Dear analysts and investors, welcome to our full year 2020 results presentation. It's a pleasure for me to be here with Johannes, Leo and Marc today. We will kick it all off with Johannes and the focus on our 2020 performance, followed by Leo, who will give you a first insight on his top priorities going forward and concluding with Mark on financials and outlook. After the presentation, Johannes and Marc will be available for your questions. With that, over to you, Johannes.
Yes. Thank you, Verena, and thank you to analysts and investors. My 44th and last call. So for a very last time, good morning. As we have a packed call today, I will give my best to be as crisp as possible, but likely fail.
With that, I will directly turn the focus to my main message. I'm proud that I can hand over the house in very good shape after completing the strategic repositioning of the company. Three points which will clearly demonstrate that. First, the strength of our operations. We delivered €3,800,000,000 EBIT at top of our guidance range that we adjusted in August.
2nd, The resilience of our business model, including the recoverable earning effects in our network business due to COVID but also due to weather, Of more than €200,000,000 from last year, we are bang in line also with our original guidance from March 3,900,000,000 to 4,100,000,000. Due to strong regulatory positions in Networks And in immediate and hard management reaction in all other business lines, we proved to be capable to keep our ships straight in even the toughest of all storms. We have basically, after all, 0 economic impact in an extraordinary COVID and weather year, 2020. 3rd and finally, the solidity of our balance sheet. We managed our leverage even in times of crisp As promised, we're now on good track to deliver even 1 year ahead of plan, accelerated by today's interest rates and the expected nuclear settlement.
Bottom line, E. ON is strong and resilient. The financials we present today are solid and contain no material risk. Our numbers describe the strength of our efficient operations, the advantages of our portfolio and the resilience of our business model. In this context, I am obviously pleased to announce a once more increased dividend of €0.40 per share For the successful financial year of 2020, despite of COVID, the company is now prepared for a new phase in its strategic journey.
The promised changes are delivered or known operational issues from the past are fixed, and we look at a strengthened balance sheet. On top, we have put in place an excellent leadership team to drive the journey forward. Let's start with the financials. E. ON did deliver in 2020.
Based on a very strong Q4, we report earnings of €3,800,000,000 And an underlying net income north of €1,600,000,000 In our network businesses due to COVID and weather effects, We are short more than €200,000,000 of earnings compared to our regulatory allowances. But remember, Each and every penny, cent or whatever of these amounts are fully recoverable in the near future and should economically be allocated to the last year's Hence, economically, we are fully in line with our initial guidance from last spring. And this is the 5th year where we, Despite of all certainties and game changing projects, we are proud to deliver in line or above guidance. We promise we deliver. And yes, we are extremely proud of our employees and our operations.
Our business model proved to be resistant to COVID, weather deviations, commodity price swings and FX volatility. Obviously, many of these factors impacted 1 or the other business or market. However, summing it all up, The composition of our portfolio, the efficiency of our operations and the stringent financial management and capital allocation led to delivery in line or above guidance. On COVID, we recorded no material impact In our infrastructure business, since regulation rightfully shields it from volume volatilities to allow safe operations and a continuous growth focus. In the commodity business, the initial demand shortfall that we reported in Q2 led To some impact through sellbacks and margin losses.
However, we were able to limit these impacts to a minimum, Thanks to operational excellence and countermeasures. These include a proactive and tight management of working capital. Consequently, we have not seen any material increase in bad debt. Weather effects were handled in a very similar fashion. Through several countermeasures, we were able to cover adverse effects throughout the portfolio.
And that is also true for commodity price swings. Our stringent risk and pricing strategies strive to limit material impact from those swings. Where we were affected, negative effects could be compensated To a large part by efficiency gains, quite adaptations of our operations and markets and customer growth. Throughout all this, we continue to profitably grow our customer base in essentially all markets. And since we run most of our business in Europe, and again, the most profitable ones within the Eurozone, the remaining economies with solid currencies and close associations So the euro or FX swings are nonmaterial.
All of the above shows the new E. ON is The reliable investment opportunity that we promised to investors. E. ON delivers and will continue to deliver growing earnings and dividends In a safe and sustainable manner, even in challenging times and even better in better times. Now let me turn to another important message.
E. ON is ready for the next strategic phase. All material issues that worried you, the investors, from the past Have been fixed in 2020. An important proof point that should surprise, I would hope many of you this is the acceleration of the deleveraging of our solid balance sheet. Some equity investors had expressed concerns That our approach to organically deliver would not bear fruit.
Today's announcement might thus come to you as a surprise. Our strong ongoing cash flow from operations as well as tight working capital management reaffirm our confidence in the deleveraging plan. On top and based on the new nuclear agreement as well as recent interest rate developments, we can today not only reinforce But even expedite our deleveraging pledge. First, we specify our debt Factor target range to 4.8 times to 5.2 times economic net debt to EBITDA. 4.8 times to 5.2 This is, for a business like ours, a very rather comfortable level for a resilient company with major infrastructure exposure.
2nd, we not only pledged to deliver against the target for certain in 2022, But we see a very good chance that we can even reach this target this year, in line with current market developments. This is the result of stringently implementing a clear and ambitious organic deleveraging plan. Our successful settlement of nuclear lawsuit Helps to accelerate this achievement. Personally, I'm especially proud that we have succeeded to achieve A very profitable settlement of all material remaining nuclear lawsuits. The outcome is, for us, very attractive.
It's fully in line with our conviction. We arranged, as pledged to you, to obtain our production rights from the plants jointly operated with Waffenfals for free. And all payments will be reimbursed. Further, this allows the continuous profitable production of the 3 remaining nuclear plants until their defined end of life At good margins. Having settled all obligations with regard to nuclear storage already in 2017, You can now put this nonstrategic asset as derisked and make peace with it.
It will deliver reliable profits and cash flows for the remaining 2 years. And in parallel, we will deliver the promised €500,000,000 reduction in our asset retirement obligation. All in all, concerns on leverage can be put to rest. Let us move on with Page 3. As the record shows, we successfully managed regulatory reviews.
We have gone through 5 reviews during the last 18 months, Czech Republic, Turkey, Hungary, Romania and Poland. These reviews in each case covered multiple value drivers. Let me just remind you of a few: allowed return, Calculation of the regulated asset base incentive schemes and whether a review outcome is good or bad Always depends on manufacturers. At the end, it comes down to whether the review incentives the review incentivizes The required investments for a successful energy transformation. Obviously, understanding the need of the infrastructure and entertaining a trusted relationship With network customers as well as regulators and politicians is a prerequisite for sustainable success.
But the other is also the ability to swiftly react to changes by redirecting funds and investments, raising efficiencies And addressing new incentive schemes without time lapse. E. ON brings all these capabilities to the table second to none in Europe. So what is the bottom line? Even in time of low interest rates and changing conditions, In those five countries, we were able to sustain our earnings and investment power.
This should prove to you that E. ON is the best owner for regulated assets, A better one you can't think of. And this makes me also personally very confident for the upcoming review of the parameters for the next regulatory period in Germany. The next proof once more Should be seen as a surprise. It's our successful turnaround in the UK.
In British Retail, The former Innogy business and Power and E. ON UK together lost almost €200,000,000 on EBIT level in 2019 on a full year In 2020, this number already improved to around minus €130,000,000 With the best option at hand, we promised to migrate NPower's B2C business to a new future proof platform and wind down the old business in its entirety. 2020 financials already proved the strong and sustainable improvement that our UK colleagues have reached. We have also promised that we would migrate E. ON UK, the old E.
ON UK, to the same platform and shut down also our old legacy systems, Targeting for superior customer service and significant cost savings. Despite the lockdown, The migration is ahead of target with already 90% of Npower customers migrated. Under the name E. ON Next, the new platform and operating model demonstrate to Trade. To be highly customer centric with best in class customer satisfaction from the start, as proven by an independent Trustpilot score of 4.4 out of 5.
The Npower customer migration will be completed within weeks. We already started closing down Enpower Systems and with the majority of people leaving by the end of Q2 And full NPower wind down to be expected by the end of the year latest. We also started migrating E. ON customers to E. ON NEXT Earlier than ever expected.
Thus, our operations increasingly benefit from the efficient system that delivers a cost per account reduction of around 50%. This is the fastest and most successful migration we have ever delivered. And remember, it was done from home office during the extended British lockdown. A remarkable and outstanding performance of our U. K.
Colleagues, which is finally giving a relief for investors that had their doubt of our comeback in the U. K. Just as a teaser, and I'll leave the best message to my successor, Leo here. Already today, We can promise you we are back to profitability, and Leo will give you detailed numbers on how great the developments will be for the year. The final proof point is a full integration of innogy and the delivery against our synergy targets.
The E. ON Energy deal delivers value for E. ON and you, our shareholders. Be reminded that our synergy targets exclude the UK. The U.
K. Optimization comes on top. And just from the synergy, dollars 780,000,000 of recurring savings We are fully on track every cent, every penny, every dime. With all legal transaction steps already completed, We can say that the Innogy transaction is operationally completed for good. We have delivered the target at €130,000,000 of recurring Savings last year and future savings are secured.
This is also underpinned by our projected FTE numbers. This decrease is driven by the name Synergies, the U. K. Turnaround, the German retail digitization case as well as many other initiatives, and it shows that E. ON stands for performance in its DNA.
Also, all our other cost savings and improvements stemming from the innogy integration are secured today. Summing it all up, I can claim this confidence that this house is in a very good shape. We keep our dividend pledge. With the mentioned €0.47 per share, we delivered the 4th increase in a row. Let me close with a very short look back onto my 11 years at the helm.
My tenure was set under the lodestar of cleaner and better energy with E. ON, and I followed consequently. One of my first decisions was to exit E and P and to scale up renewables. Consequently, we became one of the largest The best owners and operators of offshore wind farms, actually, we were number 2 in the world. We successfully operated and grew this business over the years.
And I'm proud to say that it was one of the cornerstones for the transformation into E. ON as an enabler of the energy transition. In the wake of the nuclear meltdown in Fukushima, a large part of our old business faced exceptional challenges. Nevertheless, we delivered a strong operational performance. I imposed rigid efficiency and cost optimization measures onto E.
ON And a major asset disposal program to delever the company. This sparked the acceleration of the transition of the energy world on which we acted decisively. And then in 2016, we spun off our conventional generation business into the new company Uniper. From that moment, E. ON fully concentrated on the new energy world: Networks, Infrastructure, Customer Solutions and Renewables, The decisive growth businesses with major opportunities.
Shareholders profited from the spin off and received free shares in Uniper, In which they could realize a significant uplift. Shortly after, in 2016 'seventeen, we addressed The fundamental and existential risk around our nuclear exposure post Fukushima. We first reached an agreement with the German government about the transfer of the immediate and final nuclear storage liabilities and relieved you, the investors, from all long term nuclear obligations. This was a major step towards de risking. In addition, we successfully pursued our legal claims against the unfair and unconstitutional nuclear fuel tax.
We won the cold battle, and we received roughly SEK 3,000,000,000 compensation from the government. And now in the wake of my departure, Leo Birnbaum negotiated The final agreement with the government, saving us more than €500,000,000 of payments to Wathenferl or other people And securing a steady income stream in the last operational years from 2019 to 2022. We improved the financial soundness of our company from government interventions passed for Fukushima and derisked the nuclear operations. In the period since 2016, we fully concentrated on strengthening the balance sheet and made E. ON strong for the next step in the transformation.
We used that for the innogy takeover. With the innogy takeover, we focused even further and significantly streamlined our portfolio. We successfully performed one of the most complex transactions in German industrial history to position E. ON with a unique focus on customer centric energy infrastructures and associated solutions to truly capture the benefits of energy megatrends through focus, scale and efficiency. The resilient business also enabled us to steer tremendously well through the COVID-nineteen pandemic, While living up to the responsibility towards society as the largest operator of system critical infrastructure, each and every of our customers could rely on us On every day, everywhere in Europe.
Leo, obviously, this is just the base for your chapter to write As incoming CEO, it's now up to you to introduce yourself to our investors, customers and colleagues. We worked together more than 8 years. Let me once more congratulate you on being elected to take the baton forward. You are the best person the Board could have chosen. At the end of the week, I'll leave the ship.
As pledged, I have no intent to return as Chairman at any time because this is in strong contradiction to my core belief That there must be 100% independence between CEO and Chairman in judgment and the Board. But you can be rest assured, I will drum for you and E. ON's success in the years to come. And I will eagerly follow how you will set course for an even better future. Leo, over to you.
Thank you, Johannes, and good morning, ladies and gentlemen, also from my side. It is a special day for me. It's an honor to be trusted with the responsibility to steer a company like our E. ON through the next strategic phase. And it's also an honor, Johannes, following you.
After 17 years on the Board, 11 years as the CEO, 8 years together with me on the Board And leaving me, E. ON, in such a great shape, strong, resilient, ready for tapping into the untapped potential. I count on you to follow us, And I'll make sure with my new Board team that you will enjoy watching us from the sidelines wherever those sidelines might be. So ladies and gentlemen, to be assigned with the CEO role is an honor, But foremost, it's actually an obligation. It's an obligation to deliver.
To deliver versus the progress of our society in the energy transition, Because that is our license to operate. More than anything else, it's also an obligation to deliver the potential of The strong and resilient E. ON portfolio to the benefit of our shareholders. And let me, therefore, be very clear at the beginning. My Board colleagues and I believe that there is untapped potential in our E.
ON. And this will continue to translate into annually growing dividends for our owners. We have committed to growing dividends over the last 4 years and this will continue. This is and will stay at the heart of my and the Board's capital allocation decisions. And we understand how important the dividend is to our shareholders.
With our new business model and setup, E. ON addresses long term profitable growth for our core business. Our growth aspirations for decades to come will be fueled by 2 megatrends: sustainability and digitization. And therefore, my priorities are clear: growth, sustainability and digitization. The new E.
ON is clearly a platform for growth. The energy transition leads to So far, uncharted, unprecedented investment opportunities for the decades to come. And this is not just theoretical, We can show you proof points to make the point. Following the megatrends of sustainability and meeting the climate targets of Germany and EU, We will need a massive electrification of our society based upon new renewables plus green gas to get to net 0. And this means growth for E.
ON. Actually, it means that both the supply and the demand side Drive growth for E. ON. On the supply side, 90% of the renewables need to be connected to the distribution grid. And over proportionately, they are connected to E.
ON's distribution grid. To give you a number, In Germany, more than 65% of onshore wind farms are connected to the E. ON grid today. And since we need many more renewables, we are currently seeing record applications for new connections. On the demand side, Mobility is being electrified, driving massive network growth again.
But also green heating requires electrification next to green gas. Again, all of this drives growth in our networks. Obviously, all these assets and devices This will be digitized and managed by new data centers, again, consuming enormous amounts of power via our networks. No surprise, We are receiving record requests for new and extended customer connections in our German network. With this ongoing trend and the high amount of customer requests, we will continue to grow our RAP, our power RAP by 4% to 5% per year for many years to come.
Growth is not only a focus in our Networks business, but also in our Customer Solutions business. A very successful and unique example for that is the ambition in our EIS business that stands for Energy Infrastructure Solutions. EIS offers cities, municipalities and industrial customers innovative energy solutions such as heating, cooling, power generation, efficiency solution, All about achieving climate targets in an efficient way and again translating into growth options for us. So much for growth. Let me come to my second priority, sustainability.
We at E. ON have already transformed ourselves over the last years into a sustainable The journey was just described by Johannes. We focused, as he told us or reminded us, On infrastructure and customers to enable the ongoing energy transition. Already today, more than 80% of our investments are EU Sonamy compliant. We drastically reduced our emissions and set ourselves even further ambitious targets.
We are delivering In terms of our own CO2 reduction and avoided emissions together with our customers, in line with our CO2 reduction target, we have already reduced Our own emissions in Scope 12 by 7% in 2020. Avoided emissions, so called Scope 4, Together with our clients amount to over to roughly 100,000,000 metric tons of CO2 in 2020. As a further proof point, I'm happy that the well known and widely regarded CDP Carbon Disclosure Project ranking has awarded us with an A This membership in the prestigious A List is actually a limit to a small number of high performing companies out of the 5,800 This company is scored by CDP. However, we can still do more. We want to make ESG, an anchoring theme of everything we do.
Just a few points to make the case. First, we will embed ESG with specific targets for greenhouse gas reductions, safety and diversity into our long term incentive scheme for all management levels at E. ON. 2nd, we know that our ambitious Climate targets, which we have set ourselves last year, are well in line with climate science. Therefore, we are preparing to submit a science based emission reduction target to the Science Based Target Initiative for official validation.
3rd, we will continuously focus on safety because it's if not all our employees Return home every evening, we can't be satisfied. 4th, we will increase transparency. In the absence of a commonly recognized reporting framework, we have listened to our shareholders and Decided to reconcile the Global Reporting Initiative into the SASB framework and will therefore provide the highest transparency possible To our investors in our sustainability report. So much for sustainability. Let me turn to digitization.
Today's systems, processes, structures are not suited to manage the energy world of tomorrow. We need new systems, processes and structures, be it in Infrastructure, our solution and commodity business or in our support functions. Digital transformation is about applying technologies to rapidly change our processes into data driven, Highly Connected Solutions. And a future digital champion in this industry can monetize this with significant Efficiency gains and entirely new business models. One example in the commodity retail business, we are already at an Advanced stage in the transformation of our main customer platforms in Germany and the UK, and this is behind the turnaround in the UK that Johannes already described.
The integration of innogy enables us to leverage the scale of the business even more. The ambition that we have is clear. We want to achieve cost leadership while increasing the quality of our products and services. Now Johannes already said that we have delivered in the UK despite the tense situation during 2020 with the pandemic and that we have over delivered on our financial targets based on the operational improvements. The sustainable cost savings that we have achieved and the rigorous The acquisition strategy has delivered a remarkable progress on our financial delivery.
Having said that, We are upgrading our financial ambition for the UK to achieve an EBIT level of at least £100,000,000 Already by the end of 2021 instead of 2022. Again, as Johannes said, This GBP 100,000,000 EBIT in 2021 compares against the more than GBP 100,000,000 losses in 2020. This is truly a tremendous turnaround case. So much for my priorities: Sustaining the resilience of our store improved business model, but adding a focus on profitable growth Supported by the megatrends of sustainability and digitization. And as you see, they are all aiming at creating shareholder value And we'll reinforce our capacity to continuously grow our dividend.
When can you expect detailed results? We are currently working with great teams on all these topics. We are aiming for a more detailed strategic update in Aalton, Where we want to bring together the results of this work with the new planning and present the outcomes to all of you. In the meantime, you can trust E. ON to continue delivering on our promises.
We will add To our strong and resilient track record, specifically, we will deliver an EBIT CAGR of 8% to 10% until 2023, Which translates in 12% to 14% EPS growth, a debt factor of 4.8 to 5.2 times, in line with our rating commitment and 1st and foremost, a growing dividend. And with this, I hand over to Marc.
Thank you, Leo. Dear analysts and investors, a warm welcome also from my side. With all this positive and encouraging news flow from Johannes and Leo, let me shed more light on the financial delivery of last year, I'll also provide you with more details on our targets for the next 3 years. Moving on to Page 11. To start with, Adjusted EBIT lies at the top end of our COVID adjusted guidance range at SEK 3,800,000,000 Taking into account that More than €200,000,000 negative earnings effects stem from COVID and weather in our network business And will be fully recovered mainly from 2022 onwards, we are economically bang in line even with our initial guidance range from March 20 Let me move on to the details of our operational performance in 2020 on Page 12.
The reported year on year technical decline for the group stems predominantly from our network operations and is largely COVID related. Compared to Q3, the negative impact from COVID has only marginally increased by another €30,000,000 to now €280,000,000 for the full year. So no material impact anymore during Q4 due to COVID. Looking at the segments, earnings in Energy Networks are down approximately €250,000,000 compared to Full year 2019 pro form a figures. Almost all of that decline relates to COVID-nineteen and weather related effects that are fully recoverable within the coming years.
In Sweden, we recorded a decline of around €100 €70,000,000 over the course of the year, mainly driven by the lower WACC in the new regulatory period. This isolated decline was largely compensated by stronger earnings in other network regions, especially in Hungary and the Czech Republic. In addition, the earnings contribution of the Slovakian entity VSE since Q3 that was not yet included in 2019 Also contributed to this positive development. Turning to our Customer Solutions segment, which is down only €90,000,000 year over year Despite significant adverse weather and COVID related effects. The impact from COVID alone for our Customer Solutions segment Added up to roughly €150,000,000 for the full year 2020.
This includes the already communicated effects of realized losses from the sellback of excess volumes at lower spot prices in the size of a high double digit €1,000,000 amount. It also reflects our additional bad debt provisions, mainly in the UK, of roughly €50,000,000 This is fully in line with our expectations and in comparison to Q3 levels almost unchanged. And let me also reiterate what we said in Q3 Up until now, we have not seen any cash shortage due to bad debt. So until now, it is only provisions. The full year 2020 earnings of our non core business are up €50,000,000 year over year.
Let us have a brief look what the earnings development means for our bottom line on Page 13. Our adjusted net income Came in at €1,600,000,000 Year on year, this is a €65,000,000 or 5% increase over pro form a 2019 figures, Fully overcompensating the decrease in operating result. The interest results line improved by more than €200,000,000 in comparison to 2019 pro form a, which is mainly due to lower financing costs and lower accretion of provisions. The minority line improved by another almost €60,000,000 as expected, as this is driven by the decrease of innogy minorities due to the squeeze Our group effective tax rate came in at 24%, slightly shy of our guided 25% tax rate. By the way, we expect a tax rate level of 25% also to remain a good proxy for future years.
On to the economic net debt, which you can find on Page 14. We recognized a strong improvement of SEK 1 point SEK 4,000,000,000 in the last quarter of 2020. Main reason for the reduction is, as expected, a strong cash flow from operations In line with the seasonality of our Energy Networks and Customer Solutions businesses. The cash conversion rate for the full year came in at 91%, which is also fully in line with our plan. Pension provisions decreased by roughly CHF 500,000,000 over the 4th quarter.
We saw a strong planned asset performance, which combined with additional contributions to our pension vehicles, overcompensated The meaningful decrease in discount rates of 20 basis points in Germany and the U. K, respectively, during the Q4. Furthermore, we recorded the cash proceeds from our Czech remedy disposal and the sale of the remaining stake in Rampion RWE and therefore could improve the economic net debt further. Let us now turn to the outlook, Which we will prolong until 2023 in the context of our updated financial framework. For 2021, We are guiding for an EBITDA on group level of between SEK 7,200,000,000 to SEK 7,400,000,000 and for an EBIT of between SEK 3,800,000,000 to SEK 4,000,000,000.
Any further expected COVID effects are completely covered within this guidance range. Between 2021 2023, earnings will grow on average by 2% to 3% on EBITDA And 8% to 10% on EBIT level per year. We will see underlying earnings growth in all core segments accelerated by the synergies ramp up, Well, our non core business will decrease with the shutdown of our nuclear fleet by the end of 2022. Thus, our core EBIT We'll even grow at a higher pace of 11% to 13% until 2023. With our guidance being extended until 2023, we also explicitly confirm the previously highlighted guidance for 2022, which was €7,600,000,000 to €7,800,000,000 on EBITDA level And €4,600,000,000 to €4,800,000,000 on EBIT level.
Furthermore, we are comfortable To fully compensate the loss of earnings from the final closure of all of our nuclear power plants by earnings growth in our core business in 2023. In other words, our core business will grow by more than €150,000,000 On EBIT level between 2022 2023 because that is about the amount of our nuclear business in 2022, which will then fade away in 2023. As Johannes has elaborated, We have reached an agreement with the German government on the outstanding nuclear lawsuits. We expect the financial settlement The agreement most likely in Q3 this year. Earnings wise the impact is not yet reflected in our financial outlook.
We will nevertheless update our guidance as soon as legislation has become effective. Let me therefore explain to you what will happen with our earnings. On EBIT level, we expect an uplift of roughly €600,000,000 in 2021. This uplift is independent of the timing of when the legislation turns into effect. The timing is, however, important when we look at the expected impact on our EBITDA.
The magnitude of the EBITDA effect Depends on the total value of production rights that will cumulatively have been depreciated until legislation comes into effect. As we will have to continue to depreciate the production rights until the very date of legislation becoming effective, We will further increase the cumulative value during 2021. For that reason, we anticipate an EBITDA impact of minimum €200,000,000 which can then rise to up to €600,000,000 depending on the timing of the settlement. Let us now take a closer look into the segments on the next page. Already in 2021, We expect a significant year on year increase of our core EBIT.
This earnings growth is driven by the Customer Solutions Segment. And this growth in this segment is built on multiple strong pillars. Growth Will come from the delivery of the UK turnaround. We will also benefit From growth in our Energy Infrastructure Solutions business, we will also benefit from the further deployment of synergies And we will also benefit from an anticipated recovery from COVID. As pointed out By Leo earlier, we have upgraded our specific U.
K. Targets and will achieve at least GBP 100,000,000 of operational earnings already in 2021. Furthermore, the continuing synergy delivery will improve EBIT not only in the Customer Solutions, but also in the Corporate Functions segment. We expect weaker earnings in Energy Networks, mainly because of expected developments in our German business. Lower earnings in Hungary due to the plant restructuring with associated disposals will also have a negative impact, While the full year consolidation of VSE in Slovakia will contribute positively in the Central Eastern European and Turkey sub segment.
The new regulatory periods in Czech Republic, Hungary and Turkey with lower WACCs will not Have an adverse impact on earnings as they are fully compensated by outperformance and beneficial changes In the respective regulatory schemes, as highlighted by Johannes earlier and let me reiterate here, this is the template which we expect to be at work also going forward in other jurisdictions. I move on to the next page and with that to the bottom line. For adjusted net income, we guide for a range of €1,700,000,000 to €1,900,000,000 in 2021. And on earnings per share level, this translates into €0.65 to €0.73 per share in 2021. On the bottom line, the strong outlook for 2021 to 2023 EBIT continues to be amplified by lower refinancing costs.
Over the next 3 years, we have bond maturities of almost €8,000,000,000 of which €3,000,000,000 still bear high coupons of between 5.5% to 6.5%. Assuming future issuance at low levels over the 3 year horizon, The total is expected to add up to about €150,000,000 with a significant relief for our financial expense line. Beyond 2021, we therefore expect adjusted net income as well as earnings per share to grow significantly and guide for a CAGR of 12% to 14% for both between 2021 2023. Let us now turn to our CapEx projection on Page 18. Also this year, we strive for a continuation of our capital And are targeting an almost €5,000,000,000 investment program for 2021.
In the midterm period, we target to deploy Around €14,000,000,000 in our businesses. We continue to focus most of our investments towards customer centric energy infrastructure. 75% of our total CapEx is earmarked for our Energy Networks business. All investments Are well aligned with the megatrends that Leo mentioned earlier. Let me highlight a very important number to you.
I am pleased to report That 80% to 85% of our eligible investments in the period 2021 to 2023 are aligned with the draft EU taxonomy legislation. Considering the definition of the draft EU taxonomy legislation, our investments into power networks are fully aligned with EU Taxonomy. In addition, a significant portion of our Energy Infrastructure Solutions CapEx can be classified as EU Taxonomy aligned. This means that we are in good course to invest more than €10,000,000,000 in green assets during the next 3 years alone. Furthermore, we have also tilted our financing towards the EU taxonomy.
We have upgraded our Green Bond framework about 3 weeks ago to be fully aligned with the EU taxonomy as a first company in Europe. On that note, let us now move to the deleveraging. Let me first elaborate on the developments and strategies for the individual components of our economic net debt. On the nuclear provisions, We are confident to achieve tangible savings of €500,000,000 until 2022. This is what we communicated back in March And this is what we promised to deliver.
Thus, we keep on following the principle of beat the provisions. Regarding the pension provisions, we clearly benefit from the recent interest rates development. With higher discount rates for our pension provisions in the 1st few months of this year, We see a clear positive impact on our debt factor. If we mark to market it our pension provisions to today's interest rates level, We would see a relief of more than €1,000,000,000 already. In this context, Let me remind you that we are positively geared to both rising interest rates and higher inflation.
Rising interest rates immediately result in a massive relief on our economic net debt. In addition, rising interest rates will lead to increasing regulated earnings over time as they will positively feed into the regulated revenue allowance of almost all of our regulated frameworks. Also, we are typically much better positioned To meaningfully outperform when inflation rates are rising. So rising inflation is actually a friend to us. We will continue to manage our net financial position for cash.
To support this, we are in full swing to implement Our targeted €1,000,000,000 working capital optimization program. We can hence upgrade our average cash conversion to around 100% in the medium term. On top, the proceeds from our plant disposals, among others, the restructuring in Hungary, will improve the position further. Last but not least, we are confident to accelerate our deleveraging once the settlement of the nuclear lawsuits is put successfully into law And payments are being made. As elaborated earlier, we expect a positive cash impact of roughly €500,000,000 from that settlement.
Turning on to the next slide, let me remind you that managing our leverage in line with the metrics for a strong BBBBA rating is important to us. Our rating does not only provide secure and inexpensive access to bond markets, but it also underpins The reliability of an equity investment in our stock. In that regard, we specify our around 5 times debt target into a debt I can also reconfirm today that we are fully on track to achieve a debt factor of 5.8 times to 5.2 times based on our organic deleveraging program. Our CapEx plan of SEK 14,000,000,000 until 2023 And the midterm and long term dividend growth commitment are fully embedded in this thinking. As Johannes pointed out earlier, With the tailwind of the current interest rate development and the additional cash that we will receive from the settlement of nuclear lawsuits, we see a very good chance To achieve our leverage target even a year earlier by 2021.
Translated Into a debt factor, this would indicate a level at the upper end of the range of 4.8 to 5.2 by the end of this year already. Looking at 2022, we for sure We'll reach at least a level in the upper half of the targeted range. For the years to come, we target to stay within the range of 4.8 times to 5.2 times, which fully supports our strong BBBBA rating. Our funding needs for the full year of 2021 are less than €2,000,000,000 Of which we have done €600,000,000 in January already. Finally, let me turn to our updated Financial framework, which gives you guidance until the end of 2023, thus one additional year compared to our framework from last year.
I confirm that the dividend will continue to grow by up to 5% until 2023. Growing our dividend also in the long term Remains, as Leo said, the single biggest parameter for our capital allocation. The dividend pledge is backed up by strongly growing operational earnings of 8% to 10% compound average growth rate translating into 12% to 14% earnings per share CAGR for 2021% to 2023. Our upgraded cash conversion rate of 100% on average over the next 3 years will allow us to further focus on organic growth While being fully in line with our rating commitment over the midterm. With a debt factor of 4.8 times to 5 times At 5.2 times, we again reiterate our capital structure commitment of a strong BBB, Baa rating.
With these final remarks, I would like to thank you very much for your attention and hand over to Verena for the Q and A.
Many thanks, Marc. We will now start with the Q and A session. Please Be reminded of the 2 questions per person rule and keep your questions as crisp as possible. We will start with Wanda from Credit Suisse. Hi, Wanda.
Please go ahead.
Hi, good morning. Johannes, all the best from me. Two questions from me. First one, I think, Johannes, you said that you are optimistic on the upcoming German regulatory review. Can I ask what makes If you're optimistic about it, if we mark to market risk Q rates, it suggests a circa 200 bps cut?
In what? Do you see any change in the formula or if you can share anything? My second question is on your 2020 dividend. You proposed EUR 0.47. The census was at EUR 0.48, so you said EUR 26,000,000 on your cash flow.
It's not very material, I would say. Was it because of COVID-nineteen only? Or is there anything else behind it? I'm just trying to understand I mean, your dividend policy talks about a growth of up to 5%, but what is the main driver? Are you looking at the core EBIT net income?
Anything on that one would be appreciated. Thank you.
German regulatory formula. We just educated our supervisory board on that in a 2 hour session this week. It's about that long. It's a formula consisting of an enormous amount of data, many, many single factors. Markets do a big mistake of just taking always one factor, for example, the risk free rate or something Or the, the WACC or something.
We had seen a reduction in the last period of 2% On the equity return, and we grew our earnings. We are number 1 in operational delivery on beating the regulatory formula. And we understand the formula to the footnotes. And we are extremely quick in reallocating resources, raising the right pulling the right levers in changing efficiencies that matter. So since there are so many factors and since there are so many things we can move and since there are so many things that will be decided, If you, for example, it's a theoretical exercise.
If people would ask me, now what would a 1% point in ROE mean? It's useless question because in every of those times for a new period, Not one factor changed, but let's say 20 factors changed and only the outcome measures. And we have so many levers, and we know so many things at hand that we are confident that we can manage. And we have managed, as I said, 5. We talked about Sweden.
In Sweden, the carryover is back in Parliament with a new compromise with all parties, Still very acceptable. And the Swedish court has challenged the return rate already and said it's wrong. It needs to be higher. So I told people time and time again, sometimes it takes a little while until the system shakes out. The main thing that makes me confident is There's one asset class that defines upon the success of the energy transformation, And that is the power network.
That is the one and only thing that matters. Nothing will happen with renewables if we don't grow ahead. Nothing will happen with eMobility if we don't grow ahead. And nothing will happen with digitization if we don't connect the new data And allow the data streams on 5 gs networks. Nothing.
And everybody that has his mind together knows That the whole future of the political will of the whole Green Deal rests in this infrastructure. And Customers push politicians. Look at Sweden. There was an alliance of customers approaching politics and says, are you crazy To over expect from those guys, we need them. We need them more than ever.
If they don't deliver, we cannot green our processes. And the same happens in Germany. Yes, the regulator has a very, very tough job. He needs to address also public expectations. So it is obviously and Some of some numbers in the formula need to move, let's say, south.
Otherwise, people would say, what has happened? But wait for the outcome. And judge us on the record of the facts. We managed the last German cycle, and we managed 5 in the last 18 months With positive outcome. So what give you know, I would turn it around.
What gives, you know, the assumption merit That suddenly E. ON fails. I think we are the best owner of that asset class in Europe. We have proven time and time again, If some investors want to sit on the sideline to see how it works, hard for management to tell. But we have confidence Because we deliver value to society, people know that, people expect it, people expect more and more capital to put at work.
We strengthened our ability to put more capital at work. Obviously, the support system of regulation needs To be also on our side, and I think we have a good chance that the total outcome will be acceptable, but don't focus on single numbers. And I won't I tell you already now, I will not speculate with anybody on any single number. In a system that has many factors, speculating on one is ridiculous. It's a waste of my time.
Yes.
Dieter, you also asked about the dividend for 2020. It is a mere reflection of how you've seen us acting throughout the COVID pandemic last year. You remember that we even stepped our CapEx commitment during that time, but most importantly, manage the infrastructure in a very safe and reliable manner throughout the entire crisis. And I do think that the proposed increase is something which supports the high appreciation which we have seen from societies, Politicians and even regulators throughout last year, and that is the context in which I would put our proposal for the dividend.
If I can quickly follow-up. So going forward, when we make our focus on the dividend growth, Should we
look at the EBIT? Should we look
at the net income? Should we look at the on the CapEx? I mean, probably it's a mix of things, but what would be your best guidance for
us. So again, as we said, our fundamental thinking is To grow the dividend per share every year and in order to have a sustainable achievement, which can be appreciated by our investors, you should assume That any dividend increase will be backed up by increasing earnings per share. So the parameter, which for us matters in our thinking next So the dividend is therefore our adjusted net income and earnings per share. And only sustainable increases in our earnings per share will actually, I think, contribute To rising dividends, which can also fully be appreciated by our shareholders.
It's very clear. Thank you very much.
Thank you, Wanda. The next on line is Deepa from Bernstein. Deepa, please go ahead.
Thank you. And I wanted to wish both Johannes and Lior all the best in their new respective roles. And my two questions are. So firstly, I think you touched on the electricity growth in network. We've seen one of your peers in the UK make a very large Move to buyout, another distribution company.
So hearing from management teams, I believe that the industry understands all those growth ahead, But investors don't seem to understand. So one question is why do you think that's the case and would E. ON, perhaps in its CMD try and illustrate how this profile will actually develop to give investors some visibility into that growth. And my second question is for Mark on the guidance for 2022. So So you've given the new guidance for 2023.
Can you just remind us where you think 2022 will be versus what you laid out in last year's CMD?
I think on the growth, I have no doubt that this will be likely the fastest growing asset class in the energy sector. But admittedly, we have not brought the case across to the markets. You need to leave something to your successor. So I think Leo will definitely talk much about it. He talked already Today to you about his fundamental desire to deliver growth plus resilience as a base And that he also elaborated on the 2 main drivers.
It's sustainability of society at large, but also sustainability at work at E. ON. And it's digitization of everything in and around infrastructures and customer relationships. Nobody else in this world will know about every device connected and every person acting than the one that runs the infrastructure, Plus, understanding the data makes a difference. Not just getting it, understanding makes a difference of then putting the right capital decisions at work.
So I think the management will go out of its way this year to start to educate and to grow the fantasy around it. I think this should be seen as a sustainable growth stock on top of its base resilience. But you give my successor the chance to do so, but today is not the day. But we he wanted to send a clear message, and I couldn't say it better than him. And second question, over to you, Marc.
Yes, Deepa, on the guidance for 2022, Very specifically, we will continue to foresee a delivery on EBIT level of €4,600,000,000 to 4 point €8,000,000,000 and on EBITDA level, that means €7,600,000,000 to €7,800,000,000 for 2022.
Okay. And there is no nuclear effect or anything in 2022?
In 2022, we still expect that
From the settlement or anything?
No, from the settlement, that impact again. The settlement is not included in this guidance. So any impact from the nuclear settlement, we will communicate later this year once the legislation has turned into effect. All the guidance numbers which we presented do not include any effect from that. So they are as clean as they can.
Okay. Thank you.
And adding to that, the likelihood of, let's say, this positive profit warning has increased whilst we talk. We just got the news from our team that the German government has embraced the settlement with the operators And initiate the legal process now. Still, it's a done deal once it's a done deal. But You should be prepared for the likelihood that Mark and Leo will come back to you. But Leo, Mark has been very specific On the impact on all numbers, it's a 2021 effect, an extremely positive 2021 effect, But it also means undisturbed operations in 2022 from new news.
No uncertainties in the numbers of 2022 from There are no upside there, but also no new news, no new stories, no new legal litigation bullshit, Just enjoying the last year and then sailing to the south.
Thank you. One small follow-up, Mark. In 2023 or 2022, do you include any COVID recovery in your numbers?
Well, we have for 2021, we still Obviously, a certain impact. So as we also said that our guidance now covers any effect from COVID, which May occur at least in reasonable bandwidth, but as we all have experienced, even a reasonable bandwidth can be pretty broad. So I think we are quite confident that the guidance range will cover anything you can imagine from that end. But that means that in 2021, there is still a negative impact From COVID in our numbers, that is around probably a high double digit €1,000,000 number. And this will also Provide further release by 2022, obviously.
The question was 2023. Do you have wild growth? No.
For us, it is in COVID is done after 2021.
So do
you have any recovery? So any positive benefits in 'twenty three or 'twenty two from the network recovery or whatever?
You mean the network recovery you mean The volume and weather effect in 2020, how that will be recovered then? Is that the question?
Yes.
Okay. Got it.
That is amount around a mid double digit €1,000,000 amount, which will kick in, in the years 2023 and subsequently.
Okay. Thank you.
Welcome.
Thank you, Deepa. The next one on the line is Lueder from Societe Generale, Lueder, please go ahead.
Yes. Good morning, good afternoon, everybody. And Johannes also for me, all the best For the future, certainly has been some eventful years. Two questions on my side, if I have to restrict So after that, the first one, sorry to come back to this on the Warthenfeld nuclear rights to come back on something that isn't part of your guidance. But The €500,000,000 also, you said that will be booked in all likelihood in Q3.
Would it be One off booking of the impact that will be shown in the EBITDA and EBIT. So the question is here, is there a tax Element or will it actually be split over 2 years as these are production wise and should really be Well, visible, I guess, in the EBITDA of Proyce and Electro. Just more details of where we can expect it And how much? It was a bit, maybe I didn't quite understand it, but you mentioned a range of €200,000,000 to €600,000,000 earlier. I can't quite Connect the dots there.
The second one, a lot more straightforward, is on Sweden. And what is the time line for the court decision on the allowed return?
So Mark, you will do the nuclear question. The Swedish question is the court of The first instance has decided the question. The regulator filed an appeal. Now the question is there are Several outcomes. The most likely, we believe, is that we'll see a final decision in Sweden Probably in 2022.
It will take a year because, they need to do the full recalculation and everything. So I would think 2021 is too optimistic. It could also involve A sidekick to the European Court that could prolong the process, but we believe the most likely outcome is Clearance in 2022, which is very much in line with what we saw in the last regulatory period with the intervention. And it's a replay of The game. But the settlement of the carryover of the political process, that's expected in around April, May likely.
April, May 2022. Thank you.
No, no, no. April, May 2021 will be the carryover. This is a few months and the appeal to the calculation of the WACC, the whole regulatory formula is likely one given a year.
Okay. Thank you.
So Lula, on the nuclear lawsuits, let me try to make it Now very simple. I start with what is most important, that is cash. So we expect one settlement happens around €500,000,000 in Cash, that translates into an earnings impact of around €600,000,000 on EBIT. That is not depending on the timing of when settlement happens and EBITDA depends on the timing and it Can grow from €200,000,000 to €600,000,000 But just take the €500,000,000 cash and earnings wise €600,000,000 on EBIT level. Take that.
This will, as we do expect settlement in 2021, impact our 2021 Earnings, we do not expect a material impact for our 2022 earnings from it.
And the 500, I think include the tax payment on the
The final is a bit lower than the pretax EBIT, obviously, due to tax.
Okay. So it will also go will be shown in the operating results? Yes.
We will include it because The most of the earnings impact is actually correcting depreciations, which we have included in our operating results in the past. So it's for us a matter of consistency that the impact, although it's of one off nature, obviously, but as we hit the depreciation in the On the operating line, we consistently therefore need to report it also the reversal, so to say, of the depreciation as part of our operating
Very clear. Thank you.
Thank you, Lueder. The next one on the line is Sam from UBS. Sam, please go ahead.
Hi. Hello, everybody. Let me start by just adding my congratulations also to the Outgoing and incoming CEOs, and thank you for the excellent presentation today. I've got two questions, one probably for Mark and one Leo, Marc, can you take a minute just to speak about group return on capital employed And where you see this heading in coming years. I think I'm right that this used to be one of the metrics used in the management incentive Scheme, but it became sort of a bit more difficult to do that during the transaction.
And I'm wondering if we would see A return on capital employed coming back as a metric in future? That's my first one. And then Leo, on your side, I think a very simple question. But Given the priorities that you very helpfully set out, can I ask, are you broadly happy with the portfolio of Businesses that you inherit in the current business? In other words, I'm sort of asking you if you want to take this opportunity to rule out any large scale M and A.
Hopefully, that's a simple one, but thank you on both hands.
I take the second question because I have to inform you that I am the Leo of the day. We deliberately decided to retire Leo from the call Because Leo wants to use the time first today to listen to investors after giving his initial insight, And he will entertain a dialogue with you on separate venues and will educate the market and when he comes out with Which is full thinking. So Leo will not be available today. It's not a disregard to investors, please. It's a deliberate decision not to Start to talk on strategic developments and his plans and give him a little time.
He starts next week. So we cannot answer your question. And but best wishes from Leo. And Leo is very carefully listening whilst we speak, but no answer is coming today. And now to the ROCE.
Yes. Actually, Sam, the ROCE currently is not part of our LTI, but it is intended To become again with the remuneration scheme, which we are about to publish for decision in our AGM. The return on capital employed in 2020 settled at 6.2%, down from 2019 where we saw 8 point 3%. That is a reflection of the integration of innogy. As a consequence, our return on capital employed will only see One direction going forward and
that is
upwards. And this will be backed up. And I will not now summarize all of our guidance. But obviously, it is to a large extent supported by synergy delivery, by U. K.
Turnaround and And also by growth in high yielding Energy Infrastructure Solutions Businesses.
Okay. That's super helpful actually. And I entirely understood, Johannes, on the question for the year, so thank you for explaining. No, no, no. Thank you, Marc.
But I should use also the opportunity. Each of you has sent me very kind wishes, and I want to use the opportunity. I don't want to stop Toast, and I don't want to play here a farewell game, but I'd like to thank you all already for your very kind wishes. And you can be rest assured That Eon is listening very carefully, taking note of every question and will start his dialogue with you soon.
All right. Thanks, Sam. Next question comes from Rob from Morgan Stanley. Rob, please go ahead.
Of the U. K. Turnaround. And could you provide a little bit more detail here as to exactly what has changed and improved versus the previous guidance And of course, what we can learn from that. The second one, and it's a bit of a high level question to Johannes.
May we ask, Given all that you've achieved with E. ON over the preceding years that you've outlined, what do you believe is left undone That you also wish you could have addressed. And let me just end by saying we wish you all the best for your next adventures. Thank you.
Thanks a lot. You should never almost as a CEO, I learned you should always avoid talking, for example, on On your share price, but I use the opportunity to be the outgoing CEO. So I think we are totally mispriced. I think we have I've failed obviously to educate investors and markets sufficiently on our strengths. We have been maybe too conservative.
We are beating our guidance all the time, but maybe we should I should have been more ambitious in pledging because if you see now, nuclear Follows me from day 1, and we are back to square 1 and everything is good. Maybe I should have been more outspoken. The people shouldn't worry so much. Or the U. K.
Energy failed so many years and derate further and further. It took us just 2 years, 1 year to take it and Start to correct in 1 year now for the delivery, you tell how. And also this growth, This is so enormous, the potential that I can see. And I talk about the infrastructure plus the associated solutions. Every industry now needs to have A plan how to decarbonize and needs technologies from people like us.
Every private household will be forced To invest into solar on roof, batteries in the basement, e cars sitting in front of the door, Vast opportunities of solutions. And all of that accumulates in every millisecond in our infrastructure that We'll go forward. So I think we have not succeed or I take the blame for that. I have not been successful And bringing investors along, understanding these tremendous opportunities. And I think the company deserves quite a different valuation.
But again, as I said in the media conference, So you need to leave something for your successor. And I know Leo will do a tremendous job, not only educating, but also delivering On those opportunities and pledges. Give you another one, but maybe it was my time also to do the repositioning. And yes, it was a couple of tough years and a couple of very tough milestones to take, But you need to take where you are. So how what can you say, Mark?
Now how will you give more meat to the UK?
Yes. Rob, I would start actually with where Johannes left it. I mean, obviously, you and us, we have We've seen, innogy struggling for 5 years to get control around Npower. And so last year when we put together our plans, Obviously, we included a decent level of caution also when it came to the pledges to the outside because one thing was Very clear that we wouldn't want to follow the same route of disappointing again and again about a situation in the U. K.
I think what we have learned now during the last 12 months is That a, the IT architecture which we have developed together with Kraken Technologies is not only a technically Viable and stable one is actually also one which will fully deliver the targeted cost savings faster, Well, actually, at the same point in time, already increasing customer satisfaction. And I think that is the combination which makes us very confident and why we have now upgraded Our earnings target. Still, as it is an ongoing IT migration, it's not now that we I'll turn everything out here along the lines of what Johannes said. I think don't expect us now that our UK Projection of achieving GBP 100,000,000 means that we turn out everything what we see. I do think if the teams continue to deliver Along the lines, as we've seen it, there is even a chance that we will be able to outperform on that one.
But I think one thing is important for our investors, You can be rest assured that for sure we will deliver the U. K. Results that we promised in 2021.
And by the way, we Focus so much on the U. K. Because it was one of the biggest worries of you investors and analysts. I would have loved The time, but the team killed me if I talk longer than I did already. If I look on the German digitization effort, also on the retail side, We have more than 4,000,000 customers on our own design platform based on Salesforce, Power Cloud, SumSup.
So It is not just there came this octopus to our help and finally we know how it works. We know it very much by ourselves. We also turned Germany around similar cost savings, similar ambitions. We just used the Kraken technology because Adjusting our own platform to the U. K.
Would have taken too long. And we knew investors have no time left for the U. K. Retail. So we needed to embrace a situation that works the fastest.
But running that process 100% from home office, And it's not just IT. It's a total different operational platform. Each and every employee Working for the platform has been newly hired in a new location, in a new operational processes. So this is not just an IT project. It's a total reset.
It's the 2 old companies, Npower and E. ON UK, We'll cease to exist and just a smaller, very agile platform remains, plus obviously for new businesses, the Odeon platform. I have never seen something being pulled off similar to that. And that is not just, yes, it's based there on the Kraken technology, but it's based On the creativity and the drive and the will of our management team to implement and to deliver. So it's an EON achievement And not just a copycat of something else.
Well, tremendous success. So well done. And I will resist Asking the follow on question about where the UK can get to, and we'll save that for the CMD. So thank you very much. I'll turn it over.
All right. Many thanks, Rob. The next question comes from James from Deutsche Bank. James, please go ahead.
Hello. Well done with the good results. So two questions. First one, you obviously kind of reiterated the 4% to 5% growth for the Power RAB, but you obviously do have some gas. So I was wondering whether you could tell us what we should expect for the RAB growth overall.
Should we maybe take a percentage point of that 4% to 5% when we're thinking about the whole group? Or maybe the gas side is growing a little bit quicker than that implies? And then secondly, on the German regulatory review, I was wondering whether you could outline for us the time line here. I understand that there's a paper that's in the autumn, maybe you could tell us what's expected from that and then what the next steps After that would be thank you very much.
And may I take the second? And particularly, that's the one thing I'll leave the ship, so I shouldn't worry much. But it's my company for 30 years plus, so I will continue to worry. The timeline is the only thing that worries me because Part of this German process is that other, for example, than in Turkey, where there's a big bang always on Christmas Day, Obviously, they don't celebrate Christmas, so they always use Christmas for the disclosure. And then everything comes together, and you have the full picture.
In Germany, it comes piecemeal. They will likely first come out with a study in late spring on how to calculate the risk premium. Then potentially in Q4, they will come out with an initial idea of the allowed return rate, which is actually there are several allowed return rates. People always talk only on one. I'm afraid there are more That are never being talked upon.
They come out with that one. And then next year, they come out with the result Of the allowed costs, which is because you outperform against them, which is a big number, Then they come out with specific incentives schemes and their drivers later. So You will see multiple times numbers. If you I can only try to advise investors. Take first single numbers with a big caution.
Because if I were the regulator, I would Always use, let's say, one of the earlier numbers to positively surprise consumers, it's going in the right direction. And use other numbers at other times for bringing the system in a balance. So What I'm worried is that the market generalists will just jump left, right and center every time a single number, which might be even Just a preliminary number comes out and then tries to do the squaring what the total outcome is. I know that you need to do that because investors expect that from your analysts. But I promise you the likelihood that you are wrong with your prognosis Based on single numbers, it's about 100%.
So if I were you, I don't know what I'd do, but Better be a bit cautious because whatever you try to square from the first number is very certainly wrong. But I can't help you because a regulator just places cards like holding it close to his body and then from time to time shows 1, exchanges 1 And only once everything is at the table, then it matters. And until then, you will be worried. We might even sometimes be a bit worried and say, how do we run it now? But We can't help you.
That's I don't know if that is the smartest way one can run a regulatory system. Definitely not the most transparent, Not the one where you create the biggest trust of investors. I'm afraid it's the only one we have and we need to live with it. But we were we proved capable of running it and managing it. So maybe you need to educate investors a bit on Look on the merit, look back how E.
ON, Innogy as well as E. ON managed regulatory cycles in the past in that country And compare then also how this company manages regulatory systems elsewhere, maybe that's a better lead Then second guessing single numbers. It doesn't help you much, but I'm afraid that's the only thing I can tell you there.
On the Gas Network, A question you asked for, what growth do we expect there? So first of all, let me stress that the share of our guest networks From our total regulated asset base is small. We predominantly talk about gas concessions in Germany. Those concessions make up about €4,500,000,000 of regulated asset base. That is less than 15% from our total regulated asset We do expect that regulated asset value to stay stable in the midterm.
I think Leo referred to that, obviously, For a sustainable but also affordable transition on the heating side, we do see that there is a key role in distribution gas networks As well, we do not expect that to play out already in the midterm. Hence, for the midterm, stable wrap, I. E, No growth on the gas regulated asset side in the next 3 years.
And on the power side? On the
power side, we do see growth rates of 4% to 5%.
Great. Thanks very much.
Thanks, James. Next questions come from Alberto from Goldman Sachs. So Alberto, please go ahead.
Thank you, Verena, and again, Johannes. All the best and good luck to Tulli in the new role. Two questions. The First one is, I have not seen in your presentations anything related to potential investments from EU Recovery Fund or all these New projects that could be funded in terms of like clean energy spending. So I was wondering if this It was intentional, you're still working on it?
Or if you can give us some flavor about potentially what can come In terms of digitalizing your network or green gas, biofuels, whatever potential And maybe magnitude for that, we've seen pretty big numbers from some competitors. And the second question is, Johannes, You started a digitalization process in the company, which very successfully, for instance, culminated with this migration of Smers out of Empower. And I can see still one of the pillars that Leo brought up in the slide. Can I ask Thank you, Johannes? In terms of I mean, clearly, you're passing the baton, as you said, but What type of KPIs should we be thinking about when it comes to the digitalization opportunity for E.
ON? Mimi, you clearly had already a plan that was ongoing. And I'm wondering if we should mostly be thinking about Comparing the employees with some of your competitors, do you think most of the digitalization upside would come from the network business, from the Supply Business, any color there will be very helpful. Thank you.
I think on the front end, the advantages came From the commodity business. And I would argue, although it's a hell of work, it's probably the easier part, Digitizing the retail processes, and thus we are ahead there. But presently, we are setting The new code standard was SUP on the infrastructure side, on the network, power network side. We are defining the architecture, The language of the architecture and the code for future networks in Europe, That, for me, is delivering most long term opportunities. There we don't talk really that much on costs.
Yes, there will be cost savings. And yes, we can hold them always a while, maybe 6, 7 years, and then we The main thing is the ability to manage the system and the insights that delivers. We will be able to read every device and there will be billions of devices on the network and we'll be able to read everything. And depending on progress of legislation, we will be able to manage many of those. And we can read every customer.
Every customer behavior, we can Immediately decrypt. That has never been possible. The distribution side was dark like in the medieval ages. We hardly knew the status of the distribution system often. We can read in the future everything.
And I don't talk now about intervening with this data protection. It's no problem if that is crypted with Private personal data, but you can decrypt all the behaviors and that will allow you then To obviously allocate money best in that field to know where to grow it, both profitable. But you will also be able To bring in solutions that truly change things, that create sustainable value for customers that The debottleneck, for example, the network that allocate capital there where you can suddenly relieve the network from shortages and stuff. So I think that's where it truly matters, where the biggest knowledge, not just in monitoring, managing, but also artificial intelligence And everything will come in. You probably hear the same story from my friend, Francesco.
And by the way, he's right on that. And I don't think we are more stupid than him. And obviously, we also clarify everything and stuff. But that's where it matters. So this is where I would talk about things.
We are a bit more hesitant at this time to talk about these relief funds. We have a slide in our deck. I have 40 something. Verena, you need to account, see it from here. We said €60,000,000,000 of potential EU funding is earmarked For markets we are working in with the climate, let's say, node, we have defined 200 something individual projects, where we talk now with governments, the decision is always a local government decision.
It's not done by the Brussels. The national governments need to develop their precise project plans, deliver them to Brussels and then they allocate the individual decisions. And thus, we feel the smartest thing at this point is to engage with national government, regulators, politicians On individual country level, to try to qualify our plans. Every number now that Competitors sometimes should. I don't know how their political systems work.
Here, we talk about 8 nations where it matters. The German one, I don't see that many opportunities in Germany, but I see significant opportunities in some of our other nations. For example, we already profit tremendously from Italy. Italy is financing a system where they drive growth On the PV, private PV side, our installation rates have explode whilst we talk, And we are making very decent money with it. So it's a case by case thing.
And instead of Flagging numbers where you never know when they come and materialize, I'm quite certain that the new team will talk regularly on quarterly calls On where we make progress, where we achieve the numbers and where we see that. On the distribution side, yes, there might be also funds. But Again, remember, if other people finance the CapEx, you can't earn a return on the CapEx. So there maybe there are better places for receiving Funds then replacing our own CapEx. In individual cases, it might help, where return is not certain.
But in many other cases, We would definitely be cautious. But we have projects from Sweden. It's about geothermal In Hungary, where it's about connecting renewables, so and all of those are double or triple digit million cases. So things are running, And we will disclose once we have more to say. And until then, take the SEK 60,000,000,000 as just an indication that there is meaningful money on the table.
All right. So Next speaker on the line looking at the time, we're actually well advanced. So I would like to close the call after John from RBC. John, please go ahead.
Yes. Good morning, everybody. Only a couple of Relatively small questions, unfortunately, to end with. On the Energy Infrastructure Solutions and The 15% CAGR that you're guiding to there, can you just give us a base for that today and how much that makes up of the EBIT? And then secondly, around bad debt provision, but I missed the numbers you gave there, Mark.
I can't remember what you said. It was about €50,000,000 but it's all provisions rather than any increase in bad debt. So Two questions. One would be, is there potential for some of this to get written back in the current year? And I think also you said It was all in the UK, so just wondering what was unique about the UK, why you put through provisions there versus elsewhere?
Okay. So let me start with the Energy Infrastructure Business. In 2020, that business contributed around €150,000,000 on the EBIT line. Bear in mind that this business last year was affected negatively by the extremely warm weather. So I would actually see a normalized level of earnings rather towards the CHF 200,000,000 and I think that gives you a fair indication for the starting point On which we do expect the growth rates which Leo mentioned.
On the bad debt, indeed, the €50,000,000 It's almost exclusively relating to the U. K. What is the difference? The difference typically is that in other markets, we have a much, much higher Chair of Direct Debit, and hence, already in a normal year, a much lower level of bad debt. And so this is largely a reflection of a difference which we even see in normal times Already.
And again, as you said yourself, but happy to stress that again and again, we haven't seen any single major So we do remain also quite confident that those provisions We'll remain rather a precaution and that we will, after 2021 is over, also be able to release some of that. But also to be straightforward here, we have not now included in our outlook guidance whatsoever any positive impact from that, that would Purely come on top, but we are actually quite comfortable as we are managing this part of the value chain quite tightly. I think that closes the call, right?
Yes. Many, many thanks to the analysts and investors for all your Trist. So, I guess there are a couple of more questions that we are looking forward to answer to you. So the IR team will be happy to follow-up with View on any questions, the management team will also be available for management roadshows over the next couple of days. So we are looking forward to keeping The dialogue with you, stay healthy and yes, we keep in touch.
Goodbye.
And thanks for working with me. Take care. Stay healthy, everybody.