Dear, ladies and gentlemen, welcome to the conference call of Verbund AG. At our customers' request, this conference will be recorded. As a reminder, all participants may be in a listen only mode. After the presentation, there will be an opportunity to ask questions.
May I now hand you
over to Peter Kollmann, who will lead you through this conference. Please go ahead, sir.
Thank you. Ladies and gentlemen, let me welcome you to our presentation for the 1st 3 quarters, and let me thank you for joining today's conference call. I hope you are all well and healthy. Before we move into the analysis of the business development, let me make a few general comments about the 1st 3 quarters 2020. Despite the challenges and consequences of the COVID-nineteen crisis, including the reduction in electricity demand, Verbund is able to present a good set of results for the 1st 3 quarters.
Improved profitability and lower level of debt the strong commitment of the EU member states towards rapid decarbonization of the energy system supports our solid business model and our focus on electricity production from renewable energy sources. Our expansion of the high voltage grid in Austria, optimizing our downstream activities and investments into innovative new business areas related to green hydrogen and e mobility is an addition to our strong business model. In the Q1, we were able to take an important step to improve our business profile when we signed the contract for the acquisition of the 51% stake in Gatkonnect Austria. As owner and operator of critical infrastructure, this transaction will enlarge the share of our regulated business in our group EBITDA. It will ensure an optimum positioning with regard sector coupling while offering the optionality for a future hydrogen economy.
We are convinced that gas will be an important bridge technology towards the transformation to renewable energy system. Against this background, let me now present the figures for the 1st 3 quarters in detail. At the beginning, in the second page, let me highlight the most important influencing factors. 1st and foremost, the consequences of the corona crisis, mainly lower demand for electricity and as a consequence, lower spot market prices. Following the development of long term futures prices and based on our hedging strategy, the average achieved contract price was higher compared to the first 3 quarters 2019 despite much lower spot market prices for electricity.
The hydro coefficient determining the generation from our Round River hydropower plants was lower than the long term average and was lower than in the 1st 3 quarters of 2019. However, production from our storage power plants increased. Our results development was negatively influenced by slightly lower contribution from the grid segments. Contributions from flexibility products, especially from concession management, also decreased slightly compared to last year. However, the financial results contributed positively.
The impact of these influencing factors on the key figures of Verbund in the 1st three quarters is as follows. EBITDA increased by 4.6% to €990,000,000 The group result increased by 6% to €478,000,000 dollars The margin increased from 33.5 percent to 39 percent. The operating cash flow was lower at a level of EUR 852,000,000. The free cash flow after dividends was positive at a level of EUR 135,800,000 and allowed us to reduce the debt level further. Net debt decreased by almost 11% to a level of slightly above EUR 2,000,000,000 We also improved the outlook for 2020.
So we'll now expect for 2020 an EBITDA between approximately $1,240,000,000 $1,300,000,000 and the group result between approximately EUR 570,000,000 to EUR 610,000,000. The payout ratio will be between 40% 50% of the adjusted group results between approximately EUR 560,000,000 EUR 600,000,000. In the following charts, I will explain the influencing factors on the results in more detail. Let me start with the analysis of the generation volumes. At 0.98%, the hydro coefficient was 2 percentage points below the long term average and 4 percentage points below the levels of the 1st 3 quarters 2019.
But we saw better levels in all three months of the Q3 compared to last year. However, the production from annual storage power plants increased by close to 17% due to increased lowering of water levels and more turbining. Oil production from hydropower, therefore, remained roughly stable at 24.3 gigawatt hours compared to the 1st 3 quarters 2019. Generation from thermal power plants was down by 24.4% or minus 261 gigawatt hours, stemming mainly from the decreased use of our Mela CCGT. Generation from wind power increased by 2.6% or 17 gigawatt hours to 6 80 gigawatt hours due to better wind conditions in Germany and Romania and that counterbalanced less favorable ones in Austria.
A second important influencing factor on our results. As you know, the average achieved contract prices at the end of the 1st 3 quarters 2020, again, based on our hedging strategy, we achieved an average achieved contract price for our hydro generation of EUR 44.9. For the full year 2019, we achieved EUR 39. Now please note that we have already hedged approximately 96% of the volumes for 2020. On a mark to market basis, as of the end of October, we calculated with a price of €44.7 per megawatt hour.
As you know, €1, plus or minus, has a sensitivity of approximately €25,000,000 in the EBITDA line for the entire year. Now on the next page, we talk about the flexibility products. You know that one of the major trends in the new energy world is increasing volatility in our European grid system. That is a result of the massive development of renewables. We have very flexible assets consisting of CO2 free, low cost pump storage power plants and the most modern CCGT in Austria.
So as a result of that, we are very well positioned to benefit from this trend through the sale of our flexibility products. After a result of EUR 90,000,000 in the 1st 3 quarters 2019 from Flexibility Products, we registered a slightly lower value of €87,000,000 in 2020. The decrease results mainly from lower contribution from concession management. Please note that since October 2018, our Mellark CCGT has been put into a strategic reserve mechanism, under which we receive a fixed capacity payment and a payment for the generation. As a consequence, we have changed what used to be an unpredictable volatile cash flow into a secure stable cash flow for a period of 3 years.
Now our guidance for the full year 2020 for our flexibility products remains at approximately €110,000,000 On the next page, again, a short summary on our high voltage grid. As you know, we have a system length of approximately 7,000 kilometers, interconnected capacities with 7 neighboring countries. As we have discussed many times on this conference call, strategically very important to us, not just because it is a regulated business, but also because the grid within the European Energy Transformation plays a very important strategic role. Also, as we have discussed on many conference calls, there is a difference between IFRS and local GAAP. As a result of that, we have volatility in the results contribution.
That is something we cannot avoid because IFRS does not accept what we have in local GAAP, which is a regulatory account. The EBITDA from the grid business, according to IFRS, was almost unchanged in the 1st 3 quarters of 2020, but we increased the guidance for the Grid segment for the full year 2020 from EUR 200,000,000 to EUR 240,000,000. Now this is a strong increase. This strong increase results from lower expenses for concession management due to the better than expected weather situation during the summertime. I'm sure that this is something we will discuss in the Q and A in more detail.
Please also note that the current regulatory period started on the 1st January 2018 with a WACC of 4.88% for existing assets and 5.2% for new assets. As a result, an average of approximately 5%. The regulatory period lasts from 2018 to 2022. The current regulatory asset base is EUR 1 point 7,000,000,000 and steadily increasing. On the next slide, you see the nonrecurring effects in the 1st three quarters.
We encountered impairments amounting to $14,600,000 in total, stemming from an impairment in our Mellach CCGT, then our hydropower plant in Graz and our hydropower plant in Greece. The reason is higher cost of capital. In addition, there is a measurement of an obligation to return on investment, which is our hydropower plant in Jochenstein. That amounts to SEK 26,100,000 and had a positive effect on the other financial results. Then we had a small impairment in Austria, in Albania.
Overall, the financial results showed nonrecurring effects amounting to $25,300,000 in total. After considering the impact from the nonrecurring effects above on taxes and minorities, the nonrecurring effects on the group result level amounted to €9,500,000 Therefore, also the approximately €10,000,000 difference in our guidance, which I've mentioned before. We also show the nonrecurring effects in the first half year of twenty nineteen to give you a comparison. Now on the next slide, we show the effects described before, what has been the influence on our key financial figures. As I mentioned, EBITDA increased by CHF 43,300,000 or 4.6 percent to $989,500,000 This increase is a result of mainly for Hydro segment, which was $58,700,000 higher than in 2019.
I also mentioned higher average achieved contract prices and higher production from storage power plants more than compensated at below average hydro coefficient. The sales segment also shows a positive contribution with an increase of €11,000,000 compared to last year. The increase in the sales segment is a result of higher transfer price margins, recalculation of electricity deliveries and absence of negative valuation effects compared to last year. EBITDA contributions from the Grid segment decreased by $2,400,000 from the new renewable segment by $5,400,000 and from all other segments by $15,000,000 mainly due to lower thermal generation. The financial results strongly improved to $16,800,000 dollars This was caused by lower interest expenses because of high repayments in 2019 2020.
That, of course, is a logical consequence of our repayment of debt. The EBITDA margin increased to a level of 39.2%. The EBIT margin also increased from a level of 23.9% to 27.5%. Finally, I would like to mention the additions to tangible assets, which were based on our CapEx plan far above the previous year's level, now at EUR362,000,000. The additions concerned mainly hydropower plant, Turgene in Bavaria as well as investments into the high voltage grid.
On the next page, our net debt and cash flow numbers. Verbumso, operating cash flow decreased compared to 2019. It decreased by 4.6% to $852,300,000 due to lower revenues from the grid usage and additional margining payments for our electricity hedging transactions, higher revenues from hydro production had an opposite effect. The free cash flow of the dividend showed a decrease to a level of SEK 135,800,000 mainly due to higher CapEx and an increase in dividends. Net debt decreased further to around $2,000,000,000 from previously $2,300,000,000 dollars as a result of the positive free cash flow and the repayment of a fixed interest bond in the amount of $200,000,000 in June of this year.
Our gearing decreased from 34.4 percent at the end of 2019 to just below 30% at the end of the first 3 quarters of 2020. Now on the next page, we talk about our financial liabilities. The debt maturity profile shows the remaining repayment of only 11,000,000 in 2020. I mentioned our large repayment in June of EUR 200,000,000. Dollars The debt maturity profile for the following years shows another peak in 2024, where we have repayments of 525,000,000 dollars mainly consisting of our green bonds in the amount of €500,000,000 which we had issued in 2014.
As a liquidity backup, we have access to $500,000,000 syndicated loan facility, which is undrawn, has no MAC clause and is available until 23 with 2 extension options. We also have access to uncommitted lines with a large number of banks up to an amount of EUR 610,000,000. We utilized EUR 119,000,000 of those as of end of October 2020. The total amount of our financial liabilities is just above SEK 1,000,000,000. The average interest rate on our debt is approximately 2.3 percent.
80% of our debt is subject to fixed interest. 100% of our financial liabilities are denominated in euros. Now on our external ratings, these remain unchanged compared to the Q2. The S and P rating is still a single A stable at S and P. The Moody's rating is still at A3 stable outlook.
The rating clearly reflects the sound financial figures and our strong liquidity situation and obviously a large number of measures, which we have taken in the past and a very stable business model. On the next page, I would like to take you through our CapEx plan 2020 to 2022. The overall figures are unchanged. The total CapEx for the 3 year period between 2020 2022 is still around EUR 2,000,000,000 split into growth CapEx of EUR 1,300,000,000 and maintenance CapEx of 7 approximately EUR 790,000,000 The main part of the growth CapEx, approximately EUR 719,000,000 will be invested into the regulated grid business, particularly our 3 18 kVselberg line. In order to increase the capacity to integrate new renewables and better address the volatility and the congestions in the grid system.
Our biggest project in the hydro segment is the construction of the Rund River power plants in Turgene, a project which we acquired in 2,009 when we bought the hydro power plant on the river in. In addition to the growth CapEx, we are planning to invest around EUR 790,000,000 into maintenance between 2020 2022, approximately EUR 265,000,000 per annum. Please note that we stick to our CapEx plan despite the fact that we saw some temporary delays caused by the coronavirus, something we discussed on our last conference call. Now at the end of the results presentation, now the outlook. As you know, the key parameters for the development of the operations business are mainly prices and hydro volumes.
At the end of the Q1, we have hedged approximately 53% of our hydro generation at an average price of $44,300,000 for 2021, which is slightly below the average achieved contract price for 2020, where we had a level of $44,900,000 On a mark to market basis, as of October 27, the average achieved price would be at a level of EUR 43 per megawatt hour. We've also hedged approximately 11% of our hydro generation for 2022, this at an average price of EUR 44.4 The mark to market valuation shows a level of EUR 44.1 for 2022. With regard to the year to date hydro situation, we have currently a hydro coefficient of 1 point 01. As I mentioned before, we increased our guidance for the full year 2020. We now guide an EBITDA between SEK 1,240,000,000 and SEK 1,300,000,000 and a group result of approximately between EUR 570,000,000 EUR 610,000,000 under the assumption of average hydro and wind generation for the last quarter 2020.
For financial for the entire financial year 2020, Vergund plans to pay out between 40% 50% of the group results after adjusting for nonrecurring effects. That would be approximately EUR 560,000,000 to EUR 600,000,000 before we went through the impairments of around EUR 9,500,000. As always at this point, I would like to highlight what the sensitivities are. A deviation of plusminus1% in the generation from hydropower would have an impact of plusminus1,500,000 in the group results because we have hedged already a very, very high percentage. A deviation of plusminus 1% of this generation from wind power has an impact of plusminus 0.2000000 and a deviation of plusminus €1,000,000 in the wholesale price has an impact of plusminus €700,000 in the group result.
Now with that, I would like to open our Q and A session. Please go ahead.
Ladies and gentlemen, we will now begin our question and answer session. And the first question we received is from Tania Morgloff of Commerzbank AG. Your line is now open, madam. Please go ahead.
Yes, good morning. I would be interested whether you could give us some guidance on the impact of the Gasconet Austria acquisition on your CapEx plan? But I think so far you have not included any impact in your guidance.
Yes, sure. Maybe a general comment on GetConnect Austria. GetConnect Austria, as you know, we have signed. At the moment, we are working towards the closing. We think that the closing will happen most likely towards the beginning of the Q2 2021.
As a result of that, we will show with the half year numbers 2021, the full consolidation of GetConnect Austria. So as a result of that, please note that the full consolidation will only happen for the last 6 months of 2021. Now as far as CapEx is concerned, CapEx, we have not given any guidance on that. Generally speaking, we have decided that we are going to give full detail on Gazkonet Austria only after the closing of the transaction, something you will certainly understand This year, obviously, there is no impact. And generally speaking, the CapEx numbers of Gasconet Austria are relatively low.
You probably have APG in line, where we have increasing CapEx numbers as a result of the Salzburg line, as a result of many investments into the electricity grid with Gasconc Austria. It is a different situation. There we have mainly maintenance CapEx. And the only big investments, large investments will occur when we're going to invest for hydrogen, yes, for the hydrogen economy, and that is something that will obviously occur in the future.
And the next question we received is from Mikael Zavala of Bank of America. Your line is now open, sir. Please go ahead.
Hi, good morning, everyone. So two questions from me, please. The first one, I would be interested in hearing your views about the Austrian growth flow on renewable support. And particularly if you see CapEx upside to your guidance to 2022? And the second one is maybe a bit more thematic, just thinking about the next decade when the share of renewables in Austria approaches 100%.
Obviously, you have right now a marginal pricing system, so that's likely to result in lower power prices and more zero price towers from renewables. So potentially a risk to any merchant renewable assets. So do you have any thoughts on what could potentially prevent this scenario from happening? Is it the introduction of batteries, storage in the form of hydrogen? Is it maybe a reform of the power passing system?
So how do you think about this issue over the next decade? Thank you.
Yes. I will start with your second question, and you know it is a very complex one. What you're basically asking is our views on the energy transformation and that energy transformation is not only a topic in Austria, it is a European topic. And in your question, you have mentioned a number of very important issues. Let me try to summarize because that is something we could discuss for hours.
But the key points is the way I see it is the following. We have a massive build out of renewables. The renewables, the production cost of energy are getting cheaper. Technology is increasing. As a result of that, you would assume that the power price goes down.
At the same time, we have a situation that we don't have a price effective storage system. We just don't have it. We have a storage system, where short term, we can with lithium ion batteries store, but what we don't have is a seasonal storage system, which is exactly what you would need when PV and wind produces less at a time when the energy consumption is at the highest, which would be the entire winter period. And for that entire period, what you need is a backup system. If you don't have a backup system, you have a blackout.
And that backup system, by definition, cannot consist of renewables only, you need baseload. And the base load is coming out of the market. So a lot of people basically assume, well, coal is coming out of the market, nuclear is coming out of the market, the power price needs to increase. Yes, no. The one thing which we need to be aware of in terms of the energy transformation, and this is not just over the next 1, 2, 3 years, it is something that is going to stay with us over the next 10 years.
We need to understand the pricing of the backup system. Our assumption for Bond is that we need as a bridge technology gas. Why? Because we don't think that we are going to have cheap storage in large quantities, which we can use as seasonal storage. Hydrogen is a possibility, but it's not cheap, and it needs development.
So this is something where we need to look way into the future. So what is going to happen in the meantime? In the meantime, we are going to have massive build out of renewables. When the wind blows and the sun shines, we're going to have very cheap power prices. At a point in time when we don't have the renewables, we need the backup system and the backup system is going to be relatively expensive.
And then you can basically see and that is basically that is a theoretical assumption, which you really need to make hour by hour where you think the power prices could be. I'm sure that you have follow-up questions, and we can certainly go into those follow-up questions. But now I would like to come back to your first question. Now we like many other countries in Europe, we have a renewable legislation, a new renewable legislation. The objective of the legislation is very logical and is similar to many countries.
The measures that are going to be taken, they are different from country to country. Austria's current framework is very ambitious. Austria wants to be CO2 free in 2,030. In order to achieve that, we would have to build more than 10 terawatt hours in PV, something like 10 terawatt hours in wind and something like 5 terawatt hours in water. So what that basically means is you need to have another Verbund being built over the next 10 years, yes?
You all know that we have massive hydropower stations along the Danube. We have in some we have more than 130 hydropower stations. We have pump storage, etcetera, etcetera. So all that, what we have built over the last 50 years, we have to build over the next 10 years. That is a huge challenge.
The other challenge is land. You need a lot of land to build all that. You need to take agricultural land and you need to transfer it to land which can be used for PV. That takes time. That is going to be a challenge.
So to summarize, yes, the regulatory framework, which by the way has not been decided yet, it still has to go through parliament, and that will probably take until the beginning of next year, is a very important guideline, is a very important framework. But at the same time, it is very challenging.
And the next question received is from Wanda Srinivka of Jefferies. Your line is now open, madam. Please go ahead.
Hi, good morning. Wanda Serynofka, Credit Suisse. Two questions for me. The first one is on DTA. You disclosed revenue and EBITDA of the asset.
Could you also disclose net income after minorities and free cash flow, if possible? And my second question is about your view on the power price and carbon. What do you see over the next 1 to 3
years? Years?
Yes. I will start with the second one, power price and carbon. When you ask 10 people, you get 10 different opinions. I've never been shy to give my opinion, So I will do it again. I think that we're not going to see a dramatic movement in power prices over the next 2 years.
I think that we are going to trade within a range, in my view, between 35% 45%. I don't see major catalysts either for the power price to go down or for the power price to go up. As far as CO2 prices are concerned, there are really 2 schools. The school that is basically talking about very high CO2 prices is gaining momentum and the one that is that believes in low CO2 prices is getting smaller. However, the input factors into CO2 pricing are very complex.
I just mentioned one thing. You know that the EU Commission and several national legislators would like to have CO2 being extended to various sectors, like traffic, for example, and households and industries. As a result of that, you would have a major influencing factor. I don't want to go into any details, but just to give you food for thought, the German industry is going through a pretty tough time, as we know, in terms of economic growth. The one thing they don't need is a very high power price.
As a result of that, I am absolutely convinced that the German industry will have a very forceful discussion with the legislators in Germany in terms of power price and all the input factors into the power price. What I'm hearing from major representatives of the industry, they're already talking about the fact that the German industry has a tough time to remain competitive in comparison to the U. S. And to Asia because of higher power prices. As a result of that, I think that key economies will try to find the balance between CO2 pricing, high power prices and the competitiveness of their industry.
Now on Gasconet Austria, we don't give any details in terms of minorities and cash flow. We will in the future after the closing. At this point in time, what I can tell you is for your model that we will have a revenue addition of approximately EUR 200,000,000. The EBITDA contribution will be approximately EUR 100,000,000. The EBIT around EUR 50,000,000 to EUR 60,000,000, Yes?
So that is sort of the numbers I would like to share. However, in terms of detailed numbers of Gasconet Austria, I would kindly ask you to be patient and to wait until we have our closing down.
Thank you very much. Can I ask one quick follow-up?
Sure. Have
you seen any impact on the demand and power prices given the 2nd round of lockdowns?
Yes. No, that's a good question. We are following the supply demand situation, not just on the Verbund side but also on the grid side because it's important in terms of the congestion management and a few other aspects. What we're currently seeing is 5%. Those are the latest figures which I have in Austria, 5% below last year's monthly figures.
Werner, you might remember that when we discussed on the last conference call sort of like the impact of the last lockdown, there we have seen in Austria around minus 15%. That was relatively close to what we have seen in Germany. In Spain and Italy, we have seen even higher numbers. It's going to be interesting to see if the new lockdown is going to have an impact of the 5% to maximum 10%, which we currently predict or if it's going to be higher. The reason why I don't think that it is going to be as high as the lockdown as the last lockdown is because the governments have decided that industries, like the car industry in Germany, for example, should not be impacted by the lockdown, yes?
If, however, the numbers the COVID numbers increased dramatically And if countries came to the conclusion that there needs to be a wider lockdown, I. E, the similar lockdown which we have seen in spring, then we would probably see demand decreases similar to numbers which we have seen before, like up to 15%.
Thank you very much. Super helpful.
And the next question received is from Lueder Schumacher of SocGen. Your line is now open, sir. Please go ahead.
Good morning. Peter, let me just come back to the Renewable Expansion Law. As you mentioned, it's a very ambitious law, adding 20 7 terawatts of renewable output over 10 years. The load factors that are being mentioned in the law, you get to about 16 gigawatts of new installed renewable capacity. That should be a huge growth opportunity for you.
And yet there's not a single slide in your presentation. You did not mention it in the main presentation. What are the details of the law? Is it just not attractive enough, the kind of incentives that are being offered there in terms of feed in tariffs or construction cost subsidies? I'm pretty sure you have gone through the law in detail.
What is the reason why we are not hearing more about it? Is it just not attractive enough or just too early days? Or you're too busy with Gas Connect Austria?
No, we actually yes, we are busy with GatConnect Austria, but we're also busy with a lot of other things, as you can imagine. No, you are asking the right question, and I'm more than happy to discuss it with this group. It is too early. And at the same time, I think it is important for us as business people to be realistic. You have mentioned load factors.
I mean, that is something I haven't even mentioned before. I was just talking about terawatt hours that need to be built. Obviously, the load factors are completely different from a hydro power station. As a result of that, indeed, you need huge
numbers of installed capacity just in order to
get to the required terawatt And we all know Austria, or at least some of you know Austria pretty well, from skiing and from summer vacation, not just from cultural events. Austria is not a flat country like the Netherlands or Spain or other areas of Europe. It's a mountainous area. It is an area where it is simply very, very difficult to build huge amounts of PV. Wind has been challenging all over Europe, where like in Bavaria, for example, the wind has been very, very slow in terms of build outs because municipalities have decided against wind because people don't want to have wind in their backyard.
As a result of that, it's going to be at the beginning a relatively slow development, and we are trying to be realistic. On paper, literally, you're right. It is a huge growth opportunity on paper. In practice, we need to see the distribution of the investments. What I mean by that is that obviously, the operators, which are owned by the regional governments, like EVN, for example, and others, they are going to be very much focused on the build out of renewables as well.
We are going to be very focused, as always, on the build out of hydro, hydropower capacity, but that is not changing with the Renewable Law. And we need to observe the space very, very carefully. To sum up, early days, we're totally focused on it. We have a large team working on it. We're looking at opportunities every day.
But at the same time, we want to keep the balance, which and you know as well, we want to keep the balance between growth opportunity and creating value, I. E, making an investment that makes us money.
Can I just follow-up on this?
Even if
you say PV and wind EBIT leave it to others, just focus on hydro. Under the law, the 5 terawatt hours was the load factor from the law. You're talking about 1100 Megawatts to be built. But the point is, if it would be economically feasible to build new hydro in Austria, I'm pretty sure you would have done this a long time ago, Hence, all the investments in Switzerland elsewhere because everywhere where it's sensible to build new hydro, it has been done. So are the incentives in the law big enough for you to consider?
Yes. There aren't the incentives for large hydro are not huge. The incentives for small hydro are very interesting. As a result of that, the key parameter to build large hydro, yes, it cannot solely be the investment subsidies which you get. And obviously, some of the investment subsidies are very interesting, like we have faster depreciation.
There are investment subsidies as a result of COVID-nineteen of significant numbers. All that we are going to use. And as a result of that, yes, we have some projects which are now more interesting than they were before. And those projects we will build. At the same time, we have also seen an increase in the power price.
As a result of that, obviously, in a recalculation of the power project, which we're doing today in comparison to the power project, which we calculated in 2016 or 2017, it is more interesting today, yes? We have also seen a decrease in our weighted cost of capital. We have seen a decrease in our funding as a result of that. Some of the larger hydro projects are simply more interesting than they were 2, 3 years ago. And as a result of that, that is something we are going to consider.
So what you should expect? And I don't want to go into details because it is something which we always tell you when we do our full year results presentation in spring of next year. But you can expect an increase in our CapEx, yes? We have currently EUR 2,000,000,000, which there was a full year CapEx plan 2020 to 2022. You can expect that we are going to increase our CapEx plan.
And that increase and I'm not going to go into details, but this increase will be shared between the grid, hydro and new renewables. And that CapEx plan does obviously not include potential inorganic situations, M and A situations, which is something we're always looking at.
Very interesting. Just the last one. When do you think you'd be in a position to give specific numbers on interesting and very interesting in terms of feed and tariffs and construction cost subsidies? Is that something that we can expect also with full year results
when you Actually, yes, that is something where we have only just seen the end of the observation period where all the stakeholders can familiarize themselves with the new draft legislation. They have been able to comment until like a week ago. Those comments are going to be discussed and analyzed with the ministry. Then the ministry will come up either with the same draft or with the change draft. That will go into Parliament.
Parliament always has the possibility to discuss. And then we're going to have the new law with the details by the end well, I shouldn't say by the end of this year, but at the beginning of next year would be my estimate. Probably, my feeling is end of January. And then obviously, our Investor Relations department will be in discussions with you. We don't have a conference call, but we'll be in discussions with you.
The details are going to be public, and you will be able then to look into the mechanism, into the methodology of the new legislation.
That's great. Thank you very much.
And the next question received is from Theresa Shinbald of Raiffeisen Central Bank. Your line is now open, madam. Please go ahead.
Thank you and good morning, late good morning, everyone. And also my question is on the new law, but on a different angle actually. Because one thing that wasn't clearly mentioned was the grid. When can we expect a new grid development plan that's sufficient to keep all the new renewables running? That's the first part of the question.
2nd one is actually also the tariff system in Austria doesn't seem to be fit perfectly fit for the new volatile system. What's your expectations for changes also considering that I believe you're still in negotiations with the regulator on the regulatory account?
Yes. Thank you, Theresa. You mentioned an important point, I'm glad you're mentioning it because the grid is indeed very important. I can give you the current grid development plan, the number for the next 10 years, which is close to SEK 3,000,000,000. That includes a lot of projects that are actually important for the system stability, also in line with the 7 neighbors.
We cannot just look at our own system, The entire European grid system is an interconnected system. As a result of that, we need to be closely coordinated with all the neighbors around us. The sales part line is the most immediate big investment of anything between €800,000,000 to €900,000,000 So that is a huge project. It is a very important project. We're very happy that only a short while ago, we have received the final the very final confirmation from the courts that we that the sales pipeline can be built.
And we have already started, and this is something that is going to be completed within the next 3 years. But that is only one component. There will be many other components within the Austrian grid, which are going to be built. You are insinuating that the new grid development plan could be even higher than the SEK 3,000,000,000 Yes, it is possible. It's a stakeholder process where everybody has an impact or has an input on the 10 year grid development plan.
It is possible that we're going to see an increase of around 10%, but that is something that is a pure estimate. And I don't know what the new plan is going to look like, but it will probably be slightly higher. On the tariff system, again, that is an important point. That is something that is also being discussed in Germany with a lot of intensity. When you have the demand by the system to make huge investments as a result of that, you obviously want to have a proper return for those investments.
That is something where we are very focused. We have a team that is already working on the tariff argumentation and the tariff discussions for the tariffs starting in 2023. So we're trying to be ahead of the curve. We're trying to anticipate what the new tariffs could be. And we're obviously trying to make the regulator be more understanding in terms of the tremendous responsibility grid operators have nowadays across Europe.
They are system integrators. They're not just like in the old days, building a line from A to B and making sure that we don't have a blackout. They have really turned into very, very important system integrators within an energy transformation. And I think that should be respected in the new tariff system.
So just to get it right, it's nothing we can expect to be 2 years within the next, let's say, 9 months. So, late 'twenty one at the earliest.
Yes. Starting new regulatory systems starting in beginning of 2023, I would be very, very surprised if we had a number before 2022. The discussions take a long time. They're very complex. It involves not just the high voltage grid, but it also has an impact on the distribution.
And quite frankly, all that also has an implication in terms of the regulation of our new assets, which is Gasconet Austria. So it's all interlinked. It's the same regulator.
Sure. Thank you. Thank you very much.
As there are no further questions, I hand back to Mr. Coleman for closing remarks.
Yes. I would like to thank you for I should always say it's a very interesting discussion, very important questions. And I would like to thank you for your interest. And I'm sure that with the lockdown, which we're currently seeing, which is also impacting all of you, It's going to be a challenging period between now and the end of the year, probably going into spring. Our team is always available in terms of video conferencing.
You have seen that we have not been able to go on the regular roadshows to see you personally to have personal meetings. However, so far and I would like to thank you for that so far, communication has worked extremely well. We have been in with both the research analysts, the rating agencies and, of course, our institutional investors across the world on a very regular basis. And we hope that we don't have to continue with that for too long. But in the meantime, we can say that it has worked extremely well.
And we will continue over the next few months during lockdown to communicate with you according to the way we have done it before. And I wish you all the best. Stay healthy. Thank you.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.