Good morning, ladies and gentlemen, welcome to the conference call on EVN's results of the first quarter of the 2022/2023 financial year. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Mr. Stefan Szyszkowitz.
Good morning and welcome to the conference call on EVN's results for the first quarter of this current financial year. In the first quarter of this financial year, EVN achieved a solid financial performance despite some unfavorable framework conditions. This period still was remarked by distortions in the energy markets with historically high prices and volatility. In addition, the very mild weather in all of our three markets affected the energy demand. These developments mainly influenced our at equity consolidated company, EVN AG. The earnings contribution declined in the reporting period and is expected to remain negative in the current financial year. In line with our strategy 2030, our ambitious investment program for the expansion of renewables is proceeding according to plan. Over the coming years, annual investments will reach levels of EUR 500 million.
Thereof, three-fourths will be dedicated to Lower Austria, mainly networks, renewable energy and drinking water. Currently, three wind parks and four large-scale photovoltaic projects with a total capacity of 120 MW are under construction. It is our ambition to increase EVN's attractiveness for ESG investors. We agreed on CO2 emissions reduction targets until 2034 within 10 internationally renowned Science Based Targets initiative. One measure is that we will further grow our renewable generation portfolio. Our goal is to grow our wind capacity by another 350 MW to 750 MW by 2030. Additionally, we will build up a photovoltaic portfolio of about 300 MW within this decade. We also made efforts in the area of E-mobility.
We are proud to announce that we have reached an agreement with the Austrian retail chain, SPAR, on the installation of E-charging stations in supermarket parking lots. EVN will be also in charge for the supply of renewable energy for these charging points. Our ambitions and initiatives are beginning to bear fruits. We achieved ESG rating improvements in the CDP score as well in the SDG rating from ISS ESG. EVN is rated among best-in-class companies in both ratings. Let me now continue with the key financials of this reporting period. In the first quarter, the group's revenue was up by 30.3% year-over-year to EUR 1.2 billion. The main reasons for this development were price effects in renewable generation, valuation effects of hedges and price adjustment at EVN Wärme.
In Southeastern Europe, revenue increased due to the higher network tariffs and the increase of electricity prices in the regulated household customer segment in North Macedonia. Progress on the major project in Kuwait also positively influenced revenue. The cost of electricity purchases from third parties and primary energy expenses remained nearly unchanged year-over-year. The weather-related decline in volumes was offset by higher energy procurement costs. Please be also aware that in our previous years, expenses were reduced by compensation payments of the Bulgarian government for the network losses. The share of results from at equity accounted investees declined significantly to minus EUR 43.2 million. The earnings contribution from EVN KG sharply dropped due to the rise in procurement costs and valuation effects of hedges. Please keep in mind that higher costs can only be passed on to customers with a certain delay.
Operating expenses increased due to general price movements due to inflation and the windfall profit tax for renewable production became effective as of the first December last year. Group EBITDA amounted to EUR 281.7 million. Scheduled depreciation and amortization increased due to our investment. Please be aware that the first quarter last year was affected by a reevaluation of EUR 6.4 million for the Kavarna wind park in Bulgaria. In total, group's EBIT rose to EUR 201.1 million. Financial results improved to minus EUR 10.2 million, while foreign exchange effects had negatively influenced the previous year. In total, we generated a group net result of EUR 149.4 million. Now I would like to move to the next slide, which provides some information regarding the group's balance sheet structure.
Balance sheet sum decreased due to a substantial decline in the acquiring amount of equity accounted investees, which resulted primarily from the negative valuation of hedges held by EVN KG and EnergieAllianz at the end of the reporting period. As of the end of December, EVN net debt increased to EUR 1.6 billion, mainly related to the working capital, primarily from the liquidity settlement for EVN KG. Gearing ratio amounted to 24.7% correspondingly. Nevertheless, our financial flexibility remains solid. EVN has committed undrawn credit facilities in the amount of EUR 636 million as at the end of December last year. Let's move now to our segments in more detail. First of all, the generation segment. Electricity generation volumes were down by 23.9% year-on-year.
The main trigger for such a decline was a decrease in the use of the Theiss power plant by the Austrian network transmission operator for network stabilization. Significantly lower wind flows couldn't be offset by higher water flows. The share of renewable generation increased year-over-year by 11.2 percentage points to 65.6%. Revenue reached under EUR 12.5 million. High electricity prices were able to offset the decline in electricity generation. EBITDA increased to EUR 66.4 million, despite higher operating expenses due to the windfall profit tax on renewable production. The Austrian law became effective as of 1st of December last year and will apply for a limited period until the end of 2023. In Austria, the price cap for the tax is EUR 140 per megawatt hour.
The cap can increase up to EUR 176 per megawatt hour, subject to investment into renewable generation assets and energy efficiency measures. Segment EBIT also increased year-on-year to EUR 55.7 million. Please bear in mind that higher depreciation amortization in the first quarter due to last year's revaluation of the Kavarna wind park in Bulgaria. Let's continue with the energy segment. Our first quarter was characterized by extremely mild temperatures, both year-on-year and compared with the long-term average. Energy sales volumes to end customers decreased compared to the previous year. Additionally, we have seen energy savings by customers. The development of revenue in the energy segment depends primarily on the marketing of electricity generated in EVN's power plant. It includes the revenue from our domestic heating business. Revenue raised to EUR 356.6 million.
The strong increase is started primarily from the positive price effect in the marketing of our own electricity production. Valuation effects of hedges also drove the revenue growth. Price adjustments supported the revenue contribution of our heating business. The increase in operating expenses reflected higher procurement costs for the heating business and for natural gas. The earning contribution from our equity consolidated company, EVN KG, declined year-on-year due to the rise in procurement costs and negatively valuation effects of hedges. Please keep in mind that higher costs can only be passed on to customers with a certain time lag. The earnings at EVN KG are expected to remain negative in the current financial year.
Based on these developments, segment EBITDA increased to EUR 67.7 million and EBIT increased to EUR 62.4 million, which is mainly the result of the valuation of hedges. On the next slide, I will present the development of our network segment. The mild temperatures, as well as the consumers energy saving efforts, negatively affected our network segment. Because of this development and the lower use of our Theiss power plant for network stabilization, network distribution volumes decreased year-on-year. Segment revenue went down correspondingly to EUR 151.5 million. The volume declines couldn't be offset by the grid tariff increases for electricity and natural gas. A positive revenue contribution was recognized by CLTV, Internet, and telecommunications. In total, EBITDA amounted EUR 68.6 million and EBIT decreased to EUR 31.8 million.
As of the beginning of this year, the new regulatory period for the natural gas distribution network became effective. Due to the development of interest rates, the RAC was reduced. Similar to the regulatory system for the electricity distribution network, new investments with the RAP are incentivized. In the appendix of this presentation, you will find an overview of the current regulation system for both the electricity and the natural gas distribution networks. E-Control increased system charges for household customers, which became effective with the beginning of the new calendar year. Based on those decisions, the network charge of natural gas increased by 17.2% and for electricity by 40%. The latest mainly driven by cost of the network losses and will be partly compensated by the state later on this year. Let's turn to the Southeast Europe segment.
Temperatures in Southeast Europe were above the previous year and the long-term average, which led to a decline in network and energy sales volumes. In contrast, electricity generation volumes could be raised in the first quarter, especially due to the higher water flows in North Macedonia. Additionally, a new photovoltaic plant was commissioned in North Macedonia in October 2022. Revenue of this segment increased to EUR 480.9 million due to higher network fees and an increase in electricity prices for the regulated household customer segment in North Macedonia. Operating expenses decreased in the reporting period due to the weather-related decline of cost for electricity purchases from third parties and primary energy. In North Macedonia, cost for network losses coverage decreased year- on- year due to the government subsidized purchases.
Segment EBITDA amounted to EUR 46.8 million and segment EBIT was up to EUR 26.8 million . I go on with the next slide, presenting the last segment, the environment segment. In our international project business, we can rely on a solid order book of nearly EUR 700 million as the end of December. In total, 14 projects related to the areas of wastewater disposal, drinking water treatment, and thermal sewage sludge utilization are currently under construction. In this reporting period, we made great progress on the Kuwait project. This was a main driver for an improvement in revenue, which also EUR 158.1 million . On the other hand, there was a corresponding increase in operating expenses. The progress made at the Kuwait project also positively affected earnings contribution from equity accounted industries.
In total, this development led to an increased EBITDA of EUR 20.4 million and higher EBIT of EUR 12.2 million. Result before incoming tax rose to EUR 9.2 million. This was supported by the absence of negative foreign currency development recorded in the previous year. The next slide shows the development of our group cash flows. Gross cash flow was higher year on year at EUR 309.4 million. The main drivers for this development were higher earnings recorded in the reporting period and the consideration of earnings and dividends from at equity accounted investees, mainly from EVN KG. Cash flow from operating activities decreased to minus EUR 265.9 million. Triggers for this development were the liquidity settlement for EVN KG and the related capital commitment for working capital.
A negative effect was also the year-on-year increase in income tax payments. The positive cash flow from investing activities of EUR 74.3 million resulted mainly from the sale of the short-term cash flows, which are recognized in this cash flow position. Investments in property, plant, and equipment remained at a high level. Cash flow from financing activities amounted to EUR 87.3 million, which reflects the conclusion of two long-term bank loans totaling EUR 100 million, as well as scheduled repayments. The net change in cash and cash equivalents amounted to -EUR 94.3 million. As already mentioned, EVN has committed undrawn credit facilities of EUR 636 million as of the end of December last year. I would like to conclude my presentation with the outlook for the group.
The conditions in the energy business remain rough and are characterized by distortions on the wholesale markets. This may have a significant impact on our performance. For instance, higher energy prices bring on one hand an upside in potential generation, on the other hand, for our energy supply business, especially for our equity consolidated company, EVN KG, higher energy prices are a heavy burden, which we need to overcome through price increases, which can mainly only be passed on within a certain time lag according to price increases. As already mentioned before, earnings from our supply company in Austria, EVN KG, are expected to remain negative in the current financial year. Having only finished the first quarter of our financial year, I confirm today the guidance we gave in December.
Under the assumption of a stable regulatory environment and pre-predictable energy sector and tax framework, we expect group net results to be in line with the previous year and within a range of roughly EUR 190 million-EUR 250 million. Please keep in mind, as already mentioned at our full year's presentation, that earnings contribution from VERBUND for the 2022 financial year is not included in this estimate. Our ambitious investment program for the expansion of renewable is proceeding according to plan. Over the coming years, annual investment will reach levels of around EUR 500 million. Regarding our dividend policy, I confirm that future dividends from operating activities shall at least equal the dividend for the previous financial year, which is EUR 0.52 per share.
I also confirm that we are committed to let our shareholders appropriately participate in any additional earnings growth. I've reached the end of my presentation. I'm looking forward to answering your questions.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press nine star on your telephone keypad. If you would like to withdraw your question, press nine star again. I will repeat one more time. Please press nine followed by a star key in order to place your question. We have received already the first question. The first questioner is Mr. Patrick Steiner of Erste Group. Please go ahead.
Good morning, and congratulations on the strong results. Firstly, could you give us a better understanding of the price effects in the marketing of your own electricity production and how you expect this to develop over the next couple of quarters? Secondly, how big is the impact from the valuation effects from hedging? Thank you very much.
Okay. Second question is around EUR 50 million. Yeah. The first question, of course, this is the best question you can take, because no one knows how prices will develop. We pretty much depend on the geostrategic situation regarding Ukraine, and of course, the question mark, how the European economy is developing and if Asia is even taking more energy and LNG than they did in the last year. These effects will in pretty much define also the spot prices over the next period. We are expecting over the next 24 months that the prices, under the condition that we're not having an additional external factor, will come down slowly, but will never go back to the level we had before the pandemic crisis changed the landscape.
Okay.
You can see this also in the pricing of the CO2 emissions. The CO2 emissions are now on a level between EUR 80 and EUR 90 per ton, and this goes into the pricing of gas-fired plants, and this goes into the merit order system, and therefore, we have a strong indication that the price of wholesale markets over the next 24 months will be on a certain level.
Yes. Perfect. Thank you very much.
Next questioner is Ms. Teresa Schinwald of Raiffeisen Bank International. The floor is yours.
Hi, good morning. I have a follow-up question on the hedge valuation effect. As far as I understand, there are two different effects, and I'm wondering if the EUR 50 million figure is the net figure of these two because your power generation.
Yeah. I can confirm this. I can confirm this. It's the net figure.
Can you also give us a flavor of the two individual effects at EVN KG and in the marketing of your own production, as well as for the heating business, positive effect on the energy segment?
Yes. Well, you know, this is another competition field of our business, yeah. To give you an understanding, it's dominated by the KG kind of hedges, yeah. This is a high double-digit number.
Okay. Thank you very much. I want to follow up on the revenue cap effects that were only recorded in December according to Austrian law. Can you give us a flavor how much it is and how it is actually recorded? On the top line or somewhere else?
Okay. It's around EUR 7 million, yeah, for December. It's recorded in the other operating income.
Great. Awesome. Thank you. Last question.
Well, colleagues say the other side is expenses. It's expenses. Other operating expenses, yeah.
Yes. My last question is on the, I know it's a tricky field, but it's on the regulation and the upcoming or the new changes in the gas distribution regulation as well as the upcoming changes in the electricity regulation. The Austrian regulator now has this potential to change the return for new investments pretty quickly and not rely on the five-year backdated average. This would at the moment look points out more than 50 basis points increase in new investments. What's your overall expectations because we're now having many factors coming together. We have lower volumes. We have probably also change in the productivity factor. We have lower returns for the existing asset base, but higher or potentially higher returns for new investments.
Would you expect this to be a net neutral path forward, from a current, perspective or, what's your take on that?
Well, I think that the Austrian regulatory system is quite mature, and it has over all these 20 years been quite reliable. On this basis, short-term effects have always been more or less averaged, yeah, on certain periods. Of course, in the situation which we are now with this strong increase on interest rates, the system also has to be more flexible. They did this kind of change when they were developing the strategy for the new gas period by acknowledging the interest rates during the period are much more changing. I would expect that the same thinking, the principle behind it, will also be applied for the electricity new regulatory period.
If you just look how the interest rates have changed over the last calendar year 2022, it's pretty hard to judge now what will be then on the 1st of January 2024. I confirm that the principles from the gas adoption will influence also the electricity. I cannot confirm basis points on the structure yet. It would not be the reliable expectation. What I really think is that there is no energy transition without strong grids. Therefore, there has to be an incentive on new investments because in parts of our territory, we need an additional grid, which is not just reflected by the end customers, but more by the producers. Therefore, the speed to realize this will also be included in the regulatory framework because this is a state affair.
Thank you. Thank you very much.
At the moment, there are no further questions. I will repeat once again. Ladies and gentlemen, if you still have a question to stage, please press nine followed by a star key. There seem to be no further questions in the queue.
Thank you for joining today's conference call. We will publish the results for the first half of this financial year on Thursday, the 25th of May. Please join us then again, have a nice day and stay healthy. Goodbye.