To date, we have issued a total of EUR 5.5 billion in green bonds, which means that half of all our outstanding bonds are classified as green. Going forward, the share of our sustainable financing instruments will continue to increase in line with our inherently sustainable investments.
Let's turn to our retained cash flow, which amounted to EUR 4.8 billion in 2023 and hence significantly exceeded the prior year. The increase was mainly driven by higher cash-relevant operating earnings, which were partially offset by higher taxes and dividends declared. As illustrated on slide 18, net debt increased slightly by about EUR 900 million in 2023 and reached a level of EUR 11.7 billion at the end of the year. Against a very strong retained cash flow, we had investments of EUR 2.7 billion, as already touched upon a few minutes ago, and recorded an increase in adjusted working capital by roughly EUR 2.3 billion, mainly driven by a lower positive margin balance. Moreover, the pension discount rate decreased from 3.7%-3.15%, which caused an increase in pension provisions by about EUR 500 million.
This translates into a debt repayment potential of 41% in 2023, which significantly exceeds our long-term target of more than 15%. Based on the strong earnings and our positive outlook, we propose to increase the dividend for 2023 to EUR 1.50 per share. If approved by the AGM, this marks an increase of 36% compared to the prior year and corresponds to a payout ratio of some 15% of adjusted group net profit. While in the long run, we continue to aim to pay out no more than between 40%-60% of adjusted group net profit, the moderate payout ratio for 2023 strengthens our balance sheet and implies that a larger profit share is available to finance future investments. And that brings me to page 19 and our outlook for 2024. Let's start with the business segments.
In renewables, as part of sustainable generation infrastructure, we will benefit from new capacity additions in wind and solar and from the reclassification of all pumped storage power plants to renewables in line with the categorization under the EU Taxonomy. Thermal generation and trading, also part of sustainable generation infrastructure, is expected to record a very solid performance in 2024. However, earnings will be lower than 2023 due to lower realized power prices. The earnings of system-critical infrastructure will increase year-on-year, in particular on the back of ongoing investments. In the segment smart infrastructure for customers, operating earnings will increase moderately since we assume that a negative effect from 2023 will largely disappear. All in all, Adjusted EBITDA on group level is expected to amount to between EUR 4.6 billion - EUR 5.2 billion. And now back to Georg with a snapshot on our ambition for 2030.
Thank you very much, Thomas. Ladies and gentlemen, with our strategy EnBW 2025, we have a very good basis that we will continue to further strengthen until 2030. By the end of this decade, we expect an Adjusted EBITDA of EUR 5.5 billion-EUR 6.3 billion. With a high share of low-risk Adjusted EBITDA of at least 70%, our portfolio will remain balanced across our three segments. The transition to a climate-friendly, decarbonized energy world requires major investments. From 2024 to 2030, we will invest EUR 40 billion gross. I can assure you that the expansion of the grid infrastructure for electricity and gas, including hydrogen, the expansion of renewables, and the development of low-carbon dispatchable power generation will continue to make up by far the largest part of our investments in the coming years. With these investments, EnBW will further drive ahead the energy transition.
In doing so, we aim to meet the strict sustainability criteria of the European Union Taxonomy with more than 85% of Taxonomy-aligned CapEx. A meaningful part of our investments will be funded by bringing partners on board for selected projects and activities. We hence expect net investments of roughly EUR 22 billion until 2030. In this context, it is important to note that we have already secured almost half of the expected cash inflows, in particular from our partners at our offshore wind project He Dreiht and TransnetBW. Until 2030, we will largely finance net investments via retained cash flow. Ladies and gentlemen, finally, we would like to address the following, which is essential for the success of the energy transition. Major projects go hand in hand with high investments, and therefore we and our partners need a stable framework and environment.
And when I talk about stability, I mean beyond one legislative period. The energy transition must be planned and implemented over a period of time which is far longer than that. We at EnBW welcome the publication of the first key points of the German power plant strategy. It is very positive that the German government has agreed on a system-friendly expansion which is needed in addition to the expansion of renewable energies. Now, further clarity is required. The same applies to hydrogen and a clear framework in order to successfully ramp up the hydrogen market in the near future. In parallel, the expansion of renewables and grids must be driven forward at high speed. And with this, I would like to hand over to Marcel.
Yeah, thank you, Georgios and Thomas. Ladies and gentlemen, we'll now start the Q&A session.
As I mentioned earlier on, please move to the Q&A tool on our website now in order to ask a question live. You can also use this tool to submit questions in writing as a fallback if you have technical difficulties, either with your camera or audio. It may now take a few seconds before you get through. As I said, we just want to give you a few more seconds to register and list yourselves for Q&A to just stay with us a bit. We can see Andrew on the list, Andrew Moulder. Andrew, if you would want to start raising your questions, please.
Hi, Marcel. Can you hear me?
Yes, we can. Loud and clear, Andrew.
I'm sorry. I don't know what happened there. Okay. I have a few questions, but maybe the first one is about the gross and the net investments.
I mean, EnBW is an important company, but it's not a huge company. And to have EUR 18 billion of potential partnerships and divestments over that period of time, to me, seems like a very ambitious target. Could you perhaps give a little bit more color on exactly how you're going to do that? I think you mentioned that you've done some with He Dreiht already, so how much of that have you already done? Just a little bit more clarity on that, please. Also, EnBW has quite a significant amount of minorities, which I know is something that the rating agencies have pointed out in the past. And I'm just a little bit concerned that the fact that you're going into so many new partnership arrangements will further increase those minorities and could put pressure on your rating. So perhaps you could give me a little bit more comfort around that.
Maybe my final question, which you probably won't answer, but I'm going to ask it anyway. Andreas Schell, the press release was quite cryptic, saying that the key reason he had left was that he differed in his strategic ambitions for the group and so on. EnBW's strategy seems quite sensible to me, but I just wonder, what did he want to do differently that you're not doing? I'll stop there.
Thank you. Andrew, actually, hi. Good afternoon. Good to hear you. Let me get started with your third question. Indeed, I think we don't want to go into too much detail regarding the reasons for Andreas Schell leaving the company. I think the press release made all the statements, and it's more like a question to the supervisory board than to us anyways.
But to your first two questions, I would like to elaborate a bit more on that. You were mentioning the EUR 40 billion in gross and the EUR 22 billion net investments. Indeed, actually, we've hit right. The 49.9% minority stake we sold and also TransnetBW, a bit above 50% of this difference of EUR 18 billion, are already locked in with these two partnerships. So the rest, actually, the rest are EUR 9 billion, and we are very comfortable that we can achieve these divestments. I mean, it's quite a long time until 2030 for first and secondly. It's all normal business. That's what we always did. We always take partners on board, as you know, with our offshore wind parks and also now with our grid expansion. So we are quite confident to be able, actually, to deliver on that.
Regarding minority stakes, it's a fair point, and we are looking into it. Rating agencies are also looking into it. However, we feel very comfortable that we are able, actually, to keep our ratings at that level, A minus, B plus. That's the ballpark. We feel quite comfortable, even with increasing shares of minorities. Does that actually answer your question, Andrew?
Yeah, yeah. No, that does. Maybe I could just ask one more question.
Yeah, certainly.
Obviously, I asked about Andreas, but I would like to congratulate Georgios for taking up the role of CEO. And I do have one question for him. Previously, he was the head of the sustainable generation business. So I'd just like to ask really about the hydrogen-ready gas plants.
I think this is a question I've asked before, but as an expert in the field of generation, how realistic is it really to believe that hydrogen is ever going to be used as a source of fuel for a power plant?
Thank you very much for the congratulations at first. Andrew, let me answer your question. We are installing now already 3 hydrogen-ready turbines, 2 in the near vicinity of Stuttgart and 1 in Heilbronn. These machines are capable to run 100% hydrogen. We expect this second fuel switch, if you want to name it like this, first fuel switch being from coal to gas and second from gas to hydrogen, by the mid-2030s. We are very glad that the German government did not limit the hydrogen into green hydrogen, but also leaves blue and turquoise hydrogen to be used in these machines.
I think we need to consider, when we are speaking about these power plants, that they are going to fill in the gaps left by the renewable generation. We expect in Germany to have 80% coverage through renewables by the year 2030. Already, the number 20% means a few operating hours for these power plants. And I think it is realistic. Nevertheless, we need this dispatchable capacity. Otherwise, the system cannot operate. And if you look at the technological options that we have, then you end up with hydrogen or other green gases. You need these molecules in order to realize the energy transition. It will not work only with batteries or only with pump storage hydropower plants. And I'm very confident that in the end, we will manage also the second fuel switch to hydrogen.
Okay. Can I just follow up slightly?
Because I'm not really concerned about the sort of technology. I have no doubt that that is possible. I'm more concerned about the economics of actually using hydrogen. Where do power prices have to be in order to make it economic to generate power with hydrogen?
Yes, but this is exactly the point where we are discussing currently with the German government about the power plant strategy. As you have heard or probably heard, the German government wants to introduce a capacity market regime by the year 2028. We expect our fuel switch projects to be eligible to participate at this market. And there are also some discussions about financing the CapEx of new machines, not the three projects that we are currently doing, but of new machines to get a subsidy or a support from the German government to build the additional power plants that are necessary.
And for sure, we expect also, for the limited amount of hours that these plants are going to come into operation, to have a free price policy to let them, for limited times, earn this amount of money in the market.
Okay. Great. Thank you. Thank you, Andrew. We've got Sharon now here in the backlog of Q&A. So Sharon, do you want to start raising your question? I know you posted it in written format as well, but I hope your camera and microphone are working.
Hi, Marcel. Hello. I think there's a bit of an echo because I can still hear comments from the previous question ongoing.
Okay. We can hear you loud and clear.
Okay. I'll talk over it then. I've got a couple of questions. I think I heard the CEO say that you had charging points across 17 countries.
If I heard that right, can I ask why such a wide presence instead of focusing on areas where you have an integrated presence across the board? And my second question is, for transmission and distribution electricity and gas assets, could I just have an idea of the proportion of the asset split in terms of your fixed assets or maybe a regulatory asset base? I just want to get an idea of the proportion of what the relative proportions are, please. Proportion of what?
Sharon, not quite sure we understood your second question right on the grids, I think. Were you asking for a regulated asset base number?
Not precisely the number because I know I've tried this, and I've never been able to get this before. But if you could give me just in percentage terms, broadly, across your grids, what is electricity transmission? What is gas?
What is distributional? And what is distributional gas distribution? Even percentage terms, that'll be very helpful.
Yeah. Okay. Thank you. Sharon, now fully understood. I don't have the numbers, actually, here with me, but we'll provide you the numbers regarding the split of our regulated business, as just mentioned from you. To your first question, actually, the 17 countries, it doesn't mean, actually, that we are building our own charging infrastructure in 17 countries. That's actually partnerships to allow our customers who are using our ENBW charging system to charge in 17 countries. And I think it's 600,000 charging points in total. So we are focusing, when it comes to our own charging infrastructure, we are focusing here on Germany very clearly and Austria.
Okay. That's great. Thank you.
Welcome. Thank you, Sharon. So do we have any more questions?
I'll just give it another second or two to see if somebody still registers. That doesn't seem to be the case. Once again, thank you, Georg and Thomas, for your answers and comments. Thanks to all of you on the line for taking the time. We very much look forward to welcoming you again when we present our results for the first three months, 2024, on our next conference call on May 14th. Until then, all the best and goodbye.