Welcome to the RWE conference call. Michael Müller, CFO of RWE AG, will inform you about the developments in the first three quarters of fiscal 2026. I will now hand over to Thomas Denny. Please go ahead.
Thank you. Welcome and good afternoon from Essen. Thank you for joining RWE's investor and analyst conference call on our results for the first nine months of 2026. Our CFO, Michael Müller, will guide you through the key highlights, our financial performance, and the outlook for the full year. With that, let me hand over to you, Michael.
Yeah, thanks, Thomas, and good afternoon to all of you. We have delivered a strong financial performance in the first nine months of 2026. Adjusted earnings per share stood at EUR 2.52, and we have already achieved around 85% of our full-year adjusted EPS target. Therefore, we are well on track to deliver a very strong result for the full year. Earnings are expected to be towards the upper end of our guidance range. We also continued to execute successfully on our strategy. In Germany, we achieved a major success in the first auction for long-term capacity. We were awarded 15-year contracts for three CCGTs with a capacity of 2.5 GW. The projects are set to deliver attractive returns, exceeding our average IRR target of 8.5%. We are also moving ahead with one of U.K.'s biggest offshore wind farms, our 2.8 GW Vanguard West and East offshore wind projects.
Those projects secured a 20-year inflation- index CfD at a strike price of GBP 91.2 per megawatt hour in 2024 prices in the U.K. AR7. For the two projects, we successfully completed the equity closing of our 50/50 joint venture with KKR. We have also reached financial close for both projects and secured a GBP 13 billion non-recourse project financing. This involves a consortium comprising 35 international banks and is the largest-ever project financing in the U.K. for offshore wind. Financing includes a GBP 1 billion commitment from the U.K. National Wealth Fund and credit cover from Germany's Euler Hermes as well as Denmark's EIFO. This marks the first participation of a U.K. offshore wind project financing in U.K. National Wealth Fund and Germany's Euler Hermes. Preparatory works are well advanced, and the installation of the foundations at our Vanguard West projects will start in 2027.
In total, we now have 4.5 GW of offshore wind projects under construction, and all projects are progressing well and are on track. We've also increased our stake in Amprion to now 58% through the acquisition of an additional 3% of the investment company M31. The transaction was completed at the same attractive terms as our initial transaction earlier in the year at a 1.07x EV/RAB multiple. We're confident to add another small stake in the coming months. This will not require any financing measures. Let's now have a look at our Flexible Generation portfolio. In the first auction of new-build flexible generation in Germany, we were awarded contracts for 2.5 GW of new CCGTs at our Werne, Voerde, and Weisweiler locations. This translates to 2.1 GW derated capacity as per auction rules.
We are a clear winner in the first auction, and our strategy has fully worked out. We secured supply chain and applied for permits early and combined our existing sites, grid connection, and project expertise to create a highly competitive proposition. Construction can start in the coming weeks, and we expect first power in early 2030. The awarded contracts have a duration of 15 years and will start in November 2031. The expected returns are well above our average return target of 8.5%. Looking ahead, we have a further pipeline of more than 1.5 GW that is ready to participate in the second auction in December. At the same time, we are making strong progress with our battery projects in Germany. With around 3 GW of project under construction and an advanced project pipeline of around 1 GW, we have further strengthened our market position.
Deploying batteries in the current market environment and being able to bring new projects online in the near term provides highly attractive opportunities. Our battery projects clearly exceed project returns of 10%. In 2030, we'll operate a 5 GW flexible storage portfolio consisting of batteries and pumped storage. Let's now turn to our offshore wind construction program. All projects are on track. At Sofia, all 100 turbines have been installed, and 88 had already generated power. Since the beginning of November, the project has been offline, and we're conducting repair works on a damaged onshore cable. At the end of the month, we will resume electricity generation and expect all turbines generating by the end of the year. At Thor in Denmark, 62 of 72 turbines have been installed, and 59 of them are already generating power. The project will be fully operational in early 2027.
At Nordseecluster A in Germany, 34 of 44 turbines are installed. First electricity generation started in July, and now already 17 turbines are generating power. Also, our projects with a later COD target are making good progress in the construction phase. In the Netherlands, the OranjeWind project has successfully installed the first monopiles in the Dutch North Sea in September. Currently, 33 of 53 monopiles are installed, and installation will be fully completed by early 2027. In 2027, we will also kick off the construction of our second Nordseecluster B project with a capacity of 900 MW. The production of the foundation has already begun, and they are scheduled to be fully installed next year, followed by the installation of 60 Vestas turbines in 2028. On our Vanguard projects, pre-works for offshore construction are already well advanced.
The start of the foundation installation for Vanguard West is planned for the first half of 2027. Let's now take a closer look at the first nine months' financials. We have delivered an excellent financial performance in the first nine months. Adjusted EBITDA increased to almost EUR 1.2 billion to EUR 4.6 billion. The increase was driven by organic growth, better wind conditions in Europe, and stronger earnings in supply and trading. Offshore wind adjusted EBITDA increased to EUR 1.1 billion, driven by normalized wind conditions and the phasing in of Sofia, Thor, and Nordseecluster A. Onshore wind and solar recorded an adjusted EBITDA of EUR 1.5 billion. The increase was mainly driven by organic growth and better wind conditions in Europe compared to previous year. Flexible Generation delivered an adjusted EBITDA of EUR 1.3 billion.
Earnings increased due to higher margins and higher contracted capacity payments in the U.K. The result also includes the EUR 332 million compensation payment for the production restriction at our Eemshaven power plant in 2022. Supply and trading delivered an adjusted EBITDA of EUR 543 million, driven by a strong trading performance in the second and third quarter. In the fourth quarter, trading has continued to deliver a strong performance. We expect to deliver the full year well above our initial supply and trading segment guidance range. Other and consolidation contributed EUR 82 million, mainly reflecting the higher contribution from Amprion. Adjusted depreciation increased to EUR 1.8 billion, mainly due to organic growth. Adjusted EBIT stood at EUR 2.8 billion. The adjusted financial result improved to -EUR 42 million, mainly due to a higher capitalized interest.
For adjusted tax, we applied the general tax rate of 20% for the RWE Group. Adjusted minority interest increased to EUR 336 million. This reflects Apollo's share in the Amprion stake and our partner's share in the better offshore wind result, as well as in capitalized interest. Adjusted net income increased to EUR 1.8 billion. Adjusted earnings per share reached EUR 2.52 compared to EUR 1.77 in the first nine months of last year, reaching 85% of our full year adjusted EPS target. This gives us great confidence for a very strong delivery in the full year. Adjusted operating cash flow stood at EUR 1.9 billion at the end of September. This was mainly driven by our strong adjusted EBITDA and seasonal effects. Changes in provisions and non-cash items had a negative impact of approximately EUR 1.5 billion, driven by changes and the utilization of provisions.
It also includes the negative cash flow of our Phaseout Technologies. Operating working capital also had a negative impact of around EUR 1.2 billion. This mainly reflects higher gas inventories and movements in trade receivables and trade payables. Net debt stood at EUR 17 billion at the end of September. This was mainly driven by our gross investment of EUR 10.7 billion and includes the acquisition of the additional Amprion stake of EUR 3.6 billion. Other changes in net financial debt had a positive effect of EUR 3.4 billion. This mainly reflects the equity capital raise and positive timing effects from hedging and trading activities, partly offset by the share buyback program, which was completed in June.
For the end of the year, we expect net debts to be significantly lower at around EUR 12 billion on the back of the change in consolidation of the Vanguard projects following the equity close with KKR. Let me close with the earnings outlook. For 2026, adjusted EBITDA is expected to be between EUR 5.75 billion and EUR 6.35 billion. Adjusted net income is expected to range from EUR 1.95 billion -EUR 2.45 billion, and adjusted earnings per share is expected to range from EUR 2.6- EUR 3.3. Given our strong financial performance in the running year, we expect to be towards the upper end of our guidance at the end of the year.
Our dividend target for financial year 2026 remains EUR 1.32 per share. Let me summarize. We have delivered an excellent financial performance in the first nine months of 2026, and we have made significant progress in executing our strategy. We are well-positioned to deliver a very strong result for the full year. With that, let me hand it back to Thomas.
Thank you, Michael. Operator, please kick off the Q&A process.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. If you wish to withdraw your question, you may press star two. We will pause for just a moment while waiting for them to queue for questions. Thank you. We will now take our first question from Peter Bisztyga of Bank of America. Your line is open. Please go ahead.
Yeah. Good afternoon. Thanks for taking my question. Two from me, please. First of all, just one on your guidance. Can you just tell us what assumptions on wind conditions for the fourth quarter you are assuming in your new upper end of guidance guide? Also, does your new guide fully reflect the strong fourth quarter trading profits or performance you described? Then the second question, I just wondered if you could give us an update on the status of your data center transactions that you signaled were, that there were two of them on the way, when you reported the half-year results.
I think since then, it has become clear that negotiations are taking a bit longer than expected. But can you give us a little bit of insight as to what has caused the delay, and is there anything we should be concerned about in that? Thank you.
Peter, thanks for your questions. The first one, as usually, we assumed average wind conditions for the fourth quarter for wind in our guidance, and I can also report that October was pretty much on average, so in line with expectations on wind. On the trading, fair question. We did not include the strong performance we have actually seen in the actuals so far, but obviously, it is still two months to go towards the year end. On the data center deals, yes.
I can confirm that on two sites, we are nearing agreement in the next months. We could well see announcement before year end, but it depends on the progress in the coming weeks. I think we already stated that it has been a little bit slower than expected in August, but we continue to see progress and also strong interest. So nothing to be concerned about. For me, that is just regular project work, but confidence that we also will reach agreements there.
Thank you, Peter. Next question, please.
Thank you. We will now take our next question from Harry Wyburd of BNP Paribas. Your line is open. Please go ahead.
Hi. Afternoon, everyone. Hi, Michael . Two from me, please. One quite short-term, one more long-term and strategic. In the short term, on the gas new build auctions, thank you for the disclosure on the IRRs. There has been some press over the last few days suggesting the government is going to tweak the rules because of what LEAG has been doing with their plant conversions, and I wondered whether you think that will have a bearing on how the second round auction in December goes. Could you or would you benefit from rule changes? Would that potentially allow you to unlock higher IRRs if it slightly shifts the competitive landscape for the second round of bids? The second one, this is very long-term and strategic, but it is a CFO question.
If we think about Amprion and potentially further raising your stake in the next few weeks or months, where are we going to end up with consolidation? Because you have a decent amount of off-balance sheet debt through Amprion at the moment. We are aware of the unbundling rules and so on, but could you ever consolidate Amprion, and what would happen if you did? What would it mean for your debt ratios, for credit metrics? Because presumably, the rating agencies would award you a significantly lower risk rating if you brought all of the EBITDA onto your balance sheet. I just wanted to understand what the end game is here, because it is important if we are going to evaluate RWE alongside other integrated utilities with networks, which of course do consolidate the networks' EBITDA. Thank you.
Yeah, Harry, thanks for the questions. Let's start with the gas new build auction. I mean, first of all, and I said that in my speech, we are extremely happy with the outcome and that we were awarded three CCGT, which is clearly in line with our expectation, and also on the returns, that is very attractive. So happy with the outcome. Now look, the outcome with LEAG was kind of a surprise to some people in the industry and probably also in politics. So, we're still analyzing what now has been announced, but it looks as if for the second auction, you can only bid assets that don't fall under this coal exit regulation. So only assets that have come offline before 2030. And that would clearly limit the number of lignite stations to be bid into the auction.
So probably LEAG doesn't have the opportunity to bid further assets into the auction. That obviously means that given that there is, I think it's now 3.8 volume, because the first auction was larger than initially set. So, and that's in large volume in the first auction is now deducted from the second one, so the total of 9 GW derated stays. So that means for the remaining number, obviously, if LEAG can't bid in lignite stations, that increases the opportunity for other projects and other technologies. And, I mean, as we said, we have more than 1.5 GW of additional projects that we can bid into. We also believe that they are competitive, so we are actually going confidently into the second auction. Second question on Amprion. I mean, let's first start, what is the end game?
I mean, we are very happy with the size of the current stake. Now 58% total in Amprion. And obviously, there is no need to increase the stake. I think that's an attractive stake. But obviously, if in the future opportunities would come up, especially if they are at such attractive prices as we bought the initial stake, we obviously would look at that and then also, yeah, evaluate that. But I would foresee currently, also given the conversations we have with investors, we don't expect in the nearer term any change in ownership apart from that small stake I mentioned. Therefore, we're very happy with the current setup, and I wouldn't expect here in the near term any further changes. The question Harry raised is a fair one. Is a fair one on full consolidation.
No, no, go ahead. No, get extra answers. Okay, go for it.
The question on full consolidation is a very fair one. I mean, first of all, anything we would do would be fully aligned with the rating agencies. In a situation where we would see the opportunity to buy more, and that would lead to a full consolidation, obviously we would discuss beforehand with the rating agencies to make sure it matches with the rating logic, and we also can fully finance and keep the current investment grading. Our assessment, by the way, is that probably a full consolidation should not be negative, yeah?
Because as you rightly said, on the one hand side, you get more debt on the balance sheet, you get also more FFO on, but you also should reduce the rating threshold simply because you have more cash flows than from regulated business. But as I said, that's not a topic in the short term, but obviously, in case, we would clearly align that, and it should not have a negative impact, maybe even a positive impact on our rating KPIs.
Got it. Thank you. Since you just gave some very useful extra color there, one very final one. In terms of consolidation, is that a decision that you can make at any time, or is there some kind of procedural or accounting trigger that would—
Yeah. It's an accounting trigger. It's effectively driven by this independent transmission operator regulation that is very specific to Amprion. Only in a situation where we can nominate all shareholder members in the supervisory board, that would trigger a full consolidation. Given that we have a joint stake with Apollo on the 25%, and we also have the M31 shareholders still being part of the setup and also being part of the supervisory board, that's currently not foreseen.
Got it. That's very clear and very useful. Thank you.
Thanks, Harry. Next question, please.
Next question comes from Alberto Gandolfi of Goldman Sachs. Your line is open. Please go ahead.
Afternoon, and thank you for taking my two questions. The first one is on the United States renewable business. After midterm, can I ask you what are the implications of midterm in your opinion, particularly when it comes to two specific factors? One is the opportunity to repower onshore wind. I suspect you have done some analysis. Is there any way you could tell us how many gigawatts you could potentially repower in the U.S.? And secondly, does this change your ambitions to have 2 GW, 3 GW CCGTs in a data center campus?
The second question is on Uniper. Can I ask you here, what is the timeline? We've been reading in the press that a non-binding offer has been submitted. Can you confirm the scope? I mean, would it be a minority stake? Would you try to take full control of certain assets? How would you finance the acquisition? Thank you.
Let's start with the midterms. Our view is that the midterms don't really change anything fundamentally. I mean, if we look at U.S., the demand growth is clearly there on the back of data center demand. Even if there is maybe here and there more scrutiny on permitting of data centers, I think that is a topic we have seen anyways, irrespectively now of the change in political leadership. Even if there is some more scrutiny, we still see a significant demand that will drive power demand, and that needs to be met. Therefore, on the demand side, we continue to see strong demand for power, and that's completely unchanged. The second one, the whole regulatory framework around tax credits is fixed until 2030. As we already said, we have sufficient capacity safe harbored so that we can deliver projects until 2030 at attractive terms.
No change here. Topics, say, on the project level, I mean, we always said that we only would bring forward projects if tax equity is secured, tariffs are secured or properly mitigated, and we also have all the permits in place. The latter one is more a topic, say, on communities and on states, and that needs to be managed locally, but I also don't see big changes here on the back of the midterms. Therefore, on your precise question, opportunities for onshore wind repowering, I mean, we are developing onshore wind projects. We have seen that onshore is clearly more difficult currently to develop than, say, for example, solar. But we do see projects progressing, therefore, no change here.
The ambitions on CCGT energy campuses, in the half-year results, we said that we have secured capacity for gas turbines and that we are also working on energy island projects. That is unchanged and is not impacted by any read across now from the outcome of the midterms. On Uniper, I mean, look, I can't comment on the process and also not on the details. Just to reiterate what we said before, I mean, I think it's natural that if something in our market happens, our M&A teams will take a careful look at that. Given antitrust hurdles, clearly, a potential involvement, if any, would only be under very specific circumstances and narrow in scope. Therefore, also the financing of that, given that's narrow in scope, would be clearly with the balance sheet.
Thank you.
Thank you. Our next question comes from Rob Pulleyn of Morgan Stanley. Your line is open. Please go ahead.
Hi, thank you. Good afternoon. Thanks for the answers so far. So two more from me. Firstly, could we get an update on how the trading environment is progressing in Q4, given obviously a lot of volatility out there in commodities? Secondly, we have had a question on U.S. renewables. How about the offshore projects you mentioned earlier? How is the locking into PPAs developing? Has there been any further additions from what was announced quite a while ago? Could you give some kind of indication of how much of those projects you would like to put onto PPA versus keeping merchant? Thank you.
Yeah, Rob, I mean, I mentioned in my speech on trading that trading Q4 has continued to perform strongly, as it did in Q2 and Q3. Therefore, positive read across and continuation on trading. I also don't foresee any changes for the remainder of the year. I mean, volatility is high, but performance is good. Around offshore contracting, we said that our goal clearly is to fully contract the merchant assets. I mean, you know the first one now coming online is Nordseecluster. We have already secured some of the offtakes, and we are in conversations for further securing that on Nordseecluster B, which will come online 2029.
We already, and that's communicated, secured the first, I think it's 120 MW out of the 900. Also that is progressing well, but obviously we have more time until COD. On OranjeWind, that is the next one, we are also continuing to find offshore offtakes. Thor is the same. Goal is clearly to fully contract that. I mean, in the current environment, obviously you benefit from the elevated prices, but the goal is clearly to contract that, and we stay confident that we will also manage that.
All right, thank you. I will turn it over.
Thank you. We will now take our next question from Pavan Mahbubani of JP Morgan. Your line is open. Please go ahead.
Thank you. Good afternoon, and thank you for taking my questions. I just wanted to revisit in more detail a couple topics, please, Michael Müller. Firstly, on the full year guidance, take your point on the assumption of average wind conditions and also not accounting for the strength in supply and trading so far. But can you give a bit of help on the guidance ranges for the other segments, and if there is anything we should be thinking about, or is the midpoint for offshore, onshore, and FlexGen the best place to be given how Q4 has been progressing? So that is my first question. And then my second question is on the gas auction.
I was wondering, based on what you have won in the first round, if you can give any more details on assumptions underpinning the IRR guidance, or if you can give some detail as to how much of the NPV or how much of the IRR is covered by the capacity payments, and how much we need to assume for volumes or spreads going forward, so we can make an assessment of the risk profile, let's say, of those returns, given your confidence in the IRRs. That is my second question. Thank you.
Yeah. First, on the full-year guidance, you are right to assume that they should be around the midpoint of the guidance. Clearly, if now prices stay as high as they are, there is, when you saw the sensitivities, there is some upside on the offshore side, but that also depends then on the wind volumes we are seeing there. On the assumptions of the gas assets, yeah, you can assume, I mean, with the 15-year capacity contract, in the first 15 years, clearly a large part is already backed by the capacity payments, and therefore confirmed, and the rest is then a spread position. I mean, you know on the spread position, typically the risk is significantly lower than the risk you have on an outright position. Therefore, I assess the risk rather low.
I think I would rather argue there is upside, because as we currently see in tight situations, if you have a long optional flexibility, that could provide for additional upside. After the 15 years, the project is fully merchant, but, I mean, if you incorporate discounting effects, that effect is not so significant. Large parts are really de-risked, and that is why also we are confident on the returns.
Thank you.
Thank you. We'll take our next question from Ahmed Farman of Jefferies. Your line is open. Please go ahead.
Hi, Michael. Hi, Thomas. I have a broader high-level question, and then I have a question a little bit about 2027. Michael, just thinking through some of your core markets, you've had a little bit more clarity in the U.K. with the budget, a few U.S. midterm elections. You have had some of your the outcome of the gas auctions in Germany as well, and you're talking obviously, you seem quite positive about the IRRs within batteries in Germany. Just taking these events or clearing events together, I'm just trying to understand if these are moving, how are you thinking about the potential organic CapEx envelope for the company, given the balance sheet strength, or are there still other big milestones that you need to see for that thinking to evolve?
That's first question. My second question is 2027. You last gave us, when you gave us this the guidance, and so you gave us some helpful sensitivities around the movements in prices. I just wanted to know, since then, how many terawatt hours, can you tell us how many terawatt hours at what average power price you may have hedged already for the next year to give us a sense of where that outlook may be shaping? Thank you.
Yeah, Ahmed, first on your question, I think it's a very fair summary that all the developments we have seen lately, be it in the U.K., be it in the U.S., the gas auction, the batteries, confirm our assumptions around projects in the plan towards 2031. So therefore, that's definitely a positive read across, and you also see that those projects exceed, as we already said in the half-year result and also full year, exceed the minimum return expectations we have on the project, which clearly provides upside. What that exactly means now to the way forward, you can assume that the logic would always be, if we have headroom on our balance sheet, and if at the same time we see attractive projects, we would clearly use the headroom for further investments.
With that, you could argue, yes, kind of the projects are proving to be attractive. Potentially, we also could see more headroom on the balance sheet, and that could also then lead to additional investments. But I would say that is too early to tell, but the direction of travel and the direction of thinking is exactly what you asked for. Second one on price movements, look, we do not report kind of the details anymore, but yes, you can assume, I mean, we will try to use the current environment to lock in the higher levels. Having said that, there is always a certain time delay because, I mean, we also already hedged some of the volumes upfront. That is why, if you look into the sensitivities, we reported in the half year, the sensitivities for 2027 was 6 TW for offshore.
You see that we already hedged quite some volumes, so they will not benefit from that. But obviously, we will try also to capture some of the upsides. And also then in later years, that is obviously something where we now can benefit from the elevated power price environments to lock in higher volumes for later. But to put it into context, I mean, our strategy clearly is to de-risk our offtakes, and therefore, kind of on the positive note, we get much more stable incomes, yeah? On the negative, in a situation like that, we do benefit less than we probably would have done a few years ago, but I mean, that is part of the strategy. If you de-risk your cash flows, you also give up some of the potential upside. But honestly, we do like it more to have kind of stable incomes for the next years.
Thank you.
Thank you. We will now take our next question from Olly Jeffery of Deutsche Bank. Your line is open. Please go ahead.
Thanks very much. Hi, Michael. I have two questions, please. The first one's connected to the German gas auction. Registrations for the gas auction, I believe, close this evening. Is it feasible that we might see some additional entries from, I don't know, EnBW in the rest of the day, or are you happy with what's currently registered? Connected to this, previously you highlighted that you had 2.7 GW of turbines secured, had negotiations with the supply chain since.
Could we assume that for the rest of the supply chain where you've had negotiations, that turbines have been secured at higher prices than the 2.7 GW or materially higher? The other question I have is just around Sofia with the cable issue. How confident are you around securing compensation on that? Is it possible to give any indication on the, I guess, the revenue amount that will forego from this outage to give an indication of what that compensation level could be?
Yeah, Olly, thanks for the questions. First, on the auctions, I'm not 100% sure, but I do believe, and then the IR team, so Thomas and Eric, can confirm that afterwards, that tomorrow it only starts that you can register for that. Actually, you have a period until shortly before you bid where you can register. So, it's not necessary that tomorrow you'll see all the bids in the register. So it may well be that further bids, or further capacity that kind of requests to bid could be entered. But let me confirm that afterwards so that I don't tell you something wrong. Second question was then on the secured capacities and also the price levels. Look, you're right. The CCGTs that we had secured, those are the ones we now already bid into the auction on the CCGT side.
When we talked about the other projects, we also said that there are further projects which we were in discussions with suppliers. Therefore, you can assume that also for more capacity, we have kind of good indication and good frameworks with suppliers in agreement. On the price levels, I cannot comment on this one because that's obviously a competitive knowledge. We can discuss that after the auction outcome. The last one on the cable issue, very fair question. The cable issue that is currently repaired was not caused by us. It was caused by somebody else. So, there is a good chance for us to claim compensation, and we'll also do that, but we haven't incorporated that into any numbers yet.
Okay. Thank you very much.
Thank you. We will take our next question from Ingo Becker of Kepler Cheuvreux. Your line is open. Please go ahead.
Yes, thank you. Hello, Michael. I also have a question on the IRRs that you are stating in FlexGen, and particularly the over 10% in batteries. I was wondering, could you share the total amortization horizon you are assuming here, that is, over how many years do you expect to earn that IRR? You will probably not change the share price and volatility assumptions with us, but given that you have a EUR 100 million-EUR 500 million trading range guidance for 2031, which is pretty far out, would it be consistent to assume that you, in your calculations, have a rather cautious long-term assumption with regard to the market environment? Thank you.
Yeah, Ingo, first, on the batteries, I cannot give you exact amortization periods, but very clearly, the assumption is that those projects have a much shorter amortization period than you would typically see on flexible generation or on renewables. So the earnings are clearly front-loaded, and so in case scarcity stays longer, that is potentially upside. Second question on price volatility. I am not sure if that refers to batteries or the general trading results, because on the batteries, the results from the batteries is reflected in the FlexGen numbers, so not in trading.
If you then look at the pure trading results, which we guide with EUR 300 million consistently, that is just an average assumption which we have in trading. You have seen that in years when there are opportunities for good positions and for good trading, we can also exceed that guidance, but EUR 300 million is one that we consistently see to meet even in normal trading environments.
If I may, just to clarify, apparently your FlexGen guidance is including a lot of investment as well, and your trading guidance might be a better indication of how you are planning with energy markets in general longer term, particularly those markets relevant for FlexGen and trading, i.e., the price levels and volatility and so on and so forth. Is that a view that you would probably also assume when you calculate those IRRs, the cautious view on trading that you tend to be—
No. Yeah, no, Ingo. That is not how we do it. The trading guidance is purely kind of an average assumption of the last years, which we have consistently met. We do not go into details of modeling individual markets because trading is, I mean, it is not just European power markets, it is all kinds of markets globally. Therefore, that is independent how we view that. On the FlexGen side, we do obviously have modeling not only around prices, but also around volatilities, but that is a separate calculation.
I can also follow up on the question that we just had on the Marktstammdatenregister and when units have to be registered. My team was also trying to check again the documents on the BNetzA, and I can confirm what Michael Müller just said, that the units that participate in the auction have to be registered in the Marktstammdatenregister at the time of submitting the bid, which is the end of December. Next question, please.
Thank you. The next question comes from Wanda Serwinowska of UBS. Your line is open. Please go ahead.
Hi, Wanda Serwinowska, UBS. I have a few questions around one topic, the CCGT auctions. First of the lignite conversion projects, based on the yesterday announcement by BNetzA, it is pretty clear they want to tighten. Do you have any projects in your lignite portfolio that in theory you could convert? The second question is, Michael, you seem to be very confident. You flag at least 1.5 GW, good framework, no comment on pricing, but you are one of the biggest winners in the first round. If you win 1.5 GW in the second one, would it be too much as a market share or your share basically in the auction?
Would it raise any antitrust or basically market competition concerns? Lastly, how are you thinking about the second round pricing? Because if there are restrictions on lignite and many of your big peers, basically, were left empty-handed, Uniper, EnBW, do you expect the average clearing price to be much higher compared to the first one? Thanks a lot.
Wanda, now I have to be careful. Some of that is obviously confidential insight that we will not reveal before the auction. Look, we are now clearly analyzing the conditions of the auction. What we just discussed about the restrictions, the way how I read it is that lignite units do not qualify under those criteria. Therefore, I would not assume that lignite assets would bid into that one, but that is obviously contingent to the analysis because, LEAG did it, so why should not we do that? But that is something we need to analyze carefully when we read the exact conditions that were published this morning. Second one on antitrust. No, there are no restrictions because antitrust is only if you buy something, but not if you build something organically. So you can do that.
Obviously, you need to comply how you then dispatch the assets in the market with antitrust, but that is something we do anyways, so no change here. I mean, you probably refer to discussions from the German antitrust authorities, which commented that they feel this is too much concentration. I mean, look, our view is exactly the other way around, because if you look at the auction, I mean, one thing that is clear, it was a highly competitive auction, because otherwise, some of our peers you just mentioned would have been successful. So therefore, it was competitive, so therefore, we should also assume that really the best offers got the contract. And that is a clear view, clear proof for me that competition is working. And that also brings me back to the question that was asked previously.
The way how the auction is set up, you actually win. Most of your income is via the capacity payment and not from later market income, so therefore, it is important that you have high competition in the capacity auction. That is really driving competition, and that is what we have seen in the auction. So, both from a formal perspective, no antitrust issues, and secondly, also from a content perspective, we feel free to be in a very safe position here that this is fully in line.
If I may. Oh, sorry.
Sorry, go ahead.
No, no, go ahead.
Yeah, on your last questions, auction price levels in the second round, I cannot comment. I have a personal view, but I won't tell you.
That's fair. Just on lignite, do you have any assets which would, in theory, meet the criteria? On the top of your head?
Look, as I said, the way how we reach the setup is that you cannot bid assets that exit after that date. So, no, I don't see that.
Thanks a lot.
Then, sorry, Thomas just gave me a good comment. So the 1.5 gigs we are talking about that qualify for the auctions do not include lignite, yeah? So it is 1.5 gigs projects, new build projects.
So this is not lignite. Okay. That would be CCGTs or OCGTs or small engines, or you have not made any comments about type of—
No comment. Good try, no comment.
We always try. Thanks a lot.
Thank you. We will now take our next question from Peter Crampton of Barclays. Your line is open. Please go ahead.
Yeah, thank you for taking my questions. Two, if I may. Firstly, around AR8, your kind of views, how you see yourself positioned going into it. AR7 was obviously a big success for you. Then secondly, maybe a little bit of detail on your commodity price assumptions you have used for the 2026 guidance, because back at half-year results, we had quite a detailed slide on kind of the power prices used. Are those low levels still something that you are reflecting in the guidance? Then can we expect for the full year results a kind of proper update given kind of where power prices are and way above those sensitivities you have quoted in the past? Thank you.
Yeah, Peter, first the question on AR8. We do have 2 GW of capacity, offshore capacity, plus additional onshore capacity that qualify for AR8. You can be sure we will look at the auction, and now we need to see, yeah, what competition is. At the same time, you also saw our bidding behavior in the last two auctions. We will only bring forward projects that meet our return expectations. We believe it is an attractive auction, and now we need to see the conditions and see the outcome. I think the track record from AR7 proves us right in the approach we have taken so far.
On commodity prices, no, we have not updated the commodity price assumptions. To be fair, you also see that the impact of commodity prices, given the open position for 2027, is somehow limited. For full year, if we then talk about guidance for 2026, 2027, I would assume that we will also update the price assumptions by then and then provide an update on the price sensitivities.
Thank you. Very clear.
Thank you. We will now take our next question from Skye Landon of Rothschild & Co. Your line is open. Please go ahead.
Hi, good afternoon. First one from me on data center site sales. It might be a bit of a long shot, but I am just wondering if you are able to confirm if the two sites are similar deals to the one last year, i.e., are they one-off site sales, or could these be different monetization models? Then sticking with data centers, you have clearly got more sites kind of behind these two, so I am just wondering if you would be able to elaborate on the longer-term pipeline for 2027 and beyond.
Should we expect continued site sales beyond the current two? Then final question, on the E.ON stake surplus at 2Q, I think it was noted this stake overfunds provisions by several billion. So just wondering how you are strategically thinking about potentially selling that down in order to fund additional investments given where project returns are at the moment. Thanks.
Yeah, thanks for the question. First, on the data center sites, I mean, I can't reveal details on it, but what I can say in general is that we do have clearly more than two sites. Last time we talked about 10 sites that we are really progressing well with works. There are further sites potentially, but the focus is clearly on those. And there are different ways to monetize. One is a one-off sale, but also other forms, and we are discussing different ways. So in the end, on the one hand side, it takes two to tango. But secondly, clearly our ambition is to maximize the value, and that could also well lead to some other models. But we're discussing those and obviously only reveal that once we have closed the deal. So apologies for that. Next question on E.ON. Yep, you're right.
So there currently is overfunding on the E.ON stake compared to our provisions. That's correct. But just to repeat what I said previously, on the one hand side, there is no strategic rationale for us to keep E.ON. Therefore, in principle, selling that is an opportunity or a topic we would look at when we regularly discuss capital allocation. At the same time, I continue to say that the best investment we have done since 2016 is clearly E.ON. So the performance of the share has been tremendous, and so therefore I don't see necessarily a need to sell that stake, given also the growth trajectory, the stable regulatory environment for grids in Germany. Yeah, I will leave it here.
Thanks, Michael.
Thank you. We will now take our next question from Piotr of Citi. Your line is open. Please go ahead.
Hi. Good afternoon, everybody. I have two questions. One, I wanted to follow up on your net debt guidance. You say now you will be at EUR 12 billion at the year end, and the improvement is driven by a EUR 2 billion positive effect from hedging and some variation margins. Just wanted to clarify, that is going to reverse in 2027 or later? Second, I wanted to ask you about your funding for Vanguard East and Vanguard West.
Can you help me match the numbers? You now say there is a GPB 12 billion investment. Is this including the development cost or not? I presume not. There is GPB 11 billion. What is the equity debt ratio in the project, and what are the conditions on the loan? How should we think about it? If you can maybe say how much does this increase the kind of a project IRR to equity IRR? Thank you.
First on the net debt, your assumption is right. The variation margin should come back at some point in time. Over the long tenor, that should be zero. That is a fair assessment. On the Vanguard, the GPB 12 billion investment, obviously, that is the total investment of the project. In the project financing, the leverage we have in the project financing depends on which part of the project is financed. On the one hand side, we have the OFTO, which obviously is a regulated process, and here the leverage is higher. I think it is 90% something or nine-ish around this one. On the rest of the project, the leverage is lower, but I think it is in the 80s or so.
It is highly leveraged, but that also reflects the very strong CfD inflation linked over 20 years, which enabled us to get a high leverage, but also attractive terms on the project financing. I mean, by the way, if you look at the project financing, we are extremely happy with the outcome because one is, we fully financed the project, the biggest offshore wind project ever. Secondly, we also saw a significant scale back for our banks, so you can assume that the book was much bigger, which also gives us confidence that this is a very healthy financing, and also puts us in the position to do further project financing going forward on offshore projects, which is very important.
What is roughly the cost of this funding?
Well, two answers. One is, as I said before, we hedged the interest rate, the underlying interest rate when we got the project. The interest is actually the interest from beginning of the year, which is significantly lower than now. On the spreads, I cannot comment, but they are attractive.
Okay. Thank you very much.
Thank you. We will now take our next question from Louis Boujard of ODDO BHF. Your line is open. Please go ahead.
Yes. Hi. Good afternoon, Michael. Good afternoon, Thomas. Thank you for taking my question. Two on my side. Maybe coming back a little bit on the supply and trading. Sorry for that, but just to have a little bit more granularity on certain aspects. First of all, I would like to understand which element into the performance of this division might be eventually related to seasonal factors, to the weather, and to the dryness of the situation that we witnessed into the summer. Is it something that could eventually repeat in the future and potentially help the earnings contribution of this division going forward, that could eventually unlock further upside in the range of your guidance in the future? Maybe something also that is quite, that caught my eyes regarding the investment into this division, which is EUR 850 million recorded as of nine months.
It is not the normal level. Generally, we are at much lower levels. Could you just give a little bit more color on what it is related to and if it is expected to have any contribution in the future in the supply and trading earning range going forward? Regarding my second question, it would be regarding the GPB 12 billion total investment in the Vanguard project. First of all, if you could maybe provide the share of the total amount that is expected to be invested into the transmission assets into this project in comparison to the generation business. The share of the absolute number could be fine. Also, if you could also elaborate on what remaining obligation remain on RWE in case of cost overruns or any delays, what could be potentially your risk related to this project? Thank you very much.
Let's first start on the supply and trading topic. Look, we don't go into details of exactly where the earnings came from. I mean, we revealed that at the beginning of the year, we lost on a gas position, gas long position at that time, and on a gas short position and on a CO2 long position. That was in the first quarter. Since then, all the trading books have performed, but it's not that there are just single strategies. It's really across the books. All books in trading are performing well with variety of strategies. It really crosses more that in the current environment where you see volatility, where you also just see displacements of spreads and of price levels, that's an environment where the trading business can really benefit from. Second question on the investments in trading, well spotted.
That's the investment into the LNG terminal that we communicated mid of the year, where we invested, took an investment and financial investment into an infrastructure LNG project. The payback, so that's not a, you shouldn't expect that to continue going forward. That's a single investment, and we said that the investments will generate dividends starting 2030, and then you should also see that in the earnings. By the way, that would come on top of the EUR 300 million we guide as kind of the regular trading result. For the second question, I would hand over to Thomas.
Yeah, I think if you look at the GPB 12 billion construction budget, roughly GPB 4 billion relates to the transmission.
Yes.
Thank you. There are no further questions in queue. I will now hand it back to Thomas for closing remarks.
Well, thanks to the moderator. It has been a rather extensive call today, but thank you all for asking all these interesting questions. I think it has been a very good discussion. If there are any follow-up questions, you know how to get hold of the IR team, and I am looking forward to see many of you in the coming weeks and months, and latest, of course, then with our full-year results in early March. Have a great rest of the year, and bye-bye.
Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.