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, and after the presentation there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Peter Kollmann, CFO of VERBUND AG, who will lead you through this conference. Please go ahead.
Thank you very much. Ladies and gentlemen, let me welcome you to our presentation, and let me thank you for joining today's conference call. I hope you're all well and healthy. Now, before we move into the analysis of our business development, let me make a few general comments about the first three quarters of 2021. The energy business environment continued to be very favorable for VERBUND. Prices for primary energy sources increased strongly. The reasons for the increase in gas and coal prices included, as most of you know, the low average gas storage levels, unfavorable weather conditions and supply disruptions in an environment where demand is recovering from the repercussions of the historic lows coming from the COVID-19 crisis. In addition, demand from China strongly increased as well, for example, for LNG.
At the same time, prices for CO₂ certificates increased alongside the above-mentioned developments, as did wholesale electricity prices, which hit new record highs. The wholesale energy prices are an important factor for the business performance of VERBUND. Thus, we were able to strongly benefit from these developments. VERBUND shares ended the first three quarters 2021 with a value of 87.7 EUR, representing a performance of 25.6%. With a corresponding market capitalization of more than EUR 30 billion, VERBUND is by far the number one in the Austrian stock market index, ATX, and among the bigger utilities in Europe. Against this background, let me now present the figures for the first three quarters. At the beginning, as always, let me highlight the most important influencing factors for the results development in the first three quarters.
Following the development of prices at the electricity exchange and based on our hedging strategy, the average achieved contract price increased by EUR 7.4 - EUR 51.3. The hydro coefficients determining the generation from our run-of-river hydropower plants was 1 percentage point below the long-term average, but 1 percentage point above the first three quarters 2020. Production from our hydro reservoirs was much lower compared to last year. On the other hand, the contributions from flexibility products, especially control energy, pumping and intra-day trading, strongly increased by 28.6% compared to last year. Finally, there was a positive contribution from the full consolidation of Gas Connect Austria. Now, the impact of these influencing factors is as follows: EBITDA strongly increased by 16.3% to EUR 150.
The group result increased by 23% to EUR 587.4 million. The adjusted group result increased by 20.9% to EUR 566.2 million. The operating cash flow was lower at a level of EUR 510.6 million. The free cash flow was negative at a level of EUR 595.8 million, due to the lower operating cash flow, the acquisition of Gas Connect Austria, as well as higher CapEx and dividends. Net debt had increased by 47.6% to a level of EUR 2.77 billion. Based on the strong figures and the good market environment, we increased our outlook for 2021 on October 12 of this year.
Verbund now expects for 2021 a reported and adjusted EBITDA between approximately EUR 1.49 billion and EUR 1.59 billion, and a reported group result between approximately EUR 740 million-EUR 810 million. The payout ratio will be between 45% and 55% of the adjusted group results, which are between EUR 720 million-EUR 790 million. On the bottom right side, you will also find our guidance for APG, which is approximately EUR 210 million, for Gas Connect Austria, approximately EUR 70 million, as well as for our flexibility products, which is approximately EUR 140 million. Now, on the next page, and before I talk about the different segments of our company, I will give you an overview of the hedging volumes.
As you can see, we have created a new chart, because the average achieved contract prices are always of great interest to you. I hope you find this overview helpful. At the end of the first three quarters 2021, based on our hedging strategy, we achieved an average achieved contract price for our hydro generation of 51.6 for 2021, 62 for 2022, and 60.9 EUR per MWh for 2023. Please note that we have already hedged approximately 96% of the volumes for 2021, 60% of the volumes for 2022, and approximately 21% for the volumes of 2023. Now, on a mark-to-market basis, as of the October 26th, we calculate with the price of 58 EUR for 2021, 88.8 EUR for 2022, and 82.1 EUR for 2023.
As most of you know, 1 euro ± has a sensitivity of approximately EUR 25 million in the EBITDA lines. Now, on the next few pages, we have slightly changed the reporting which we're providing to you. We give you more insight into the segments. The first one is the hydro segment, and there I will go into the key influencing factors. At 0.99, the hydro coefficients, an index quantifying the hydropower generation of the run-of-river power plants, was one percentage point below the long-term average, but 1% above the level of the first three quarters of 2020. The production from annual storage power plants decreased by 10.7%, mainly due to less turbining.
Own production from hydropower, therefore, overall decreased by 589 GWh or 2.4% compared to the first three quarters of 2020. Higher average achieved prices and an increase in the contribution from flexibility products overcompensated the reduced volumes. Therefore, the EBITDA in the hydro segment increased by 17.8% to EUR 841.8 million. 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 both on time and progressing well. Now, let me continue with an analysis of the own generation from new renewables.
The new renewables coefficients, an index quantifying the generation from wind power and PV, amounted to 0.88 in quarters one-three 2021, compared to 1.02 in quarters one-three 2020. Generation from wind power decreased by -13.7% or 93 GWh and amounted to 587 GWh. Less favorable wind conditions in all markets, i.e., in Austria, Germany, and Romania, were the reasons for this development. Generation from PV amounted to 1.6 GWh in the reporting period. Now, when we look at the EBITDA development in the new renewable segment, we see that EBITDA decreased by 37.3% to an EBITDA amounting to EUR 26.8 million. Higher prices could not compensate for much lower volumes.
In addition, higher procurement expenses in Romania due to low output to cover for electricity delivery obligations took its toll on the EBITDA development. Let me continue with an analysis of the sales segment, comprising trading and sales activities of Verbund. Taking a look at the EBITDA development in the sales segment, we see that EBITDA increased by 44.6% to an EBITDA amounting to EUR 82.0. The improvement in EBITDA results from high contributions from flexibility products as well as higher sales to end customers, due to higher volumes and higher prices. Verbund delivered electricity and gas to approximately 535,000 end customers, representing an increase of 3% year-on-year. Now, let me continue the next page with the analysis of the other segments.
Generation from thermal power plants was down by 61.3% or 495 GWh stemming from the decreased use of our CCGT in Mellach for congestion management and the decreased use of the Mellach district heating plant due to the discontinuation of our coal-fired generation. However, the EBITDA development more or less remained equal to the corresponding lower use of fuel. The EBITDA contribution from Kelag, the provincial utility from Carinthia, increased by 17% to approximately EUR 39.5 million due to a better hydro situation and higher achieved sales prices compared to last year. Finally, let me inform you that our Mellach CCGT was contracted from APG for future congestion management starting with the first of October 2021. In addition, CCGT Mellach is providing district heating for the city of Graz.
The district heating power plant Mellach was not contracted by APG and is therefore mothballed as of the first of October 2021. Next page is on our grid segment. As you know, the grid segment consists of our regulated business, which is Austrian Power Grid as well as Gas Connect Austria. First, contribution from APG. As you know, there is a difference between local GAAP and IFRS. Under IFRS, in contrast to local GAAP, volatilities in the result contribution cannot be avoided because the so-called regulatory account cannot be applied. The EBITDA for the first three quarters 2021 from the grid business, according to IFRS, was approximately EUR 161 million.
The guidance for the grid is approximately EUR 210 million, which is an increase compared to our last guidance, which was at EUR 170 million. 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 demands. Gas Connect Austria operates approximately 900 km of natural gas high pressure pipelines in the grid. There are five compressor stations positioned along the pipelines which guarantee the relevant pressure. In addition to operation maintenance and repairs, all these are also important paths which Gas Connect Austria has to pursue.
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 to Germany, France, Slovenia, Croatia and Hungary. Now, with regard to the results contribution of Gas Connect Austria, we only report June to September 2021 on an isolated basis amounting to approximately EUR 36 million. Please note that we do not provide values from last year as we did not own the asset by then. The guidance for 2021 is approximately EUR 70 million on the IFRS. The guidance relates to the months June to December 2021. On the right side of the slide, you will find information regarding the regulatory system. Andreas will now take us through the key financial figures. Please, Andreas.
Thank you, Peter. The next slide shows VERBUND's consolidated key figures for the first three quarters 2021 on a reported and adjusted basis. The EBITDA increased by 16.3% to EUR 1.1506 billion. We have already mentioned the most important influencing factors, the sales prices, the water supply, the flex products and the positive contribution coming from the full consolidation of Gas Connect Austria. The financial result improved by EUR 45.4 million from EUR 16.8 million due to a significant increase in the other results from equity interest, mainly due to a one-off effect relating to the full consolidation of the e-mobility provider's SMATRICS, a higher equity interest coming from our participation in Austrian provincial utility Kelag and a further reduction in interest expenses.
The reduction in interest expenses was mainly due to the decrease in interest payments for bonds. The group result increased by EUR 109.6 million - EUR 587 million. The adjusted group result was up by 20.9% to EUR 566 million. EBITDA margin increased strongly to a level of 64.3%, which is not only driven by the increase in wholesale prices, it is also driven by a valuation effect in the electricity revenues according to IFRS. Finally, I would like to mention the additions to the tangible assets, which were above the previous year's level at EUR 430 million. The additions concerned mainly investments into hydropower assets as well as into the Austrian high voltage grid.
When we move to the next slide, you see the key financial figures relating to cash flow and debt. Here you see a big influence coming from the strong increase in electricity wholesale prices. The operating cash flows showed a decrease by 40% to a level of around EUR 411 million. Mainly due to changes in the working capital, higher tax payments, and this, I think, is the most important influencing factor, the margining payments for the energy trading business due to the strong increase in electricity wholesale prices. Let me mention that this is only a temporary effect. Once these contracts are closed, the margining payments, of course will be paid back to Verbund.
Due to the decrease in the operating cash flow and increase in investments in hydropower plants and the Austrian high voltage grid, the acquisition of Gas Connect Austria, as well as higher dividends, the free cash flow after dividends is negative by about EUR 600 million. Net debt increased to around EUR 2.8 billion. It is mainly driven by the fact that we have issued a bond, a green and sustainability-linked bond for the acquisition of Gas Connect Austria. The corresponding figure for the gearing is therefore at the level of 41.9%. A few last words to the financial liabilities. I think when you look at this chart, you see on the left side the debt maturity profile, which is characterized by two peaks, one in 2024, one in 2030.
As I mentioned, financial liabilities have increased because of the acquisition of Gas Connect Austria. The total number of financial liabilities is currently EUR 1.848 billion. We have committed and uncommitted lines in order to secure our liquidity needs and the interest rate mix in our financial liabilities is around 68% fixed interest rates and 32% floating. The rating of VERBUND AG are currently unchanged. We will have our annual rating meeting soon. We can confirm currently the rating at Standard & Poor's at A- stable outlook, and Moody's at A3 stable outlook. Now I would like to pass on to Peter again for giving us the final outlook.
Thank you, Andreas. As always, at the end of our presentation, we give you the outlook. We would like to highlight the various sensitivities. Now, a deviation of ±1% in the generation from hydro has an impact of ±EUR 6.2 million in the result. A deviation of ±1% in the generation from wind has an impact of EUR 0.3 million, and a deviation of ±1 euro in the wholesale price has an impact of EUR 6.6 million in the group results as a result of the high hedging level, which we have already this year.
On the basis of the aforementioned developments, we increased our guidance for the full-year 2021. As I mentioned before, on the 12th of October, we now expect to report an adjusted EBITDA of approximately EUR 1.49 billion-EUR 1.59 billion, and the reported group results of approximately between EUR 740 million and EUR 810 million. All this under the assumption of average hydro and wind generation for the last quarter 2021, as well as the chances and the risk situation of the group. For the financial year 2021, Verbund plans to pay out between 45% and 55% of the group results after adjustment for non-recurring effects of approximately between EUR 720 million and EUR 790 million.
With that, we have come to the end of our presentation, and we are happy to start with our Q&A.
Ladies and gentlemen, 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 your question. If you find your question is answered before it is your turn to speak, you can dial zero and two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. The first question is from Wanda Serwinowska. Your line is now open. Please go ahead.
Yes, good afternoon. Three questions on my side, if I may. The first one, I mean, Peter, you referred to it's quite extraordinary what is currently happening in power markets at the moment. You know, a few commodities going crazy, power prices going with them. How do you what's the general view of how this will play out over the winter and into 2022? Is that a short-term spike that will all normalize by 2022? If you stare into your crystal ball. You already extended your normal hedge path to take advantage of these prices. Can you see this increasing further? If we're going to see further price spikes? The second question is, I mean, we all know the reasons why your hydro EBITDA keeps rising.
Your regulated earnings are also increasing quite nicely between flex products, APG, Gas Connect Austria, you know, expecting EUR 70 million more for the full-year. Can you run us through the drivers behind it? Is it volume? Is it price? Is it volatility? If all of this is linked to the quite extraordinary conditions we are seeing now, should we expect much lower numbers for 2022? Lastly, Andreas referred to it when you mentioned the net debt level and the operating cash flow. How much exactly was the cash outflow from variation margins?
Yeah. Thank you, Wanda. On the first one, extraordinary. Yes. I think there are so many different words to describe what we are currently experiencing. I'm perfectly honest by saying, I have not in my wildest dreams expected the kind of rise which we have seen. It is a situation which requires a fundamental discussion on many different levels, as we are in the midst of the energy transformation, as we're in the midst of a climate discussion. This is a very, very important point. You were more specific. You basically said, you know, what are our expectations through the winter and coming into spring?
We think that we are going to have a similar kind of situation which we're currently seeing throughout the winter. If the winter is very cold, we could even see a further increase. We currently think that Nord Stream 2, which would help the situation, will not go online before the end of the year. That was the original expectation. Now we think it's rather going to be spring next year. As I say, this is our expectation. Also on Nord Stream 2, we don't have a crystal ball. When we come to spring, particularly when we come towards summer, we think that there is going to be a normalization, particularly on the gas price front.
We also think that coal prices will come down. The same is, in our view, not true for CO₂ prices. We think that they will probably remain around the level where they currently are. With the input prices for gas and coal coming down, we should see what I would call a normalization of electricity prices. We think that the forward curve, the backwardation of the forward curve, in all the commodities and therefore also the electricity prices, is a pretty good indication of where it could move towards to. Now in terms of your sub-question, the expanded hedging, yes, you're right. We have specific points which we carefully calculate also statistically.
Whenever we reach those points, we increase our hedging, because we would then have come to the conclusion that this is an extraordinary move upwards and therefore we should take advantage of that. Being loyal to our long-term hedging program, we never go overboard. The reason for that is very simple. If you think back six months, you would have thought at the time that we have seen such an extraordinary increase in prices, that at that point in time, we should have really gone out and hedged like there's no tomorrow. If we had done that, we would have left a lot of money on the table. That again has shown that it is very, very difficult to predict markets.
It is very difficult even short-term to predict developments. The result of that, I think that we should be quite happy with our hedging strategy. The next point on the drivers, I will go through it step by step. On the flexibility products, you're right, we have increased from our original guidance. We have seen interestingly less on the congestion management side. We have seen actually the first time for many years, much better revenues on control energy. The control energy side has been very stable over like four or five years. All of a sudden we have seen much higher prices for control energy.
At the same time, congestion management, which has always provided us with very generous revenues, has come down. Congestion management coming down has actually helped the grid APG, because on the APG side and the tariff, they were originally budgeting for higher expenses in congestion management. Since it was lower, they have additional revenues. The same is true for the auction side and some other areas. As a result of that, we have, and again, you know, this is the IFRS, not the regulatory account, this is the IFRS. So everything where the tariff is more generous than the actual cost which we have in IFRS goes directly to the results.
There we were able to increase from our original guidance of EUR 170-EUR 210. Yeah. This is on the regulatory side and on the flexibility side. Now, we had a question with regards to our net debt, and there I would like to hand over to Andreas.
Yeah, Wanda. One additional remark to the regulated business. I think you mentioned this increase in the results from Gas Connect Austria to EUR 70 million. I think this is only, it is a one-off effect coming from an insurance payment coming out of a court proceeding with regard to the so-called Baumgarten accident a couple of years ago. It's a slight increase, and as I said, it's only a one-off effect. With regard to, I think the question was with regard to the variation margin. This is correct, Wanda. We had strong cash outflows based on the price developments.
I think that this development could be seen for all the utilities being active in long generation, I would say, the exact figure here but of course highly volatile. Yeah, but at the end of the third quarter there was an additional year-to-date payment for the variation margin of around EUR 350 million, which of course is directly going into the operating cash flows. It's negative, it's a negative effect on the operating cash flow, but you have to take into account that we are basically short-term hedger based on this fact. Next year when these hedges are running out, basically, these variation margins will be repaid to VERBUND. It's basically a time effect.
We expect next year that we will have the opposite effect in the operating cash flow.
Very clear. Thank you.
The next question is from Miguel Zavala, Bank of America. Your line is now open. Please go ahead.
Hi. Good afternoon, Peter, Andreas. So two questions from me. First one on the plant. I understand you still have to take financial investment decision on this one. Could you give us an idea also on how the CapEx profile look like? I think it was a sizable investment, EUR half a billion, if I recall, and it doesn't seem to be in your CapEx plan at the moment. And the second question, thanks for the new hedging slide. So I see you've been taking advantage of those high prices ahead more or less 10%, hedging 10% more of your generation ahead for years one and two. Is that the most you can do?
Should we expect that 10% to be 15 or maybe a bit more, or that's all you're willing to deviate from your normal hedging strategy? Thank you very much.
Yeah, we'll start with the hedging, and Andreas will give you an overview in terms of the slices, the CapEx slices into Limberg III. Yeah, maybe I should, you know, quickly sort of like summarize again, where we stand in terms of our hedging, and then I will explain under what circumstances we would increase our hedging. Again, for 2021 we are, you know, per literally per today, we are 97% hedged. Therefore, because the power prices are so high, even the 3% can make a difference, yeah. Which is why on the mark-to-market, we are getting to something like approximately EUR 58.
On 2022, the outstanding prices, because we have, as I mentioned before, the backwardation, the effect is not as high as it is in 2021. Still, we have much higher prices for the outstanding volumes than we have for the hedged volumes. When you look at the, you know, 63%-64%, which we have hedged for 2022, the hedging level is at, you know, 64.7. What we currently see for this period in the market is around EUR 130. Therefore, mark-to-market for today, we get to something like 88.8.
For 2023, again, since we have further backwardation, we see something like 82.1 for the mark-to-market. You already see how the normalization of power prices, what we discussed before, obviously has an impact on the overall prices where we can sell our electricity into the future. We have further points defined. We have, because of the very sharp increase, increased our hedging when we reach very high points. We have additional points defined, which are even higher.
Should we have a very cold, a very strong winter, and as a result of that, we see a further increase in commodity prices and therefore in power prices, then it could be that we have an additional trigger in terms of accelerated hedging. Now with that, again, over to Andreas on the slides for Limberg III.
Limberg III, a big project, Miguel, currently not reflected in our CapEx program. I think the additional CapEx in our high voltage grid is still not reflected. Please be a little bit cautious with our current CapEx plan, which will be soon updated. With regard to Limberg III plant, also the total CapEx is around EUR 500 million.
The CapEx will be split over four years, so between 2022 and 2025. And the peak of investment is in 2023 and 2024. As a last indication, we spend around EUR 50 million in 2022, a little bit less than EUR 200 million in 2023, a little bit more than EUR 150 million in 2024 and around EUR 100 million in 2025. So this is the rough split of the CapEx.
Okay. Very clear. Thank you.
The next question is from Thibault Dujardin of Bernstein. Your line is now open. Please go ahead.
Yes, thank you very much. Good afternoon, everyone. Just a follow-up then on Limberg. Is it possible, since you provided the EUR 500 million CapEx envelope expected, is it possible to provide as well what could be the load factor to be expected on this plant going forward? Then, my questions were more regarding the flexibility product first. Could we have the actual figure of the nine months? I'm not sure that I was able to find it. More precisely, is it possible to have the split into the disclosure that you provide now? You provide indeed a split which is a bit more detailed.
It could be interesting to find the flexibility product underlying element in each of these, on these items, if possible. My next question is regarding Mellach. I see that you mothballed the plant, which is understandable, but why don't you decommission it, in fact? Why do you prefer to mothball it? Is this just a first step, or is it because there is any other reason on it? My last question regarding renewables, the traditional renewable, I would say solar and photovoltaic and wind. You have a very limited contribution of this kind of activity for the time being in your activity. Probably one way to speed it up quite strongly would be to make some acquisition.
In the meantime, the price on the market are lower at this stage. Do you see a room for significant development in this field in the next few years? Thank you very much.
Yeah. Thank you very much. A number of interesting questions. I will start with the renewables. Yeah, I agree. If you compare it to hydro, the renewables installed capacity is relatively small. Yes, we have participated in a number of M&A processes this year, last year. We continue to participate in such processes. Yes, it is possible. You could even say it is likely that, you know, within the foreseeable future, we are going to increase our generation capacity on the renewable side, on the wind and the PV side, through M&A.
On the load factor, it would be very misleading if I gave you a specific load factor because the beauty of Limberg III is that it is part of a system of reservoirs. To give you a little bit of insight, the fact how we calculate our IRR for Limberg III is not on an isolated basis, but we always have to see it in comparison to the system within which it operates. Also as part of this project, we are increasing one of the reservoirs by increasing the height of the wall, therefore we have much more volume in there.
The reason why we think that this is going to be a very interesting investment is not just that together with its sisters and brothers within you know the system it is one of the largest batteries in the world. It is also it also has the opportunity to very flexibly faster and more efficient pump when the price is low and turbine when the price is high. Yeah. It is more a function of the best hours the cheapest hours the efficiency of the turbine and less what you know from the classic generation in wind in run-of-river power plants in CCGTs where you have a load factor. The next question was on Mellach.
On Mellach, yes, you said it yourself. The first step is the mothballing. You know, there are certain reasons why we didn't go first or directly into decommissioning. You know, we thought about it, but we considered it would be better to mothball first. But you had then a number of other questions.
I think one. Another one was the split of the flex products.
The split of the flex products. We have not given the specific split of the flex products. We've always given the entire number for flexibility products. Just to remind everyone, in our terminology, that would include intraday trading, that would include pumping and turbining. The third one would be control energy, and the fourth one, congestion management. We have always sort of like given you more granularity, like we've done before, that why the changing. It is changing because control energy has gone up, but we don't give a specific split.
Okay. Thank you very much.
You're welcome.
Before we go to the next question, just a brief reminder, if you would like to ask a question, please press zero and one on your telephone keypad now. The next question is from Piotr Dzieciolowski, Citi, Milan. You may open, please go ahead.
Hi, good afternoon, and thank you for the presentation. Just, maybe three questions from my side. I wanted to ask you the first on your, how you think about, capital allocation in light of the super profits which you made. As you mentioned yourself, you didn't expect this type of, power prices. I just wonder at what point we should see either a dividend increase or an update on the CapEx plan and, how you think about this excess profits and, the allocation of it. Second thing on the Gas Connect Austria, I wanted to ask you what is the kind of a medium-term outlook for the profitability of it? Is there anything in your contract, that would, undermine the profitability like some of the contracts expiring? And if so, what would be the years?
Finally, I wanted to ask you on the flex product, do you expect any impact on the profitability of these activities based on the upcoming switching off the plant in the German market? You know, the nuclear lignite imminent shutdowns, there's quite a few capacity going off. Is this changing any dispatch across to Austria?
I will start with the flexibility products. We don't foresee any specific changes there because of the shutdown of the remaining nuclear power plants. On dividend and CapEx, well, we have not too long ago increased our payout ratio by 5 percentage points. Now with the improved profitability as a result of the power prices, obviously, you know, the absolute number, which we're paying out as a dividend, is going up. Currently, also because of our large CapEx which we are planning, we're not foreseeing any changes in terms of the payout ratio. On the Gas Connect Austria, I would like to sort of like to share the answer with Andreas Wollein.
First of all, the Gas Connect Austria, as you know, is a regulated business. We have a regulated system which runs until 2024. We are going to have, obviously already starting earlier, there is going to be a regulatory review. As a result of that regulatory review, it is possible, and this is still far away, but it is possible, that the regulated return could come down. Now, there is one difference between Gas Connect Austria and APG. APG has tremendous growth. Why? Because in order to integrate renewables, we have to make huge investments, by the way, like the rest of Europe, into the grid, into transformer stations.
We have recently increased our 10-year plan to around EUR 3.5 billion. EUR 3.5 billion is an investment which obviously goes directly on top of the regulatory asset base, and our return is a return of our regulatory asset base. Now in Gas Connect Austria, the only additional investments would be into hydrogen, because there we have an existing very high-quality pipeline. This is something we would very much like to do in order to support the regulatory asset base on the gas side.
We are, like the rest of Europe, currently waiting for a regulatory framework, which we consider very important, that every investment into hydrogen, into the refitting of the pipelines, into the refitting of the compressor stations, not only gets a regulatory return, but hopefully gets a regulatory return with a premium, because hydrogen is considered to be a very important factor within the energy transformation. Andreas will give you a little bit more insight on the capacity side, which you also asked about.
Yeah. With regard to profitability, you know that we have currently a regulatory system and a new regulatory period which foresees a 5% return in Gas Connect Austria. We will have that regulatory return, as I said, within or in the next four years. There is a certain volume risk. This is correct in Gas Connect Austria, but I think that's where that's compensated in the regulatory tariff. There will be a decline, I think in contracts, in long-term bookings, between 2025 and 2030. But of course, that was well known when we took over the asset. And it's very transparent, and I think, as Peter mentioned, we see basically two developments.
One is, we are convinced that, let's say, fossil gas will further play an important role within the next decade. We will see basically a trend from long-term bookings towards shorter- term bookings. There will be more. I would say, a structural shift in the next five-10 years. Shorter term bookings have a higher revenue multiple, so that's not necessarily negative. Of course, we see these higher CapEx requirements for hydrogen, yeah, for making the gas grid H2 ready. This is something where there is a lot of discussion.
We have, of course, also our plans here with regard to Gas Connect Austria because it is a long-term target to let's say make sure that the future hydrogen network will also go across Austria. We have a very central position here as a gas hub. It's basically a little bit comparable to the electricity system. Austria, based on its location within Europe, plays a very important role for the exchange of electricity and also for gas and maybe also in the coming years for hydrogen.
Okay, thank you very much.
There are no further questions in the queue, so I hand back to the speakers for closing remarks.
Yes, I would like to thank you all for your interest and a very interesting discussion. I look forward to seeing you either during our next conference call, or maybe during upcoming road shows, when we're allowed to travel again. With that, all the best and have a nice day. Thank you.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.