Dear ladies and gentlemen, welcome to the conference call of VERBUND AG. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties during the conference, please press star key followed by the zero on your telephone for an operator assistant. May I now hand you over to Peter Kollmann and Andreas Wollein, who will lead you through this conference. Please go ahead.
Thank you. Ladies and gentlemen, let me welcome you to our presentation for the first quarter, and let me thank you for joining today's conference call. Before we move into the analysis of our business development, let me make a few general comments. As early as 2021, as you know, there was a massive increase in primary energy prices on the international procurement markets. This development was exacerbated by the outbreak of the war in Ukraine and the tight supply and low storage levels in Europe and high demand were particularly noticeable in gas price developments. The uncertainty caused by the geopolitical conflict in Eastern Europe regarding gas supplies contributed to a further rise in gas prices and high volatility for all commodities on the energy market.
As a result of the sharp rise in world market prices for primary energy sources and the high cost of CO2 allowances, European wholesale electricity prices increased and had, as you will see, a big impact on our earnings. Against the background of geopolitical challenges, the pressure is growing in Europe to phase out fossil fuels and move away from energy imports, particularly from Russia. An increased expansion of renewable energies as well as an increased expansion of grids and storage facilities is necessary in order to achieve this. You know our business model very well, and you know that we can make a valuable contribution in this context, thus, we will continue to invest massively in the expansion of our grids and power plants in the coming years. Now let's move on to the details.
At the beginning, as always, I would like to highlight the most important influencing factors for the results. Based on our hedging strategy for our own electricity generation, the average achieved contract price increased by EUR 66 to EUR 113.8 in the first quarter, 2022 compared to the first quarter, 2021. The hydro coefficient, which determines the generations on our run-of-river hydropower plants, was 6 percentage points below the long-term average and 5 percentage points below the first quarter, 2021. Production from our hydro reservoirs, on the other hand, was higher compared to last year. Contributions from flexibility products increased in all categories, especially control energy and pumping, in total by close to 160% compared to last year. There was also a positive contribution from the full consolidation of Gas Connect Austria.
Finally, we had a positive non-recurring effect amounting to EUR 56.6 million. This effect results from the revaluation of deferred taxes due to the reduction of the corporate income tax in Austria as part of the so-called Eco-Social Tax Reform Act. Now, the impact of these influencing factors on the key figures of VERBUND in the first quarter 2022 is as follows: EBITDA strongly increased by 170% to EUR 815 million, and the reported group results increased by 255% to EUR 515 million. The adjusted group results increased by 220% to EUR 464 million. The operating cash flow increased to a level of EUR 209 million. The free cash flow after dividends was negative at a level of EUR -105 million.
Net debt increased by 5.3% to a level of EUR 3.7 billion. VERBUND expects for 2022 a reported and Adjusted EBITDA between approximately EUR 2.8 billion-EUR 3.5 billion, and a reported group result between approximately EUR 1.55 billion-EUR 2 billion based on average generation from hydro, wind, and PV, as well as the current risk situation of the group. The payout ratio will be between 45% and 55% of the adjusted group results between approximately EUR 1.5 billion-EUR 1.95 billion. The guidance for flexibility products is approximately EUR 190 million. As you know, our old guidance was approximately EUR 130 million. The reasons for the increase are improvements in all areas, especially high returns from pumping due to higher spreads.
On the next page, you see our hedging volumes for 2022. We achieved an average achieved contract price for our hydro generation of EUR 95.4, EUR 94.1 for 2023, and EUR 97.8 per megawatt hour for 2024. Please note that we had already hedged approximately 78% of the volumes for 2022, 36% of the volumes for 2023, and approximately 21% for 2024 as of the end of the first quarter. On a mark-to-market basis as of the end of April 2022, we calculate with a price of EUR 125.7 for 2022, EUR 157.4 for 2023, and EUR 156.9 for 2024. You know, EUR 1 ± in the power price has a sensitivity of approximately EUR 25 million in our EBITDA line.
Going through the various segments, I'm starting with our most important segments, hydro. At 0.94, the so-called hydro coefficient, which you know is an index quantifying the hydropower generation of the run-of-river power plants, was 6 percentage points below the long-term average and 5 percentage points below the level of the first quarter 2021. The production from our pumped-storage power plants increased by 15%, mainly due to higher turbining. Own production from hydropower, therefore overall decreased slightly by 47 GWh or -0.8%. Higher average achieved prices and an increase in the contribution from flexibility products compensated the reduction in volumes. I should say, overcompensated the reduction in volumes, because the EBITDA in the hydro segment increased by 193.5% to EUR 515 million.
Our main projects, the 480 MW Limberg 3 pumped-storage power plant, and the 45 MW Reißeck II+ pumped-storage power plant projects are both on time. On the next page, we talk about the new renewables segments. The new renewables coefficient, which, similar to hydro, is an index quantifying the generation from wind power and photovoltaics, amounted to 1.06 in the first quarter compared to 0.86 in the first quarter 2021. Generation from wind power increased by 24% or 61 GWh and amounted to a total of 314 GWh in the first quarter 2022. More favorable wind conditions in all markets in Austria, Germany and Romania were the reasons for this development. Generation from PV amounted to 0.7 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 80% to an EBITDA amounting to EUR 24.2 million. In addition to higher volumes, higher average achieved prices were the reasons for the EBITDA development. Now on the next page, you see our sales segment. Now taking a look at the EBITDA development here, we see that EBITDA increased by 29% to EUR 37.5 million. The improvement results from a better result from the valuation of energy derivatives and higher contributions from flexibility products. While higher procurement prices for electricity and gas for end customers had negative impact. VERBUND delivered electricity and gas to approximately 533,000 end customers in the first quarter 2022, which represents an increase of approximately 3%.
On the next page, I continue with all other segments. The generation from thermal power plants was up by 557 GWh to 688 GWh due to the market-driven use of one line of the CCGT Mellach for electricity and district heating. Higher volumes and higher spreads contributed positively to our EBITDA development here. The second line of Mellach was contracted by APG for congestion management. The contribution from flexibility products decreased by EUR 8.8 million. Contributions from KELAG, the provincial utility of Carinthia, to the financial result amounted to EUR -8.8 million due to a lower hydro situation and non-recurring effects. Finally, let me remind you that the Mellach CCGT was contracted from Austrian Power Grid for future congestion management, starting with 1st October , 2021.
In detail, line 10 is contracted from the 1st October 2021 to the 30th September 2023, and the line 20, second line, from the first of April 2022 to the thirtieth September 2022. In the first quarter and in the fourth quarter, we can use line 20 on a market-driven basis. As you can see, we have a combination of market-driven use and the quasi-regulated business as part of our concession management. The district heating power plant Mellach was not contracted by APG and is therefore mothballed as of the first of October 2021. On the next page, we come to our Grid segment. As you know, the Grid segment consists of our regulated business, Austrian Power Grid, as well as Gas Connect Austria. First, the contribution from APG.
As you know, there is a difference between local GAAP and IFRS. Unfortunately, makes the reporting more complicated, on the IFRS. In contrast to the local GAAP, volatilities in the results contribution cannot be avoided because the so-called regulatory account cannot be applied. That is something we are working on with the IASB, and we hope that within the next two, maximum three years, we get an adjustment here, and we can introduce a regulatory account into IFRS as well. The EBITDA for the first quarter 2022 from the Grid business according to IFRS was approximately EUR 137 million. The EBITDA guidance for the electricity grid is only, EUR 75 million . Now, the reasons for this are the following.
With regard to concession management, there has been only very low costs for the Austrian control area in the first quarter 2022. Currently, we are seeing very high prices and the months with the highest demand for concession management that are still to come. Also with regard to auctions, we had very high revenues in the first quarter 2022, particularly due to the increased price spreads at the borders, especially with Germany. This year, however, the auction mechanism will be changed. The entry into force of the new regulations and the future bidding behavior is currently very difficult to estimate, but a significant reduction in revenues compared to current and past auction revenues is to be expected. In addition, the clawbacks of the regulator to reduce the regulatory account will have a negative impact.
Therefore, that delta between the relatively high first quarter and the overall guidance for the entire year. 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. The transport capacity required for domestic natural gas demand is included in that. The company plays a pivotal role in the supply of natural gas in Austria and Europe. The natural gas is transported to the Austrian federal states, but also Germany, France, Slovenia, Croatia and Hungary. With regard to the results contribution of Gas Connect Austria, we only report January to March 2022, amounting to approximately EUR 28 million.
Please note that we do not provide values from last year, as we did not own the asset by then. The guidance for 2022 with regards to Gas Connect Austria is approximately EUR 100 million under IFRS. This guidance relates to the full year 2022. With that, I would like to hand over to Andreas Wollein. Please, Andreas.
Yeah. Thank you, Peter. Let me quickly go into the key financial figures and the development. I'm starting on page 10. Let me start first with the EBITDA development. EBITDA increased by EUR 512 million to EUR 815 million. This increase is mainly attributable to an increase in all segments. The Hydro segment was up by EUR 340 million, mainly caused by higher average achieved prices and an increase in the contribution from the flexibility products. The new Renewables segment was also up in total by around EUR 11 million due to more favorable wind conditions.
The Grid segment was up as well by around EUR 84 million due to higher contributions from auctions and higher national grid usage revenues, and also all other segments were higher by about EUR 72 million because of higher volumes and higher spreads in the thermal segment. Depreciation increased by around 15% to EUR 110 million. The main reason for this development is the acquisition of Gas Connect Austria last year, and of course, increased investments, mainly into the high voltage grid APG. The financial result was weaker or slightly weaker by around EUR 1 million. This was mainly attributable to lower earnings contributions from the interest accounted for using the equity method, mainly KELAG. The reasons were, I think, described already before.
Taxes on income were influenced by a positive non-recurring effect amounting to around EUR 57 million. This was already explained by Peter Kollmann. The group results therefore increased by around EUR 370 million or 255% to EUR 540 million. The group results after adjustment for non-recurring effects was up by 220%. When we move on to page 11 and we go to the operating cash flow development. The operating cash flow in the first quarter was slightly increased. It showed an increase by 2.7%, mainly due to the higher average spot contract prices for electricity and the higher operating cash flow from the Grid segment. Higher tax payments and increased margining payments for energy derivatives have had a balancing effect.
Excluding the margining effects, in the operating cash flow would have been around a EUR 500 million effect. The operating cash flow would have been higher by EUR 500 million. The free cash flow showed a decrease from EUR 35 million to a level of EUR -105 million, caused mainly by the increased investment activity, and the net debt figure slightly increased to around EUR 3.7 billion. Again, here, this figure was heavily influenced by the margining requirements for the trading business. Moving on to slide 12, a few words about the development of financial liabilities. I think it's worth mentioning that we have, in this market environment, sufficient access to liquidity, to all kinds of different credit lines.
As a liquidity backup, VERBUND has a EUR 500 million syndicated loan facility, which is undrawn and has no maturities. We have also access to a number of committed and uncommitted lines in total of around EUR 3 billion. The total amount of our financial liability is approximately EUR 2.8 billion. The increase is mainly caused by the issuance of a green bond, the acquisition of Gas Connect Austria, and the high amount of short-term money market liabilities due to higher margining requirements. The average interest rate on our debt is approximately 1.7%, around 46% of our debt is subject to fixed interest conditions.
The rating of VERBUND is unchanged, so we have a rating, let's say of senior stable outlook, Moody's and S&P stable outlook, and stable and boost. Now let me hand over to Pete again, for giving you the outlook.
Thank you, Andreas. Now, at the end of our results presentation, we always give you our sensitivities. A deviation of ±1% in the generation from hydropower has an impact of EUR ± 28.6 million in our group results. A deviation of ±1% in the generation from wind power has an impact of EUR ± 0.8 million, and a deviation of EUR ± 1 in the wholesale price has an impact of EUR ± 3.5 million in the group results. Now, on the basis of the aforementioned developments, our guidance for 2022 is the following.
We expect a reported and adjusted EBITDA of approximately between EUR 2.8 billion and EUR 3.5 billion, and reported group results of between EUR 1.55 billion and EUR 2 billion under the assumption of average hydro, average wind and PV generation, in the remaining quarters, as well, of course, as the overall risk situation of the group. For the financial year 2022, VERBUND plans to pay out between 45% and 65% of our adjusted group results, and that would be between EUR 1.5 billion - EUR 1.95 billion. Now, with that, we have come to the end of our presentation, and I would like to hand over to you for Q&A.
Thank you. We will now begin our question and answer session. If you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question has been put before your turn to speak, you can dial zero and two to cancel your question.
If you're using speaker equipment today, please lift a hand before making your selection. One moment please, for the first question. The first question is from Wanda Serwinowska of Credit Suisse. The line is now open for you.
Hi, good morning. It's Wanda Serwinowska from Credit Suisse. Two questions for me. The first one is on the potential political intervention in Austria. Which options apart from the levy on profit taxes or special dividend are being discussed? And what is the most likely outcome in your view? And do you consider a new basically market model where power price will be based on the kind of return on the asset value? And the second question is on all the other sectors EBITDA. I struggle a bit to reconcile a EUR 70 million increase in EBITDA in Q1, because even if I take 800 MW of Mellach, I would need to run a 40% load factor to get to 0.7.
I would need to take EUR 100 per megawatt hour spread, basically to justify EUR 70 million increase. When I look at Reuters on the spread, on the market spread, it's all negative. My question is, what I'm missing, if you could explain and a very, very quick request, would you be able to disclose the latest hedging and hydro situation? Thanks a lot.
Let me just summarize. We have the question windfall taxes and dividends. We have a question on market model. We have an update on the hedging. Then you had a detailed question in terms of load factors, et cetera, et cetera. Now, Andreas will look into the EBITDA question that was very specific. In the meantime, I will cover the other three. Now let me start with the windfall taxes. At this point in time, we have no specific information which I could share with you. The reason for that is the Ministry of Finance is currently looking at a lot of different proposals.
They're looking at a lot of different ways to look at the sector and potential taxation. As you know, there are many countries within the EU that have basically applied different methodologies. We have the Spanish situation with the EUR 50. We have the French situation with the retail prices. We have again a different methodology in Italy, in Romania, in Greece. As a result of that, among that relatively wide optionality of potential measures, we don't know which one is going to apply by the Republic of Austria to the sector.
Furthermore, because you also asked about the dividend, we have no specific information that there would be a request for an extra VERBUND dividend to be paid. In terms of the market model, I'm not surprised that you are bringing it up. That is a big discussion around Europe. You all might remember that it was first brought up by the Spanish government, and that was already in fall of last year. They were basically arguing that why should a very high gas price determine the price for production technologies which are much lower. As a result of that, with the increase of renewables, people are asking the question, should we change the merit order system?
Which is a system that has obviously come from a centralized system, which has relatively similar production costs and which was much more predictable. Should we still apply that to the new world where we are in the midst of an energy transformation? Now, ACER recently has come up with a response. That response, obviously, the recommendations, this is something that would then be looked at by the national governments, by the regulators, by the national regulators, and of course by the EU Commission. ACER has basically said, "Let's stick to the existing merit order as it gives an incentive to the development also of renewable energies.
At the same time, we should not be distracted by a very high gas price, which is the result of a war, of an extraordinary situation, that should not influence the medium to long-term system that is derived from the merit order system. They also said there should be other measures, which make the market more liquid, which make the market more predictable and which overall should lead to lower energy prices. I cannot add a lot more to that. I can give you my personal opinion.
I think that, you know, with the ACER contribution, but at the same time with some national governments, particularly the French and the Spanish, believing that the merit order should change, I think that discussion is going to stay with us. I think it is, on the one hand it can be, a political discussion. On the other hand, it needs to be a highly technical discussion, and that is something that is going to be very interesting to follow over the next few years. In terms of the hedging levels, yes, I can actually give you up-to-date numbers in terms of where we stand today. The numbers which I have given in my presentation obviously were the first quarter numbers. For today we are 80% hedged for 2022.
We are 45% hedged for 2023, and we are 28% hedged for 2024. We have hedged 2022, i.e., the 80% at a level of EUR 99, the 45% for 2023 at a level of EUR 93 and 2024, i.e., the 28% which we have already hedged, at EUR 89. Obviously, you know, you can then put in the current market, which is highly volatile and is changing all the time in what is derived in mark-to-market. Obviously the mark-to-market, if we take current very high power prices for 2022, 2023 and 2024, would be significantly higher than the power prices which we have hedged.
Now I hand over to Andreas, who can now give you the detail of the question you have asked.
One of two additional questions. The first one with regard to the hydro levels. As we said, the hydro situation is weak, continued to be weak, now also in April and so far in May. We have a hydro coefficient of 0.94 for Q1. We have now a hydro level of around year to date of around 0.90. It's about 10% below the long-term average. With regard to your next question, for this thermal segment. I think the solid result in the thermal segment can be attributed to the spreads in the market. As we said, we have a different way of operating Mellach.
One line is operated constantly over the year in the so-called capacity reserve. The second line is operated in the market against the market in Q4 and Q1. In the winter quarter basically one line is operated against the market. The decision to operate the market-driven line is made on a daily basis. One day before operation we decide if we operate this asset or not. It's purely driven by a margin. It's a margin decision. Based on that, I would say roughly half of the EUR 70 million coming from as the increase. Around half of that is coming from running the power plant in against the market.
Half of the additional income is coming from district heating, yeah, which also has a significant impact. Congestion management for Q1 played only a minor role. Yeah. This is the answer I can give you.
Thank you very much. Very, very quick, two follow-ups. The first one is do we have any timeline on the political intervention in Austria? When should we hear any update? And Peter, the second question to you on your personal view, I do appreciate that you share your views on the market. Do you believe that it's possible to implement any cap like in Spain or Austria, given all the interconnection? Because if the power price in Austria is capped, everybody will be happy to buy cheap power from Austria.
Yeah, that's a very good point. I think those are exactly the kind of considerations which the Republic of Austria needs to think about. That is exactly why, you know, at the outset I said, there is no panacea. There is no quick solution. I think it requires a very, very careful consideration in terms of the impact on the energy sector, the impact on a lot of other areas, including import and export. You're right to say that we are the country in the middle of Europe.
We have seven neighbors, and we have, you know, a delta between the power prices in Austria and literally all our neighbors. Given the different net transfer capacities, and there needs to be very careful analysis. Now, I cannot comment any further on that, not because I don't want to, but because I think the chancellor, Mr. Nehammer, he has basically said that he is going to give the specific question to the Ministry of Finance and the Ministry of Energy, and that he's basically asking them within the framework, what is possible within the EU, looking at a lot of different possibilities, and we cannot make any judgment at this point in time of what the result would be.
There is no timeline?
We have no specific timeline at this point in time. If there were one, we would obviously communicate with the market. You have to take into consideration that, you know, we are talking about the entire sector here. We're not talking about VERBUND specifically. I mean, we're obviously by far the largest utility in Austria, but there are many other energy companies within the sector that would then be impacted as well.
Thank you very much.
The next question is by Ludo Schumacher of Raymond James. The line is now open for you.
Good morning, good afternoon. A number of questions from my side as well. The first one, I apologize, is going back to the idea of a windfall tax, although I appreciate that you probably can't say much more about it. What has changed? I mean, in all previous meetings we had, you mentioned that there's actually nothing like this on the horizon. There was no debate in Austria. Austria is looking across the border in Germany, where there is still no debate. Did this come completely out of the blue, or was there suddenly some kind of debate of these windfall profits or the burden on end customers? Just if you can share with us your idea where this might have come from.
It sounds to me, maybe you can confirm this, that you're not involved in this discussion of possible intervention at all, which would seem to be hopefully just effect of early days, but bearing in mind the damage that can be done by the wrong kind of intervention. I would have hoped that the market players would be involved in this at some stage. Your view on this would be great. Probably one for Andreas, you mentioned that the impact of the variation margin on net debt has been big. It was heavily influenced. Can you put a number on that, please? How much of the increase in net debt is due to variation margin outflows?
Lastly, on your acquisition of Q-Energy for about EUR 1 billion, you had many attempts at renewable acquisition in Spain, but always refused to pull the trigger due to valuation concerns. What makes this one different? Where do you see the attraction? I mean, if I look at the portfolio, it seems to be that there's very little value in the existing assets. It's all about the pipeline. But if you could sort of put a bit more color on this, and also on the 82 MW of existing capacity, is that all solar? And can you give us maybe an idea about the age of the plant? Are these relatively young? And maybe if you can also share a bit on the feed-in tariffs they are operating under.
Yeah. Ludo, where shall I start? Windfall tax, of course. Let me sort of like summarize the comments which I have made before in previous conference calls. I remember very well that we had the discussions and, you know, starting in Spain, and then when we had the measures in Italy and France, you always asked, I mean, you as a group, So what about Austria? The answer which I had given at the time was, at this point in time, you know, when I said that, I don't think that there will be a windfall tax. However, there would be two developments which could change the perspective of a windfall tax in Austria.
Is that the one would be that media papers start to focus on this in the sense like in other countries you know we have very high electricity bills for consumers. At the same time we have high earnings of utilities. You know how are we going to resolve that dichotomy? What is the government going to do? Media were very quiet for a very long period of time but they have started to very much focus on that point. That one area which I had predicted that would then have an influence on politics happened exactly in that way.
The other point which I have made is I said if Germany decided to introduce something like that, you know, Austria, being the smaller neighbor that always likes to look across the border to see what's happening there, could then be influenced. Now, the interesting thing is that, Mr. Nehammer, our chancellor, has been very outspoken in terms of the possibility of a windfall tax. Whereas in Germany there is Mr. Habeck, who is also saying that this is something Germany should consider. The finance minister, who as you know belongs to another party within that coalition government, is saying, No, Germany should not introduce a windfall tax. Now you have an interesting discussion in Germany as well on that point.
Your next question, which is perfectly valid, is are we involved? Now, we are involved in the sense that we say what the impact on VERBUND would be. Obviously it's not a positive impact, it is a negative impact. That is something we communicate very clearly. That's the same kind of communication we would have with anybody else. If we were involved in very detailed discussions on the government level, and if we then came to the conclusion that there is a higher than 60% probability that what we are discussing with the government would actually be enforced, then we would immediately have to make an ad hoc announcement according to very, very strict capital market rules in Austria. There is no optionality. That is something we need to do.
Theoretically, we will then as a company have to go out to tell the markets at a point in time when the government has not made a decision yet. Therefore it is more prudent for us as a market participant not to be involved in the creation and in the design and the methodology of such measures. In fact, I think it would be much more intelligent for the Austrian ministries, you know, to go into a dialogue with other European countries and to then assess the pros and cons of the different methodologies. That is my response to the involvement of VERBUND.
In terms of the project which we have worked on over the last few weeks and which we have recently signed, EUR 1 billion consisting of obviously the debt which we have assumed, but also the equity payment which we have made, is what we think different from situations which we have looked at previously. What is the difference? The difference is there is a very large pipeline of around 2,000 MW which we would consider advanced. All the entire amount of the 2,000 MW, even slightly more, has grid connections. It does not only have grid connections, it is already pretty advanced.
As a result of that, we found that very interesting, in terms of developing that specific very large opportunity. At the same time, we have acquired a platform of around 20 people. Those 20 people were the ones that specifically worked on the 2,000 MW to get it to that advanced stage. We are going to combine those people with the people which we already have, including senior management, which we have in Spain.
We think that, you know, with the people which we have, and with the advanced pipeline, and I'm not even mentioning sort of like the less advanced pipeline which we have acquired as well, that could be a quantum leap for us. It could really, instead of sort of like the, you know, the 100 MW which we have acquired recently and the 150 MW which we have acquired as well, which were sort of like the, you know, the beginning of our activity in Spain, we have now really come to the stage where we could create critical mass in this market.
In terms of the megawatts which you have mentioned, which are in the regulated area, they will run in the regulated system with the feed-in tariff for approximately another 17 years. It is a relatively long period of time. As a result of that, they are relatively in terms of those assets. Now, you also had a specific question with regards to initial margins, I think.
The share.
The share feed. Yes, Andreas, could you?
Only one addition to what Peter Kollmann said with regard to the Spanish assets. I think it's all PV. Also, the existing assets are PV assets. With regard to the share of the margin requirements in the net debt figure, currently around EUR 800 million. As Andreas Wollein mentioned, we have approximately, let's say, EUR 4 billion of credit lines to cover potential margin calls should the situation with regard to the gas flows and the gas prices or also prices for electricity change dramatically.
Okay. The underlying net debt, so would it be EUR 800 million less than the-
Yes.
Okay. Just one last one. On the feed-in tariff you've got for 17 years, can you give us a number there?
No.
Okay. Straightforward. Okay.
We are sorry.
Thank you very much.
The next question is by Mr. Bartek of Erste Group. The line is now open for you. Mr. Bartek, your line is open now.
Hello, can you hear me?
The next ques-
Yeah. Yeah. We can hear you.
Sorry. Some technical problems. I would have a question regarding the net debt and the margining requirements. If electricity prices stay at current levels, would you expect that your debt related to margins will gradually come down or it will be stable? Maybe in another way, if you have any debt target for the end of this year? Also related to this, what's your outlook for total investments, meaning CapEx plus the investment in renewables, what amount we should expect this year?
Yes.
What IRR you are targeting from the renewable investments? Thank you.
Yeah, sure. Our CapEx plan for the next three years, i.e., the remainder of 2022, 2023, 2024, is slightly above EUR 3 billion in grid, hydro, et cetera. Renewables as well. Our most recent acquisition, which we have only just signed, is not included in that number. That would be on top in terms of our CapEx plan. I have to make a more general comment on debt because I think it's important, specifically when you look at VERBUND. We have an increase in debt on a purely temporary basis.
You know, as Andreas has mentioned before, we had last year a dramatic increase in terms of variation margins, but also initial margins. Now, you know, now we have remained at approximately the same level, so therefore, there has been no further increase. Of course, if gas flows would stop and let's say gas prices would double, then from the current level, we would then obviously again go up dramatically in terms of variation margins. However, that is something we have provided for in terms of the liquidity lines, which Andreas mentioned before. We are perfectly safe in that specific respect. In terms of the margins, when the futures contracts run out, that money comes back. Yeah.
This is why sort of like the short-term debt is temporary. I will then hand over to Andreas to give you more specific numbers again on the margins in relation to the debt. Coming to the overall percentage of new renewables, we are looking at something of around 25% of our generation by 2030 to come from new renewables. We feel that in order to have the diversification effect, which we're talking about diversification in terms of technology, but also in terms of geography, we should have critical mass, and that critical mass we see at around 25% of our generation. Now coming back to the debt levels, Andreas.
There are only a few additional remarks to what Peter said. The forecast, the margining requirements, as you know, is very difficult because it's a very complex system.
Basically, the margin requirements are determined by the price. The lower the price level, it's determined by the volumes which we set on the futures, and it's also dependent on the volatility of the prices. Yeah. These are basically the three main influencing factors. If your assumption would be, as you said, the price is going to be stable, then it depends on if we also keep the volumes, which we set on futures, stable, then I think there is no impact. The level of the margin requirements will be roughly the same. Yeah. If we increase our futures volumes, which we set on the electricity exchange, then the margin requirement could basically increase.
If we reduce the futures volumes, then of course we have the opposite effect. As I said also, volatility is a very important factor which determines the initial margin. If volatility is the same, there is of course no change in the requirements. If volatility increases, we see the initial margin also goes up. It's a highly complex system, but let's say, to say very simply, prices stay at the same levels and we do not increase the volumes on the futures markets, then I would say the need for cash collateral for the trading business will roughly stay at the same levels.
You wouldn't expect gradual decline in the requirements if prices are stable and your volumes are stable?
Sorry, can you repeat the question?
Just theoretically, if prices are at current levels, stable, let's say, and your hedging volumes are also stable, you wouldn't.
Yes.
Expect a gradual decline of the requirements. You would rather expect the stability, correct?
Yes. Yes. If prices stay where they are and if we keep the same hedging strategy, then I think the margin requirements will stay where they are. Yeah.
Thank you. I was also asking about the IRR, which you targeted in our renewables investments in the M&A, if you can elaborate on that.
Yeah. The target would be our hurdle rate, which is approximately between 150 basis points and 200 basis points, you know, according to the kind of risk which we are taking above our WACC.
Thank you.
The next question is by Gert- Jan Chojnicki of Citi. The line is now open for you.
Hi, good afternoon. It's Gert- Jan Chojnicki of Citi. I have a couple of questions, please. First one, I'd like to go back a little bit for a second to this possible taxation issue. I wanted to ask you about other players, hydro players in Austria. Like, if I was to impose an industry-wide tax, let's not call it a windfall tax, but let's call it a hydro tax. What would be the broad-based consequences for the other players? Would any of them, according to your knowledge, have any issues and so on? If I was, let's say, to put the tax, anything above EUR 100 realized price, I take it to a state budget or something along these lines. That would be the first question.
Second, on the acquisition you've done, you talk about 2 GW pipeline. Can you say anything, as to when this could really come to the market in terms of ready capacity?
Yeah. Okay. Now, first of all, on a hydro tax, if a hydro tax were introduced, then of course you cannot limit it to specific players. All you can do is you can basically say small hydro generation plants would be excluded, and larger generation plants would be affected by a hydro tax. Then, you know, you basically have to look at the sector. It is very obvious that VERBUND would be the one with by far the largest amount of hydropower stations, and most of our hydropower stations, as you know, are very large. Others would obviously be affected as well. We have no information whatsoever that a hydro tax would be introduced.
Everything you know we have heard so far, which is actually very similar to what is out there in the media, is to basically look at various forms of windfall taxation. Now the other point was on how fast would the pipeline be converted. Now that is something that very much depends on the approval process. It is very advanced. It has the 2,000 MW of grid connections. They you know are pretty advanced in the approval process. However, you know, with approvals you never know how long it takes. You know, if there are any objections. That is something that is very difficult to judge.
Obviously it is our goal that we would implement as quickly as possible. In other words, you know, the minute we get the full approval, we will build. Therefore, you know, we hope that we can convert the 2,000 MW as quickly as possible. Of course, at the same time, we have acquired a very large pipeline of early-stage development, and we are working on that early-stage development as well to bring it to a more advanced stage. We will obviously, I'm sure that you will ask me, you know, at every conference call in terms of our progress, and I will report if and when we have new information.
Okay, thank you. Can I please just follow up on your CapEx program and on the other investments? When I look at your kind of operating cash flow ability and then look at the market prices and compare it versus your EUR 3 billion CapEx for next three years, you clearly can see that company generates way more cash than required. I just wanted to understand, can you come up with an acceleration of a CapEx program so that the excess of a cash flow could be redeployed in the business? Or if not, does this mean in order to protect yourself from the taxation, you can go for a higher dividend, and then change the dividend policy?
Because the situation where you kind of pile up the cash on the balance sheet, it's, you know, I understand why there is a temptation to put a taxation on you.
Yeah. It's a very good point. In terms of capital allocation, you can always accelerate CapEx. However, you have to be careful that you don't just accelerate because you have enough money. You know, we only want to accelerate if we feel that we have appropriate returns. If we don't have the appropriate returns, you know, we don't accelerate. Sounds simple, and that's exactly what it is. Where we have an acceleration, where we actually had an acceleration of around EUR 50 million, was on the grid. We have made much more progress on the so-called Salzburg Line. We have on the construction been quicker than we thought.
We have done a lot of planning and as a result of a very careful planning, we have been quick in the implementation. As a result of that, we have spent EUR 50 million more than we had originally anticipated at this stage. Wherever we can accelerate construction, that's what we are doing. On the other hand, you shouldn't forget that there is a real challenge in the utility sector across the board, you know, this is across Europe, to get material. For example, it is very difficult to get cables, high voltage cables for the grid. There are the supply chain problems obviously, which are widely reported.
We have a lot of volatility in steel prices. We feel inflation. Procurement is a challenge. As a result of that, you know, we need to, like all the others, we need to focus. We need to be very diligent in terms of CapEx in terms of acceleration. Sometimes it is much better to wait a little bit because if you want to accelerate, you pay higher prices. That is something where we need to find the balance. From a bird's eye perspective, yes, you're right. I mean, we have with you know power prices where they are, and you know, you have seen the numbers. I've given you the guidance.
You know, it is clear that, you know, coming into that, you know, we had a very sound capital structure. We had a, we have a very strong rating, so we have already come in a very strong way into this situation with the higher power prices. Now with the higher power prices, despite the fact that we have a higher CapEx plan, we are not in terms of medium to long-term debt, we're not increasing debt. In fact, we are reducing debt. Andreas has mentioned before the change from the on the short-term side, which is a reflection of the margin calls. But that is temporary. And that is short-term debt and not long-term debt. So yes, we are, we have a very sound structure.
We are highly resilient in terms of potential future shocks to the system. Yes, we have the potential to invest more if and when we see an interesting opportunity.
Okay. Thank you very much.
The next question is by Olly Jeffery of Deutsche Bank. The line is now open for you.
Thank you. Good morning, everyone. Just two questions from me, please. The first is in your answer earlier when referring to why, you know, windfall tax coming in now and what's changed in the narrative, one of the things I think you spoke about was that in Germany you're saying that there's been no call for a windfall tax. Was your implication that you thought Austria might follow that same logic? That's the first question. The second is just on the politics with the discussion of the windfall tax. Could you talk a little bit around what the opposition party is saying with regard to this? Has the opposition party mentioned whether they favor special dividends or a windfall tax?
'Cause I just wonder more generally, do you think a special dividend would satisfy both the opposition and the electorate optically instead of a windfall tax? Because a special dividend might not sound as a windfall tax sounds more, might sound better to the electorate than a special dividend. I'll be interested to hear your views on that. Thanks.
Yeah. I can understand why you're asking the question. The answer is complex. First of all, I cannot judge the opposition party, neither in Germany nor in Austria. You're right that the opposition party has basically started, or I should say it differently. They have basically taken the clue, the lead from other European countries, and they've basically said, Well, wait a second, you know, if it's introduced in other countries, that is something we should make, you know, we should turn into a big topic here in Austria. It was a combination of media and, yes, you're right, the opposition parties, that is basically picking up that specific windfall tax topic as an important one.
You said could a dividend, like a special VERBUND dividend, could that be enough to end the discussion? That's very difficult to say because it's completely different, right? When you look at a dividend, you're only looking at VERBUND. When you look at a taxation, you look at the entire sector.
I don't think there is a single EU country that has basically taken out one specific company and has said, Well, you know, we want a dividend from you, or, We want a tax from you, but not from the rest of the sector. I think that in terms of like, you know, a fair legislation around windfall taxation, I could imagine that Austria, similar to other EU countries, is looking at the sector. Could there be demand for a higher payout ratio from VERBUND in the future? The answer is yes. Yeah. I cannot exclude that.
I mean, we have between with a range of 45%-55%, you know, could there be, you know, an opinion, you know, across the political spectrum that there should be a higher payout ratio given the fact that we're 51% owned by the Republic of Austria and that they would be, you know, a main beneficiary of a higher dividend payment? That is a possibility. I don't have any information whatsoever that would be considered or that we would be asked to pay higher dividends. You are right that in the media, there was already a few weeks ago and then again a discussion around what they call the Sonderdividende. Sonderdividende is another word for special dividend.
That obviously would be related to the very large increase of our earnings. You asked about the discussion in Germany, and the potential, you know, cross influence, Austria influencing Germany or Germany influencing Austria. I mean, media has asked, you know, when our chancellor made a very specific comment on windfall taxation in Austria, I think, a number of journalists in Germany have then asked, the German government if they would also consider something like that. If they, you know, if they feel that the statement from the Austrian chancellor is something, you know, they would see in a similar way. You had, you know, the response from Mr. Habeck, who basically said, you know, he thinks that Germany should look into windfall taxation as well, and Mr. Lindner who has denied.
I can obviously not comment further on what Germany is going to do. There will be pure speculation. I think we don't know. I cannot simply give you a response here, more than commenting on what's out there in the open and in the media.
Okay, thank you.
The next question is by Thibault Dujardin of Bernstein. The line is now open for you.
Yes, good morning, everyone. Thanks for the presentation. Two questions from me. The first one is on your acquisition in Spain. So you did not disclose the purchasing price, but we've seen some of your competitors disclosing the price and it seems like there is an average price of EUR 150 ,000 per megawatt for this kind of pipeline. So would you be in a position today to confirm overall this number or maybe give us some indication if you are above or below this price? Second question on the sales segment. To what extent are you exposed to Russian gas supplies? I mean, do you have a direct long-term contract or some indirect exposure?
Apologies if we already talked about this topic, but I can't remember. Many thanks.
Yeah. No, no. We haven't talked about Gas Connect Austria today, so I can happily comment on that. Yes, I mean, Gas Connect Austria is linked to via Slovakia to the Brotherhood pipeline, which is a very large pipeline coming from Siberia, going through the Ukraine and finally going into Baumgarten, which is a major hub in Austria, owned by Gas Connect Austria. From there, you know, gas obviously goes into our own distribution for Austrian domestic use. A large part of that also goes via a pipeline called TAG, T-A-G, further on to Italy. Then of course, there are connections into Hungary, into Germany and into other countries as well.
Austria has a very, very high dependency on Russian gas of around, you know, 80%, maybe even slightly more, 80%. So any reduction in gas flows from Russia would obviously be felt by Gas Connect Austria, and that would reduce the transport capacity of Gas Connect Austria. So that's on the gas side. Sorry, what was your first question again?
The acquisition price of the portfolio.
Oh, yeah. Yeah.
Maybe-
Yes.
You can give us some indication.
Yeah. Now, I just give you an approximation. The enterprise value for this acquisition has been around EUR 1 billion. That obviously includes, you know, the existing regulated business. That also includes the pipeline, the advanced pipeline, it's the 2,000 MW. That includes what we call the platform, i.e., the around 20 people which we have acquired as well. There are sort of like, you know, like with any platform, early-stage developments. That is, you know, that is what I can tell you in terms of what we paid.
Very clear. Thank you.
The next question is by Wanda Serwinowska of Credit Suisse. The line is now open for you.
Hi, Wanda Serwinowska from Credit Suisse again. Just a follow-up on the M&A in Spain, as we haven't had an opportunity to talk about it before the results. Have you signed a contract with the suppliers for the two, basically to get all the equipment? What is your assumptions for CapEx per gigawatt? Have you seen an increase? Because remember in the past you were guiding for EUR 0.55 billion per gigawatt, if I'm not mistaken. Peter Kollmann, you mentioned that the final timing depends on the approval process. What would be your blue and gray sky scenario? I mean, can we anticipate 2 GW of new solar capacity to be installed later this year or next year? Or are we talking about 2024, 2025? Thanks a lot.
On the approval process, I cannot comment. Also we have just signed, we have not even closed the transaction. Approval processes, as you probably know from other players in Spain, very, very difficult to judge. I mean, it is very advanced, however, can't give you any specific details. The CapEx assumptions, which we internally make, we don't disclose, those assumptions. What was the first one again, Wanda?
If you signed the contract to basically get all the panels because there is.
Yeah. Sure. Yes, we have some contracts, some supply contracts. Obviously, you know, for business where there is certain openness in terms of timing, then we have no supply contracts.
Okay. Brilliant. Thanks a million.
Thank you, Wanda. Yes?
There are no further questions until I hand back to you.
Yes. Thank you very much. That was a very intense discussion today. A very long Q&A. I'm not surprised that you were obviously extremely interested in the point around windfall taxation. You know, we have discussed it from a lot of different perspectives. If and when we have more information, we will obviously inform the capital markets. In the meantime, have a good day. As you know, we are always at your disposal if you have any further questions. Thank you very much. Bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.