Ladies and gentlemen, welcome to the EnBW Investors and Analysts Conference on the first quarter of 2026. I'm Vicky, 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 cell phone. Webcast viewers may submit their questions in writing via the relative field. For operator assistance, please press star, then 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Lenka Zikmundova, Head of Investor Relations. Please go ahead.
Thank you, Vicky, and good morning, ladies and gentlemen. Thank you for joining us for EnBW's Investor and Analyst Conference Call on the first quarter of fiscal year 2026. As usual, our Deputy CEO and CFO, Thomas Kusterer, will guide you through the presentation. Afterwards, we will open the floor for questions. For those of you joining via webcast, please feel free to submit your questions at any time using the chat function. With that, let me hand over to Thomas.
Thank you, Lenka, and good morning, everyone from my side as well. Overall, EnBW had a solid start to fiscal year 2026. Earnings were resilient and operating execution remains strong. Adjusted EBITDA amounted to EUR 1.2 billion, fully in line with our expectations, and we therefore confirm our earnings guidance for the full year 2026. The key strength of our performance continues to be the high quality and stability of EnBW's earnings base. Around 81% of earnings were generated from stable low-risk activities, with grids once again forming the backbone of our results. This underpins the resilience of our integrated business model, particularly in the current volatile market environment. We also made good progress on the financing side. In February, we successfully issued EUR 1 billion in green hybrid bonds.
Transaction attracted high investor appetite, further secured a significant share of our funding needs for 2026, and increased our permanent hybrid capital to EUR 3.5 billion. Operationally, our flagship offshore wind project, He Dreiht, is progressing well and remains on track for completion. To date, 45 of 64 turbines have been installed. The majority of capacity is secured through long-term PPAs, providing strong earnings visibility ahead of commercial operation this summer. In parallel, we reached another important milestone at our power generation site in Marbach. Construction has started on our first large-scale battery storage project at a site that already hosts our grid stabilization gas power plant. The capacity of 100 MWh , the project will further support system stability and the integration of renewable energy in Southern Germany. Commercial operation is planned for the end of 2026.
Building on our existing battery storage footprint, this marks the next step in expanding our activities. Today, EnBW already operates around 20 storage assets with more than 100 MWh of installed capacity. In addition, around 2 GWh of battery storage projects are already in our development pipeline. The next milestone is our 800 MWh project in Philippsburg, which leverages EnBW's existing infrastructure at the former generation site. Following FID, taken last December, we are targeting commissioning by the end of 2027. Finally, we also made good progress in e-mobility. During the first quarter, we expanded our infrastructure by an additional 500 fast charging points in Germany, taking the network to more than 8,500 fast charging points in total. Once again underlines the strong momentum in e-mobility and supports continued growth in Smart Infrastructure for Customers.
Now back to the financials of the first quarter of 2026. Let's just mention, adjusted EBITDA was at EUR 1.2 billion of the first three months, which is in line with our expectations. The performance was once again anchored in our low-risk business, which accounted for 81% of adjusted EBITDA, well above our long-term target of 70%. Overall, earnings developed as expected across all segments. System-Critical Infrastructure continued to provide a stable earnings platform. Renewables Energies were impacted by hydro conditions, while wind and organic growth provided support. Thermal Generation and Trading contributed less in line with our expectations. Smart Infrastructure for Customers delivered a solid performance, mainly from e-mobility. Let me now take you through the performance of our three business segments in more detail, starting on slide four. Starting with System-Critical Infrastructure, our largest segment in terms of earnings.
In the first quarter of fiscal year 2026, adjusted EBITDA amounted to EUR 667 million and remained broadly unchanged compared to the prior year. Building on the strong momentum of recent years, regulated grid revenues continued to grow, in particular in electricity and gas distribution. This reflects the continued expansion of our regulated asset base, supported by substantial investments across all grid assets. This positive development was partly offset by higher personnel and maintenance costs, in line with our expanded operational activities of the business. In addition, we saw a temporary effect in electricity transmission, which we expect to reverse over the course of the year. Moving on to Sustainable Generation Infrastructure on slide five. In Sustainable Generation Infrastructure, earnings were lower than last year and amounted to EUR 429 million of the first three months of 2026.
This development was mainly driven by weaker performance in thermal generation and trading, as expected, while renewables were broadly close to prior year levels. Let's start with renewables. Here, adjusted EBITDA came in at EUR 275 million. Earnings were impacted by lower hydro levels across Germany. This was driven by below-average water flows and declining spreads, particularly in run-of-river generation. These effects were partly offset by favorable wind conditions and additional earnings contribution from newly commissioned assets. Among them was the continued ramp-up of our offshore wind farm He Dreiht, which contributed positively to the first quarter earnings. Turn to thermal generation and trading, adjusted EBITDA was lower year-on-year at EUR 154 million and in line with our expectations. This reflects, first, lower hedged generation margins.
In addition, available generation capacity was lower following our lignite exit at the end of 2025. Second, earnings were impacted by weaker trading performance in a volatile global market environment. At the same time, it's helpful to put the current market volatility into perspective. Alongside our integrated setup, EnBW continues to benefit from the disciplined risk management processes established before and during the market dislocations of 2022. These frameworks are operating as intended. Our hedging strategy once again delivered stability and visibility. Margin movements were fully manageable, highlighting EnBW's effective and risk-mitigating policy. Liquidity remains a clear strength with nearly EUR 10 billion in cash and cash equivalents and almost EUR 10 billion of undrawn facilities. EnBW is well-positioned to absorb market volatility without any material impact.
For the current fiscal year, our generation position are almost fully hedged, providing a high level of comfort for our earnings guidance. Looking ahead, hedge ratios stand at 70%-90% for 2027 and between 20%-50% for 2028, and we have already started hedging for 2029. In Smart Infrastructure for Customers, on slide six, adjusted EBITDA increased by 19% year-over-year to EUR 143 million. This positive development was primarily driven by continued strong momentum in e-mobility. Higher charging volumes once again supported earnings, benefiting from our market-leading network of more than 8,500 fast-charging points, its ongoing expansion, and continuous EV adoption. In addition, retail activities benefited from higher gas sales volumes, reflecting the colder weather conditions in the first quarter in continental Europe.
Let me now turn to adjusted net profit and the reconciliation on slide seven. Adjusted net profit attributable to EnBW's shareholders was at EUR 227 million of the first three months. In absolute terms, the year-over-year movement in adjusted net profit was in line with the development of adjusted EBITDA. Also resulted in corresponding lower tax outflows. The adjusted financial results remained broadly stable year on year as offsetting interest rate effects balanced each other out. Finally, results attributable to non-controlling interests reflect improved earnings performance of minority-owned entities. Moving on to slide eight with a brief look at our investments on the first quarter. For the first quarter 2026, our gross investment amounted to EUR 1.2 billion, around 21% below the prior year level.
This development was fully in line with our expectation and reflects the composition at maturity of our project portfolio rather than any slowdown in execution. Investments are once again clearly focused on grid expansion, while outflows for renewables were low. This mainly reflects the well-advanced status of key projects as well as the selective exit from two U.K. offshore wind projects this January, as they no longer met our strict risk return criteria. Overall, 87% of these cross investments were taxonomy aligned and 83% attributable to growth projects. Looking at the allocation by segment, System Critical Infrastructure accounted for 60% of gross investments in the first quarter. Here we continue to invest at full speed in grid expansion reinforcement in both transmission and distribution. Our lighthouse projects in electricity transmission are progressing according to plan. Construction of SuedLink, our major North South DC transmission project, is well underway.
At the same time, Ultranet is almost completed on our side and remains on track for commercial operations by the end of this fiscal year. Around 30% of investments went into Sustainable Generation Infrastructure, spending mainly related to the construction of our offshore wind farm He Dreiht and two hydrogen-ready gas power plants. The remaining investments were allocated to Smart Infrastructure for Customers, primarily for the continued expansion of our e-mobility charging network. Finally, in line with agreed payment schedules, we recorded higher inflows from co-finance contributions by our partners. These inflows mainly related to He Dreiht and our transmission grid operator, TransnetBW, and form an important element of our diversified funding strategy. With that, let's take a brief look at our retained cash flow on slide nine.
After the first three months, retained cash flow amounted to EUR 607 million and came in as anticipated for the first quarter. Compared to the prior year, retained cash flow was lower. This was mainly driven by the year-on-year decline in adjusted EBITDA, which mechanically translated into a lower cash contribution. In addition, the first quarter included higher non-cash items, primarily related to our gas storage businesses. These effects were driven by higher market prices and weigh on retained cash flow. Finally, declared dividends were slightly higher than in the prior year. With that, let's move on to the development of net debt. As illustrated on slide 10, net debt was at EUR 12.7 billion at the end of the first quarter. This is around 4% lower than at the end of financial year 2025, and therefore broadly unchanged.
Net debt remained stable as net cash investments were largely financed from retained cash flow. Additional net debt reducing factors included our two green hybrid bonds issued at the beginning of the year, with 50% classified as equity. Further support came from seasonal working capital effect and a slight reduction in pension-related net debt driven by higher interest rates. That brings me to the last slide and our guidance for 2026. Ladies and gentlemen, as already mentioned at the beginning of the presentation, we are confirming our full year guidance for fiscal year 2026. Starting to the year provides a solid foundation for the remainder of the year. It gives us confidence in our outlook, both at segment level and for the group as a whole.
The breadth of our well-balanced portfolio anchors EnBW in volatile times and supports reliable performance in a geographically demanding environment. This leaves us well-positioned for the year ahead. Now let me hand back to Lenka.
Thank you, Thomas. Ladies and gentlemen, we will now start with the Q&A session. Operator, please begin.
Thank you. 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 then 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. At the moment, there are no questions from the telephone.
Thank you, Vicky. We will start with the chat because we have received already several questions. I will start with the first one from Andrew. Hi, Andrew. Thank you, have you on the chat. Please can you give a general update on trading conditions in Europe and on gas trading with regards to LNG? Do you expect a stronger result from trading in 2026 compared with 2025?
Yeah. Good morning, Andrew. Thanks for the question. Actually, I mean, it's a quite volatile market environment as you are probably aware. I guess, trading was stronger in Q1 than expected. Electricity trading was below expectations. In alternative, it's quite difficult in this environment to make the right trading decisions. You can only hardly rely on fundamentals. It's more depending on political decisions. Directionally, I would hope that we will see a good result in trading by the end of this year, but it's actually hard to tell in all fairness.
We go continue with the next one from Andrew on the guidance. In 2025, the last three quarters of the year achieved about EUR 3.7 billion of EBITDA. With EUR 1.16 billion of adjusted EBITDA in the first quarter, you need to achieve about EUR 3.7 billion of EBITDA over the remaining nine months of 2026, in line with what you achieved in 2025. You talk about lower generation margins, reduced installed capacity, and lower trading results in first quarter 2026. Can you give more details on why you are confident in achieving your full year guidance?
Yeah, absolutely, Andrew. I mean, when we looking at normalized trading results and also normalized weather conditions, on top of it, we do see a good performance in our e-mobility business above, also well above prior year. We are getting more installed capacity and renewables into our portfolio, especially with the ramp-up of He Dreiht. Overall, we are quite positive that we will be able actually to meet our guide, our guidance for full year 2026.
Thank you. We go on with Michael Charles from Santander. He has two questions. Do you expect any material effect potentially coming from political movements to reinforce windfall taxes and to alter the ETS reflected in electricity prices?
Good morning, Michael. Actually, I do not see any kind of risks regarding windfall profits. When you look at the current market situation and the market price development over the last couple of months, it's not comparable to the situation we have seen back in 2022. As a quick reminder, in 2022, we had gas prices at the peak around EUR 340 per megawatt hour , and currently we are looking more like EUR 40 to EUR 50 per megawatt hour. As a reminder, before the war in Ukraine started, the level was around, let's say early EUR 30s. It's not comparable at all. We do not expect any kind of political movement towards windfall profits.
Thanks. The second one goes in a similar direction. Can you confirm, please, that all your natural gas requirements are fully covered for 2026? Is EnBW fully able to pass through costs to customers?
We are fully covered. Actually, we do not have any kind of exposure to the Middle East when it comes to LNG sourcing. Most of our LNG is actually procured from the U.S. and other countries. No direct exposure when it comes to price development. As I just said, fully hedged for 2026, and we do also not expect for this year actually any impact from this development on our customer base, be it retail nor industrial customers.
Thank you. Next one, again from Andrew on the gas tenders in Germany. Can you update on the auction process for new hydrogen-ready gas plant in Germany? When do you now expect the auctions to take place?
Yeah, Andrew, we finally might be getting there. We do expect the first auction, beginning of September and the second beginning of December. It looks like this is going to happen. However, I'm cautious. I mean, as you are, we're waiting for these auctions now for, yeah, three to four years already. As it looks like it's September and December.
Thanks. Now with Joshua from Insight. He's gonna do also several questions. First one, given currently elevated one-year base load power prices, are you locking in your remaining unhedged 2027 generation?
I mean, we are monitoring market development, as you would expect, closely and continuously. If we feel that we do have the right level, we also hedge forward to 2027, but also actually 2028, and we've already started our hedging for 2029. Yes, we are looking at the current market prices and see if it's a level we feel comfortable for the next years to come.
The next one is also on the guidance. I can see that full year guidance has been maintained. Is there any color that can be shared on how Q2 is progressing and the benefits from higher power prices?
Yeah, I mean, I think I kind of answered the question already. Andrew had a similar question. For the second quarter, I mean, it's progressing in line with what we would expect. We've already hedged our electricity capacity for the year 2026. Of course, we do benefit to a certain extent from higher power prices, we are trying to lock them in. Also, as mentioned before, given the volatile market environment and the dependency of power price developments, commodity price developments, related to political decisions and short-term decisions, it's hard to tell what it really means for our full year trading results. I would hope actually that it's going into the right direction.
Perfect. Thank you. The next one is on pre-regulation Germany. Given the upcoming regulatory updates from the Federal Network Agency, can you clarify the expected timing of key decisions? Any informal guidance or signals you are already receiving from the regulator?
Joshua, no. I mean, in this instance, the regulator actually published the final draft of the next regulatory framework the back end of December last year. No big surprise in there. However, just still a few unknowns, especially when it comes to cost of equity and cost of debt. We do not expect actually to get any clarity before 2027 on these quite decisive points.
Thanks. Next one on the offshore. Can you update us on your participation strategy for upcoming offshore wind tenders, including where you see the most attractive opportunities and how you are positioning your bid pipeline?
I mean, as you know, we already built three CCGTs as we speak, and we will potentially also participate in the next tenders. I mean, we do have one CCGT in the permissioning process already. Let's say in Karlsruhe, a larger CCGT of 850 MW. We do have more sites that would be eligible and also potentially well-placed for further tender processes. Oh, I'm sorry. Did I misread your-
This was on the offshore wind tender.
It was on offshore wind. Sorry. I was actually referring to the gas tender. I will answer your question in addition to what I just said regarding the gas tender. Yes, actually we will potentially also participate in the offshore tender. However, very much dependent obviously on the framework, and we need to have more clarity on that. As of today, we do expect that we are looking at two-sided CFDs, that needs to be clarified first before we can really commit ourselves to participate in these tender processes. Sorry about that.
The next one is from Alexandra from BlackRock. Will the higher CapEx in grids be covered through tariffs in the next years?
That is clear, yes. Yeah.
The next one, was, the low hydro levels across Germany expected and included in your guidance? What do you invite in your guidance over the next few quarters?
Actually, it was not expected. It's lower than the normalized level we have seen for the last couple of years, and that is what we normally assume when we put out our guidance. The level was below what we had expected for the first quarter. As I mentioned before, assuming that we are going to see normalized levels in hydro and also wind and solar for the rest of the year, we've seen an increase again in earnings from hydro generation, especially run-of-river.
Many thanks. I don't see any other questions in our chat. Just turning to Vicky, to the operator. Do we have some questions?
There are no questions from the telephone.
Okay. With that, we come to a close. Once again, thank you very much, Thomas, and everyone online. Thank you for the questions. As always, if you have any further questions, please do not hesitate to reach out to our IR team for more details or in-depth discussions. All the best, and have a great rest of the day. Bye-bye.
Bye, and thanks, everyone.
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