Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the VERBUND AG Q3 Results Conference Call. Throughout today's recorded call, all participants will be in a listen-only mode. After the presentation, there'll be a question and answer session. If you'd like to ask a question, you may press star followed by one on your telephone keypad. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Peter Kollmann. Please go ahead.
Thank you. I'm here with Andreas Wollein, our head of investor relations and finance. Ladies and gentlemen, welcome to our presentation. Before we move into the analysis of the business development of VERBUND, let me make a few general comments. The first three quarters were marked by difficult geopolitical and energy industry developments. Significant factors influencing the business development of our group changed in particular due to the war in the Ukraine, as well as record inflation and rising key interest rate expectations. The difficult framework conditions led to major distortions and challenges, particularly in the European energy markets, which were reflected in extreme price increases and volatility. Prices for primary energy sources increased drastically over the year, and changes in gas supply volumes and purchase structures had an enormous impact on gas prices in particular.
European wholesale prices for electricity continued to rise or reach new highs as a result of the strong increase in world market prices for primary energy and the increasing risks. Now, due to the difficult situation in the European energy sector and in order to address the high impending price burden for all customer groups, discussions on short and long-term market interventions and profit levels have been initiated at national and EU level. The aim of these measures is to reduce the extremely high energy prices and to create financial scope for the state to reduce end customer prices. These discussions and decisions on market interventions caused uncertainties on the capital markets and also led to a decline in the VERBUND share price.
With a closing price of 87.5 as of 30th September 2022, the VERBUND share price recorded a -11.6% compared to year-end 2021. It still performs far better than the Austrian benchmark index ATX and the sector index, STOXX Europe 600 Utilities. Now let's move on to details. At the beginning, let me highlight the most important influencing factors for the results development in the first three quarters. Based on our hedging strategy for our own electricity generation from hydropower, the average achieved contract price strongly increased by 60.3 EUR per MWh to 111.6 EUR per MWh in the first three quarters 2022, compared to the first three quarters 2021.
The hydro coefficients determining the generation from our run-of-river hydropower plants were 16 percentage points below the long-term average and 15 percentage points below the first three quarters 2021. That development had a negative EBITDA effect of approximately EUR 640 million. It also forced us to buy back electricity at very high market prices to cover supply obligations with an additional EBITDA effect of approximately EUR 350 million. In sum, it's EUR 1 billion that hit us here as a result of a very dry environment. The production from our hydro reservoirs, on the other hand, was positive, with an increase of 2.5% compared to last year. Contributions from flexibility products increased strongly in all categories, especially concession management and pumping.
In total, it increased by 180% to EUR 314.8 million compared to last year. There was also positive contribution from Gas Connect Austria. Finally, there were positive non-recurring effects of in total EUR 82.6 million compared to EUR 21 million in 2021. Now, the impact of these influencing factors on the key figures of VERBUND in the first three quarters is as follows. EBITDA increased by 68% to EUR 1.933 billion, and the reported group results increased by 81.4% to EUR 1.065 billion. The adjusted group results increased by 73.5% to EUR 982.6 million.
The operating cash flow increased to a level of EUR 1.12 billion, and the free cash flow after dividends was negative at a level of EUR 628.4 million. Net debt increased by EUR 28.3 million to a level of EUR 4.5 billion. Let me now give you an update on the guidance. Due to the low hydro availability in the first three quarters of 2022, the point I mentioned before, and the announced EU measures to skim off profits, VERBUND now expects for 2022 a reported unadjusted EBITDA between approximately EUR 2.8 billion and EUR 3.3 billion, and the reported group results between approximately EUR 1.53 billion and EUR 1.88 billion based on average generation from hydro, wind, and PV for the rest of the year.
The payout ratio will be between 45%-55% of the adjusted group results, which will be approximately EUR 1.45 billion-EUR 1.8 billion. The earnings forecast and the information on the expected payout ratio are contingent on not being impacted by possible further energy policy measures to skim off some of the profits at energy companies. As you know, a very big discussion across Europe. The guidance 2022 for flexibility products is approximately EUR 380 million. Our old guidance was approximately EUR 250 million. The reason for this increase are the exceptional results in the first three quarters. Now, before I talk about the segments, I will give you an overview of the hedging volumes.
For 2022, we achieved an average achieved contract price for hydro generation of EUR 119.6, EUR 177.8 for 2023, and EUR 131.4 for 2024. Please note that we had already hedged approximately 96% of the volumes for 2022, 49% of the volumes for 2023, and approximately 24% of the volumes for 2024. This is of course, as of the 30th of September 2022. On a mark-to-market basis, as of the 24th of October, we calculate with a price of EUR 127.3 for 2022, EUR 280.5 for 2023, and EUR 219.9 for 2024. As you know, 1 euro up and down is approximately EUR 25 million on our EBITDA line.
Now, let me start with a more thorough analysis of our hydro segment. At 0.84, the hydro coefficient, which as you know, is an index quantifying the hydropower generation of the run-of-river power plants, was 16 percentage points below the long-term average and 15 percentage points below the level of 2021. That's quite a low level when you look at the history of VERBUND. The production from annual storage power plants increased, as I mentioned before, by 2.5%. Own production from hydropower, therefore, overall decreased by 2,844 GWh or -12% to 20,836 GWh compared to 2021.
Higher average achieved prices and an increase in the contribution from flexibility products more than overcompensated the reduction in volumes. Therefore, the EBITDA in the hydro segment increased by 115.6% to EUR 1.815 billion. Our main hydro projects, the 480 MW Limberg III pumped-storage power plant project and the 45 MW Reisseck II pumped-storage power plant project are on time. The 118 MW project in Töging, which is a revitalization, went into operation in Q3 according to our plans. Now I'm on page 9. Sorry, on page 5. Let me continue with an analysis of the own generation from new renewables.
The new renewables coefficients, which is an index quantifying the generation from wind power and PV, amounted to 1.01 in the first three quarters 2022, compared to 0.88 in 2021. Generation from wind power increased by 22.4% or 132 GWh and amounted to 718 GWh in 2022. More favorable wind conditions in all markets were the reason for this development. Generation from PV amounted to 3.5 GWh in the reporting period. Now, taking a look at the EBITDA development in the new renewable segment, we see that the EBITDA increased by 236% to an EBITDA amounting to EUR 90 million. Now, in addition to higher volumes, higher average achieved prices were the reasons for this development.
The chart also provides an overview of our successful acquisitions in the renewable sector. Now let me continue with an analysis of the sales segment, which comprises trade, trading, and sales activities of VERBUND. Taking a look at the EBITDA development in the sales segment, we see that EBITDA decreased strongly to a negative value of EUR 178.1 million. The negative EBITDA is mainly due to a negative result from the valuation of energy derivatives in connection with hedging transactions for future energy deliveries and higher procurement prices of electricity and gas for our end customers. In principle, the negative valuation effect should balance out again in the future with the realization of the underlying transaction. On the other hand, the positive contribution in the sales segment resulted from flexibility products. Here we saw an increase of EUR 66.6 million compared to last year.
VERBUND delivered electricity and gas to approximately 527,000 end customers. That represents a decrease of approximately 1.5% year-on-year. Now, let me continue with the analysis of all other segments. The generation from thermal power plants was up by 566 GWh to 879 GWh due to the market-driven use of one line of our CCGT Mellach for electricity and district heating production. Then higher sales prices were counterbalanced by increased gas procurement costs and negative effects from the valuation of energy derivatives, thus leading to a more or less equal EBITDA compared to last year. The contribution from flexibility products decreased slightly by EUR 2 million.
The contribution from KELAG, the provincial utility of Carinthia, to the financial result decreased to EUR 13.1 million due to non-recurring effects and a weaker operating performance. Finally, let me remind you that the CCGT Mellach was contracted from APG for future congestion management. In detail, line ten is contracted from the first of October 2021 to the thirtieth September 2023, and line twenty from the first of April 2022 to the thirtieth of September 2022, and from the first of April 2023 to the thirtieth of September 2023. In quarter one and quarter four, we used line twenty on a market-driven basis. The district heating power plant Mellach was also contracted by APG for the period from the first of April 2023 to the thirtieth September 2023. Activities for converting the plant for burning coal instead of gas are on hold due to the missing legal framework.
Now, we are coming now to the grid segment. As you know, the grid segment consists of our regulated business, Austrian Power Grid, as well as Gas Connect Austria. Now, first, the contribution from APG, our subsidiary responsible for the Austrian high voltage grid. As you know, there's a difference between local GAAP and the IFRS. Under IFRS, in contrast to local GAAP, volatilities in the results contribution cannot be avoided because the regulatory, the so-called regulatory account cannot be applied. The EBITDA for the first three quarters 2022 from the electricity grid business according to IFRS was approximately EUR 156 million. The new EBITDA guidance for the grid is approximately EUR 105 million. The reason for this decrease are as follows.
In the auctions, we had very high revenues in the first half of the year due to the increased price spreads at the borders, especially with Germany. Since the go live of the Core region, there are currently losses from auctions due to the new regulations as a result of the Core region. In addition, expenses for grid loss energy will increase in the fourth quarter, and the clawbacks of the regulator to reduce the regulatory account will have a negative impact. That is the reason for the decrease from 156 until September 30 to 105, which we're currently planning for year-end. Gas Connect Austria operates and constructs natural gas high pressure pipelines in Austria.
The company is also responsible for the marketing and provision of transport capacity at border points, so-called entry and exit capacities, and the transport capacity required for domestic natural gas demand. The company plays an important role in the supply of natural gas in Austria and Europe. The natural gas is transported to the Austrian federal states, but it is also transported to Germany, France, Slovenia, Croatia, and Hungary. With regards to the results contribution of Gas Connect Austria, we report an EBITDA of approximately EUR 56 million for the first three quarters. The guidance for 2022 is changed to approximately EUR 80 million under IFRS. The main reason for this is the increase in energy costs, mainly for the compressor station. Now the next slide, I show you the non-recurring effects in the first three quarters.
We encountered impairments amounting to EUR 31.9 million, stemming mainly from an impairment in the Austrian hydropower plant, Gratkorn, and impairment of the goodwill of Gas Connect Austria. There was also a reversal of impairments relating to Mellach in the amount of EUR 56 million. In addition, the measurement of an obligation to return an interest in the hydropower plant, Donaukraftwerk Jochenstein, amounted to EUR 28 million, which had a positive effect on the other financial results. The evaluation of the Trans Austria Gasleitung, TAG, where we have a profit participation right, amounted to EUR -11.3 million and had a counteracting effect on the other financial results. We also had impairments relating to Ashta, the hydropower plant in Albania, and TAG amounting to EUR -4.2 million in total.
In total, the effects on the financial results was EUR 12.5 million. In taxes, we had, in addition to the effects due to the above-mentioned topics, also the revaluation of deferred taxes as a consequence of the decision to lower Austria's corporate income tax rate in connection with the Eco-Social Tax Reform Act. This effect amounted to EUR 56.6 million on an isolated basis, so in total effects on taxes were EUR 44 million. Now, after considering the effects on minorities, the non-recurring effects on a group result level amounted to EUR 82.6 million. We also show the non-recurring effects in the first three quarters 2021 as a comparison for you. Now, for the key financial figures and financial liabilities, I will hand over to Andreas Wollein. Please, Andreas.
Yes, thank you, Peter. The next three slides, I would like to present quickly the development of the key figures. On slide 10, you can see that EBITDA increased to EUR 1.93 billion, an increase by 68%. As mentioned, this increase is mainly attributable to an improvement in all segments, except the sales segment, and all other segments. The hydro segment was EUR 973 million higher than in Q1-Q3 2022, mainly caused by higher average achieved prices and an increase in the contribution from flexibility products. The new renewable segment was up by EUR 63 million due to more favorable wind conditions and higher prices.
The grid segment was up by EUR 14.7 million, mainly due to the initial consolidation of Gas Connect Austria. The sales segment was down by EUR 260 million, euros, as we mentioned, because of valuation effects. Depreciation increased by around 10% to EUR 335 million euros due to the acquisition of Gas Connect Austria last year, and the increased investments following our, let's say, CapEx strategy, mainly into the high voltage grid and into hydropower plants. The financial result deteriorated, from plus EUR 34 million euros to minus EUR 23 million euros. This was, among others, attributable to lower earnings contributions, from our participation in KELAG, the Carinthian provincial utility. Taxes on income were influenced by a positive non-recurring effect amounting to EUR 56 million euros, which I already mentioned before.
The group result therefore increased to EUR 1,065.2 million. The group result after adjustments for non-recurring effects was up by 73%. Finally, I would like to mention the increase in additions to tangible assets in total from EUR 430 million to EUR 811 million, an increase. Basically, a doubling of the figure. The increase resulted, in particular, from the acquisition of the 70% of shares in four wind and one PV project in Spain, with a total capacity of 171 megawatts from Capital Energy, as well as investments into connection with Limberg III, Töging, and the 380-kilowatt line in Salzburg. On the bottom left, you will find the additions into tangible assets of Gas Connect Austria and APG, the regulated business.
Whereas on the bottom right, you will find the additions into tangible assets in our core business and others. Moving on to slide 11. VERBUND's operating cash flow in the first three quarters increased compared to the first three quarters 2021 by 119.5% to EUR 1.1 billion, mainly due to higher average contract prices and higher operating cash flow from the Grid segment, higher tax payments and increased margining payments for energy derivatives that are counterbalancing effect. The free cash flow showed a slight negative development from -EUR 595 million to -EUR 628 million.
The higher operating cash flow had a positive effect, whereas the high payments for investments into intangible assets and property, plant and equipment, higher dividend payments, as well as the acquisition of our renewables portfolio in Spain had a negative impact. Net debt increased from EUR 3.5 billion to EUR 4.5 billion, mainly due to money market transactions in connection with margin calls and the acquisition of Spanish photovoltaic and wind power companies. Therefore, the gearing increased from 55.2% to 89%. On slide 12, you can see the financial liabilities development. Of course, there's a big change because of the short-term financing of margin calls. On the left side up, you see the debt maturity profile of our group.
You can see a peak in 2024 with a repayment of EUR 700 million, and also, let's say, after 2029, that's our long-term green bond of EUR 500 million. As liquidity backup, VERBUND has access to a EUR 500 million syndicated loan facility. VERBUND has also access to committed and uncommitted lines with a large number of banks of approximately EUR 3.7 billion. The total amount of the financial liability is approximately EUR 4.1 billion. The increase, as I mentioned, is mainly caused by the considerably high amount of short-term money market liabilities due to higher margining requirements. The average interest rate on our debt is approximately 1.8%. 35% of the debt is subject to fixed interest.
That was basically a quick summary of the financial liabilities, and I would like to hand over to Peter again for giving you the outlook.
Thank you, Andreas. We have come to our last page here with the outlook. As always at this point, we want to highlight the sensitivities. A deviation of 1% in the generation from hydropower has an impact of EUR 18.5 million. A deviation of 1% in the generation from wind power has an impact of EUR 4.4 million, and a deviation of EUR 1 in the wholesale price has an impact of EUR 4.5 million in our group results. Now, on the basis of aforementioned developments, especially our low hydro situation in the third quarter, we adjust our guidance for 2022. We now expect a reported and adjusted EBITDA of approximately between EUR 2.8 billion and EUR 3.3 billion, and a reported group result of approximately between EUR 1.53 billion and EUR 1.88 billion.
All that under the assumption of average hydro, wind and PV generation in the fourth quarter, as well as chances and the risk situation of the group. For the financial year 2022, we plan to pay out between 45% and 55% of our group results after adjustment for non-recurring effects of approximately between EUR 1.45 billion and EUR 1.8 billion. In addition to our regular dividend, the management board of VERBUND AG will propose to the 2023 AGM the distribution of a special dividend in the amount of EUR 400 million. Distribution of the dividends must be approved by the supervisory board at the meeting at which the annual financial statements are to be approved, and also requires the approval of the shareholders of VERBUND at the 2023 AGM.
The earnings forecast and information on the expected payout ratio are contingent on not being impacted by possible further energy policy measures to skim off some of the profits at energy companies. Now, with that, we are happy to go into Q&A.
Ladies and gentlemen, at this time, we will begin with the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. First question is from the line of Wanda Serwinowska, Credit Suisse. Please go ahead.
Hi. Good morning. Wanda Serwinowska, Credit Suisse. I would ask about two topics. The first one is about your 2022 guidance. I'm still a bit confused if you included anything.
In your 2020 guidance on the revenue cap or windfall profit tax, if you could clarify what is included in your guidance, because it may affect roughly 2 TWh if it's only December. If you could walk us through the bottom end of the guidance. I know it's very tricky. You have big losses from the valuation of derivatives, but if you could help us to understand if there is further downside to your 2022 guidance. The second topic that I would like to ask about is the revenue cap or windfall profit tax. Any comments from your side would be much, much appreciated. What is the discussion in Austria these days? What do you expect?
Maybe if you could also comment on your exposure to the spot sales derivatives forward, because from what we see elsewhere in Europe, this is because this becomes very, very relevant in terms of the revenue cap. The very last one, I promise, the latest hydro and hedging would be much, much appreciated. I know, Peter, you always disclose it, so thanks a lot.
Okay. Wanda Serwinowska, you have increased from two to four questions, but they're all very relevant, and I will go through it step by step. Now, first of all, on 2022 guidance, I mean, the key influencing factor on this guidance change has been an extremely dry quarter, which was unexpected and had a major impact. You know, I've mentioned that the impact has been a very big number, EUR 1 billion, of which two-thirds has basically been the volume, and one-third has been what we had to buy back because of our low generation. That was the key point for our guidance change.
You asked how much we have included into the guidance numbers in terms of windfall tax. We have included around EUR 30 million. The reason why we have included that number is that we have taken the only data point which so far we have seen, which is the EUR 180 from the European Union. Everything else, you know, there's a huge discussion, and we will certainly on this conference call talk more about it. But we had to use the one data point which we have had, and we have included, of course, Romania, where we already have specific, very specific windfall tax, where we have a specific data point as well. We have done it for December.
I know that there are discussions in other countries that it would be retroactive. So far, everything we have learned from the EU in official statements is from the beginning of December until the end of December. That is what has basically gone into our 2022 guidance. Now, your second question is on the revenue cap. I mean, that is a major uncertainty, not just for us, for everyone across Europe. On the political side, on the national side, there are big discussions. There is analysis. There has been a draft paper which has come out in Germany that is basically talking about having a retroactive measure in terms of the windfall tax.
There has been rumors in terms of where the cap is going to be set in terms of profits per technology. That is something where we have obviously no confirmation. It is very hard to say how this is going to influence Austria, for example, in terms of their decision-making. The hedging, I'm more than happy to give you sort of like the, you know, the latest figures in terms of 2022, 2023 and 2024. We have hedged approximately, you know, 96%-97% at EUR 119.2. If we take the mark-to-market, we come out with a hundred and. You know, more than 127, between 127 and 128.
In terms of 2023, we have 58%, and there we have hedged at 100 and slightly above EUR 178. On a mark-to-market basis, we have EUR 280. As far as 2024 is concerned, we're around 31%, and there we are hedged at EUR 130. With the mark-to-market, that's EUR 220. The one thing that is really important, and I need to mention that here, obviously with the very high volatility, you know, that mark-to-market changes every day.
While in the past, you know, it would change by very small amounts, at the moment it can change dramatically because we have such a high volatility in energy prices. With the, like in 2024, for example, you know, with the fact that there are still 70% unhedged, you know, those 70% are influenced by very, very large increases or decreases in forward power prices. That is something you need to bear in mind, you know, that is just the level of uncertainty on our unhedged levels for 2023 and 2024. Then you had a question on exposure. Could you repeat that, Wanda, please?
Yeah, sure. Could you just explain the exposure to the spot sales to derivatives? Because when I look at the leaked document or the leaked numbers from the German government, I mean, there is a difference between treating windfall profit, if it's going to be spot sales or if it's going to be the forward contracts. I'm trying to understand how you hedge your generation. That would be very helpful just to help us to understand how you hedge, guys.
Yeah, sure. Well, we haven't really changed our hedging strategy over the years. You know, there are small modifications, but at the end of the day, we hedge 60% 1.5 years forward, then we have 20% with quarterly products, and then we have 20% with shorter period products. In terms of how they are going to skim off the profits, there are no specific details.
You know, the understanding is that they're basically going to look at a specific level X, and any contracts which are entered, and it doesn't really matter if it's, you know, if it's a short-term hedging or if it's a medium-term hedging, will be taken into consideration for that specific year. So anything that is going to be hedged for 2023 obviously would not be included in a windfall tax for 2022. So it would only be the hedges for 2022 that would be included and the amount between whatever that number X is going to be, you know, we have used 180, but in Germany they're now discussing, you know, anything between 60 and 100, according to the technology.
We have not yet heard, not even rumors, what onshore wind, solar, or hydro would be in Germany. You know, I personally think that whatever the number is going to be in Germany is going to have an impact, an influence on the discussion here in Austria. Yeah. That would be significant. I mean, no doubt, yeah. When you look at the 2023 numbers, and when you look even at the 2024 numbers, you know, if it were at a level, even at, like, around 100-120, it doesn't really matter, but all that is going to have quite a significant impact. You know, the same is true for the rest of Europe.
That is something that is going to have an influence on the entire energy sector in Europe. Right now it is very hard, not just for you, but also for us, because we simply, you know, we can simulate different levels, but we cannot really say what the level is going to be. If I remember correctly, you also mentioned, you know, sort of like in one of your questions, sort of like, you know, what our preparation for the volatility is in terms of margin payments. There we have been very conservative. You might remember from our last conference call, I mentioned that we have started very early to increase our liquidity cushion.
We've already started at the middle of 2021, so really early, to increase our liquidity quite dramatically. We have then continued in fall of 2021, fall of last year, again. We have gone up step by step and I can assure you that we have ample liquidity reserves even for a very, very big increase in electricity prices for margin calls.
Thank you very much, Peter, for all the answers.
You're welcome, Wanda.
Next question is from the line of Ekaterina Haigh with Bank of America. Please go ahead.
Yes, good morning. Thank you very much for the presentation. I have a couple of questions. The first one is if I may, follow up on the power price caps, you know, what you just mentioned, basically, you know, all contracts being affected. Do I understand correctly that, I mean?
Yeah.
Just looking at your Q3 hedged price, obviously the incremental volumes between Q2 and Q3, they came at a much higher price than the, you know, current data point we have, which is 180. Do I understand correctly that these contracts for 2023 will be affected by the cap too? Is this your current expectation?
A related, you know, follow-up with respect to, you know, power price caps, how should we think about, you know, the special dividend that you know, plan to pay for 2022, like next year, you know, if a lower power price cap is introduced in Austria, is there a risk of the special dividend being, you know, canceled and not approved by the board by the shareholders? The second question I had was on your CapEx profile. I as far as I see, it remained, you know, sort of unchanged related to Q2 guidance.
Is there a reason why you have not included, you know, potential extra CapEx for development of the, you know, sort of the renewable pipeline you have acquired year to date? When do you plan to adjust your, you know, planned investments for that? Thank you.
Okay. Quite a few. But again, all important and highly relevant given, you know, all the discussions which we're having in the European energy sector. First of all, on the revenue caps. Now, we. You know, as I mentioned before, we don't have any details. The understanding is that right now, the windfall tax would run, you know, despite what we're hearing from Germany, that it would be running from the beginning of December until the middle of 2023. There is a discussion that, you know, if the situation continues, there could be the entire year 2023 that would be included. That is a discussion. That is not something that we are currently assuming.
Right now, it's basically from the beginning of December until the end of June 2023. What would be included? Now, depending on where the cap is going to be set, it would basically be the sales of electricity for the year 2023, either sales that are done on a spot basis, but also sales that would be done on a hedging basis. Short-term hedges that are for electricity production in 2023, if they were above the cap, they would be included. Hedging that would be entered for 2024, and I mentioned before that we already hedged around 31% for 2024. Obviously, that would not be included because it is electricity generation of the year 2024, which we are now selling forward as part of our hedging strategy.
That would not be included. We are still waiting for details. It's going to be interesting how exactly that is going to be defined, but that is my current understanding. In terms of the special dividend, we have a very strong confirmation. Well, I shouldn't say confirmation. We have a very good understanding that from the Republic of Austria that the special dividend will be accounted for, i.e., the special dividend will not come on top of a revenue cap, as far as 2022 is concerned, but will basically be taken into consideration, which is perfectly logical.
Because when we decided that we're going to pay an extra dividend, special dividend of EUR 400 million, we did it exactly as a response to the additional profitability which we have had, yeah. That is something that obviously would be decided when the Republic of Austria and the Ministry of Finance decide how the revenue caps are going to be designed, yeah. Therefore we currently assume that we're going to pay the special dividend of EUR 400 million, yeah. That is our current assumption. You know, you know I said that obviously it depends on the AGM, and it depends on the supervisory board, that is the current plan of the supervisory board to pay the dividend of EUR 400 billion. That's point number one.
Point number two is that it is our understanding that the EUR 400 million special dividend will be taken into consideration when sort of like whatever future measures are going to be designed. In terms of the CapEx profile for the next three years will be announced when we have our conference call for the year 2022. For the full year results 2022. Then we're going to give the new CapEx plans. As you know, we have a very low debt level. We have ample capacity in terms of investments. As a result of that, as per today, we don't see any changes in our CapEx plans going forward. Does that answer your questions?
Yeah. That's quite detailed. Thank you so much. Just a small follow-up on the dividends. You know, with respect to you having an understanding that this will be, you know, dividends will be accounted for when the Republic of Austria is, you know, taking a decision in terms of the power price caps. This is with respect to 2022. Do I understand correctly? I mean, like-
Only 22.
Yeah.
This is only with respect to 2022, and no decision has been made. This is just an understanding, and this has been, you know, made public, you know, by statements which have been made that the, you know, the EUR 400 million special dividend is being seen as a very positive move by VERBUND. As you know, we were very early with the announcement of the special dividend, and there has been several comments by the Ministry of Finance with regards to the special dividend. However, very important special dividend is 2022. Yeah, it has nothing to do. It will be paid out in 2023, but that only covers 2022.
It has nothing to do with any potential revenue caps or potential windfall taxes for 2023.
Yeah. Understood. Thank you so much for that.
You're welcome.
Next question is from the line, Olly Jeffery with Deutsche Bank. Please go ahead.
Thanks very much. Two questions from me, please. The first one is a kind of follow-up on the discussion we were just having. The hedge prices in 2023 and 2024 for the hydro volumes are, you know, EUR 177/MWh and EUR 131/MWh respectively.
Yeah.
If you price cap 180, it's obviously below that. When you look in Q3, and I guess this is the follow-up, in Q3 just gone, the implied hedge price for 2023 and 2024 for the additional volumes was EUR 520/MWh and EUR 370/MWh, I believe. I just want to get to your understanding here. If the price caps at 180, if that's based on a yearly average, you know, 2023, average price of 177, you'd be able to keep all of that perhaps. If it's based on a quarterly profile or, you know, shorter time period, you might not be able to keep all of that.
Do you have a view on in your working assumption, is it based on, do you think the price cap will be based on average year prices or will it be done, you know, monthly or quarterly perhaps? That's the first question. The second one is just going back to the read across from Germany. You mentioned price levels there of EUR 100-EUR 120 per megawatt hour. Is that where you see, you know, you believe the price cap for hydro in Germany might come out? Do you think it'll be quite politically difficult for Austria to have a price cap for hydro that's higher than what Germany has? Because it would seem optically a bit of a tricky thing to do. Thank you.
Yeah, I can't really speculate, neither on sort of like, you know, what the result in Germany is going to be. You know, I'm basically reading the same information you're reading. The only thing I know is that there are obviously, you know, big discussions. There has been an article this morning in the Handelsblatt, which, you know, some of you might have read where there's a very strong criticism, particularly with regards to the retroactivity of the revenue cap. You know, people are basically saying that, you know, that is something that should not be implemented. That just shows you that there is still a lot of uncertainty in terms of the structure.
Now when we talk about Austria, in Austria, everything will be analyzed. You know, what is happening around Austria will have an indirect impact because, you know, when Germany comes up with a specific number on caps on technologies, obviously it will enter the political discussion in Austria. That is unavoidable. What the result of that political discussion is going to be and what is at the end of the day decided, it can be very different from Germany, but it can be similar to Germany. That is completely open. I would like to give you a more precise answer, but there we don't have any details whatsoever.
Furthermore, on exactly how the revenue cap is going to be calculated, we also have no specific details. In Austria, they haven't even, you know, talked about the revenue cap yet, so we're still using EUR 180 because that is the only data point we have. You know, if there were a lower revenue cap and the way that revenue cap would be calculated, we don't know. Yeah. Did you have an additional question on that?
Well, just did you have a view on if you think the revenue cap will be applied on a yearly basis or if it might be applied on a quarterly basis? Because that would impact-
Yeah.
your, how you've hedged and the potential impact on yourself.
Yeah. Well, you know, our hedging, we have a very specific hedging strategy, and right now we can't really see how revenue cap would, you know, specifically impact our hedging strategy. Yeah, if the calculation would be on a quarterly basis or if it would be on an annual basis, that is something, again, that has not been decided yet. I don't even think that it has entered any public discussion yet in terms of, you know, that kind of granularity, how it's going to be calculated.
Okay. Thank you very much.
Next question is from the line of Ingo Becker with Kepler. Please go ahead.
Yes. Good morning, thanks. Also the question on this price cap, and I think, Peter, you just indicated that apparently there's some uncertainty around it. I was just wondering on your views or the assumptions you made for the last quarter of the year. When we look at the base peak load price spreads in the market, it's not just that prices are on unprecedented levels, but also the peak load spread over base load is at record levels. I would have two questions. First, what is your view on the structural spread here, on a market basis? How would you see that?
Secondly, how do you think, or how do you assume, at least in your guidance, how that share of peak load sales that you are having is here treated under a cap, this EUR 180? In other words, do you assume that's a base load cap or is that a total blended average achieved price cap, i.e., how is peak load treated here in your view? Thanks, Steve.
Yeah, Ingo, that is a very good question, and I can't really give you a good answer. On the structural spreads, you have probably seen that the base peak delta has moved dramatically over the year. It has been, you know, over the last five years, it has been relatively stable. Recently it has moved quite dramatically. That is something, you know, only ex post facto analysis where you have all the data and where you have all the information on demand and supply that you could really assess, you know, where the volatility is exactly coming from.
I mean, the one thing that is certain is that we had a lot of, you know, changes in net transfer capacity across borders, and France, Germany being one border that has been impacted significantly and that we have a European system that is a very, very complex algorithm that at the end of the day needs to be assessed in order to answer your question. I'm not trying to avoid it, but it is simply very difficult to answer. In terms of the revenue cap, the understanding and there is, again, no detail and I need to be very careful.
The understanding is that it is a cap that covers mainly base load. Yeah. It's an understanding. However, there is a school of thought that is basically saying that any revenue caps, you know, should basically not make a differentiation between base load and peak load, but it should basically just, you know, just take into consideration what has been sold, what volume has been sold at what price. Yeah. Then you basically take the new price, you know, the cap price, and then you basically calculate, you know, what the windfall tax would be. There it would be totally irrelevant if that would come from a base load product or from a peak load product.
Because if you made a differentiation between the two, it would make it very difficult, you know, to calculate the tax. I think it's already pretty complicated to calculate. The regulator or the tax authority does very much depend on the proper way the companies do their revenue calculations, because they have to rely on that piece of information. If you then separate the base load from peak load, it would add an additional complexity.
The one thing that is going to be excluded, and again, there has been no confirmation, but that has also been, you know, in the papers that have come out, recently in Germany, and that is also in accordance with what the EU has said, is the pumped storage. Because the pumped storage obviously, you know, has a very important function for the stability of the energy system as a result of that. You know, people, decision-makers seem to have decided that it should be excluded. I know that is not a fully satisfactory answer, but it's, you know, it's anything that can be said at the time.
Can I maybe add just one more question to this? If you know, the way the discussions are progressing and one is wondering, I mean, this only sounds easy in theory, right? In practice, really implementing those technologies, specific price caps in an interconnected market with lots of cross-border trading where you might or not want to have a different rule country by country. It seems to become one way or another utterly complex, the government being very dependent on the data that you or others are submitting, then you will most likely have the sense on how this data is to be interpreted and it's used in the calculation.
It seems to be a sense in view of the outcome, mirroring the outcome of a fully regulated regime, which seemingly also the EU isn't really planning to do, but keeping the way the market works and putting something on top that regulates the profit outcome.
Isn't it simpler, and I'm interested in what you hear and what you see, how the political arena thinks about that, to just handle it via the general corporate tax rate, which is based on an established system of working out the profit, and if that profit is seen too high, you can just easily, like the UK does for oil and gas upstream, for example, and something similar has been suggested by the EU for oil and gas producers, handle the whole thing via the established tax system rather than kind of in an in-between way, trying to tap into very technology and market-specific profit outcomes that are most likely going to be very tricky to agree on from both sides. Just wondering what your view is on that.
Yeah. Well, my view on everything basically is, you know, keep it simple. Because if you don't keep it simple, it can get very messy. You know, what I have said at the outset, and you might remember already sort of like, you know, conference calls we had nine months ago, you know, I basically argued for a synchronized, harmonized way to deal with the issue of high power prices across the EU. You're right that anything where you have a national measure and then at the same time you have a European energy market, it makes it very complicated. Now, at the moment, they are trying to avoid the complexity of changing the merit order.
The merit order remains the same, which basically means that the entire way the system, the algorithms work across Europe, with all the border capacities and the market coupling, the capacity calculations and the flow-based market coupling. The way, you know, the system, the energy system operates, that has not been changed at all because they didn't want to do that. They're right not to do it because it would have created a monster. That does not exclude that medium term, you know, the merit order could have, you know, could be changed.
In fact, I think there's a relatively high probability that medium term something will be done as far as the merit order is concerned. There will be, you know, there will be enough time to do it properly and to do it in a fully synchronized European way. In terms of the measures, the national measures, at the moment, because of the uncertainty, they sound very complex. You're right, they completely rely on the data which is going to be furnished by the companies. I think that the data that will be delivered will be correct.
The important thing is that, the governments need to be very specific and detailed, how they want to calculate the revenue cap. Because if they're not very precise and it's not very detailed, the companies are going to, you know, to have a gray area, and in that gray area, calculations are going to be different. That is a conditio sine qua non. They need to be highly detailed. Then the companies know exactly what they need to do, and then they will deliver the data, and then they will deliver, and then, you know, whatever payment needs to be made, to the government, will be evaluated.
Your point about the more money you make, the higher the tax rate, sort of like, you know, like the same way your income tax is applied, but in terms of corporates. You know, I've looked into it. I think it's an interesting concept. It is obviously easier. I haven't thought it through completely, you know, if there are sort of like weaknesses in the concept. You're right, it is simpler. I think the reason why they didn't want to do it is they wanted, you know, and this is the discussion which we're seeing in Germany right now. They wanted to make a difference between the different technologies.
They basically wanted to say, "Look, you know, we fully understand that, you know, different technologies have different production costs. As a result of that, you know, we are aware of the fact that you need to make a profit, according to your production cost, and we're well aware of the fact that you need to make future investments," because that's what they all want, for us to invest into renewables, into the grid, et cetera. They don't want to curb any investments, but they basically want to find sort of like the golden middle of, you know, taxing the windfall profits, making sure that the investments go into the energy system, i.e. that there are no reductions in CapEx.
At the same time, they want to be seen to be fair, as far as the different technologies are concerned. That is not easy. I'm, you know, very curious how that is going to be resolved. You know, you asked me for my personal opinion. I personally think that the progressive tax rate is not going to be applied. I think it's going to be something, you know, that has come out of this paper two days ago. This I don't know if it was leaked or how it came out, but I think that is already a pretty good idea what it's going to look like, for 2023, or for the first six months of 2023.
Thanks so much.
Next question is from the line of Piotr Dzieciolowski with Citi. Please go ahead.
Hi. Good morning, everybody. I think there's plenty of questions asked about this skimming of profits, and I have a couple of other questions. I wanted to ask you, in your experience, the fact that we have such a poor hydro situation, does it have any read-across for the next year? This is basically up to a winter and how much snow we get and, you know, in the past, has there been any years where we had a very bad hydro and the next year there was a follow-up because there wasn't enough of the hydro in storage and so on. That would be the first question.
I wanted to also ask you, where do you expect your net debt at the year-end, and at what point you could collect some of these variation margins that you've been paying over the last couple of quarters? There was clearly a big mismatch between the operating cash flow and your EBITDA, and I thought that at some point that should change, and we should see improvement. Finally, thirdly, I wanted to ask you about your this negative valuation of hedging transaction that impacted the sales segment, supply segment. What is it about these hedges? What actually happened there? 'Cause none of the other components really are forced to record such losses due to the hedges. What have you done differently or why is it treated differently than in case of the others?
Yeah. I'm going to share the answer with Andreas here. I'll make a general comment on hydro because I think it's, you know, it is important. It has something to do with, obviously, with the weather. The interesting thing is that you know, we're looking at 100 years. We're looking at the data over the last 100 years. The surprising thing is that it is very difficult to predict. It is also a case where one year has no influence on the next year. Even if one year is particularly wet, it doesn't mean that, you know, the next year could not be particularly dry.
The only thing, you know, if I heard you correctly, you were insinuating that. The only thing is that when you have a lot of snowfall in the mountains, then of course you have in spring when the snow melts, then you have more water, obviously, not just going into, you know, into the alpine storages, but you also have more water in the rivers. When you have very little snowfall, that is not such a good start to the year. When you have a lot of snowfall, that is already a good basis. Yeah. Only for the melting in spring.
Again, that is just an indication because, you know, we had situations where we had relatively little snowfall, but then we had so much rain in a year that again, you know, the hydro coefficient was relatively strong despite the fact that it was not a great winter. The answer which I can give you is that our long-term average, which is basically the calculation for our hydro coefficient of one, is a 100-year average. That is also the reason why for our budgeting and even now for the rest of the year calculation, we always use the one. Yeah. That is on the hydro situation. For the others, I will hand over to Andreas.
Yeah. Piotr, with regard to net debt, as we showed, net debt figure currently is at around EUR 4.5 billion. It consists, I think more than EUR 1.5 billion of short-term credit lines. Of course, we cannot forecast, let's say, prices. If we take the current price levels as the basis, also for, let's say, the fourth quarter or the end of the fourth quarter, we could assume that the net debt figure could come down by between EUR 500 million and EUR 1 billion. If prices stay where they are, we would expect based on cash flow generation and also the, let's say, reduction of margin costs that, we can reduce net debt by around EUR 500 million to EUR 1 billion. Yeah.
That's the current expectation. With regard to the Sales segment, as you know, there is a negative impact, valuation impact. Without this negative valuation impact, the EBITDA in the Sales segment would have been positive with around EUR 90 million, which is a normal figure. The reason why we have this negative valuation effects in the P&L is because, as I said, we have here specific electricity products which cannot be classified as cash flow hedges. These products especially relate to the hedging of the pumped storage volumes and also, let's say, the monthly hedges, which cannot be classified as cash flow hedges. As a consequence, they do not go through the balance sheet, but these volumes go through the P&L.
That's the reason for the negative development in the Sales segment.
Okay. Maybe last follow-up, 'cause I think you said you include or embedded within your guidance at December negative skimming effect of the power prices. Can you say what did you assume in terms of either pricing or absolute euro amount?
It is not a big amount. Nevertheless, it's around EUR 30 million. The EUR 30 million, the biggest part is not coming from the Austrian, let's say, price cap. It's coming from the Romanian price cap, where we have currently, as a data point, let's say, 90 EUR per megawatt hour as a price cap. Here we have the impact, the negative impact, on our wind power plants in Romania. Then there is the, let's say a small amount is based on, let's say, the comparison between the current, the potential planned market cap of 180 EUR per megawatt hour compared to the hedging we did for the month of December.
It's only a small amount here in Austria, yeah.
Okay. Understood. Thank you very much.
You're welcome.
Next question is a follow-up question from Olly Jeffery with Deutsche Bank. Please go ahead.
Thank you. Apologize if you answered this. My line's cutting out. Just on hydro for the quarter so far, did you say how the hydro had been performing, already? If not, could you update on that, please?
Yeah. We have mentioned that for the three quarters, we were 16% below. We were at 0.84 in terms of our hydro coefficient. For the rest of the year, the number would be, you know, for the rest of the year, we are at, as I mentioned before, we calculate with 1, and that would give you approximately 0.87. Yeah. Approximately.
Is it too early to say how October has performed?
October would be. We don't have the details, the detailed numbers. If you take for the entire year, 0.87, 0.88, you know, that would basically be a fair assumption. We don't know what the end of the year is going to be because as I mentioned, you know, this, we always use the one because we don't know if there is going to be strong rainfall in, you know, November and December.
Okay. Thank you. Yeah.
There are no further questions at this time. I would like to hand back to Peter Kollmann for closing comments.
Yes. Well, thank you very much for today's very large participation in our conference call. You know, I fully understand that, given the uncertainty in the market, on any future European regulation, there has been big discussion on this point. That is clearly in addition to the volatility which we have in the energy markets, that is an additional uncertainty. I would like to thank you for your questions. I would like to thank you for the discussion, and I look forward to either seeing you or hearing you, soon. Thank you very much, and have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you very much for joining. You may now disconnect.