Good morning, ladies and gentlemen. Thank you for standing by. Welcome to EVN C onference Call for the Quarters of the 2024-2025 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 Alexandra Wittmann.
Good morning, everyone. EVN's Conference Call on the Results for the First Three Quarters of our Current Financial Year. In a nutshell, today's results can be summarized as follows: the sector environment for power generation has been challenged, especially due to weak wind and water conditions, as well as lower market prices. The normalization of operational results in our energy supply business is proceeding as planned. Financial performance in the first nine months of the financial year has been solid. While EBIT increased by 18%, Group net result is down by 9%, primarily due to lower financial results resulting from forbidden use dividend payout for 2024. Full-year financial performance is on track, and we confirm our full-year guidance. We expect net results in a range between EUR 400 million and EUR 440 million, subject to a stable regulatory and energy policy environment. We are also on track in realizing our investment program.
CapEx were up by 22% at EUR 535 million during the reporting period. This is in line with our plan to invest annually about EUR 900 million until 2030. The key investment areas remain unchanged. About three- quarters of our CapEx will be made in Lower Austria in networks, renewable generation, e-charging infrastructure, and drinking water supplies. I would also like to highlight that our CapEx plan is supported by a solid project pipeline. We are therefore very confident that we will successfully deliver on our plan, which will further support organic growth, especially in the areas of renewable generation and regulated networks business. We are currently working on several new wind and solar projects, which will bring us another step closer to achieving our 2030 expansion targets: 770 MW for wind and 300 MW peak for photovoltaics.
In June, we also achieved the next important milestone in our plan to divest the international project business. Together with STRABAG , we finalized the transaction contracts for the sale of WTE Group and signed the share purchase agreement. This was based on the key terms for the transaction, which were agreed upon already in last December. We are now working on the fulfillment of the conditions precedent required for the closing of the transaction. Closing is expected within the next six months. On the next slide, I will take you through the main financial developments in the reporting period. Before I begin, I'd like to remind you that we are reporting the international project business, which we plan to sell to STRABAG , in accordance with IFRS 5. Therefore, all P&L items for the previous half year have been restated to reflect the IFRS 5 disclosure.
Revenue rose by 5% year-on-year to EUR 2.4 billion. The main reasons were positive volume and price effects from all three network companies, as well as from our supply companies in Bulgaria and North Macedonia. Colder temperatures during the winter months led to higher revenue at EVN Wärme. In contrast, there was a drop in revenue from renewable generation and natural gas trading, mainly due to lower prices and volumes. On top of that, there were also negative impacts year-on-year from the valuation of hedges due to positive effects in the previous year. The increase in other operating income was due to insurance compensation we received to cover damages, which were caused by the floods in Lower Austria during September 2024. The cost of electricity purchases from third parties and primary energy expenses increased due to higher procurement costs in the regulated energy supply business in Southeast Europe.
This increase was contrasted by lower procurement costs and reduced quantities of natural gas. The cost of materials and services was up due to the repair costs for the flood damages, which, as already mentioned, are largely covered by insurance. The rise in personnel expenses reflects the increase in workforce and adjustments according to the collective bargaining agreements as well. Other operating expenses declined. In the previous year, we had two one-offs, being the impairment loss on receivables in the international project business and the energy crisis contribution for electricity. The share of results from equity-accounted investees improved substantially. This resulted particularly from the normalization of results at EVN KG. In addition, the contributions from RAG and Burgenland Energy were up too, however, contrasted by a slight decline at the VERBUND Innkraftwerke power plant. In total, Group EBITDA rose by 14% year-on-year and amounted to EUR 714 million.
Scheduled depreciation and amortization increased by 7%, reflecting our high investment program. Hence, Group EBIT was up by 18% and totaled EUR 447 million. Financial results fell substantially from EUR 165 million to EUR 94 million. This decline resulted from the lower dividend paid out by VERBUND for their 2024 financial year. In total, we generated a group net result of EUR 435 million in the reporting period, which represents a decline by 9%. Now, let's move on to the next slide, which provides information regarding the group's balance sheet structure. As of the end of June, EVN's net debt amounted to EUR 1.1 billion and was slightly below the level as of the end of September 2024. Correspondingly, gearing ratios stood at 16.6%. Our indebtedness is increasing in line with our higher investment program. Our financial flexibility remains secured and solid. EVN holds contractually committed undrawn credit lines in the amount of EUR 770 million.
On the next slide, I will present the developments of our segments in more detail. I will start with the energy segment. Energy demand for natural gas and heat increased due to colder temperatures, whereas electricity sales volumes declined year-on-year. Such decline was due to ongoing strong competition and the trend towards growing own photovoltaic generation. Our equity consolidated supply company, EVN KG, is in charge of the electricity and natural gas sales, whereas the heating business is fully consolidated. Therefore, heating is one of the main drivers for the revenue of the energy segment. The other main factor for the development of revenue is the marketing of the electricity generated in our renewable power plants.
In the first nine months, revenue fell year-on-year to EUR 512 million due to volume and price effects in the marketing of our own generation and in natural gas trading, as well as reduced earnings effects from the valuation of hedges. In contrast, our heating business benefited from the colder temperatures. In line with the declining market prices, operating expenses also decreased. For our equity accounted supply company, EVN KG, the expected operational turnaround continued as planned, and it contributed with a slight positive number of EUR 1.5 million. In total, segment EBITDA amounted to EUR 84 million and EBIT totaled EUR 63 million. Let us now turn to our generation segment. Electricity generation volumes in the segment declined by 10% year-on-year due to lower wind and water flows in Austria. Thermal generation volumes increased due to higher demand by the Austrian network transmission operator for network stabilization.
Revenue decreased due to declining market prices and lower generation volumes. The generation segment also contains the effects from lost revenue and repair costs at our thermal waste incineration plant due to the flooding in September 2024. Our equity-accounted investee VERBUND Kraftwerke delivered a lower earnings contribution as compared to the previous year due to weaker water flows. All in all, EBITDA amounted to EUR 130 million. Based on higher scheduled depreciation and amortization because of our investment program, segment EBIT stood at EUR 90 million. Today, we would also like to further increase our transparency for the generation segment by starting to disclose the hedging ratios for our own generation. According to our hedging policy, we apply a 12 month- 18 month rolling forward hedging strategy for our own electricity generation. At the moment, about two-thirds of the electricity generation volumes for the next financial year 2025-2026 are hedged.
Let's continue with the network segment. The colder weather and higher consumption for heat pumps and e-mobility, as well as the increased use of thermal power plants for network stabilization, led to higher network distribution volumes for electricity and natural gas. In view of the positive volume effects and higher network tariffs for electricity, revenue in the segment increased. Operating expenses also increased due to rising upstream network costs for electricity. In total, EBITDA was up at EUR 277 million. Taking into account higher depreciation and amortization due to the high investment level, EBIT totaled EUR 145 million. Let's move on to the Southeast Europe segment. In Bulgaria and North Macedonia, we are reporting today higher electricity network and energy sales volumes. The volume growth was, among others, driven by low temperatures in Bulgaria. Revenue increased to EUR 1.2 billion due to positive volume and price effects.
This was contrasted by the offset of positive earnings effects from recent years in Southeast Europe in accordance with the regulatory methodology. Operating expenses increased in line with higher procurement costs in the regulated energy supply business in Southeast Europe. All in all, EBITDA amounted to EUR 129 million and segment EBIT totaled EUR 61 million. Finally, the environment segment. As already mentioned in the beginning of today's call, we signed the share purchase agreement with STRABAG in June. Right now, we are working on the fulfillment of the various conditions precedent. The closing is expected within the next six months. Due to the IFRS 5 disclosure of the discontinued operations representing those parts of the international project business which we will sell to STRABAG , the financials of the Environment segment look different.
In other words, the P&L of the segment only covers the following activities which are excluded from the planned sales, such as our drinking water business in Lower Austria, the equity-accounted companies for the projects in Zagreb and Prague, the deconsolidated company for the wastewater treatment plant project in Budva, Montenegro, and finally, the deconsolidation effects from the sludge-fired combined heat and power plants in Moscow, whose sale was closed on October 31st, 2024. For the activities to be sold, IFRS 5 disclosure requires us to report results from discontinued operations, which amounted to -EUR 10 million in the first three quarters. The next slide shows the development of our group cash flows. Gross cash flow was lower year-on-year at EUR 762 million. The main reason was the correction of non-cash earnings components. Cash flow from operating activities totaled EUR 627 million.
Year-on-year, it was negatively influenced by an increase in trade receivables and a parallel decline in trade payables at balance sheet date, which was reduced by a lower capital commitment for our supply company, EVN KG. Cash flow from investing activities amounted to -EUR 499 million and reflected a substantial increase in investments. In addition, investments were again made in cash funds. The positive cash flow from financing activities amounted to -EUR 110 million and included scheduled repayments, the dividend payment for the last financial year, and new non-current financial liabilities. The net change in cash and cash equivalents amounted to EUR 18.2 million. Now, let's come to the outlook for this current financial year. I confirm our guidance for this financial year. We expect group net results to be within a range of EUR 400 million- EUR 440 million. This is under the assumption of a stable regulatory and energy policy environment.
When looking at today's results and our full-year guidance, it's important to bear in mind that energy demand isn't evenly distributed throughout the year. In other words, there is a clear seasonal bias with significantly higher energy demand during our winter half year. Consequently, especially our fourth quarter results always differ from those of the rest of the year. Our dividend policy remains unchanged. The dividend will equal at least $0.82 per share. As demonstrated in the past, we want our shareholders to appropriately participate in any additional earnings growth. In the medium term, a payout ratio equaling 40% of group net results, adjusted for extraordinary effects, is targeted. Our annual investments will amount to EUR 900 million until 2030. The core areas are investments in network infrastructure, renewable generation, e-charging infrastructure, and drinking water supplies.
Ladies and gentlemen, that's the end of our presentation, and we look forward to answering your questions.
Thank you very much. Dear ladies and gentlemen, please press nine and the star key if you would like to state a question. I repeat, the combination is nine star. If you wish to cancel your question again, please press three and the star key. For now, please press nine star. We have a couple of questions incoming already. The first question is from Patrick Steiner of ODDO BHF. Please, over to you.
Good morning, it's Patrick Steiner speaking, ODDO BHF. Thank you very much for answering our questions. Three from my side if I may, I'll take them one by one. First of all, I would be very interested in what were the main drivers of the weaker EBITDA in the renewable generation segment in the third quarter compared to last year's periods. I mean, how big were the effects of pricing versus volume generation of the existing asset base, and how large was the effect of new generation assets put into operations?
Okay, I think the question to that is the segment E was a drop from EUR 35 million to EUR 21 million due to lower trading results, especially the gas trading. If I may point to segment G, generation, the drop from EUR 47 million to EUR 34 million was due to lower volumes and electricity market prices. In the segment network, the increase from EUR 49 million to EUR 69 million was due to higher network volumes, especially gas, and also grid tariff increases. If I look at segment O, there is a slight increase from EUR 47 million to EUR 50 million, mainly volume effects, I would say. Last but not least, our segment for the international project business is almost stable at EUR 4 million. Previous year was EUR 5 million, and this is according to the realization of our project.
Okay, thank you very much. That's actually very helpful. A second question would be, given your forward-hedged regarding when it comes to renewable electricity sales, how should we think about the prices, which you have locked in already, basically, but materialize in the P&L over the next few quarters? Should we expect prices to come down further over the next quarters?
Okay, I think I want to emphasize that our hedging policy is to achieve a hedging ratio of about 80%. I outlined that at the moment, we have already hedged approximately two-thirds of the planned generation in the next financial year. The reason for not hedging up to 100% is that renewable production, especially wind, is very volatile. Therefore, actual production on a particular day could even be zero in case of no wind. With stable energy power prices, we expect also revenues to stay stable.
Okay, thank you. That's it from my side. Thank you very much.
Thank you. Moving on to the next question. The next question is from Thibault Dujardin of Bernstein Société Générale. Please, go ahead.
Hello, good morning. Thank you very much for taking my question. My first question will be regarding the potential of the windfall tax in Austria. Do you have more visibility on the potential impact? Do you have more insight on the potential reduction if you invest in new renewables, and what could be the impact? That would be my first question.
Okay. The federal act on the energy crisis contribution for electricity was initially put in force for the period from December 1st, 2022, to December 31st, 2023, and was then extended for 2024. This is just as a reminder for all of us. In March 2025, the new Austrian government reenacted the law for the period from April 1st, 2025, to March 31st, 2030. The new parameters for the calculation of levy on earnings from electricity generation have been tightened as follows. Also, as a reminder for us, previously, they were EUR 120 per megawatt hour. Now, they are EUR 90 per megawatt hour for existing plants and EUR 100 per megawatt hour for new plants. Any excess earnings are taxed at 95%. Also, for us to remember, previously, it was 90%. Deductibles for renewable investments, 75% of CapEx, with a maximum cap of EUR 72 per megawatt hour.
Now, the conclusion for us, given the parameters, is that the potential effects on EVN for the full year, 2024- 2025, are not clear yet. Our estimate is a low single-digit amount.
Thank you very much. It's already included in the guidance?
Yes.
Okay, thank you very much. Just to go back regarding the new renewables, considering the addition of new capacity, what is your expectation in terms of EBIT generation for the next financial year due to the addition of new renewable capacity?
I think the guidance for the next financial year is a stable EBIT, and it depends on the prices.
Okay, thank you very much.
Thank you very much also from my side. Just a little reminder, dear ladies and gentlemen, to ask a question, please press nine and then the star key. All right. The next question is from Emanuele Oggioni of Kepler Cheuvreux. Please, over to you.
Good morning, everyone, and thank you for taking my question as well. The first one is on the energy business unit. I wonder if you can disclose the share of fixed price contracts versus floating price contracts, and also the duration of your commercial offer on average for fixed price. In the past, it declined from one year to six months, if I remember well. Also, the outlook for the energy profitability next year after the strong recovery expected for this year. The second question is on Southeast Europe. In this case, what is the outlook for 2026 considering the ongoing regulatory framework? Thank you.
Okay, thanks for the question, Emmanuel. To tackle your first one, it's 5%- 60% fixed contract. It's called our Garant. Okay? In terms of the midterm expectation for the supply business, let me start and let me confirm again that we plan to achieve the turnaround for EVN KG in the current financial year. I can confirm that from an operational point of view, EVN KG is well on track after nine months. We therefore expect that EVN KG will again generate positive operating results in the current 2024-2025 financial year. We expect a black zero, so similar than after Q3. In the midterm, our ambition is that the Austrian supply business should return to generating EBIT margins of 3%- 5%. At last year's investor webcast, we communicated a midterm EBIT range for the energy segment of EUR 50 million- EUR 60 million.
The energy segment includes the equity consolidated EVN KG, the heating business, and the marketing of own generation. Now, I tackle your questions to the outlook of Southeast Europe. The EBIT range is between EUR 60 million- EUR 90 million. According to the Capital Markets Day info from October, this is still valid.
If I may, as a follow-up, the current year was particularly strong and even better than expected compared with this midterm guidance. What are the moving parts in the next year for this year-on-year decline compared to 2024-2025?
Are you now referring to Southeast Europe or to EVN overall?
Yes, still Southeast Europe.
I think we have, as outlined, the guidance for Southeast Europe is between EUR 60 million and EUR 90 million, and the EBIT is at EUR 61 million.
Thank you.
For the first three quarters. Does that answer your question?
Yes, yes, thank you.
All right, thank you very much. Next question is from Richard Alderman of BTIG. Over to you.
Hello, can I just follow up on the process of the windfall tax or the generation price cap offset? You kindly said that you expect the full-year contribution to that to be low single digit. Given your CapEx outlook for next year, would you, assuming all things being equal in the policy continuing as it is, would you assume therefore that next year you're only paying a modest contribution to that tax?
Yeah, same expectation for next year. It's very modest, and it's in the area of a low single-digit amount.
Right, okay, thank you very much. Just looking at the comments you made around the changes in operating cash flow, could you go through the mechanics of that again? You spoke about it quite quickly on the call, and I just wanted to understand the moving parts of what was happening.
So.
You talk about the increase in trade receivables was contrasted by the lower working capital needs of EVN.
Yeah, that's right.
I just wondered if you could just put some color on that.
Yeah, I think just to recap a little bit. The gross cash flow was lower year-on-year with EUR 762 million, and the main reason was the correction of non-cash earnings components, right? To understand the non-cash earnings components, which are the correction to the gross cash flow, we need to correct for the earnings contribution of equity accounted investees and need to add back the dividend payments. Other adjustments refer to, for example, the correction of non-cash versus cash items, such as interest expenses versus interest payments or interest income versus interest received. At the same time, we also have working capital changes, which we recognized. We have inflows from international projects, and we have the improved supply business. I think that is, these are the main colors to the cash flows.
Okay, thanks very much. Can I just, obviously, without wishing to draw you down the line of guiding exactly for the full-year net result, you're clearly towards the top end of that range at the nine-month level. I'm just trying to understand how that equates to your messaging around at least $0.82 a share of dividends based on a 40% payout ratio. If I look at the moving parts, you've identified the final windfall tax numbers being very low. Q4, obviously, is a summer month, so it will probably, I guess, only contribute a low single-digit number, zero to sort of low single-digit number to the final outturn. We know the quantity of the VERBUND dividend in this current year for you. What else is the driving sort of difference between where we are now and where we might outturn in terms of any one-offs?
Are you expecting any one-offs that are not yet visible to us? Obviously, the current consensus has a dividend which is above the $0.82. I think it's around $0.865, $0.87. If you come towards the top end of the range, clearly your EPS would imply a dividend higher than that. I'm just trying to understand in my mind what are the moving parts that we are yet to receive with about a month to go.
Thanks for the question, Richard. It's too early to say. We are in the middle of Q4, and you described our seasonal or traditional Q4 very well. There might be impacts of derivatives, accruals, and whatnot. Nothing unusual to our regular Q4 actions. In that sense, I confirm that the minimum dividend, according to our dividend policy, is $0.82.
Okay, that's all from me. Thank you.
Thank you.
Thank you very much also from my side. At the moment, there are no more questions in the queue. Dear ladies and gentlemen, last call, please press nine and star now if you have a question. There seem no questions to be incoming. With that, I'm closing the Q&A session and handing the floor back over to the hosts.
Ladies and gentlemen, thanks for joining today's conference call. We will publish the results for the 2024-2025 financial year on 18th of December . Hope you're all having some good late summer days, and I wish you a nice day. Good.