Ladies and gentlemen, welcome to the EnBW's Investor and Analyst Conference Call for the first half year results. I'm Alice, the conference call operator. I would like to remind you that all participants will be listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and One on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Marcel Münch, Senior Vice President, Finance, M&A, and Investor Relations. Please go ahead, sir.
Hey, good afternoon, ladies and gentlemen. Thank you for joining us today to discuss EnBW's results for the first six months of fiscal year 2024, which were published earlier this morning. As it's standard practice, Thomas Kusterer, our Deputy CEO and CFO, will first guide you through all the details in our presentation, and afterwards, we will, of course, be happy to answer the questions you may have. And now, without any further delay, over to you, Thomas.
Marcel, thanks a lot, and a warm welcome to everyone. During Q2 2024, we continued our solid performance. Earnings in the first six months developed well across all segments and in line with the gradual normalization in commodity and energy markets. For H1, adjusted EBITDA stood at EUR 2.6 billion, and adjusted net profit at around EUR 900 million, corresponding to our expectations. Hence, we confirm our full year EBITDA guidance. From a green financing perspective, we reached important milestones to advance our energy transition efforts. After issuing a green hybrid bond at the beginning of this year, we followed suit with a successful issuance of two green senior bonds totaling EUR 1.2 billion in July. 100% of the proceeds will be used to finance climate-friendly, taxonomy-aligned projects in line with our updated green financing framework.
The framework now includes the new project categories, hydropower and electricity transmission grids, too, and forms the basis for all our future green financing. As we speak, 52% of EnBW's outstanding bond issues are green, and we aim to issue at least 85% of our new issuances in a sustainable format by 2030. The recent transaction, we have fully realized our targeted financing volume for 2024 already and will now monitor the market for pre-funding opportunities. Next to our capital market financing activities, we have refinanced and enlarged our syndicated credit line to a volume of EUR 2 billion. The facility is linked again to ambitious sustainability criteria, including the reduction of the carbon footprint of EnBW in Scope 1, 2, and for the first time in Scope 3, as well as the share of green investments according to the EU taxonomy.
Another good news is the recent development in our offshore and onshore wind business. In June, we strengthened our position in the German offshore wind market by securing an attractive site in the North Sea in the offshore wind auction. The wind farm, with a capacity of 1 gigawatt, is scheduled to go into operation by 2031. In addition, our French subsidiary, Valeco, ranked number two in the most recent onshore wind auction in July with 117 MW. Also in July, EnBW has received grants from the German federal and state governments to develop large-scale hydrogen projects. EnBW was awarded a total of EUR 660 million for three projects along the whole hydrogen value chain.
They are part of the so-called IPCEI projects, certified by the EU as important projects of common European interest and focus on hydrogen production, transport, as well as storage infrastructure. This is an important step to ramp up the hydrogen economy in Germany. Staying with hydrogen, EnBW will participate in the construction and expansion of the German Hydrogen Core Network, which is an essential component of the future European hydrogen backbone. We will initially invest around EUR 1 billion via our subsidiary, terranets bw, and VNG's gas transmission company, ONTRAS, which has recently submitted specific commitments for pipeline projects to the Federal Network Agency. Let's now take a look at how well EnBW's integrated portfolio evolved and grows in our efforts to achieve climate neutrality by 2035.
As we speak, we have around 6.5 gigawatt of installed renewables capacity, representing around 55% of our overall generation portfolio, a record high for EnBW, and the pipeline is well filled. Thanks to our success in the recent German offshore auction, our U.K. offshore projects, Mona, Morgan, and Morven, and our German offshore project, He Dreiht, which is currently under construction. We are currently working on approximately 5 gigawatts offshore pipeline on a pro rata basis alone. By the way, the U.K. offshore project, Mona, develops particularly well, with its accelerated grid connection date three and a-half years earlier than originally anticipated, which brings the COD to late 2029. Furthermore, Mona belongs to those projects whose development consent order was submitted and accepted first among all U.K. Round Four sites. At the same time, we consistently decarbonize our thermal power generation portfolio.
During the first half of this year alone, we managed to reduce our coal-fired generation capacity by almost 1 gigawatt. Consequently, the coal-based revenue decreased to 3%. Considering these positive developments, we are now guiding a much lower CO2 intensity target for the year of between 290 g/kWh and 350 g/kWh. That is 100 g/kWh less than originally forecast. But we are not stopping here, and are also strengthening our balanced, integrated portfolio. Be it the flexible backup capacity for our renewables, the vital grid infrastructure, or the constant expansion of our e-mobility network. EnBW plays a leading role in all of these areas and takes its role as the leading integrated utility in Germany very seriously. And now back to the financials.
As just mentioned, the normalization of the power prices corresponds to the adjusted EBITDA development in the first half of 2024, with EUR 2.6 billion for the group. This is in line with our expectations, in particular for the segment sustainable generation infrastructure. Low-risk activities, comprising our grid as well as renewables business, came up with a robust contribution of 68% of total earnings the first six months of this year, accordingly, accounting for EUR 1.8 billion in adjusted EBITDA, compared to 55% in the first half of 2023. Let's now take a look at our business segments, starting on Slide 5 with sustainable generation infrastructure, where we achieved an adjusted EBITDA of almost EUR 1.5 billion. Starting with renewables, adjusted EBITDA amounted to EUR 596 million.
The decrease year-over-year was driven by lower realized electricity prices, mainly from pumped storage, despite the reallocation of the remaining 545 MW of these assets in our portfolio to renewables, in accordance with the updated EU taxonomy classification. The figures for the previous year have been adjusted accordingly. The decline in spreads was expected after exceptionally high levels in the previous year. New capacity additions in onshore wind and solar, higher run of river power generation, and better offshore wind conditions could only offset this decrease to a minor extent. Adjusted EBITDA in thermal generation and trading was EUR 855 million, marked by significantly lower realized hedge margins and lower trading results on the back of reduced volatility in the commodity market.
With respect to our hedging levels, we are fully hedged for this year, 80%-100% for 2025, 40%-70% for 2026, and up to 30% already for 2027. Moving on to the segment, system-critical infrastructure. Adjusted EBITDA of system-critical infrastructure came in at almost EUR 1.2 billion. This corresponds to an increase of 13% compared to last year, as a result of higher earnings on investment projects in our grids businesses across the group, as well as lower expenses for maintaining grid reserve and redispatch. These positive developments were slightly offset by lower congestion revenues and higher personnel expenses in both power transmission and distribution grid businesses. Our third segment, smart infrastructure for customers, adjusted EBITDA increased significantly to EUR 173 million. The most relevant development is the absence of one-off effects.
Last year was negatively affected by the deconsolidation of our subsidiary, bmp greengas. Lower sales volumes due to mild temperatures and higher burdens from restructuring of the product portfolio, including the planned battery module replacement at SENEC, had a counteracting effect. Moving on to Slide 8. For the first half of 2024, our gross investments totaled roughly EUR 2.5 billion. This was almost 60% above the previous year's figure. 90% of these investments were taxonomy-aligned, and 87% were attributable to growth projects linked to the energy transition, while the rest were investments in retrofitting existing assets. We invested almost half of our gross investments in sustainable generation infrastructure. Mainly, this includes investments in our offshore activities in Germany and the UK, and in our three hydrogen-ready fuel switch projects from coal to gas.
Almost 40% of our gross investments were made in system-critical infrastructure. As in previous years, the focus was on the expansion and modernization of our electricity transmission and distribution grids, and the remaining investments went into smart infrastructure for customers, mainly related to the further expansion of our e-mobility charging infrastructure. Overall, we recorded a higher amount of proceeds from divestments and co-financing contributions by partners, particularly for our offshore wind farm, He Dreiht, and our transmission grid operator, TransnetBW. Ladies and gentlemen, retained cash flow amounted to EUR 880 million in H1, which is in line with the development of the adjusted EBITDA and higher dividends paid to our partners, as well as to our shareholders after our annual general meeting in May.
As illustrated on Slide 10, net debt increased by EUR 0.9 billion, mainly due to significant net cash investments totaling EUR 2.2 billion. A major counterbalancing factor was the reduction in pension provisions by roughly EUR 400 million, resulting from the higher discount rate. Finally, moving on to the guidance for the fiscal year 2024. As I mentioned before, we confirm our full year guidance, which already reflects the decreasing volatility and lower power price environment. With a good performance during the first six months, we remain positive about both the guidance for the segments as well as on group level. And with this, let me hand over and back to Marcel for the Q&A session.
Thank you, Thomas. Ladies and gentlemen, let's now start the Q&A session, and I'll pass the ball to Alice.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets when asking a question, and eventually turn off the volume from the webcast. Anyone who has a question may press star and one at this time. Once again, to ask a question, please press star followed by one on your telephone. Our first question comes from the line of Andrew Moulder, CreditSights. Please go ahead.
Yes, hi, Thomas. Hi, Marcel.
Hi, Andrew. Good afternoon.
Hello. Oh, good, good results again, I suppose. Guidance in there still, still retained. That's excellent. I, I actually wanted to have sort of, ask a general question about kind of how you're expecting the business to develop sort of beyond this year. And the main thing I wanted to get was a timetable of when your new projects are coming online. You know, I think you've obviously got SuedLink and Ultranet, you've got the renewables, you, you've talked about Mona in your renewables comment earlier. You've also got the hydrogen-ready plants.
So I'm just wondering kind of what the timetable is for those to come online, you know, because obviously, when I look at your EBITDA now, you know, it's been artificially high for the last two years or so. So I'm guessing it's probably gonna drop down a bit in 2025 as we start to see power prices come off and so on. So then I just wanna know, you know, how it's going to increase past 2025 to get up to, I think you're talking about EUR 6 billion or so of EBITDA by 2030. So that's my first question. And my second question really is, I just saw a headline on Bloomberg that said you were considering using Chinese wind turbines for some of your offshore projects. And I just wondered, you know, what's kind of.
Is there a cost advantage there? And are you worried at all about the maintenance issues and reliability or anything like that? Could you just perhaps talk a little bit more about, you know, if that headline is correct and, you know, what—why you're considering using Chinese as opposed to, I don't know, Vestas or GE? Thank you.
Andrew, thanks a lot actually for your question. And let me get started with the second question immediately, because that's not what I said. What I said was actually that we are in the current project, we are not considering any kind of Chinese turbines. However, I didn't rule out that in the future, at some point in time, given the fact that we do only have a limited number of suppliers here in Europe, it might make sense to look into it. That's all I said. So, it's not that we are currently looking into using Chinese turbines as we speak. So thanks for your question, actually, to allow me to clarify that. And to your first question regarding development of our operating results going forward.
I mean, He Dreiht is going to be on the grid, and then COD is expected by late 2025, Mona, 2029. However, you also actually mentioned SuedLink, and SuedLink you will get immediately reimbursed whenever we invest. So we do see immediate operating results from our investment into SuedLink. Having said that, we do not assume that we will see a decline in our operating results in 2025 and beyond. Contrary, on the back of our high investments, and it's not only the big investments we are always talking about, it's also onshore wind and solar with much shorter, let's say, pre-FID and COD time frames.
We do see on the back of these high investments, also an increase gradually of our underlying operating results through 2020, 2030. So I would say it's led to slightly increasing by 2025, and beyond, it's more it's increasing through 2020, 2030.
Right. Thank you.
It helps with it.
Yes. Yes, it does actually. Particularly the SuedLink and Ultranet, I suppose, as well.
It's exactly the same actually. It's much like SuedLink.
Okay, and can I just ask one quick question on Mona? You talked about that coming on late 2029. I should know this, but I'm afraid I don't. Have you already got a CFD in place for Mona?
No, not, not yet. I mean, FID is expected 2026, and, I think the CFD option we can get into it is 2020, 2026. Also, so we do not have the CFD yet. However, having said that, I mean, it's not only CFD, we can also actually consider to enter into PPAs. So it's both PPAs and, and CFDs we are looking at when, when it comes to our U.K. projects.
Right. Sorry, I'm just. I know I'm hogging the call here, but just one more question on that then. What, what are you seeing in the PPA market, particularly in the U.K.? I mean, if, you know, if you're building these in the U.K., you'd need to be selling, I guess, into the U.K.
Absolutely.
What's the PPA market like there at the moment?
It's not like in Germany. However, it's a good market. We do have the demand you would expect. In that market, it's the same like in Germany and everywhere else in Europe. The companies try to decarbonize their own production, their company locations and reduce their own CO2 footprint, and that's why we do see a sensible interest in PPAs also in the U.K.
Okay, great. Thank you.
Welcome.
For any further questions, please press star and one on your telephone. Star followed by one. We have a question from Mr. Erkan Aycicek at LBBW. Please go ahead.
Sorry, hello, gentlemen, and thanks for taking my question. My first question is relating your outlook on the Adjusted EBITDA level, and based on your outlook, we have to calculate with an EBITDA between EUR 2 billion and EUR 2.6 billion in the second half of the year, which is below the first half of the year. Maybe you can give some insight what's the main reason for your assessment? And the second question is relating to your net debt, and maybe you can give us some indication of do you expect for the full year. Thanks.
Yeah, welcome, Erkan, and thanks for your question. Regarding the balance between the first and the second half, that's quite usual, especially when you look at our grid business. In the grid business, normally it's 55% in the first half and around 45% in the second half of the year. So, that's why we do assume, we do assume that your under or let me put it better, your underlying assumptions regarding our Adjusted EBITDA for the second half is in line with that. And when it comes to our net debt development, currently we are at EUR 12.6 billion. We do assume that we are going to see an increase to EUR 15-16 billion by the year end, and that's on the back of our high investments.
As I mentioned before, actually, we are currently investing into He Dreiht, our U.K. project, but also in our fuel switch project here in Baden-Württemberg, on top of that, SuedLink and Ultranet, so we do have quite significant investments here. Our gross investments for the full year is expected to be around EUR 7 billion. So, it's not, it's not a surprise, and we expect that our net debt is increasing accordingly. Is that helpful, actually?
Absolutely.
Does that answer your question? Perfect. Thank you.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Marcel Münch for any closing remarks. Marcel?
Yeah. Thank you. Once again, thank you, Thomas, and yeah, thanks to all of you for joining the call on our half year results. Thanks for listening in, and also thanks for the questions you raised. Should you have any further questions, as always, please don't hesitate to contact our IR team. We then look forward to welcoming you again when we present our Q3 figures on our next conference call on November 12th, and until then, we wish you all the best. Have a great day and a wonderful summer. Goodbye!
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