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 will 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 the presentation of FoRB for the Q1 2020. And let me thank you for joining today's conference call in these exceptional times. I hope you're all well and healthy. I'm sitting here on my own in my office.
Andreas Wallachn is in a different room. So you see we take social distancing very seriously. Before we move into the analysis of the business development of our GOMS, let me make a few general comments about this extraordinary Q1 2020. 2020 started well for the general economy and for Booms until the coronavirus arrived in Europe and had devastating consequences, not only on the people but also on the economy as a whole. The energy business sector, as you know, could not escape from this development.
The situation is being characterized by falling prices for primary energy sources, CO2 certificates and declining demand for electricity. All that results in a decline in wholesale prices for electricity, which obviously has an impact on us. However, due to our hedging strategy, Verbund managed to deliver a satisfying results development in the Q1, slightly lower on a year to year comparison. But we managed to guarantee the security of supply in Austria without any issues and problems, and we are ready to restart with our project pipeline once corona restrictions will be lifted. Against this background, I'm going to present the figures for the Q1 to you now, and moving to the next page.
As always at the beginning, I want to highlight the most important influencing factors on our results development. Based on our long term hedging strategy for our own generation from hydropower, the average achieved contract price was higher compared to the Q1 2019 despite much lower spot market prices for electricity. The hydro coefficients determining the generation from our Round of River hydropower plants was higher than the long term average but considerably lower than in the Q1 2019. Contributions from flexibility products, especially from congestion management, increased compared to last year. And overall, the results development was negatively influenced by lower contributions from the grid segment.
The impact of these influencing factors on the key figures is as follows: EBITDA decreased slightly by 4.9%. The group result decreased by 12% to EUR 156,500,000. The operating cash flow was at a level of EUR 298,000,000. That's a minus of 21.5%. The free cash flow was positive at a level of EUR 150,000,000 and allowed us to reduce the debt level further.
Net debt decreased by 6.7 percent to a level of SEK 2,100,000,000. Let me now give you our adjusted outlook for the business year 2020. Due to the COVID crisis, we adjusted our guidance range. For Wound expects for 2020 an EBITDA between SEK 1,090,000,000 to SEK 1,250,000,000 and a group result between €470,000,000 to €560,000,000 The payout ratio will be between 40% 50% of the adjusted group results. The adjustment reflects the significantly lower spot market prices for unhedged volumes for 2020 and the lower contribution from the grid business coming from lower national tariffs because of lower demand for electricity as well as lower contributions from congestion management services and auctioning of cross border grid capacities.
On the next page on those charts, I will explain the influencing factors in more detail. I would like to start with our own generation volumes. If you look at the hydro coefficient, we saw low levels in January but above average levels in February March. At 109, the hydro coefficients, you know, an index quantifying the hydropower generation of the Round River power plant, was 9 percentage points above the long term average, but twelve percentage points below the level of the Q1 2019, which was exceptional. However, the production from annual starch power plants increased by approximately 14% due to increased lowering of water levels and more turbining.
Own production from hydro power, therefore, only slightly decreased by 122 gigawatt hours or 1.6% compared to the Q1 2019. Generation from thermal power was up by close to 50% or 191 gigawatt hours, risen mainly from the increased use of the CECG derailleur for concession management. Generation from wind power also increased by 19 gigawatt hours to 6.2% due to a more favorable wind condition, particularly in Germany and Romania. 2nd important influencing factor is, of course, the average achieved contract prices. At the end of the Q1 2020, always based on our hedging strategy, we achieved an average achieved contract price for a hydro generation of EUR 46.2.
For the full year 2019, we achieved EUR 39. Please note that we have already hedged approximately 78% of the volumes for 2020. Now on a mark to market basis, as of the end of April 2020, we calculate with a price of €43.7 per megawatt hour plusminus €1 has a sensitivity of approximately €25,000,000 in the EBITDA line. On the next page, flexibility products. You know that one of the major trends in the new energy world is increasing volatility in the European grid system, a result of the massive development of renewables with our very flexible asset base consisting of CO2 free, low cost pumped storage power plants and our very modern Cisigit in Austria, we're very well positioned to benefit from this trend through the sale of flexibility products.
As a result of CHF 23,000,000 in the Q1 2019 from these flexibility products to register the value of SEK 32,000,000 in the Q1 2020. The increase results mainly from higher contributions from congestion management. Please also note that since October 2018, our CCGT Imela has been put into a strategic reserve mechanism in Austria, under which we receive a fixed capacity payment and a payment for the generation. As a consequence, we have changed an unpredictable volatile cash flow into a secure stable cash flow for a period of 3 years. For 2020, we maintain our guidance for flexibility products, which is approximately €100,000,000 On the next page, we talk about our grid.
As you know, the grid continues to be of strategically high importance for the group. It has an increasing importance in the European grid system. We like we very much like the regulated character of the business. As always, I mentioned that there is a gap contrast between IFRS and local GAAP that creates a certain amount of volatility in the results contribution, which unfortunately we cannot avoid. The chart on the left hand side provides you with a comparison between the EBITDA according to local GAAP and the EBITDA according to IFRS for 2019, for 2020 and of course, our guidance for 2020.
The EBITDA from the grid business according to IFRS slightly decreased from €98,000,000 to €84,000,000 The reason for the decrease results mainly from lower contributions from congestion management. We reduced the grid guidance from approximately EUR 220,000,000 to approximately EUR 190,000,000 because we expect lower contributions from congestion management services and optioning off of cross border grid capacities, mainly as a result of the COVID-nineteen crisis. Please also note that the current regulatory period started on the 1st January 2018 with a WACC of 4.88 percent pretax for existing assets and 5.2 percent pretax, including an investment market for new assets, therefore, on average approximately 5%. The regulatory period starts from 2018 to 2022. The regulatory asset base for 2020 is approximately €1,700,000,000 euros Now the next slide shows how the effects described before influenced our key financial figures.
As I mentioned, the forward EBITDA decreased by EUR 16,900,000 to EUR 331,000,000. The decrease is mainly caused by the Grid segment, which was €13,400,000 lower than in the Q1 2019. All other segments was also down by €8,700,000 mainly due to the Thermal segment being lower as there were no positive contributions from changes in provisions compared to last year. These effects were slightly counterbalanced by higher EBITDA contribution from the hydro segment, which was about €2,000,000 and the new Renewables segment with €2,000,000 and the sales segment with €1,700,000 Depreciation increased by €5,000,000 and the financial results deteriorated by €9,800,000 from minus €2,200,000 This was mainly attributable to the other financial results to the negative measurement of securities according to IFRS 9. Lower earnings contributions from interest accounted for using the equity method also had a negative effect.
Lower interest expenses because of high repayments in 2019, however, showed a clear positive effect. The group result therefore decreased by CHF 21,600,000 or 12.1 percent to CHF 156,500,000. EBITDA margin slightly decreased to a level of 26.3%. EBIT margin also decreased from a level of 21.4% to 18.8%, reflecting the above mentioned effects. Finally, I would like to mention the additions to tangible assets, which were based on our CapEx plan above the previous year's level of $88,200,000 The additions concern mainly the hydropower plant in Turgene, in Bavaria as well as grid investments.
On the next page, I'll start with the operating cash flow in the Q1 2020 decreased compared to the Q1 2019, The decrease of 21.5 percent to CHF 298,200,000 is mainly caused by margining payments from the Energy business and changes in the working capital. The free cash flow showed a decrease from $305,600,000 to a level of $150,000,000 caused by the lower operating cash flow as described before and increased investment activity. Net debt, as a result, decreased to around SEK 2,100,000,000 from SEK 2,300,000,000. Our gearing decreased from 34.4% at the end of 2019 to 30.7% at the end of the Q1 of 2020. Now with that, I would like to hand over to Andreas Wallach, who is going to take us through the financial liabilities and the CapEx plan 2020 to 2022.
Please, Andreas.
Yes. Thank you, Peter. So on Page 9, you see, as always, our chart showing our development with regard to financial liabilities. The debt maturity profile shows a remaining repayment of €226,000,000 for this year, mainly consisting of a fixed interest bond in the amount of €200,000,000 The debt maturity profile also shows another peak in 2024 with repayments of about €525,000,000 mainly consisting of a fixed interest, only in the amount of €500,000,000 So this year's repayment will be done mainly out of our, let's say, free cash flow. So this amount basically is fully colored.
As liquidity backup for builders access to a €500,000,000 syndicated loan facility, which is undrawn, has no MAC clause and is available until 2023 with 2 extension options. So this works very well as a liquidity backup, especially in these times where liquidity is very important. Verbund has also access to uncommitted lives with a large number of banks up to an amount of approximately 400 €1,000,000 The total amount of financial liabilities is around €1,000,000,000 so a very long number. The average interest rate of our debt is approximately 2.8%, and 98% of our debt is subject to fixed interest rates. In Q1 2020, the development of the external ratings of Fund AG showed a continuing positive trend.
So after the Standard and Poor's upgrade at the end of last year to a single A flat stable outlook. Also Moody's improved and upgraded for pools rating in January to a fairly stable outlook. So we are now among all the utilities in Europe, I would say, among the best rated utilities. And this development is clearly a result of the numbers measures Footprint has taken in the past to increase and optimize the cash flow and also, of course, the better market conditions for the Footprint business model so far. When we move to Page 10, you see the CapEx plan.
You see the CapEx plan. The CapEx plan is unchanged. So we see work under a 3 years CapEx plan of about €2,000,000,000 So you see the split between the growth CapEx and the maintenance CapEx. So it's about €790,000,000 is the maintenance CapEx, about €1,300,000,000 is growth CapEx. The main part of the growth CapEx, we've invested into the regulated business, especially into the 380 kilowatt Seixby line in order to increase the capacity to integrate new renewables and also better address the volatility and congestions in the grid system.
About €520,000,000 will be invested into hydropower and new renewables. The biggest project here in the hydro segment is the construction of the Ramov River power plant, Turgene, in Bavaria, a project which we acquired in 2,009 and we bought we had when we bought the hydro power plants on the Ein River. In addition to the growth CapEx, we are planning to invest around €790,000,000 into maintenance between 202020 22, which is approximately €260,000,000 per year. So the CapEx plan as a basic message is unchanged even in this environment and we are further working on our projects, which I described. So now, let's say, the last slide of the presentation, I would like to hand over again to Pieter to present the outlook.
Thank you.
Yes. Thank you, Andreas. As you know, key parameters for development of our operational business are prices and hydro volumes. Now let's look at 2021. At the end of the Q1, we attached approximately 34% of our hydro generation at an average price of EUR 46.2 for 2021, which is approximately EUR 7.2 above the level of the full year 2019.
Now important on a mark to market basis, as of April 24, the average achieved price would be at the level of €42.3 per megawatt hour, approximately €3.3 above the 2019 level. We have also hedged approximately 5% for hydro generation at an average price of $43,200,000 for 2022. The mark to market evaluation shows a level of EUR 43.9 for 2022. With regard to the year to date hydro situation, we have to report a hydro coefficient of 1.01 as of end of April, which is 1 percentage point above the long term average. On the basis of the aforementioned developments, the guidance for the full year 2020 is now an EBITDA of approximately between EUR 1,090,000,000 to EUR 1,250,000,000 and the group result of approximately between EUR €470,000,000 to €560,000,000 under the assumption of average hydro and wind generation for the quarters to the 4 as well as the chances and risk situation of the group.
For the financial year 2020, Verbund plans to pay out between 40% 50% of the group results after adjustments for nonrecurring effects. As always at this point, I would like to highlight our sensitivities, A deviation of plusminus 1% in the generation from hydropower has an impact of plusminus 3,700,000 In the group results, a deviation of plusminus 1% in the generation from wind power of 0.4000000 and a deviation of plusminus EUR 1 in the wholesale price has an impact of plusminus EUR 3,800,000 in the group results. Now with that, I would like to begin with our Q and A session, Please.
The first question we received is from Lueder Schumacher of Societe Generale. Your line is now open, sir. Please go ahead.
Indeed. Lueder here from SocGen. Good morning. A couple of questions from my side. The first one is on your revised outlook.
You say that it has been revised on to account for the effects of the COVID-nineteen crisis. What exactly are these effects? And where in which divisions should we expect to see them? As you said, you're only 78% hedged on the hydro business. So presumably, that is not where you expect to see the effects.
Grids would only account for about half of your downgrades. So I'd be interested to see where you expect to see those lower earnings in the rest of the year. The second question is on Flexibility Products. I'm a bit confused there. On the one hand, you say it's been exceptional.
It's been very strong. You point towards a 36% increase in Flexibility Products. And yet for the grids, you are talking about lower contribution from congestion management.
It would be great if
you could explain this a bit more. Where do you see the impact of the higher congestion management? Where should it be lower? And why has the outlook for the full year not changed from the €100,000,000 if you've seen a 36% increase in Q1? And lastly, perhaps the easiest one, Gasconet Austria, do you have any update for us on that?
Yes. Thank you. I will start with the Gasconet. We are currently in the midst of our due diligence. As you can imagine, due diligence is not exactly getting easier with all the restrictions in place.
So that is certainly very challenging. As soon as we have more specific information, we will share it with you. But at the moment, I cannot comment on Gas Connect any further. I think your first question in
terms of
guidance, obviously, I think it's the most important question, probably something that interests every single person on the call. The guidance change is very much influenced by power prices. When you looked at the power price development for the last 6 months, we have seen a steady decrease, quite dramatic actually, in every single product, in the quarterly product, in the weekly product, in the also in the forward product, either 1 year forward product. And that is something that is very much impacting the open volumes which we have. So when you look at the time when we originally gave you the guidance, we still had around 7 terawatt hours, which were not hedged and were open.
And the and at that point in time, the average prices were above €40 At the moment, we're around €30 So what you see there is you see a dramatic drop in prices. I'll just give you one example, which is the quarterly product. 6 months ago, the quarterly product was at 45. Then moved down at the beginning of the year from €45,000,000 to €40,000,000 But then it dropped by another €10,000,000 and currently it's below €30,000,000 So you see that there is a dramatic development, which as far as we are concerned, is a result of the crisis. And we can talk about that in a second.
And that has a direct impact on our revenues. And that has a direct impact on our EBITDA and on our earnings. And that is the key driver for our new guidance. On the grid, you're right. On the grid, we had different effects.
We actually had 3 effects. One effect on the grid was that we have lower revenues from auctions, number 1. Number 2, we have higher costs on concession management, yes? So therefore, the contribution from the grid is lower, yes, because the cost of concession management is higher. And then, of course, we have less because demand has come down, we have less tariff income from the usage of the grid, which also had an impact.
So I would say the key the big driver is the power price. The 2nd biggest driver is the grid. And those are the key factors which resulted in the lowering of our guidance. Now I've already mentioned the flexibility products. In terms of the flexibility products, and I always have to say that, and it's I know it's boring because it's always the same answer, It is very hard to predict flexibility products because it's a direct result of the volatility,
not just in Austria, but also in
Germany, in France, in all the surrounding countries. To to stick to our EUR 100,000,000 guidance on the flexibility products because it's very difficult to predict the increased volatility for the rest of the year, increased volatility as a result of demand, supply, which is obviously different as a result of the corona crisis. The demand in some of the countries has come down quite dramatically. And again, if somebody is interested, we can talk about sort of like demand situation on this conference call in different geographical areas. So that is Lueder, so that is the that would be the key response to your three questions.
Ludo, may I add to your question about the flexibility product? So the difference and I agree it's a little bit confusing, let's say, to argue that we have different developments from congestion management in the grid segment and in the all other segments. But the reason for that is that when we have an increase in congestion management services, This is the positive effect and the improvement is seen in all other segments because it's related to the operation of the thermal power plant Melacher because it's heavily used. On the other side, in the grid business, you may see a decline coming from this effect because there are a couple of clawbacks from the past. So it's always a roll up for all different measures for the last 2 years.
So in this regulatory system, you may see, let's say, a decline in the contribution, but based on the fact that we have an increase in the in Mala, in the congestion management, you have an increase. So that's why you have 2 different developments.
Okay. Very clear. Thank you.
The next question we received is from Ms. Zvirowska of Credit Suisse. Your line is now open, madam. Please go ahead. Mrs.
Hieboscka, are you still on mute? And we come to the next question. It's from Louis Boulard of ODDO PHF. Your line is now open, sir. Please go ahead.
Yes. Hi, Louis Boussjard. Could you hear me?
Yes.
Okay. So just a few questions on my side. Thank you for taking my question. I'd like to come back a little bit on Nordea's question. The first one regarding the poor market prices.
Just you were answering that you might have also some sensitivity to the quarterly product and the monthly product in your previous answer. I was wondering if you could give us an idea in terms of volume, in terms of percentage. When you hedge your volumes 1 year for loss, what would be the share that you will hedge with yearly product and the share that you would hedge with quarterly and monthly products? It could be interesting in the current environment where quarterly, monthly and yearly products do not have exactly the same price to have this kind of information? The second question regarding the Flexibility product, I know how it's difficult for you to give a view, but I would have expected also maybe some upside into that figure for 2020, in particular with regards to what is happening in the French nuclear fleet.
Could you remind us maybe what was the impact or what could be the impact in absolute terms of the stoppage of the nuclear fleet back in 2016, remember that a lot of nuclear feed were off the grid in the winter of 2016, 2017. And maybe it would be interesting to have an idea of what was the sensitivity at that time. And is it possible in your view that such a sensitivity could happen again maybe this winter? And my last question is regarding the carbon prices. Could you give us your view regarding the potential evolution of this market in the current commodity environment?
It's difficult apparently to go significantly above €20 at the moment. What do you see going forward considering the evolution of this market? Thank you very much.
Yes. Thank you. Yes, first of all, the way we hedge is 60, 2020. So 60% would be 1 year forward, 20% would be the quarterly product and 20% would be the short term products. In terms of your second question, very interesting one, something we observed.
If the French decided to put nuclear power plants into revisions, that would have an impact on a very strong export situation of France, which we currently have. So the key exporters in Europe at the moment are France and Germany. France, of course, a very, very strong baseload contribution. If France decided to cut down its nuclear production, that would have an impact on price, in my view, yes? There is always different cruises of all of this.
This is something that is relatively new in terms of configurations for this winter. But coming, let's just assume that we have a cold winter. And if nuclear production is going to come down in France, that could indeed have an impact, a positive impact on power prices. Last time in when we had the problems in the nuclear and in some of the Belgian power plants, and a lot of the power plants had to be revised, that at the time had an impact on power prices. Can't tell you exactly how much it was, but it was quite significant.
In terms of the carbon price, very, very difficult one. And the best is probably to say nothing because so far, I have a good track record in terms of my predictions. So I don't want to spoil it. But I have never been, as you know, a believer that we are going to see CO2 prices going through the sky. I have said that they could see a level of 30, even 35, but I have been very conservative on CO2 prices.
At the moment, we are below 20 today. And now we have the bandwidth. I mean, people that look at CO2 prices in great detail see an oversupply and could well imagine that the prices could go down to 15. Other people argue that CO2 prices, which have a lot of support also from the political side, could go back up to 30. I would feel very comfortable if we stick around sort of like between 2025.
That will be my personal prediction, sort of like for 2020 in terms of CO2 prices.
Okay. Thank you very much.
And we received a follow-up of Lueder Schumacher. Your line is now open, sir. Please go ahead.
Yes. Just a quick follow-up question from me. We have seen other TSOs around Europe struggling with predicting new load profiles amid all the lockdowns. What's the experience with APG? Is it all smooth?
Or is it are you struggling, hence, even more demand for balancing power?
Yes. That's an important question in terms of the grid. APG has been extremely well prepared. And there were a number of grid operators across Europe, which were actually in conference calls with APG. And taking some guidance from ABG as they have started extremely early to prepare for the situation in terms of crisis management.
I'm knocking on wood, as you can imagine, But so far, we have not seen any issues or problems. The grid has been and I'm not just talking for Austria, Austria, I'm talking for the rest of Europe. The grid has been relatively stable. And yes, there is volatility because demand is changing. In some countries, demand has gone down by 20%.
But it is relatively stable, and we had no major issues. Obviously, everybody is totally focused on it, and everybody is working extremely hard to handle the situation. I mean, I mentioned before the demand situation. I mean, it's quite interesting what we have seen. For example, you might remember from our last conference call, somebody asked me what I thought the demand decreased because there weren't any numbers at the time, how much the demand increase could be.
I think you mentioned something between sort of like 6% to 7% to 10%. In Germany, we have actually seen sort of like an interesting development. We have seen sort of like demand going down to close to minus 18% at the worse. And now demand is sort of like going up again with the partial opening. You have seen that the car industry is starting to produce again.
So the demand has gone up, and we are now at approximately minus 7%, yes, compared to the pre corona levels. In Austria, we are at minus approximately minus 14%. In Italy, we are we were at a stage, at the most extreme, minus 40%, which if anybody had asked any grid operator, if that would be a possibility, people would not have seen it in any scenario. But we have seen demand coming down by minus 40%, but it's now up to minus 17%. And in France, we have approximately minus 16%.
So what you see is we see that demand is still down. I think that it will continue to stay down. Of course, with the loosening of the lock up regulation, it's going to increase. But I think overall, demand is going to stay lower. And then, of course, we have to take into consideration how severe the impact of the recession is going to be.
And I mean, a lot of you are sitting close to your economic research departments, and you probably know that there is a lot of discussion in terms of how long the recession will take. There is a lot of discussion running through different scenarios in our simulations for the next few years, which we have already concluded. We are taking into consideration 3 different scenarios, a quick V shaped recovery, which we think is unlikely. We're taking into consideration a recovery by the end of next year. And when I say recovery, that by the end of next year, we would be approximately at the pre corona levels in terms of GMP.
And then, of course, we're also taking into consideration almost like as a bad case scenario that we would have a prolonged recession with very low growth, with very low consumer demand. Our base case, to be transparent, is that we think that we are going to see pre corona levels end of '21, beginning of 'twenty two. If I look at research, that seems to be the consensus at the moment. But I think that we are in uncharted waters, and it remains to be seen how quickly we will recover and how quickly consumer demand is going to recover.
That's very interesting. Just to complete the numbers, you said German demand was down 18% at worst and is now 7% Austria was down 14% at worst France 16. Do you just have the numbers for Austria and France where
we are now?
Yes. In Austria, we are at the moment at minus 14%. And in France, we are currently at
minus 16%. Also, these are current numbers. These are not the worst you've seen.
No, these are current numbers. These are current numbers. Yes.
Thank you.
And the next question we received is from Thierry Daschenwald of Reisheisen Centrobank. Your line is now open, madam. Please go ahead.
Good morning. Thanks for taking my question. I have 2, So the first one is on how do you handle on your end customer business side over hedged electricity? Have you already sold it? Or what are you going to do?
And the second one is Bloomberg ran a story today about for bond green power and their target to increase the share of new renewables generation to 25% by 2,030. If you're prepared to tell us already a bit more about that.
Yes, sure. I will talk about the new renewables, and Andreas is going to cover your question on retail. Yes, we from a strategic point of view, we have decided that over the next 10 years, we are going to diversify our renewable generation. As all of you write on a regular basis, hydropower dominates our business model. It dominates our earnings and it dominates our share price.
We have, from a strategic point of view, have come to the conclusion that over the medium term, we are going to diversify our renewable generation because of two reasons. Number 1, as I've often said, unfortunately, we don't have a second Danube. It would be wonderful if we had more rivers in Austria and we could build more hydro. That is not possible. So we have limited investment opportunities into hydro, point number 1.
Point number 2, we think that from in terms of generation profile and in terms of technical diversification, it makes sense for us into wind. We're already in wind, but not very large, as you know, and into solar, particularly as wind and solar are and will be even more competitive in terms of generation cost. We have come up with a target of 25% within the next 10 years. That would be 25% of our generation. Why 25%?
To be relevant, we think that we need to have critical mass also in terms of be able to have synergies and to and as I said, to be relevant. So that is why 25%. It could be 20%, could well be 30%. It really depends not so much on the organic growth, but it depends a lot on the inorganic growth, yes, because organic growth, as you know, in new renewables and wind and in solar is quite slow. Now with that, I would like to hand over to Andreas for the retail response.
Sorry, I didn't understand your question. Acoustically, can you repeat it?
Yes, sure. It's about potentially over hedged retail volumes that might not be consumed over the course of the year?
No. Basically, Theresa, we are not over hedged. That cannot be based on our hedging strategy because we basically, we sell electricity to end customers always, let's say, at for on the basis of 1 year futures linked to the prices of the electricity exchange and with regard to volumes. I mean, these are fixed volumes, which they have to take, so which they have to buy based on the contract. So basically, when you want to refer to the fact that if we have an issue with customers not, let's say, fulfilling the contracts, the clear answer is no, we haven't.
There is only one customer who is arguing, let's say, with a force majeure clause, but the likelihood of this customer to be successful, we think, is very limited. So but this is the only one, yes? So basically, we don't have any issue with customers not fulfilling the electricity supply contracts.
The next question we received is from Peter Barteko. Your line is now open, sir. Please go ahead.
Good morning. I have two questions. So first is to the hydro segment. In the Q1, you reported only 1% increase in EBITDA, while prices were up more than 15%, and generation was down 5%. So to me, it looks like the operating costs are growing 10%, right?
So if
you comment if you can comment on that and give us some outlook for the rest of the year in terms of costs? And second question is the regulatory account in the grid segment. If you already have some agreement with the regulator, how it will be reflected in tariffs. And also in the Q1, I believe the dividend segment had, again, some extraordinary revenues. So some more color on that?
Thank you.
Yes. Thank you, Peter. We're going to split the responses. I'm going to cover the regulatory account and the cost, and Andreas will talk about your first question with regards to the Q1 differences, if I understood it correctly. Now on the regulatory accounts, you're right.
It is something we discussed on the last conference call. And I mentioned that we are in negotiations with the regulator in terms of how fast or how slow we are going to decrease the regulatory account. Our objective would be that we have a regular or a linear decrease of the regulatory account, which is at the moment approximately 2 €70,000,000 we are still in discussions, and we don't have the specific results. That is the short answer. If and when we have a result, we will obviously inform you.
In terms of cost, there is a cost increase coming from areas that are related to innovation and to cybersecurity. Cybersecurity is something which we view as very important. We are a critical infrastructure, and it's critical infrastructure. We need to be extra careful, which is why we are we have at the end of last year, we have decided that we are going to further invest into our cybersecurity both on the APG side, of course, and on the Verbund side. That is something that increases the OpEx.
Apart from that, all the other cost items are in line with expectations. Andreas? Yes.
Peter, with regard to your first question, I think that's relatively simple to answer. So you're right saying that the result in the generation segment is stable compared to Q1 last year. And we also like that there is a price increase. So we realized average achieved concrete prices, which are, let's say, higher by about €5 But on the other side, you have a strongly declining volume effect based on what we said before. So in Q1 2019, we had an hydro coefficient of astonishing one point 21%, so it's 21% above the long term average compared to only 9% this year in the Q1.
So if you calculate, let's say, the volume effect and the price effect, you may see that these both effects are, let's say, have the same roughly the same size, the same amount, but of course, in different directions. So that's the reason why the EBITDA in the Generation segment is quite stable.
Sorry. So the increase in prices was relatively smaller in 1st Q than what we can expect for the full year?
So, of course, we cannot forecast the hydro volume for the rest of the year. I mean, for the time being, it's relatively low. So we I think year to date, the hydro coefficient is now exactly on the long term average. So but of course, to forecast how the hydro situation will be for the rest of the year is almost impossible. With regard to prices, you have the effect, which we described before, and that's the reason why there we reduced our guidance for the full year.
The next
question we received is from Martin Bossier of MainFirst Bank. Your line is now open, sir. Please go ahead.
Good morning. Thanks for taking my questions. I have 3 actually. So regarding your
diversification in the
renewables, you mentioned that it should be more geographies about your target? So will you be more interested in the acquisition of selected projects or the acquisition of small or medium players as a whole? And finally, do you already have a megawatt capacity target in the short to medium terms in the space?
Yes. On the diversification, we have decided that we are going to stay within Europe. We would like to stay close to where opportunities are. As a result of that, the key countries we are looking at, at the moment would be strong, solar and partially wind countries, but particularly solar. We're looking to Spain.
We're looking to Italy. We're looking to France. We always look to Germany, which we consider almost like our home market. Austria, of course. As far as Eastern Europe is concerned, we are less active in terms of looking at that specific market.
But we have a big radar screen, and we look at a lot of different opportunities. So if there is an interesting opportunity, we don't want to miss it. But geographically, we want to stay within a region which we can reach easily, number 1. And number 2, where we have very clear regulatory frameworks and want to stay within Europe, as I mentioned. Now in terms of we don't have specific megawatt targets short term.
The reason for that is clear that when we look at inorganic opportunities, there are a lot of factors to be successful. As you know, there is a lot is down through auctions. In the past, we have been disciplined in terms of pricing. In the future, we will continue to be disciplined on pricing. As a result of that, there is always a possibility not to win in an auction or not to get an opportunity.
You might remember that we have been very interested in the hydro assets in Portugal, and we have not been successful because we have decided that we're not going to go above a specific level in terms of purchase price. As a result of that, it is I can't give you a specific number in terms of how much megawatts we are going to acquire within the next 2, 3 years. And then I think you had another question, if I understood it correctly, if we were willing to buy small companies, which are in the solar sector and in the wind sector. Did I understand it correctly?
Yes, exactly. Either you acquire one project or you acquire a whole small or medium independent power producer.
Yes. Both is
possible. We are both looking into projects where we just buy projects, but we're also looking into companies which develop and own portfolios and pipelines.
Okay, very clear. Thank you.
As there are no further questions, I hand back to Mr. Coleman for closing remarks.
Yes. Thank you very much for your interest. Thanks a lot for your numerous questions. I can assure you that, as I have said in the last conference call, that our crisis management has worked extremely well. We have been able to put thousands of people into home office within a week.
We had no issues in terms of home office and the lockdown, which has been quite strict in Austria. As a result of that, I can report to you that we are very satisfied with our crisis performance so far, both on the generation level, but also on our retail level, on our services and, of course, on the grid level. And I'm very confident that we will continue to perform well even if there is a second wave, which obviously I hope that there won't be. With that, I would like to thank you and look forward to hearing you on our next conference call. Have a good day.