At this time, it's my pleasure to hand over to Lenka Zikmundová, Head of Investor Relations. Please go ahead.
Thank you, Georg, and good afternoon, ladies and gentlemen. Thank you for joining EnBW's conference call on the third quarter of FY 2024. On with me today is Thomas Kusterer, our Deputy CEO and CFO, who will guide you through our presentation, after which we will start our Q&A session. With that, I would like to pass the ball to Thomas.
Thank you, Lenka, and good afternoon, everyone. The first quarter 2024 was a good one in absolute terms, however relatively weaker in comparison to an outstanding prior year. Overall, this was largely anticipated since the extremely elevated power and commodity prices seen in 2022 and 2023 are entering in a normalization phase. Nevertheless, we have delivered robust earnings from all our segments, leading to the Group-Adjusted EBITDA at EUR 1.3 billion, and we confirm our full-year guidance across all metrics. This is a consistent proof of the power and robustness of our integrated business model. We are also on track with our progress in ESG and clean energy transition. This has been rewarded at the beginning of 2024 by CDP, an internationally renowned nonprofit organization, which recognized EnBW as a leader for environmental achievements on climate change, granting us an A-minus score.
We strive to provide full transparency on our ESG activities and decarbonization roadmap. Just recently, EnBW published its first Climate Transition Plan as well as its first ESG Factbook. Both publications enjoyed a very positive response from our sustainable finance community. Same applies to our EUR 500 million green hybrid Bond issued at the beginning of this year. Turning now to our operational and strategic progress. EnBW has also successfully continued to move at pace with its projects that highly contribute to promoting the energy transition. In renewables, we started construction of the largest solar park in the southwest of Germany this February. The subsidy-free plants will go into operations in 2025 with an installed capacity of 80 MW and, once completed, will be capable of generating enough solar power to supply around 30,000 households with electricity.
Staying with solar, we were also successful in the latest German solar tender, which ended on March 1st. EnBW has been awarded for all four projects with a total capacity of around 40 MW. As you can see, we are well on course to reach our renewables target of 6.5-7.5 GW by 2025 from currently 6.3 GW of installed renewables capacity. In our offshore business, we made further progress with He Dreiht. In April, EnBW and the German steel manufacturer SHS – Stahl-Holding-Saar signed a 15-year PPA for 50 MW of generation capacity from the 960 MW offshore wind farm. In the meantime, more than half of the capacity of He Dreiht is now secured via long-term PPAs with several German companies. Besides that, our large-scale gas and hydrogen infrastructure projects are gaining traction as well.
In March, we kicked off construction of a new 250 km pipeline for natural gas and hydrogen called South German Natural Gas Pipeline. It will be the first hydrogen pipeline in the southwest of Germany with a connection to European transport routes and is expected to start transporting hydrogen in the early 2030s. Finally, construction works have also started on our new H2-ready power plant in Heilbronn. This is the third of a trio of fuel switch projects launched by EnBW with a total dispatchable capacity of 1.5 GW. Thanks to the continuous expansion of new climate-friendly capacity, EnBW has been able to decommission old and less climate-friendly power plants. During the first three months of this year, we reduced our coal-fired generation capacity by almost 400 MW, with the plants being shut down for good or moved into reserve at the request of the grid operator.
Speaking of generation business and to round the introduction off, I'm very happy that our management team is complete again. In mid-April, our Supervisory Board appointed Peter Heydecker as new member of the Management Board responsible for Sustainable Generation Infrastructure starting May 1st. Previously, Peter was in charge of EnBW's international energy trading business, which is part of the generation segment. He took over from Georg Stamatelopoulos, who had been managing the division in a dual role since he became the new CEO of EnBW in March. Let's now move on to page three of the slide deck and dive into the earnings. As just mentioned, with EUR 1.3 billion for the group, our Adjusted EBITDA was below last year's level as the commodity and power market normalizes. This expected development was mainly driven by Sustainable Generation Infrastructure.
Low-risk activities comprising our grids as well as renewables business came up with a robust contribution of 67% of our total earnings in Q1, accounting for more than EUR 900 million in Adjusted EBITDA compared to 58% in Q1 of last year. The decline in adjusted group net profit in the reporting period is primarily due to the reduction in EBITDA. Let's now take a look at our business segments starting on slide 4 with Sustainable Generation Infrastructure, in which we achieved an Adjusted EBITDA of almost EUR 800 million. Starting with renewables, Adjusted EBITDA amounted to EUR 331 million. The decrease was driven by lower realized electricity prices, mainly from pumped storage, despite the relocation of the remaining 545 MW of these assets in our portfolio to renewables in accordance with the updated EU Taxonomy classification.
The decline spread was expected and could be offset only to a minor extent by new capacity additions in wind and solar and by higher run-of- river power generation and better offshore wind conditions. Adjusted EBITDA in Thermal Generation and Trading was EUR 467 million, marked by significantly lower realized hedge margins, the absence of income from nuclear power generation following the closure of the last unit in Germany in April 2023, and lower trading results on the back of reduced volatility in commodity markets. EnBW's hedging strategy remains unchanged with up to three years rolling forward. As such, we are fully hedged for 2024. Hedge levels for 2025 reach 70%-90% and 30%-60% for 2026, and we have started hedging first volumes for 2027 as well.
Adjusted EBITDA of System Critical Infrastructure on slide five came in at EUR 574 million on par with the previous year high levels as a result of higher earnings from our growth projects in which we are increasingly investing. Lower expenses for maintaining the grid reserve and for redispatch, which are temporary of nature, also drove earnings. This was slightly offset by increased personnel expenses. YoY, our third segment, Smart Infrastructure for Customers , was significantly up on the back of seasonally lower procurement prices due to market normalization compared to the first quarter 2023. Moreover, a good underlying performance, in particular from our B2B business at EnBW subsidiaries, supported our Q1 result in 2024. Moving on to slide seven. For the first quarter 2024, our gross investments totaled EUR 1.3 billion. This was almost 80% above the previous year's figures.
90% of these investments were allocated to growth projects linked to the energy transition, while 10% of the investments went into rate-regulated existing assets. We have invested around 60% of our gross investments in Sustainable Generation Infrastructure. Mainly, this includes investments in our offshore activities in Germany and U.K. and in our 3 hydrogen-ready fuel switch projects from coal to gas. About 1/3 of our gross investments were made in System Critical Infrastructure. As in previous years, the focus was on expansion and modernization of our electricity transmission and distribution grids. The remaining investments went into Smart Infrastructure for Customers , mainly the further expansion of our electric vehicle fast 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, let's turn to our retained cash flow, which amounted to a very solid EUR 1.1 billion in the first three months 2024. The decline YoY was mainly driven by lower operating earnings, as already touched upon, and marginally higher dividend distributions to partners. As illustrated on slide nine, net debt remained stable at EUR 11.5 billion at the end of the first quarter since both investments and retained cash flow were roughly equal. In January, we issued EUR 500 million in perpetual subordinated notes, of which 50% are classified as equity and therefore reduced net debt by EUR 250 million. We intend to use these proceeds to replace the EUR 500 million green hybrid note issued in 2019, which are callable from August 2024.
As already mentioned at the beginning of the presentation, we confirm our full-year guidance, which already reflects the decreasing volatility and lower power price environment. With a robust performance during the first quarter and an overall good beginning of the year, we feel comfortable with both the outlook on segments as well as on group level. And now, let me hand back to Lenka.
Thank you so much. Ladies and gentlemen, we will now start with the Q&A session. Georg, operator, please begin.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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 headsets while asking a question.
Anyone who has a question may press star and one at this time. Our first question comes from Bartek Deza with Bank of America. Please go ahead.
Yes. Thank you for the presentation, and thank you for taking my question. So I just had a quick query on the guidance of net debt. I mean, can you provide any guidance for net debt for the full year and also comment on your bond issuance plans for the year? And may I also note the upside that you are factoring into your guidance? I mean, in Germany, we have seen power prices rise in the last month. So would that have any upside in your current guidance? Thank you.
I appreciate it. Thanks, actually, for asking the question. Regarding your first question and potential upsides from the increase of power price, I mean, we are fully hedged for 2024.
So we do not expect that that does have a material impact on our guidance. So as I just said, fully hedged, so no material impact, at least not for 2024. Regarding the bond issuance, I mean, we have pre-financed pretty much the better part for our capital needs for 2024. Do I fully rule out that we will be in the market sometime this year? No, but that needs to be seen very much depending on our investments going forward for 2024. And regarding net debt guidance, we do expect, actually, that net debt is going to increase from currently EUR 11.5 billion to EUR 15-16 billion, very much depending, of course, on our investments in 2024. I mean, as I've just mentioned during the presentation, our retained cash flow compared to prior years is going down. Our gross investments are potentially going up.
And that means that we might see the increase in net debt, as I just alluded to. On top of the CapEx, actually, we need to see how margin payments are actually developing over the course of this year, very much depending on power prices at the end of the year. But factoring all these in, we assume an increase of roughly EUR 4 billion from today until year-end.
Thank you.
Appreciate that answer to your question.
Yes, yes, yes, it does. Thank you.
Thank you. And then may I ask one last question? Certainly. Maybe two more. So the first one is on the hybrid bonds. I mean, given that you are seeing an increase in net debt, do you plan to increase your existing hybrid stock? And the second question is on PPAs.
So what range of PPA prices are you seeing for your offshore wind projects?
Let me get started with the second question, PPA prices. I'll even not comment on PPA prices, actually. That's market-sensitive information, as you might be fully aware of. However, what we are seeing in principle is that the PPA prices are not as volatile as the power prices because they are longer-term, of course. I mean, as I just mentioned, we have just signed for 50 MW a 15-year PPA, so sensitivity is much lower, and we are quite happy with the current levels. Regarding the hybrid issuance and what we plan to do, we do not plan, despite the fact that we do have free capacity, we do, for the time being, not plan to increase our hybrid volume.
So do not expect that we will be in the market in the near future with any new hybrid.
Okay. Thank you. That's very helpful.
You're welcome.
Thank you. As a reminder, if you wish to register for a question, you may press star and one. Looks like we have no more questions over the phone. Excuse me. Excuse me. We have a last-minute registration from the line of Andrew Moulder with CreditSights . Please go ahead.
Yeah. Hi, Thomas. Hi, Lenka. It's Andrew Moulder at CreditSights . No, I just had.
Hi, Andrew. And we are fully aware of that. Oh, my God.
I just wanted to make sure everybody else on the call is here. No, I just had a simple question, really, or maybe not simple. I'm not sure.
I just wanted to understand how you will now be accounting the CapEx that is spent on the transmission networks now that you've sold 49%. I mean, when I think about it, I presume you're going to still be fully consolidating Transnet. So when I look at the investments in your cash flow statement, is that 100% of the CapEx, or will that only show 49% or 51% of the CapEx that's being spent on the transmission networks?
That's a good question, actually, Andrew. And you just pointed out that we are fully consolidating. So it's included in our, the gross investment is included in the numbers. So we have the gross investments, and then we have the divestments. So we are showing both. But when we're talking about our gross investments, it's 100% included.
That's what I was going to ask.
Yeah.
Well, then where on your cash flow statement would I see the amount of money that the other investors are putting into the transmission networks?
In divestments. In divestments, Andrew.
Oh, okay. So even though it's not a divestment, it's just an additional investment that they're making.
Exactly. Exactly. Exactly. They're providing it's not a divestment in terms of really divesting something. It's an additional contribution by our partners for the CapEx on an annual basis. Right. Right?
Okay. Okay. No, that makes sense. All right. That's great. Thank you, Thomas.
You're welcome.
Ladies and gentlemen, this was our last question.
Okay. Then we are done. Once again, thank you so much for your answers and comments. And thanks to all of you for joining. As always, appreciate the great questions. And if you have any further questions, please don't hesitate to reach out to our investor relations team.
We are at your disposal for the rest of the day. All the best, and have a great day. Bye-bye.
Bye.
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