Dear ladies and gentlemen. Welcome to the conference call of VERBUND AG. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties 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, who will lead you through this conference. Please go ahead.
Ladies and gentlemen, welcome to our presentation. Let me thank you for joining today's conference call. Before we move into the analysis, let me make a general comment about the business development of the first three quarters. Overall, the development of the energy environment continued to be positive for VERBUND. With increasing wholesale prices for electricity, mainly driven by the rise in CO2 and for primary energy sources like coal, oil and gas. As a fixed cost generator being a price take in a market where wholesale prices are still determined by coal-fired power plants, there is almost no other utility in Europe benefiting like us. At the same time, we have seen historically dry months in July, August and September. As you know, next to the price, the hydro availability is an important parameter on our results.
Our current strategic positioning and the consequent focus on free cash flow with the resulting quick deleveraging in the last years was honored by the rating agencies in September, when VERBUND received an upgrade from S&P from BBB+ stable outlook to A- stable outlook, and from Moody's from Baa2 positive outlook to Baa1 positive outlook. Against this background, let me now present the figures for the first three quarters, 2018. As always at the beginning, let me highlight the most important influencing factors for the results development in the first three quarters. Hydro availability in the first three quarters was below the long-term average, but slightly higher than last year. Hydro availability in the third quarter was on historic low levels. Contribution from the grid segment was higher than in the first three quarters 2017, mainly due to lower expenses for congestion management.
The efficiency increase in cost-cutting programs over the past contributed positively. The contribution from our flexibility products was lower when compared to the record year 2017, but is higher than originally planned. The overall impact of these influencing factors on the key figures in the first three quarters 2018 was positive. Reported EBITDA increased by 2.3% to EUR 680 million, adjusted EBITDA by 2.1% to EUR 677 million.
The reported group result was higher by around 5% to EUR 282.8 million. The adjusted group result was up by 10% to EUR 278 million. The operating cash flow was very strong at a level of EUR 542 million, representing an increase of 12%. The free cash flow before dividends was positive at a level of EUR 389 million, an increase of 21.5%. That allowed us to reduce the debt level further. Net debt decreased by 7.4% to a level of EUR 2.633 billion.
Due to the very poor hydro situation in the third quarter, we adjust our outlook for 2018. We now expect an EBITDA of approximately EUR 870 million and a group result of approximately EUR 340 million based on average hydro and wind conditions for the last quarter of 2018. VERBUND plans a payout ratio between 40%-45% on the adjusted group result for 2018, amounting to approximately EUR 335 million. In the following charts, I will explain the influencing factors on the results development in more detail. Let me start with the analysis of our own generation volumes. Generation volumes in total were slightly lower in total compared to last year. Own production from hydropower increased by 455 GWh or 2% compared to the first three quarters 2017.
At 0.96, the hydro coefficients, which as you know is an index quantifying the hydropower generation of the run-of-river power plants, was 2 percentage points above the level of 2017, but 4 percentage points below the long-term average due to the dry weather conditions with almost no precipitation in the third quarter. Generation from storage power plants, however, increased by 6.2%. Generation from thermal power plants was down by 47.8% or close to 800 GWh , stemming mainly from the decreased use of the CCGT Mellach for flexibility services. Generation from wind power also decreased by 96 GWh or 14% due to less favorable wind conditions. A second important influencing factor on VERBUND's results are the average achieved contract prices.
At the end of the first three quarters 2018, we have hedged approximately 96% of our hydro generation at an average price of EUR 29.2 compared to EUR 30.4 for full year 2017. Please note that the majority of the hedging volumes for 2018 were hedged in early 2017, when prices were much lower. EUR 1 per megawatt hour plus or minus has a sensitivity of approximately EUR 25 million in the EBITDA line. On the mark-to-market basis as of the October 17th, 2018, we calculate with a price of EUR 31.1 per megawatt hour, which is higher than the level for the full year 2017. With regards to the development of flexibility products, let me remind you that 2017 has been an exceptional year because of many influencing factors having been very supportive.
In the first three quarters 2018, we had a contribution from control energy, congestion management, grid system services, intraday trading, and reserve and pumping operations of approximately EUR 115 million after EUR 140 million in the corresponding period of 2017, representing a decrease of 18%. For 2018, we increase our guidance for the EBITDA contribution from originally EUR 130 million to approximately EUR 160 million. The reason for the increase of the guidance is the higher than expected demand for congestion management services because of the severe drought in Central Europe. Next page. As you know from our last conference calls, the Austrian high voltage grid, with a system length of approximately 7,000 kilometers and an interconnected capacities into seven neighboring countries, is strategically of high importance for the group because of its growing importance in the European grid system and its regulated character.
Despite its regulated character, volatility in the results contribution cannot be avoided under IFRS, in contrast to local GAAP. Why? Under IFRS, the application of the regulatory account as a balancing tool for surpluses and shortfalls of actual returns compared to the allowed regulated return is not allowed. What are the main differences? First, revenue surpluses or shortfalls on the IFRS are not utilized or compensated by the regulatory accounts. Under IFRS, no rate provisions or asset line items are recognized, and IFRS uses different depreciation bases, useful lives, and capitalization of borrowing costs in comparison to local GAAP. The chart on the left-hand side provides you with the comparison between the EBITDA according to local GAAP and EBITDA according to IFRS for the first three quarters 2018 in comparison with the first three quarters 2017 and our guidance for the full year 2018.
EBITDA from the grid business strongly increased from EUR 94 million to EUR 158 million under IFRS. The reason for the increase is mainly lower than planned expenses for congestion management. We keep our guidance at approximately EUR 160 million according to local GAAP and slightly decrease the guidance from approximately EUR 210 million to approximately EUR 200 million according to IFRS. The next slide shows the non-recurring effects in the first three quarters. All of the non-recurring effects have already been reported in the half year results and are of minor significance, are of importance because they influence the basis for the dividend payout ratio. Just as a reminder, the positive one-off effect in other operating expenses resulted from the adjustment of a provision for dismantling costs in connection with the resolution of an open issue with EVN amounting to EUR 0.8 million.
Impairment test conducted resulted in a reverse book impairment amounting to EUR 6.2 million and was also related to the resolution of an open issue with EVN in relation to the power plants Limmer and Korneuburg. In total, the operating results showed non-recurring effects of EUR 6.9 million. After considering the impact from the non-recurring effects above on taxes amounting to EUR 1.7 million, should say minus EUR 1.7 million, the overall non-recurring effects on a group result level amounted to approximately EUR 5 million. The non-recurring effects in the first three quarters 2017 are also shown so that you have a comparison. Andreas Wollein will take us through the key financial figures and the liabilities. Please, Andreas.
Thank you. Slide eight shows the development of the most relevant key financial figures. Reported and adjusted EBITDA both increased despite the low hydro levels by EUR 14.9 million or 2.3% to EUR 678.4 million and by EUR 14.2 million or 2.1% to EUR 677.7 million respectively. This increase is mainly attributable to the grid segment, which was up by EUR 64 million, mainly due to higher contributions from congestion management. In addition, the cost reduction and efficiency increase programs of the past had a positive effect on the results development. These effects were counterbalanced by lower EBITDA contributions from the renewables segment, which was down by EUR 17.5 million due to the slightly lower achieved average price this year to date.
EBITDA in all other segments was also down by EUR 38.1 million, stemming mainly from lower results in the thermal segment because of lower congestion management services. Depreciation decreased by 4.9% due to the sale of assets and impairments last year. The financial result improved by 17.6% due to the higher results from our participation in the provincial utility Kelag, as well as lower interest expenses because of planned as well as unplanned debt repayments. The reported group result therefore increased by EUR 13.3 million or 4.9%. Adjusted for non-recurring effects, the group result increased by EUR 25.4 million or 10.1%. The EBITDA margin increased from a level of 13.7%-32.6%, reflecting the above-mentioned effects on the EBITDA level. The EBIT margin showed a comparable increase up to 21.1%.
I would like to mention the additions to tangible assets, which were based on our CapEx spend slightly up to a level of EUR 167 million. The additions concerned mainly the investments into the modernization of our Austrian hydropower plants, as well as investments into the grid business. On slide nine, we show the development of our cash flow figures and debt figures. The operating cash flow in the first three quarters 2018 increased compared to the first three quarters 2017, despite the low hydro availability. It showed an increase of 12% to EUR 542.1 million due to lower payments for congestion management services in the grid segment and lower interest payments as a result of the deleveraging. Higher tax payments and lower revenues in the renewables segment had an opposing effect.
The free cash flow before dividends was strong and showed an increase from EUR 320.2 million to a level of EUR 389 million. Net debt correspondingly decreased to around EUR 2.6 billion, gearing decreased from 50% at the end of 2017 to a level of around 46% at the end of the first three quarters 2018. Now to the financial liabilities. On this chart, you see the debt maturity profile. It shows a remaining repayment of EUR 149 million in 2018 in December, consisting of the scheduled and unscheduled final and partial repayment of loans. The debt maturity profile shows two peaks, one in 2019, mainly consisting of a fixed interest bond in the amount of EUR 683 million and one in 2024, also mainly consisting of a fixed interest bond in the amount of EUR 500 million.
For liquidity backup, VERBUND has access to a EUR 500 million syndicated loan facility, which is undrawn, has no make-whole clause and is available until 2019. We are currently in the process of refinancing this facility. VERBUND has access to uncommitted lines with a large number of banks up to an amount of approximately EUR 570 million as well. The total amount of our financial liabilities is approximately EUR 1.9 billion. The average interest rate on our debt is around 3.7%. 98% of our debt are subject to fixed interest rates. As already mentioned by Peter, the ratings of VERBUND have been upgraded in Q3 and are now among the best within the European utility sector. S&P rating is currently at a stable outlook. Moody's rating at Baa1 with a positive outlook.
The rating development is a result of the numerous measures VERBUND has taken in the past to increase cash flows and to strongly improve the market environment for the VERBUND business model with rising commodity and CO2 prices. Now I would like to hand over again to Peter, presenting the outlook for 2018.
Thank you, Andreas. At the end of the results presentation, we always look at both the outlook and the hedging going forward for 2019 and 2020, which you will find interesting. You know the key parameters for the development of the operational business are prices and hydro volumes. With regard to the price update on hedging of our own production, the mark-to-market figures reflect the strongly improved wholesale electricity prices, which is, of course, a major driver. At the end of the first three quarters 2018, we have hedged approximately 57% of our hydro generation at an average price of EUR 32.9 for 2019, which is approximately EUR 2.5 above the level of the full year 2017. On a mark-to-market basis as of October 17, 2018, the average achieved price would be at a level of EUR 43.4, which is approximately EUR 13 above the 2017 level.
For 2020, we have so far hedged approximately 23% at a price of EUR 43.1. On a mark-to-market basis, the average achieved price would be at a level of EUR 51.5. With regard to the year-to-date hydro situation, we have to report a hydro coefficient of 0.94. That is as of the 17th of October, which is 6 percentage points below the long-term average. On the basis of the historically weak hydro conditions in the third quarter, the new guidance for the full year 2018 is an EBITDA of approximately EUR 870 million, and a group result of approximately EUR 340 million. Under the assumption of average hydro and wind generation in the last quarter 2018, those are the numbers. VERBUND plans to pay out between 40% and 45% of the group result 2018 after adjustment from non-recurring effects amounting to approximately EUR 335 million.
As always at this point, we want to highlight the sensitivities. A deviation of ±1% in the generation from hydropower has an impact of ±EUR 2.2 million in the group results. A deviation of ±1% in the generation from wind power has an impact of ±EUR 0.1 million in the group results. Finally, a deviation of ±EUR 1 in the wholesale price has an impact of EUR 4.7 million. Now thank you very much for your attention, let's move into Q&A.
Thank you. We will now begin our question-and-answer session. If you have a question for our speakers, please dial zero one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before the opportunity to speak, you can dial zero two to cancel your question. If you are using speaker equipment today, please [audio distortion] One moment please for the first question. We've received the first question. It comes from Wanda Serwinowska. Please go ahead, your line is now open.
Good morning, Wanda Serwinowska, Credit Suisse. Three questions from me, if I may. Firstly, could you please bridge a change in the EBITDA guidance? Because you cut the EBITDA guidance by EUR 80 million, of which minus EUR 10 million is the grid, plus EUR 30 million is the flexibility product. My question would be, the delta is EUR 100 million. Is it a pure impact from lower revenues, or is there something else there? My second question would be if you could comment on the potential impact on the German-Austrian power zones, please. I know it's early days, but some time ago, ahead of the trading business, VERBUND trading business said it will be negative. Is there anything that you can share with us?
Lastly, on your dividend policy, given your improved financial situation and the improved power price outlook, would you consider coming back to a higher and long-term dividend policy? Thank you very much.
Thank you, Wanda. I will start with the third one, with the dividend policy. At the moment, we remain at the 40%-45% of our adjusted earnings. The border question is an important one. We are observing it as closely as all the other market participants. You have said yourself, it is early days. Excuse me. We had unusual dry weather. As a result of that, you cannot really take those two months as a guidance for a perfectly normalized situation. As a result of that, I would be very careful with deriving from the current spot differences to what the long-term differences between Germany and Austria would be.
As soon as we have more data points, possibly on the next conference call, or maybe even later, we will give you more guidance on this. For the time being, I would say that all the studies which were produced before the frontier was established, that we're talking about a EUR 3 difference. That is still something I would use as a guidance in your assumptions, as a price difference between the two. The first one, the change in the EBITDA guidance, the impact, where is it coming from? It is in fact coming mainly from a very dry July, August, and September. When we say dry, we're talking very dry. We're looking at the last 100 years for a long-term average for the hydro coefficients. We look at deviations over those 100 years.
What we have seen, an accumulation of three very dry months is in fact among the worst dry periods over the last 100 years. It is very exceptional, and this is where the key impact is coming from. However, also related to the very dry months, we had higher congestion management. Because of the low water levels, there was the need for rebalancing the grid, and as a result of that, higher congestion management demand as we had originally expected. That counterbalanced the very dry months to a certain extent. Of course, we had on the grid, you remember what the original guidance had been at the beginning of the year. There we have seen less expenses for control energy and less expenses for congestion management. The grid contribution overall this year is higher than we had originally expected.
Those are the three key factors which really contribute to the difference to the original guidance.
If I may follow up, because you lower your 2018 guidance on the generation by two terawatt hours, so is it fair to assume that the missing EUR 100 million is related to terawatt hours?
Yeah.
Am I missing something?
No, it is always a combination. The complexity comes from when you have lower hydro levels, there are two effects. Well, there can be two effects. When you have very low hydro levels, I should say, you can have two effects. Number one, you are selling much less. You have, at the same time, a higher level of power prices. When the water level is very low, as we have seen, you actually need to buy back in the market, because you have already contracts where you have to deliver. We had a situation of two factors. Number one, we had to buy back to a certain extent, right? Because the hydro levels were below the long-term average of what we hedge, which is 80% of the hydro coefficient of 1.0.
In addition to that, we had lower volumes, which we would've been able to sell at the higher prices. It's a combination of those two aspects which give you the overall impact in terms of the low hydro levels. Right? It's not just the power price, it is a combination of all factors.
Okay. Thank you very much.
Thank you. As a reminder, if you would like to ask a question, please press zero one on your telephone keypad now. We've received another question of Ludo Schumacher of Susquehanna. Please go ahead, your line is now open.
Yes, good morning. A few questions from me. The first one is on the outlook. Normally, you always apply the hydro coefficient of 1.0 for the remaining quarters. Now, given that October's hydro conditions haven't really improved, they were still rather poor in October. Have you taken this into account when giving us your new full-year outlook, or is this just based on the usual 1.0 for the entire quarter? That's the first question. The second question is the EUR 160 million of flexibility products. Could you give us a breakdown by division? Where should we expect to find this? Lastly, life is good, cash flows are strong. Could you give us an idea where you see full-year net debt, and ideally also where do you see the full-year financial result?
Yeah. Ludo, you always ask for the breakdown on the flexibility products.
I hope that I get it eventually.
We never really give it. However, last time I've given you some guidance, and I will do that again. The major contribution from the flexibility products, the largest contribution from the flexibility products comes from congestion management. That is almost 50% of the overall flexibility products. The control energy is the second most important one. Then we have pumping and reverse operations, and finally, the intraday trading contribution to the flexibility products. In addition, that gives you approximately the EUR 160 million. In terms of the full year, that was your first statement you have made, and you're right. We always use the 1.0 hydro coefficient for the rest of the year. We have not deviated from that. You're also right that not just July, August, and September, but also October and partly November have been dry months. The overall dryness has continued.
If we take the year-to-date hydro coefficients, we are at the moment at 0.94. That shows you that despite the fact that we had very dry months for a relatively long period of time, because we had such wet months at the beginning of the year, the overall year-to-date hydro coefficient is still 0.94, which is only 6% away from the long-term average. That is something you have to keep in mind. On the net debt number, Andreas Wollein will respond to that, please. Where's our full net debt level going to be at the end of the year?
At the end of the year, we expect a net debt level of around EUR 2.4 billion, roughly. This is the current planning figure. Coming back to the split in the flexibility products, Ludo. What we can give you, and I think that's what we always communicated, is a split down to the segments. 40% roughly goes into the renewable segment, 20% goes into the sales segment, and 40% into all other segments because it's related to the thermal power plant, Mellach.
Perfect. Thank you very much. Can I just ask the full-year financial result, what should we be looking for there?
Enlighten us. When you say financial results, which ones are you talking about?
The EBIT was at EUR 36.8 at the nine-month stage.
The EUR 36.8, would you tell us exactly what you mean with the EUR 36.8?
Sorry. Just going into your P&L, I thought I was clear. You've got a financial result of EUR 36.8 million for the nine months.
Oh, yeah. Okay.
What should this be looking like for the full year?
Yeah. In the financial results, the main contribution is from Kelag. That is a figure which you can use.
What we expect for the full year is a financial result of roughly -EUR 50 million in total.
-EUR 50 million.
Yeah.
Perfect.
Also consisting of the income from participating interests.
Okay. Very clear.
Yeah.
Thank you.
Okay.
Thank you. The next question is from Dominik Olszewski of Morgan Stanley. Please go ahead, your line is now open.
Good morning. Two questions on numbers and guidance and one on kind of a longer-term question. Firstly, on the guidance, does the 2018 guidance assume this EUR 3 per megawatt hour spread that you mentioned as starting from October 1st? That spread between Austria and German power markets. The second question on hedging for 2020, the total hedged volume has gone up by, it looks an equivalent amount to the amount that the option downside protection has decreased. I was just wondering whether you could explain how we should think about that. Does that basically reflect a systematic hedging profile, or is there a different approach to hedging? I was just curious to hear your thoughts on that. The long-term question relates to the recent press speculation and discussion with regards to your largest shareholder taking a more active role in managing state ownerships.
Have you had increased discussions on that? Are you limited to discuss what those discussions are about? Would that lead to a potential change in dividend approach?
I will start with the third one. Yes, there has been a lot of press speculation because in terms of how the government manages our ownership has changed. For a very long period of time, we had kind of sort of like a dual reporting line, if you want to. On the one hand, we were owned by the Ministry of Economy. The Ministry of Economy was responsible for us in terms of the management of the government stake, quote-unquote. The ownership is still with the Republic of Austria. The management of the stake will move into the Ministry of Finance. Our dividend has always gone to the Ministry of Finance. Yes, there is a lot of press speculation, but at the end of the day, there will not be big changes. I don't predict any changes on the dividends.
In terms of the management, I think that the holding company, which is managing Telekom Austria, the Austrian Posts, OMV, and now VERBUND, i.e., all the companies where the Republic of Austria has a stake, will certainly be very professional, very much shareholder-oriented, and that is something which we're looking forward to. On the EUR 3 , yes, we have used the EUR 3 in terms of our guidance, that differentiation. If we have more data points, if we have more information, which is tangible and usable, then of course, we use that if and when it comes. In terms of the 2020 hedging level, Andreas is going to respond to that.
Dominik, for 2020, this is the latest figure we have. We have hedged around 23% physically, at a price of EUR 43.1 per megawatt hour. This is the current figure. You're right when you say that the amount of options which we take as a downside protection have been reduced. We have sold some options into the market and changed it against the futures. The current status is that we have hedged all 23% via futures.
Okay. Understood. Thank you.
Thank you. The next question we've received is from Duncan Scott of Deutsche Bank. Please go ahead. Your line is now open.
Firstly, on the renewables business, if I'm looking at the revenue from your renewables segment in Q3 and the volumes in Q3, this is implying an achieved price for the quarter around EUR 29, which is well below the sort of power price for the quarter. Is this simply an effect of the volumes being hedged back when the power price was much lower, and then also your hydro conditions limiting your ability to sell into the spot market? Secondly, going back to an earlier question on the hydro conditions in Q4, you said a coefficient of 0.94, I think it was year to date, but also that October and November have been very dry so far.
Does assuming a coefficient of one for the rest of the year, does that feel like your guidance might be slightly optimistic there? Any thoughts there would be really helpful. Thanks.
Yeah. Sure. In terms of your first question, that is something I mentioned before. The 2018 figures are low in comparison to where the power prices are today, because we have seen a very dramatic increase in power prices. We've obviously hedged 18 months ahead of time. At the time, power prices were much, much lower, and quite frankly, nobody predicted for power prices to move up so fast, so much.
As a result of that, the only way to take advantage of the high spot prices would be a high volume, because on the basis of the high volume, that high volume, you could actually sell in the spot market and take advantage of the higher prices. However, when you have a very dry situation as we have had for the last few months, we have not been able to actually sell at those high prices in the spot market.
In the contrary, from time to time, because of our delivery commitments, we had to actually buy at those high prices in order to be able to make our deliveries. This is why I emphasize the fact that this is a historic situation, i.e., that happens very rarely that for a prolonged period of time we have seen such a dry month. I hope that answers your question vis-a-vis how do you take advantage of higher power prices in the spot market. The next question was on the hydro coefficient. Yes, the hydro coefficient year to date is 0.94.
If we continue until the end of the year to have very low water levels, which, as I always say on those conference calls, we don't know because when we had a super wet beginning of the year, where the numbers were almost 20% below the long-term average, we never expected that that would be turning into one of the historically dry periods which we have seen. Also for the rest of the year, it is very hard to predict. We could have a very wet rest of the year, maybe not.
That is exactly why, as we always do, we give the sensitivities because that is something we don't know, because weather forecasting even for a few days is difficult, let alone for two, four, six weeks. The other point is that those sensitivities you have on the hydro levels, but also of course, on the power price and the combination of the two, which is exactly why we give those sensitivities on every conference call, every quarter. I hope that answers your question.
Yeah. Thank you. Very helpful.
Thank you. We have a next question from Teresa Schinwald of RB. Please go ahead, your line is now open.
Hello. Good morning. I have two different issues of questions. First, has there already been an assessment of the flood damages that happened recently? Maybe are they even included in the guidance? My second question revolves around the reserve contract that Mellach is now working on. Would this mark a change also in the flexibility product earnings, or what can we expect in terms of earnings impact from this contract?
Okay, great. I will start with your second question, and Andreas will respond to your first one. On the Mellach situation. That has not been concluded yet. As a result of that, I cannot give you very specifically what the result is. However, what I can tell you is that we have been negotiating for quite some time on that long-term grid reserve, which originally we discussed the reserve for around five years. Now the discussion is three years, and I think that it will most likely be for three years. What does it mean? It means that we are basically, instead of having the volatility of our thermal power production, which at the end of the day, only consists of our gas, which should be Mellach, replaced by a quasi-regulated return, which will be one specific number for the next three years.
As soon as we have that number, we will obviously give it to you. I would assume that in our next conference call, we can tell you what the grid reserve results of our discussions with the regulator will be. Andreas, could you respond to the other damages?
Yes. In regard to the floods we had here in the southern parts of Austria, as far as we can say now, I think based on the experiences we made in the past, and we have been very well prepared for the flood. As a consequence, and we can keep it very simple here, we have no major damages in power plants here in Austria. Also, as a consequence, there is no direct impact into our earnings.
Great. Thanks a lot.
Thank you. The next question comes from Ingo Becker of Kepler Cheuvreux . Please go ahead. Your line is now open.
Yep. Morning. Two questions. First, sorry, that's a bit of a boring one. Your trade receivables and the trade payables more than doubled respectively to over EUR 1 billion. I was just wondering why that happened. The second one, I think despite the lower generation from turbines this year, you had a lot of this offset by the comparatively high reservoir levels at the start of the year. I was just wondering if we should expect a negative year-over-year effect from reservoirs next year, even if the hydro coefficient is normal. Thanks.
Okay. I start with your last question on the reservoir. In terms of pumping and reverse operations, that is actually part of our flexibility products. There we don't expect big changes. It is more than we had in the first three quarters of 2017. In terms of the guidance, that is not something where we expect a big difference, i.e., the guidance on the flexibility products. You mentioned at the start of the year in terms of the reservoirs was good. That is correct. In terms of the strategy around the reservoir, it is part of our trading optimization, i.e., the way we manage the reservoirs is that we try to sell the reservoirs at the highest possible price, which we basically need to predict almost one day ahead.
Depending on where we see the price developments and where we see the combination of volume versus price, that is part of our trading algorithms, that is part of our anticipation of price levels, short-term price levels, and that is how we manage the reservoirs. This is basically a combination of the pumping. The pumping makes it more complex, because with the pumping, we don't just have to make assumptions on where we sell and how much we sell. There, of course, we also have to make assumptions on when do we pump. Obviously, that needs to be done at the lowest possible levels in order to increase the pump spread.
The advantage which we have is that we don't just have the pumping reverse on our reservoirs, but we have the natural water inflows into the reservoirs, which actually makes a big difference, and which makes the reservoirs very interesting. Because the inflows are very large, and that allows us for an overall optimization.
Peter, can I just inquire, the very rare weather pattern this year did not have any effect on the operating capabilities of your reservoirs going forward?
No. On the first question, Andreas will respond to.
I think that it is very simple. It is related. You saw the strong price increases in the market, and the increase in receivables and short-term liabilities based on the fact that it is a mark-to-market valuation of our, let's say, trading positions which we have, but these are more or less closed positions in the balance sheet. This is an increase which will be unwinded more or less in the course of next year, step by step, when the one-year future contracts will be realized.
Thank you.
Thank you. As there are no further questions, I will hand back to you, Mr. Kollmann.
Thank you very much for your many questions and for your interest. We will talk again for our next conference call for the full year result 2018. Thank you very much, and good day.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.