Ladies and gentlemen, welcome to the EnBW's i nvestor and analyst conference call for the half-year 2025 results. I am Valentina, the Chorus Call operator. I would like to remind you that all participants will be in 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. Webcast viewers may submit their questions in writing via the relative field. 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, SVP Finance, M&A, and Investor Relations. Please, go ahead.
Good afternoon, ladies and gentlemen. Thank you, Valentina, and thank you all for joining us today to discuss EnBW's results for the first six months of fiscal year 2025. My pleasure to hand over to Thomas Kusterer, our Deputy CEO and CFO, in a second, who will lead you through our presentation. Afterwards, as always, we will open the floor for your questions. Over to you, Thomas.
Thank you, Marcel. I warmly welcome all of you today. Based on our integrated setup, EnBW continued to deliver resilient financial performance in the second quarter, reporting solid earnings at their half-year mark again. At EUR 2.4 billion, adjusted EBITDA was pretty much in line with our expectations, allowing us to confirm our full-year guidance. At the same time, our CapEx plan is progressing well. This reflects our efforts to execute our strategic agenda and strengthens our leading role in the climate-neutral energy transition. Gross investments increased by 25% year over year to EUR 3.1 billion, with 88% aligned with EU taxonomy. In line with our investment activities, we secured EUR 4.7 billion in equity and debt funding since the beginning of the year, adding to our solid operating cash generation. With strong backing from our shareholders, we successfully completed a EUR 3.1 billion capital increase in July.
This will further strengthen our capital structure and lay a solid foundation for our substantial investment program while preserving our credit metrics. In addition, we raised a further EUR 1.6 billion in long-term debt financing and continue to diversify our portfolio across various instruments and currencies. The latest transactions in July included a EUR 500 million sustainability-linked bank loan with cover from the Italian export credit agency, SACE, and a EUR 500 million green hybrid bond. The latter attracted exceptional investor interest, a response we greatly appreciate. This brings me to the highlights beyond our solid financial performance in the first half of fiscal year 2025, as shown on page three.
With strong progress in executing our strategy across all segments, EnBW continues to actively contribute to the transformation of the energy system, further strengthening our well-balanced and integrated portfolio. EnBW is a key enabler of sustainable, secure, and affordable energy for the future. Having added nearly 220 MW mainly from onshore wind and solar, in the first half of the year, EnBW now operates 6.8 GW of installed renewable capacity. It represents roughly 60% of our overall generation portfolio. Our pipeline remains well-filled. With 1.7 GW currently under construction, we are set to gradually expand our installed capacity over the coming quarters. A key contributor will be our 960 MW offshore wind farm He Dreiht. With sea cabling completed and wind turbine installation on the way, the project is set to deliver first power in autumn of this year.
Beyond this, our Mona Offshore Wind Farm Project in the U.K. has been granted its development consent order. Mona is the first project from the U.K.'s round for -lease round to secure approval, and we expect response regarding our second project, Morgan, within the next week. At the same time, we are consistently decarbonizing our thermal generation portfolio. With the sale of the nearly 1 GW Lippendorf power plant, EnBW will be lignite-free from the end of 2025, a key milestone on our path to a full coal exit by 2028. At year end, we'll have reduced our coal-based generation capacity by around 40% within just two years. In parallel, we are gradually replacing these assets with flexible, hydrogen-ready CCGT capacity to ensure reliable power generation going forward. With energy generation undergoing fundamental change, we are aligning and expanding our grids accordingly.
Our flagship transmission projects are progressing well. ULTRANET has passed 85% completion and is set for commissioning in 2026, while construction on the SuedLink section in Bavaria has begun. In distribution, our largest grid operator, Netze BW, has successfully renewed over 260 concessions, securing the long-term foundation for reliable regional and local operations. Impressively, not a single concession has been lost since 2020. Finally, in our retail and e-mobility business, we added over 800 new fast-charging points across Germany in the first half of the year, further strengthening our market-leading position in the DACH region. Now let's turn back to the financials on page four. As just mentioned, we are on track in 2025, having achieved an adjusted EBITDA of EUR 2.4 billion for the group in the first half of the year, pretty much in line with our expectations, in particular driven by our grid business.
Low-risk activities comprising our grids as well as renewable business continued their positive development. In the first half of the year, they contributed EUR 1.8 billion to our earnings, an increase by around 4% year over year, and accounted for 75% of our total earnings. Let's now have a closer look at the performance of our three business segments in more detail, starting on slide five. In sustainable generation infrastructure, adjusted EBITDA stood at EUR 1.1 billion after six months. Earnings decreased as expected, mainly due to lower realized tax generation margins, and in addition due to continued unfavorable weather conditions throughout the second quarter. Starting with renewables, adjusted EBITDA amounted to EUR 525 million. Year-on-year earnings were lower, driven by persistently weak offshore wind conditions throughout the first half of the year and limited rainfall during the second quarter, which impacted our run-of-river power generation.
This was partially offset by improved performance in pump storage and solar power generation. Adjusted EBITDA of thermal generation and trading was at EUR 556 million. While lower realized tax margins and subdued trading performance weigh on earnings, this was somewhat balanced by a solid LNG business and the initial earnings contribution from our newly commissioned grid stabilization plant in Marbach. Let's take a brief look at our thermal power generation hedge levels for the coming years. For 2025, we are almost fully hedged. For 2026, the hedge ratio stands at over 80%, and for 2027, it ranges between 40% and 70%. We have also started hedging first volumes for 2028, reaching up to 30%. This approach remains fully aligned with our well-established and proven hedging policy. Moving on to system critical infrastructure on slide six, which comprises our electricity and gas transmission and distribution grids.
Adjusted EBITDA of system critical infrastructure reached nearly EUR 1.3 billion in the first half of 2025, corresponding to an increase of 12% year over year. This robust performance was primarily driven by higher earnings from our investments in grid expansion, alongside lower costs for energy losses in the grid. In light of our strategic focus on expanding both transmission and distribution grids, personnel as well as operation and maintenance costs trended higher during the period, partially offsetting the segment's overall earnings growth. Turning to the details on the development of smart infrastructure for customers, as shown on page seven. Adjusted EBITDA of our retail segment was at EUR 233 million after six months. Year-over-year earnings increased by 35%, driven by a stronger contribution from our e-mobility business and improved earnings in our B2C activities.
Looking ahead to the second half of the year, we expect somewhat higher costs for our B2C operations to weigh on margins in this segment. Moving on to the earnings drivers down to adjusted net profit on slide eight. Adjusted net profit attributable to EnBW shareholders amounted to a solid level of EUR 632 million. Also, it remained below previous year's levels. This was mainly driven by higher financial expenses in the adjusted financial result, reflecting market valuation effect and slightly higher interest expenses due to increased financing volume. Moving on to slide nine with a brief look at our investment. In the first six months, EnBW's gross investments totaled EUR 3.1 billion, clearly reflecting a ramp-up investment activity in line with our planned CapEx program. Compared to the previous year, this represents an increase of 25%.
More than 40% of our gross investments in the first half of the year were dedicated towards sustainable generation infrastructure, primarily into the development and construction of offshore projects in Germany and the U.K., as well as three hydrogen-ready gas power plants in Baden-Württemberg. 50% of our CapEx was allocated to system critical infrastructure, focused on expanding and modernizing our transmission and distribution grid. As already mentioned, key projects included the construction of our DC transmission project, SuedLink and ULTRANET, as well as the German hydrogen core network. The remaining investments went into smart infrastructure for customers, mainly supporting the continued expansion of our e-mobility charging infrastructure. Investments and co-financing contributions by partners, particularly for our transmission grid operator, TransnetBW, and our offshore wind farm, He Dreiht, were lower than the previous year, in line with their respective share and in the equity capital contribution.
Now, let's take a brief look at our retained cash flow on slide 10. Retained cash flow amounted to roughly EUR 1.1 billion in the first half of fiscal 2025, corresponding to a year-on-year increase of 18%. Despite a moderate decline in adjusted EBITDA, retained cash flow benefited from lower tax outflows due to refunds received for previous periods. With that, let's move on to the development of net debt. As illustrated on slide 11, net debt increased to approximately EUR 15 billion since the end of 2024, mainly driven by high investment outflows. This was partially offset by our solid cash generation in the first half of the year, as well as a reduction of adjusted working capital. Please note that this figure does not yet reflect the positive impact of our EUR 3.1 billion capital increase in July 2025, which was completed after the reporting date.
That brings me to the last slide and our guidance for 2025. As already mentioned at the beginning of the presentation, we confirm our full-year guidance for fiscal year 2025. A solid second quarter adding to a good start to the year. We feel confident about the outlook both at segment level and for the group as a whole. Now, let me hand over back to Marcel.
Thank you, Thomas. Ladies and gentlemen, we'll now start the Q&A session. In addition to the familiar option of asking questions directly in the call, we now also added a chat function for your convenience. For more detail, I'll hand back to Valentina now.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Webcast viewers may submit their questions in writing via the relative field. Anyone who has a question may press star and one at this time. The first question comes from Andrew Moulder from CreditSights. Please go ahead.
Yes, thank you. Hi, Thomas. Hi, Marcel.
Hi, good to hear you actually.
I'll use the chat function next time, but I thought I'd try the old-fashioned way first.
No way. Wouldn't allow that, actually.
I just wanted to come back a little bit on your guidance. I mean, you've confirmed your guidance, which is great. You're only at about EUR 2.4 billion EBITDA for the first half of the year. If I look back historically, the second half of the year is typically weaker than the first half. I just wonder if you can talk a little bit more about, I mean, should we be expecting guidance to be at the bottom end, so sort of EUR 4.8 billion, or is there something in the second half that's going to make it better than the first half to get more towards the middle, top end of that range? That's my first question. I've just got a couple more if I could.
Absolutely.
Just generally, I wanted to ask you, I saw this news about this German infrastructure fund, EUR 100 billion or so. Can you add anything about that at the moment, or is it all just kind of under discussion and we're just waiting to see what happens? I'd appreciate anything you can give around that, whether you think that that might, I don't know, perhaps flow through to you in some way through some kind of KfW funding or whatever. I guess my, actually, I have two more questions. CapEx, I just wonder how much of your CapEx, of your, I think you said up to EUR 50 billion or so, how much of that is actually going into Transnet? You don't really break it down into transmission and distribution. You only ever really talk about the grid segments.
You've got 60% going into networks, which is like EUR 30 billion, but how much of that EUR 30 billion would go to Transnet as opposed to your distribution businesses? I think my final question, and it's something I've asked before, but I just wanted to know, you talked about the offshore wind farms in the Irish Sea, but you're in partnership there with , and bp, kind of in its own words, is now talking about being capital light in low- carbon energy. I'm just wondering, how firm is that partnership? Is bp showing any signs of withdrawing from those offshore farms? What would happen then? Do you presumably have a right of first refusal over their stake? If you could clarify that. Sorry for all the questions, but thank you.
Andrew, your questions are always, as always, well appreciated. Let me get started with the first one regarding the guidance for full year, EUR 4.8 billion through EUR 5.3 billion. You're absolutely right. We are currently at EUR 2.4 billion. However, I think I was trying to make the point during the call, during my presentation, that we were suffering from extremely unfavorable weather conditions in the first half. We assume that, that's going back to a normal level, what we currently are seeing. That's an uplift to the EUR 4.8 billion. Secondly, actually, He Dreiht is going to be commissioned in the second half of 2025, not fully, but gradually. It's going to have also a positive impact on our earnings in the back of the second half of 2025. Actually, we also assume that we will see a good performance in both of our other areas, the customer-facing business, but predominantly the networks business.
We are still confident, for both our group guidance as well as the guidance, on the segment level. Secondly, the EUR 100 billion infrastructure fund, as you already indicated yourself, there's a lot of unknowns in that still. Having said that, I would not assume that we will have a direct benefit from this EUR 100 billion. In all fairness, I don't think we need to. However, we would also assume that there will be indirect benefits because it will cause a positive sentiment economically in Germany, and hence, it's potentially increasing electricity demand. We will have in any case an indirect benefit from this EUR 100 billion infrastructure fund. Again, I think there's still a lot of unknowns where it will flow in the end. Regarding the CapEx, the EUR 50 billion, you were asking the splits of, first of all, networks business and rest.
Networks business is 60% of our overall CapEx program. We don't disclose the exact split between transmission and distribution networks. However, having said that, when you look at the first half of 2025, it was roughly 50/50 between distribution and transmission networks when you look at the CapEx for the first six months of 2025. Your final question regarding the offshore projects, Mona, Morgan in the Irish Sea, and bp. I think you're well aware that bp formed a joint venture with JERA. It's JERA Nex bp . This joint venture is the partner of our two projects now. We have no indication whatsoever that anything is going to change. Contrary, I think we feel very comfortable with the fact that JERA is now additionally on board. We see it as a positive and helpful for the development of these projects.
No indication whatsoever that bp is trying to pull out of these projects. I hope, Andrew, it was helpful and kind of answered your questions.
Yeah, no, that's great. Maybe just one other question on the Irish projects then. Will you be bidding those into allocation round seven, do you think, or is it perhaps too early yet to do that?
First of all, it would be too early to say, and secondly, we wouldn't disclose it anyway, Andrew, because it is, of course, commercially sensitive information. Sorry about that.
No, that tells me, doesn't it? Okay, thank you.
You're welcome.
As a reminder, if you wish to register for a question by phone, please press star and one on your telephone. Ladies and gentlemen, we have no more questions on the phone. Back over to you for any, o h, we have one more from Andrew Moulder, CreditSights. Please, go ahead.
Yes, hi, Thomas. Hi, Marcel. Back again. I thought I'd give someone else a chance, but since no one else jumped in, I just wanted to ask you about the German wind auctions. We obviously had this failure of the German offshore wind auction just recently. I mean, that's clearly not a good thing, but do you think actually it will be a good thing in terms of the way the framework might change going forward? Do you see CfDs being adopted for the German offshore wind auctions going forward? Thank you.
That's a very good question. It might be an indication for the regulator and the government that the current regime and auctioning scheme might not be fit for the future. We have already tried to lobby, actually, that something has to change because, I mean, we have seen cost increases, we have seen inflation, we have seen an increase in interest and volatile markets. I think that the risks currently are well above the level we can take in this kind of project. A CfD might be an answer to the question, potentially a double-sided CfD. That is something that needs to be discussed with the government and the regulator over the course of the next couple of weeks and months. I think it's a clear indication that the current system is not actually set up for success, at least not in this market environment.
Okay, that's great. Thank you very much, Thomas. Thank you, Marcel.
Thank you, Andrew.
We have no more questions from the phone. Back over to you for any questions from the webcast.
Thank you, Valentina. We actually have one question from Michael Charlton, or two questions, with this from Santander. Partially, I think we answered it, but let's dive into that anyway again. Michael asked, what will TransnetBW's contribution to group EBITDA? Thomas, I think you touched on that already, and CapEx in the first half of 2025, and whether it is still fully consolidated. The second question is, Michael said, congratulations on our capital increase. Thank you, Michael. What will be the use of proceeds for that, and whether we intend to recapitalize TransnetBW to support its investment plans, and whether our co-shareholders will make an equal contribution?
I think you just made a point, Marcel. I think we already answered the first question. Let me jump directly into the second regarding the capital increase. As already said, the EUR 3 billion are actually the equity we need to invest an additional EUR 10 billion over the course of the next couple of years. The split of this EUR 10 billion will be approximately the same as we have indicated, call it EUR 40 billion, so 60% will be in networks business, 30% in generation, predominantly renewable energies, but also in hydrogen-ready gas power stations, and the rest is going to be customer-facing predominantly. It's going to be fast-charging infrastructure. Are we going to recapitalize TransnetBW? That's what we always do. That's how it works, very much depending on the investment plan of TransnetBW. We are going to increase the capital, and our partners are doing exactly the same.
It's very much in line with the participation shareholding levels we are going to have in the company. I hope that answers your question.
Unfortunately, we don't have the feedback loop, but if there were follow-up questions, please post it in the chat. We've got another question here from Richard Alderman. Can you please give a view on the possible capacity auction being discussed now with the EU Commission and whether that has granted permission for the first 10 GW already? Do you see it as mainly focused on CCGT, so open to all technologies? Question two, does the regulator have to spend a period in consultation on the design of the auction and allow for a period of pre-qualification? Does that make it possible or impossible to happen in 2025? Third question, will you plan to bid into the auction?
Okay, let me get started with the first question. From our understanding, the current scheme in discussion and the CapEx, [which I said], which is effectively the basis for this auctioning process, is going to be focused on gas power stations. It's not predominantly CCGT. It can also, if I'm not mistaken, be OCGT, so open gas turbines. However, it's gas, as we just said. It's 10 GW, and from our understanding, that's currently already approved by the EU Commission. That's my understanding. It's the basis for the next steps. What I would assume is actually that we get clarity by the end of this year, and the first auctions take place either by the end of this year or the beginning of next year. In any case, I think we need to speed up the process to ensure that we will have enough gas power plants in the system by 2030.
It's high time now already. We should be very pragmatic in the way we structure this process to ensure that it's going to happen. I also hope that this answered your question, Richard. Any further questions?
I think the last point, Thomas, was whether we plan to bid into the auction.
Yeah, I deliberately forgot the question. Of course, I mean, we will not disclose it because, I mean, again, that's also commercially sensitive information.
Thank you so much. Just to round that off, I'm just giving it another second. I don't think we have any more questions in the chat. With that, we come to a close. Once again, thank you very much, Thomas, to you and to everyone on the call as well as online. As always, if you have any further questions, please don't hesitate to reach out to our team for more details or in-depth discussions. All the best and have a great rest of the day. Bye-bye.
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