EnBW Stock

Ladies and gentlemen, welcome to the EnBW's Investor and Analyst Conference Call for half year 2026 results. I'm Moritz, your Chorus Call operator. The conference is being recorded. [Operator Instructions]

The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Marcel Munch, Senior Vice President, Finance, M&A and Investor Relations. Please go ahead, sir.

Welcome, ladies and gentlemen. Thank you for joining today's call on EnBW's results for the first half of 2026. I'm pleased to be joined by Deputy CEO and CFO, Thomas Kusterer, who will lead you through the presentation in just a moment. Afterwards, and as always, we'll open the floor for questions. Those of you joining via webcast, please feel free to submit your questions at any time using the chat function. And with that, let me hand over to you, Thomas.

Yes. Thank you, Marcel, and welcome all of you. EnBW delivered a solid and resilient financial performance in the first half of 2026 despite elevated geopolitical tensions in the Middle East and ongoing volatility across energy markets. Earnings remained stable, supported by the resilience of our integrated business model. At the same time, we continue to execute consistently on our strategic agenda.

We made potential progress across our growth priorities and further strengthened our well-balanced earnings platform along the energy value chain. We also see a more constructive energy policy environment, taking shape in Germany. While important details still need to be finalized, the overall direction is supported and provides greater planning certainty for future investments.

Let's now move on to the next slide and take a closer look at our key financial metrics of the first 6 months of this year. At EUR 2.3 billion, adjusted EBITDA was largely stable year-on-year and provides a solid basis for achieving our full year target. We, therefore, confirm our guidance for fiscal year 2026 at both group and segment level. Overall, our financial performance was built on a record contribution from our low-risk activities led by our Grid segment. In addition, our e-mobility business continued to show strong momentum and delivered another solid contribution to earnings.

Turning to investments. We deployed EUR 2.4 billion in the first half of the year. The focus remained firmly on low-risk and sustainable infrastructure with 84% allocated to low-risk activities and 88% taxonomy aligned. Net debt stood at EUR 13.9 billion at the end of June, reflecting the continued execution of our investment program. Our funding strategy remains aligned with our growth ambitions and supports a solid investment-grade credit profile.

Let's move on to the next slide to share some operational highlights. Across Europe, energy security has moved back to the top of the policy agenda. Recent geopolitical developments have again highlighted the importance of domestic infrastructure, greater self-sufficiency and lower dependence on external energy sources. This is exactly where EnBW's investment make a difference. Across grids, power generation, flexibility and customer infrastructure, we are helping strengthen the security of supply, affordability and energy sovereignty.

In System Grid infrastructure, our major North-South transmission grid projects continue to make strong progress. The 2 gigawatt converter station for SuedLink in TransnetBW's grid area is now close to completion. Ultranet in the final stretch and remains on track for commissioning by year-end. Both projects are key building blocks for a secure and efficient energy system. In sustainable generation infrastructure, the share of renewables in our installed capacity reached a record of 72%. At the same time, we're expanding flexibility. Two large-scale battery storage projects in Marbach and Philippsburg, the combined capacity of 900-megawatt hours are currently under construction.

Together, they support a more resilient and increasingly self-sufficient energy system. In smart infrastructure for customers, we further expanded our leading fast-charging network in Germany. We surpassed the milestone of 9,000 fast charging points in the first half of the year. This supports the electrification of mobility and helps reduce dependence on fossil fuels.

And with that, let's move to Slide 5. On Slide 5, let me briefly turn to He Dreiht, a project that is setting a new benchmark for German offshore wind. Installation for all turbines is virtually complete with He Dreiht now in the final phase of construction and nearing completion. Against this backdrop, let me briefly note the recent rotor blade incident that some of you may have seen reported in the media. The matter is currently being investigated and certain activities have been temporarily paused as a precaution.

While the review is ongoing, we remain confident in the project's overall progress. At 960 megawatts, He Dreiht is currently largest offshore wind farm in Germany, and will almost double EnBW's installed offshore wind capacity to around 1.9 gigawatts. The project also highlights how far offshore wind technology has come over the past 15 years. Compared with Baltic 1, Germany's first commercial offshore wind farm which EnBW commissioned in 2011, He Dreiht delivered 20x the capacity by requiring only around 3x the number of turbines.

Beyond its scale, He Dreiht was one of the first offshore wind projects worldwide to be awarded without public support. Backed largely by long-term PPAs, it will make a meaningful contribution to our long-term earnings base. Finally, European suppliers played a leading role across key components, underlining both supply chain resilience and European industrial strength. And against this backdrop, let's now turn to the major energy policy reforms that continue to shape the investment environment for projects like He Dreiht.

Please turn to Slide 6. During the first half of the year, we saw encouraging progress on several key energy policy initiatives. While important details still need to be finalized, the overall direction of travel is being increasingly supportive to investment and energy transition execution. First, the recent adoption of Germany's new framework for dispatchable generation, the so-called StromVKG, marks an important step towards establishing the capacity market, provides greater investment visibility for this dispatchable generation ahead of the first planned auctions later this year.

Second, the grid package is progressing through a legislative process, better coordination between grid expansion and renewable build-out should support a faster and more efficient energy transition. We continue to see scope for more and further improvements during the parliamentary process, and we view incentive-based approaches as the best way forward to reduce this dispatchable cost.

And third, discussions around the future renewables frameworks are moving in a constructive direction. Proposed support mechanisms, including 2-sided CFDs, should enhance long-term revenue visibility and strengthen the business case for future renewable projects. Taken together, these reforms should help unlock the next phase of investment in grid, renewables and system stability.

With that, let's turn back to our financial performance on Slide 7. As highlighted earlier, adjusted EBITDA reached EUR 2.3 billion after 6 months, and was in line with our expectations. Earnings continue to be underpinned by a strong contribution from low-risk activities, which accounted for 79% of adjusted EBITDA at half year. System Critical Infrastructure alone contributed almost 60%, reflecting the continued earnings impact of our investment program.

Remaining segment also performed broadly as expected, falling to the lower end of the scale in sustainable generation infrastructure. In renewable energies, weaker hydro conditions were largely compensated by favorable wind conditions and organic growth. Thermal power generation and trading was impacted by softer market conditions, but still remained a solid contributor to earnings. By contrast, Smart Infrastructure for customers recorded strong growth led by e-mobility.

Let's now take a closer look at the performance of our 3 business segments and move on to Slide 8. Starting with System Critical Infrastructure. Adjusted EBITDA of our Grids business reached EUR 1.3 billion in the first half of 2026, broadly in line with prior year. Earnings benefited from higher regulated revenues across all grid assets led by electricity distribution.

Our regulated asset base is the key earnings driver for the segment and reflects the consistent expansion of our grid infrastructure. At the same time, personnel and maintenance costs increased in line with higher operational activity and partly offset the asset-based earnings growth. Overall, the segment once again demonstrated the resilience and predictability of its earnings profile.

Moving on. Sustainable Generation Infrastructure on Slide 9. Adjusted EBITDA in Sustainable Generation Infrastructure amounted to EUR 806 million in the first half of 2026. It was below the prior year level, while the earnings contribution from our renewables portfolio remained resilient despite exceptionally dry weather conditions. Segment earnings were impacted by a weaker performance in thermal generation and trading.

Let me start with Renewable Energies. Adjusted EBITDA amounted to EUR 495 million. Earnings proved resilient despite below average water flows and declining margins affecting hydro generation. This was largely offset by strong wind and solar performance supported by additional capacity. This included the continued ramp-up of our offshore wind farm, He Dreiht, which contributed positively to earnings.

In Thermal Generation and Trading, adjusted EBITDA was at EUR 311 million after 6 months. Earnings were stable quarter-on-quarter but remained below prior year levels. Year-on-year, earnings were affected by lower hedge generation margins and scheduled phaseout of coal capacity. This included our lignite exit at the end of 2025 as well as the transfer of Heilbronn hard coal power plant into grid reserve to a combined capacity of around 1.7 gigawatts.

Trading performance improved compared with the first quarter but remain impacted by continued market volatility. That said, margin movements were fairly moderate, while our liquidity position remains strong. This was fully consistent with our respective risk appetite underlining the effectiveness of EnBW's risk management framework. Before moving on, let me briefly touch on our hedge generation position.

For 2026, we are almost fully hedged. Looking further ahead, hedge ratios for 2027 stand above 80%, while '28 is between 40% and 70%. Also started hedging for 2029 already. Let's go ahead with Smart Infrastructure for customers on Slide 10.

In Smart Infrastructure for customers, adjusted EBITDA increased by 33% year-over-year to EUR 309 million, reflecting a continued strong momentum in e-mobility. Charging volumes continue to grow and translated into further earnings growth. Higher fossil fuel prices provided additional support. With more than 9,000 fast charging points and accelerating electric vehicle adoption, our market-leading network is well on track to achieve EBIT breakeven this year. In addition, commodity sales delivered a strong performance and further supported earnings growth in this segment.

Let me now turn to adjusted net profit and the reconciliation on Slide 11. Adjusted net profit attributable to EnBW's shareholders reached EUR 595 million in the first half of 2026, broadly matching the prior year. A strong adjusted financial results partially offset the decline in operating earnings. Positive valuation effects from the solid performance of financial assets covering dedicated long-term obligations more than compensated for slightly higher interest expenses. At the same time, earnings attributable to noncontrolling interests increased, reflecting better performance of minority-owned entities and weighing on adjusted net profit.

Moving on to Slide 12 with a brief update on our investments. At the half year mark, gross investments amounted to EUR 2.4 billion. The year-on-year decline was fully anticipated and mainly reflects portfolio effects, including our value-driven exit from 2 offshore wind projects as well as the timing and maturity of projects currently under construction. Importantly, it does not indicate any slowdown in the execution of our investment program.

Overall, 88% of these investments were taxonomy aligned, while 83% were directed towards growth projects. Our investment priorities remained unchanged and continued to focus on grid. System Critical Infrastructure accounted for 61% of gross investments in the first half of the year, supporting the expansion and modernization of our electricity and gas grids as the backbone of the clean energy transition.

A further 30% of investments were directed towards sustainable generation infrastructure. This primarily included our offshore wind park, He Dreiht and the construction of 2 hydrogen-ready gas-fired power plants. The remaining investments mainly supported the continued rollout of our fast charging network in smart infrastructure for customers. On the funding side, cash inflows from project partners increased as planned and mainly related to He Dreiht and TransnetBW. These contributions continue to complement our diversified financing framework.

And with that, let's take a brief look at our retained cash flow on Slide 13. Retained cash flow amounted to EUR 787 million in the first half of 2026 and developed in line with our expectations. Compared to the prior year, the decline mainly reflects lower operating earnings, higher noncash effects in our gas storage business due to the higher price environment and higher cash contributions to shareholders following both the increase in our dividend per share and our capital increase.

And with that, let's move on to net debt on Slide 14. At the half year mark, net debt stood at EUR 13.9 billion, slightly up from year-end 2025. Net cash investments of EUR 2 billion were the main driver for it, partly offset by our solid cash generation. Structural support came from our permanent hybrid capital stock, which reached its increased target level of EUR 3.5 billion by the end of June. During the first quarter, we successfully issued EUR 1 billion of new hybrid capital. Following the subsequent redemptions of an existing hybrid instrument, the resulting increase in equity credit amounted to EUR 250 million as reflected in the bridge.

Let's close today's presentation with a few remarks on our full year guidance. Ladies and gentlemen, as outlined at the beginning of the presentation, we are on track to deliver our full year guidance for fiscal year 2026. As discussed, sustainable generation infrastructure is currently trending towards the lower end of our expectations, while the overall group outlook remains unchanged. Earnings were solid despite continued geopolitical uncertainty and volatile market conditions.

At the same time, we maintained strong operational momentum across our strategic business -- growth businesses. Our integrated and predominantly low-risk business model continues to provide resilience while ongoing progress in Germany's energy policy framework further supports the long-term investment case. Taken together, this leaves us well positioned for the remainder of the year and beyond.

And now let me hand back to Marcel.

Thank you, Thomas. Ladies and gentlemen, we'll now start the Q&A session.

[Operator Instructions]

There are no questions by phone at this time. So I would like to turn back to Marcel Munch for any written questions.

Yes. Thank you, Moritz. We have a few questions submitted via the webcast function. So let me start with the first question raised by Joshua [indiscernible] from Insight Investment. If EnBW wins capacity in the dispatchable capacity tenders in September or December, when would the project pass final investment decision? And what would be the annual CapEx profile through commercial operations?

I think that's a question from Joshua, if I'm not mistaken. Thanks for the question. Actually, first of all, we need to make sure that we are going to participate and then win in the auction. So I will not give you any indication regarding our potential -- final investment decision on any power plant, that's at this point, just not possible in all fairness. And secondly, I mean, it's a tender process. So we are certainly not providing any indication regarding volumes or capacity. We potentially would be participated in any kind of auction.

Thank you, Thomas. We have another question by Bobby Dinkov from CreditSights, which went into the same direction. So Bobby, I will pass it because Thomas answered it as he went along. If you have a follow-up question, please raise it again via the webcast. But Bobby Dinkov also raised another question regarding which elements of the new upcoming regulatory period remain most important from EnBW's perspective? Are the allowed returns and absolute return percentages, the primary area of focus or are there other aspects that you believe will improve the return profile for transmission investments?

Thanks for the question, actually. I mean, first and foremost, of course, allowed returns are important. However, it's the overall system as such. Allowed returns is one thing, equity returns is another topic. So I think it's not just one number you can pin it down to. It's the overall system. And we need to ensure that from a regulatory perspective, the returns we can deliver in the first regulatory period are comparable to what we are currently seeing in the rest of Europe, which means that we would assume that with the new system, we should be able to see an increased equity returns in the regulated business.

Thank you, Thomas. Now we have a few questions regarding our ratings target and S&P's most recent update on our credit ratings. I'll try to group them so we can answer them in a coordinated way. It was raised amongst others by [ Preeti ] from BofA and Alessandra Mac Donald. So let me start with the first one. Can I kindly ask on the credit ratings target? In the past, there was a solid commitment to A- ratings at S&P. How are you viewing those credit ratings in light of S&P's negative outlook? Do you have any obligation to maintain that A- rating with S&P? Clearly, you have sufficient levers to maintain A- ratings, including additional hybrid bond issuance. Keen to hear your views.

Thanks a lot actually, for the question. And let me be precise actually, and I'm doing this now since quite a while. And I always -- and we always said that we are fully committed to a solid investment-grade ratings. We never said we are committed to an A- or whatever rating. We always said we are committed to solid investment-grade ratings.

Having said that, what we have seen from S&P lately is, first of all, an affirmation of our A- rating to start with, albeit with negative outlook, and that very much relates to S&P's view that the credit metrics might be under pressure with limited headroom relative to the current rating level. And I mean, it's not a big surprise that we, as a company, are currently in a phase of elevated investment. And full earnings contribution will only materialize over time.

I mean, when you look at our projects in our transition grid or He Dreiht, take an example of our gas power stations, they have a substantial lead time and construction time. So it's not a big surprise that we are seeing some delays here. At the same time, I think it's fair to say that we've managed over the past couple of years -- over the last, almost 15 years, in all fairness, and that's also our intention going forward. We've managed the company with a long-term perspective, and we've always tried to balance financial discipline, value creation and strategic setup.

And you can assume that, that's exactly what we are going to do in the future. I mean we are well placed when it comes to our rating. I think we do have a strong foundation with 80% of low-risk earnings. You've seen that in the first half of 2026, stable cash flows, strong capital base. And also actually, we are able to -- and we also have the operational flexibility to manage our rating going forward. So again, still committed to what we have said all along, solid investment-grade ratings, and you shouldn't expect anything else from us.

Thank you, Thomas. Now there are a few questions regarding our CapEx program and the expected development of net debt. Let's start with the clarifying question by Alessandra Mac Donald. Is the Morven CapEx -- potential Morven CapEx included in the EUR 50 billion CapEx plan, should we decide to go ahead with the project?

Alessandra, thanks a lot for the question. It is included, however, given the time line of Morven until 2030, it's limited to a CapEx low impact on our investments. So it's not really relevant until the early 2030s, and we are going to see what we're going to do with Morven at a future time.

Thank you, Thomas. Following up with the next question. What's the latest guidance for net debt for fiscal year 2026? That was a question raised by Bobby Dinkov.

Bobby, the guidance is as it was before, around EUR 17 billion. Currently, we are just short of 14 billion when you look at our investments of the average EUR 7 billion annually, and you can assume that we are kind of at that level by the end of 2026. And our cash flow generation, it's fair to say that we are moving to EUR 17 billion potentially.

And following up on that question from Michael Charlson from [indiscernible]. Where do you expect the debt repayment ratio to be for fiscal year 2026?

It's in our annual report. I don't have it off the top of my head, but -- it's 15% to 18%, right? 15% to 18%.

Sorry, let me just quickly see if there's -- Okay. Sorry, there was one aspect of Michael Charlson question that we haven't touched upon at least during the Q&A session, the second [indiscernible], can you provide more detail as to how the energy policy reforms in Germany will impact your CapEx and planned returns in the region?

It's a good question, actually. I mean, what I said in the presentation is actually that we do have a feeling that the overall legislative framework is becoming more supportive, which means that we are well placed to execute our EUR 50 billion investment program. And as I said earlier, we also assume that from an equity return perspective, when it comes to our regulated business, we do assume that it's going to improve in the next regulatory period. But that needs to be seen. There's still a lot of pending of topics, especially actually allowed return which will be clarified for electricity not before 2028, if I'm not mistaken, yes.

Thank you, Thomas. Now another question from Joshua [indiscernible] from Insight Investment. Rather than just hedge percentages, how should we think about the progression of achieved generation prices and margins from 2026 through 2029. Are later year hedges currently being added above or below the prices rolling out of the portfolio?

That's a great question, and you will not be surprised that I will not give you any specific numbers on that. However, we do assume that the current energy prices are stable going forward. So that's potentially an indication for the future hedging levels.

Thank you, Thomas. Now one additional question from Michael Murphy with regards to He Dreiht. What work is paused on the construction of He Dreiht in the wake of the blade failure?

I mean, obviously, we are not allowed to work on the impacted windmill and also actually on those blades from the same production site. However, the basic commissioning of the wind park is progressing well and is ongoing. Having said that, we are just about to finalize the 64th turbine. So completion of the wind farm is to be seen over the next couple of days or as we speak. So we are progressing well. And what kind of impact it really has needs to be seen over the next couple of days or 1 or 2 weeks, root cause analysis is ongoing. However, from today's perspective, we do assume that it's a single issue we can take and not a product technical issue.

Thank you, Thomas. Now 2 additional questions came in regarding our CapEx plans. Let me group them together. One came from Alvaro Sanchez from Wellington and the other one from Joshua [indiscernible] from Insight. The first one, what explains the lower CapEx year-on-year? And then the second one, again, following up, it was mentioned that the lower first half grid investments year-over-year and what -- sorry, -- what was it driven by?

And was it mainly timing factors? What specifically caused the timing shift? Was it later than planned permitting or approvals, delayed site access, civil works, et cetera, et cetera? Could you identify the main projects affected and quantify how much CapEx, if any, has moved to 2027? Now that's, I must say, a very detailed question, which we will most likely not answer in detail.

No, but I can give you a broader view on it. It is predominantly timing factors. I mean we are in the middle of the construction of our 2 hydrogen-ready gas power stations at the same time, construction of He Dreiht. And in the -- when we look at our transmission and distribution networks, it's SuedLink and Ultranet, and we had more activities in the first half last year than this year. But that's not something you should anticipate as a delay in our CapEx program. It's just timing between quarters. So by year-end, we do assume that our investment in 2027 is still at around EUR 7 billion. So today, we do not see any kind of major slippage into 2027.

Thank you, Thomas. Now again, coming back to the capacity auctions for gas-fired power plant, another question raised by Alvaro Sanchez from Wellington. How much incremental EBITDA could the proposed German capacity market generate for EnBW once fully implemented? How much are you expecting to get from the 9 gigawatts? I think that's a question we've answered.

I mean, I said it earlier, I mean, due to competition in the auction process, we will not go into detail. And as I also said, we are just looking into a framework provided. We do think we do have economically viable projects on hand. However, to what extent it's too early to say.

Thank you, Thomas. And then there's one final question from Camilla. Can you provide an update on the demand growth?

Camilla, good question actually, but we are basically located here in Southern Germany, and we do not see an extreme demand in data -- from data centers as of today and also not in the near future. So from our perspective, it's not like we are going to see a significant additional demand.

Thank you, Thomas. And there was one final question here via the webcast that came in again just from Alessandra Mac Donald to clarify again, would you mind repeating the CapEx guidance for '26 and '27?

It's broadly in line with the EUR 50 billion program and over 7 years. So last year, we were about EUR 7 billion. And this year, we will be around EUR 7 billion. So the guidance is pretty much flat '26 and '27.

Thank you, Thomas, for that. Now let me briefly check with the operator Moritz, whether there are any other questions that came in via the call directly.

There are no questions by phone at this time.

Thank you, Moritz. Yes. Then with that, we'll come to a close. Once again, thank you very much, Thomas, and to everyone online. As always, if you have any further questions, please don't hesitate to reach out to our IR team for more details or in-depth discussions. All the best. Have a great rest of the day. And for those who still have it in front of you, have a great summer break. Bye-bye.

Bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the EnBW Investors and Analyst Conference on the First Quarter of 2026. I'm Vicki, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Lenka Zikmundova, Head of Investor Relations. Please go ahead.

Thank you, Vicki, and good morning, ladies and gentlemen. Thank you for joining us for EnBW's investor and analyst conference call on the first quarter of fiscal year 2026. As usual, our Deputy CEO and CFO, Thomas Kusterer, will guide you through the presentation. Afterwards, we will open the floor for questions. For those of you joining via webcast, please feel free to submit your questions at any time using the chat function. And with that, let me hand over to Thomas.

Thank you, Lenka, and good morning, everyone, from my side as well. Overall, EnBW had a solid start to fiscal year 2026. Earnings were resilient and operating execution remains strong. Adjusted EBITDA amounted to EUR 1.2 billion, fully inline with our expectations, and we therefore confirm our earnings guidance for the full year 2026. A key strength of our performance continues to be the high quality and stability of EnBW's earnings base. Around 81% of earnings were generated from stable low-risk activities with grids once again forming the backbone of our results.

This underpins the resilience of our integrated business model particularly in the current volatile market environment. We also made good progress on the financing side. In February, we successfully issued EUR 1 billion in green hybrid bond. transaction attracted high investor appetite, further secured a significant share of our funding needs for 2026 and increased our permanent hybrid capital to EUR 3.5 billion. Operationally, our flagship offshore wind project, He Dreiht, is progressing well and remains on track for completion.

Today, 45 of 64 turbines have been installed. The majority of capacity secured through long-term PPAs, providing strong earnings visibility ahead of commercial operations this summer. In parallel, we reached another important milestone at our power generation site in Marbach. Construction has started on our first large-scale battery storage project at a site that already hosts our grid stabilization, gas power plant. The capacity of 100 megawatt hours, the project will further support system stability and the integration of renewable energy in Southern Germany.

Commercial operation is planned for the end of 2026, building on our existing battery storage footprint. This marks the next step in expanding our activities. Today, EnBW already operates around [ 20 ] storage assets with more than 100 megawatt hours of installed capacity. In addition, around 2 gigawatt hours of battery storage projects are already in our development pipeline. The next milestone is our 800-megawatt hours project in Philippsburg, which leverages EnBW's existing infrastructure and the former generation site.

Following FID, taken last December, we are targeting commissioning by the end of 2027. Finally, we also made good progress in E-Mobility. During the first quarter, we expanded our infrastructure by an additional 500 fast-charging points in Germany, taking the network to more than 8,500 fast charging points in total. Once again underlines the strong momentum in e-mobility and supports continued growth in smart infrastructure for customers.

And now back to the financials of the first quarter of 2026. As just mentioned, adjusted EBITDA was at EUR 1.2 billion of the first 3 months, which is inline with our expectations. The performance was once again anchored in our low-risk business which accounted for 81% of adjusted EBITDA, well above our long-term target of 70%. Overall, earnings developed as expected across all segments. System Critical Infrastructure continued to provide a stable earnings. Renewable Energies were impacted by hydro conditions while wind and organic growth provided support.

Thermal Generation and trading contributed less inline with our expectations. Smart infrastructure for customers delivered a solid performance, mainly from E-mobility. Let me now take you to the performance of our three business segments in more detail starting on Slide 4. Starting with System Critical Infrastructure, our largest segment in terms of earnings in the first quarter of fiscal year 2026, adjusted EBITDA amounted to EUR 667 million and remained broadly unchanged compared to the prior year.

Building on the strong momentum of recent years, regulated grid revenues continued to grow, in particular in electricity and gas distribution. This reflects the continued expansion of our regulated asset base supported by substantial investments across accretive assets. This positive development was partly offset by higher personnel and maintenance costs, inline with our expanded operational activities of the business. In addition, we saw a temporary effect in electricity transmission, which we expect to reverse over the course of the year.

Moving on to sustainable generation infrastructure on Slide 5. In sustained generation infrastructure, earnings were lower than last year and amounted to EUR 429 million of the first 3 months 2026. This development was mainly driven by weaker performance in Thermal Generation and Trading, as expected, while renewables were broadly close to prior year levels. Let's start with renewables. Here, adjusted EBITDA came in at EUR 275 million. Earnings were impacted by lower hydro levels across Germany. This was driven by below average water flows and declining spread, particularly in run-off river generation.

These effects were partly offset by favorable wind conditions and additional earnings contribution from newly commissioned assets. Among them was the continued ramp-up of our offshore wind farm He Dreiht, which contributed positively to the first quarter earnings. Turning to Thermal Generation and Trading. Adjusted EBITDA was lower year-on-year at EUR 154 million and inline with our expectations. This reflects, first, to hedge generation margins. In addition, available generation capacity was lower following our lignite exit of 2025.

Second, earnings were impacted by weaker trading performance in a volatile global market environment. At the same time, it's helpful to put the current market volatility into perspective. Alongside our integrated setup, EnBW continues to benefit from the disciplined risk management processes established before ensuring the market dislocations of 2022. These frameworks are operating as intended. As a result, our hedging strategy once again delivered stability and visibility. Overall, margin movements were fully manageable highlighting EnBW's effective and risk mitigating policy. Liquidity remains a clear strength with nearly EUR 10 billion in cash and cash equivalents and almost EUR 10 billion of undrawn facilities. EnBW is well positioned to absorb market volatility without any material impact.

For the third fiscal year, our generation position are almost fully hedged, providing a high level of comfort for our earnings guidance. Looking ahead, hedge ratios stand at 70% to 90% for 2027 and between 20% and 50% for 2028. And we have already started hedging for 2029. In Smart Infrastructure for Customers on Slide 6. Adjusted EBITDA increased by 19% year-over-year to EUR 143 million. This positive development was primarily driven by continued strong momentum in E-mobility. Higher charging volumes once again supported earnings, benefiting from our market-leading network of more than 8,500 fast charging points, its ongoing expansion and continuous EV adoption.

In addition, retail activities benefited from higher gas sales volumes, reflecting the colder weather conditions in the first quarter in Continental Europe. Let me now turn to adjusted net profit and the reconciliation on Slide 7. Adjusted net profit attributable to EnBW's shareholders was at EUR 227 million of the first 3 months. In absolute terms, the year-over-year movement in adjusted net profit was inline with the development of adjusted EBITDA, also resulted in corresponding lower tax outflow. The adjusted financial results remain broadly stable year-on-year as offsetting interest rate effects balance each other.

Finally, results attributable to non-controlling interest reflects improved earnings performance of minority-owned entities. Moving on to Slide 8 with a brief look at our investments on the first quarter. For the first quarter 2026, our gross investments amounted to EUR 1.2 billion, around 21% below the prior year level. This development was fully inline with our expectation and reflects the composition at maturity of our project portfolio rather than any slowdown in execution.

Investments are once again clearly focused on print expansion while outflows for renewables were known. This mainly reflects the well-advanced status of key projects as well as the selective exit from two U.K. offshore wind projects this January as they no longer met our strict risk return criteria. Overall, 87% of these gross investments were taxonomy-aligned and 83% attributable to growth projects. Looking at the allocation by segment. system critical infrastructure accounted for 60% of gross investments in the first quarter. Here, we continue to invest at full speed in grid expansion and reinforcement in both transmission and distribution.

Our lighthouse projects in electricity transmission are progressing according to construction of SuedLink, our major north-south DC transmission project is well underway. At the same time, ULTRANET is almost completed on our side and remains on track for commercial operations by the end of this fiscal year. Around 30% of investments went into sustainable generation infrastructure spending mainly related to the construction of our offshore wind farm He Dreiht and 2 hydrogen-ready gas power plants. The remaining investments were allocated to smart infrastructure for customers primarily for the continued expansion of our e-mobility charging network.

Finally, and inline with the agreed payment schedule, we recorded higher inflows from cofinance contributions by our partners. These inflows mainly related to He Dreiht and our transmission grid operator TransnetBW and form an important element of our diversified funding strategy. With that, let's take a brief look at our retained cash flow on Slide 9. After the first 3 months, we take cash flow amounted to EUR 607 million and came in as anticipated for the first quarter.

Compared to the prior year, retained cash flow was lower. This was mainly driven by the year-on-year decline in adjusted EBITDA which mechanically translated into a lower cash contribution. In addition, the first quarter included higher non-cash items, primarily related to our gas storage businesses. These effects were driven by higher market prices and weigh on retained cash flow. Finally, declare dividends were slightly higher than in the prior year. And with that, let's move on to the development of net debt. As illustrated on Slide 10, net debt was at EUR 12.7 billion at the end of the first quarter. This is around 4% lower than at the end of financial year 2025, and therefore, broadly unchanged.

Net debt remains stable as net cash investments were largely financed from retained cash flow. Additional net debt reducing factors included our 2 green hydrogen bonds issued at the beginning of the year with 50% classified as equity. Further support came from seasonal working capital effects and a slight reduction in pension-related net debt, driven by higher interest rates. That brings me to the last slide and our guidance for 2026. Ladies and gentlemen, as already mentioned in the beginning of the presentation, we are confirming our full year guidance for fiscal year 2026.

Starting to the year provides a solid foundation for the remainder of the year. It gives us confidence in our outlook both at the segment level and for the group as a whole. The breadth of our well-balanced portfolio anchors EnBW in volatile times and support reliable performance in a geographically demanding environment. This leaves us well positioned for the year ahead. And now let me hand back to Lenka.

Thank you, Thomas. Ladies and gentlemen, we will now start with the Q&A session. Operator, please begin?

[Operator Instructions] At the moment, there are no questions from the telephone.

Thank you, Vicki. And we will start with the chat because we have received all the several questions. I will start with the first one from Andrew. Hi Andrew, thank you -- have you on the chat. Can you give a general update on trading conditions in Europe? And on gas trading with regards to VNG, do you expect a stronger result from trading in 2026 compared with 2025?

Andrew, thanks for the question. actually, I mean, the trading -- a quite volatile market environment, as you are probably aware, Gas trading was stronger in Q1 than expected. Electricity trading was below expectations. And in all fairness, it's quite difficult in this environment to make the right trading decisions. You can only hardly rely on fundamentals. It's more dependent on political decisions. So directionally, I would hope that we will see a good result in trading by the end of this year, but it's actually hard to tell in all fairness.

We continue with the next one from Andrew on the guidance. In 2025, the last 3 quarters of the year achieved about EUR 3.7 billion of EBITDA with EUR 1.16 billion of adjusted EBITDA in the first quarter, you need to achieve about EUR 3.7 billion of EBITDA over the remaining 9 months of 2026 inline with what you achieved in 2025. However, you talk about lower generation margins, reduced installed capacity and lower trading results in first quarter '26, so can you give more details on why you are confident in achieving your full year guidance?

Yes, absolutely, Andrew. I mean when we looking at normalized trading results and also normalized level conditions. On top of it, we do see a good performance in our e-mobility business above -- also well above prior year. We are getting more installed capacity in renewables into our portfolio, especially with the ramp-up of He Dreiht. So overall, we are quite positive that we will be able actually to meet our guidance for full year '26.

So we'll go on with Michael Carson from Santander. You had 2 questions. Do you expect any material effect potentially coming from political moments to reimpose wind farm taxes and to alter the EPS reflected in electricity prices.

Good morning, Michael. Actually, I do not see any kind of risks regarding wind farm profit. When you look at the current market situation and the market price development over the last couple of months. It's not comparable to the situation we have seen back in 2022.

As a quick reminder, in 2022, we had gas prices at the peak around EUR 340 per megawatt hour and currently, we are looking more like EUR 40 to EUR 50 per megawatt hour. And as a reminder, before the war in Iran started, the level was around, let's say, early 30s. So it's not comparable at all so we do not expect any kind of only to movement towards windfall profit.

And the second 1 goes to a similar direction. Can you confirm, please, that all your natural gas requirements are fully covered for '26 and is EnBW fully able to pass through costs to customers?

Yes, we are fully covered. Actually, we do not have any kind of exposure to the Middle East when it comes to LNG sourcing most of our LNG is actually procured from the U.S. and other countries. So no direct exposure when it comes to price developments, as I just said, fully hedged for 2026. And we do also not exactly for this year actually any impact from this development on our customer base, be the retail lower industry customers.

The next one, again from Andrew on the gas tenders in Germany. Can you update on the auction process for new hydrogen-ready gas plant in Germany? When do you now expect the auction to take place?

Yes, Andrew, we finally might be getting there. So we do expect the first auction beginning of September and the second, beginning of December. It looks like this is going to happen. However, I'm cautious, I mean, as you are aware, we're waiting for these options now for 3 to 4 years already. But as it looks like it's September and December.

And now with Joshua from Insight, has also put several questions. The first one, given currently elevated one-year baseload power prices, are you locking in your remaining unhedged 2027 generation?

I mean we are monitoring market development, as you would expect, closely and continuously. And if we feel that we do have the right level, we also hedge forward to '27 but also actually '28, and we have already started our hedging for '29. So yes, we are looking at the current market prices and see if it's a level we feel comfortable for the next years to come.

The next one is also on the guidance. I can see that full year guidance has been maintained is there any color that can be shared on how Q2 is progressing and the benefit from higher power prices.

Yes. I mean, I think I kind of answered the question already, Andrew, I had a similar question. For the second quarter, I mean, we -- is progressing inline with what we would expect. We've already hedged our electricity capacity for the year 2026. However, of course, we do benefit to a certain extent from higher power prices and we are trying to lock them in. But also, as mentioned before, given the volatile market environment and the dependency of power price development, commodity price developments related to political decisions and short-term decisions. It's hard to tell what it really means for our full-year trading results. I would hope actually that it's going into the right direction.

The next one is on the rate regulation in Germany. Given the upcoming regulatory updates from the Federal Grid agency, can you clarify the expected timing of key decisions, any informal guidance or signals you are already receiving from the regulator?

No. I mean, in the regulator actually published the final drop of the next regulatory framework the back end of December last year. No big surprise in there. However, still a few unknowns, especially when it comes to cost of equity and cost of debt. And we do not expect actually to get any clarity before 2027 on at least quite decisive point.

Next one on the offshore. Can you update us on your participation strategy for upcoming offshore wind tenders, including where you see the most attractive opportunities and how you are positioning your bid pipeline?

I mean as you know, we already built 3 CPGs as we speak, and we will potentially also participate in the next tenders. I mean we do have one CCGT in the permissioning process already, let's say, in calls through a larger CCGT of 850 megawatts.

And we do have more sites that would be eligible and also potentially well placed for further tender processes -- sorry, ready -- so this was sorry, I was actually referring to the gas tender. So I will answer your question in addition to what I just said regarding the gas tenders. Yes, actually, we will potentially also participate in the offshore tender. However, very much dependent, obviously, on the framework, and we need to have more clarity on that. As of today, we do expect that we are looking at 2-sided CFDs, but that needs to be clarified first before we can really commit ourselves to participate in the standard processes. Sorry about that.

The next 1 is from Alexandra from BlackRock. will the higher OpEx and grids be covered through tariffs in the next year?

That's clear, yes, yes.

The next one was the low hydro levels across Germany expected and included in your guidance? And what do you invest in your guidance over the next few quarters?

Actually, it was not expected. It's lower than the normalized level we have seen for the last couple of years, and that is what we normally assume when we put our guidance. So the level was below what we had expected for the first quarter. And as I mentioned before, assuming that we are going to see normalized levels in hydro and also wind and solar for the rest of the year. we will see an increase again in earnings from hydro generation, especially run-off river.

I think I don't see any other questions in our chat. Just turning to Vicki, to the operator to get some questions.

There are no questions from the telephone.

Okay. Then with that, we come to a close. And once again, thank you very much, Thomas, and everyone online. Thank you for the questions. As always, if you have any further questions, please do not hesitate to reach out to our IR team for more details or in depth discussion. All the best and have a great rest of the day. Bye-bye.

Bye, and thanks, everyone.

Ladies and gentlemen, the conference call is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Good afternoon, ladies and gentlemen, and thank you for joining today's call on our full year results 2025 and our outlook for 2026. In addition, we will take the opportunity today to walk you through our strategy update out to 2030, which provides an integrated view of our long-term priorities. I'm pleased to be joined by our CEO, Georg Stamatelopoulos; and our Deputy CEO and CFO, Thomas Kusterer, who will lead you through the presentation before we open the line for your questions. [Operator Instructions].

And with that, I would like to hand over to Georg.

Thank you, Marcel, and good afternoon to everyone, and a warm welcome from me as well. Looking back, the past financial year has once again underscored the central point. EnBW delivers reliably, consistently and with a clear sense of direction. 2025 unfolded against the backdrop of elevated geopolitical tensions and a challenging macroeconomic environment, conditions that regrettably have not eased and in some areas, even intensified, most recently in the context of the Iran conflict. In this environment, EnBW has demonstrated the qualities of a stable anchor. Only few companies combine continuity and resilience in such a way.

Our financial performance in 2025 again showed the strength and reliability of our earnings profile and our operational execution across grids, renewables, dispatchable generation assets and smart infrastructure demonstrates how we turn structural trends into long-term value. These trends are powerful. The transformation of the energy system, the expansion of system critical infrastructure, rising electrification and growing demand for flexible assets.

Combined with our integrated and diversified setup, they give us a highly resilient and scalable foundation for continued growth. This perspective is at the heart of our strategy update through 2030, which we will discuss in more depth later today. Before we move to that, let me briefly reflect on what we achieved in 2025 and how this sets the stage for the years ahead. In 2025, we stayed firmly on course in what remains a highly dynamic environment. Our earnings were solid, our operations strong, and we continued to invest at scale in the transformation of the energy system. Our adjusted EBITDA of EUR 5.1 billion was right in line with our guidance of EUR 4.8 billion to EUR 5.3 billion.

We delivered in all 3 business segments, a clear sign of the strength and balance of our portfolio. Our investment activity reached a new level with EUR 7.6 billion in gross investments, 22% more than last year. We reaffirmed the scale of the task ahead and EnBW's commitment to driving it. We also made measurable progress in our low-carbon strategy. 2025 saw record additions in wind and solar, bringing the share of renewables in our installed generation portfolio to 66%, the highest level we have reached so far.

At the same time, we continue to reduce coal and added new flexible hydrogen-ready capacity, strengthening our trajectory towards Net Zero. Beyond our financial performance, 2025 was also a year of strong operational delivery across all our business segments. In System Critical Infrastructure, which comprises our electricity and gas transmission and distribution grids, our major projects continued to advance at pace. ULTRANET is now 99% completed on our site with a converter station already in operation. Construction on the remaining parts covered by other TSOs continues as planned, and the full line is scheduled to go live by the end of this year. SuedLink, our largest flagship transmission project, entered construction in all 6 federal states last year, marking a decisive step towards strengthening Germany's North-South transmission capacity.

In distribution, we are accelerating the modernization and digitalization of the grid. Our new automated connection check allows customers to find out within a single day whether their PV system or battery storage unit can be connected to the local grid. At the same time, our largest distribution system operator, Netze BW, successfully renewed more than 310 concessions with no loss since 2020, securing a strong long-term basis for reliable regional and local grid operations.

Our segment Sustainable Generation Infrastructure also made significant progress. In renewables, we added 800 megawatts of new capacity in 2025, the highest increase in our history and secured 400 megawatts in onshore wind and solar auctions. At the same time, disciplined capital allocation remains essential. This was evident when we decided to withdraw from the U.K. offshore wind projects, Mona and Morgan, as economics no longer met our criteria. We also made further progress in transforming our flexible generation portfolio.

In spring 2025, we commissioned the first of our 3 fuel switch power plants. The hydrogen-ready gas units add urgently needed flexibility to the system. In parallel, we continue to decarbonize our thermal generation portfolio, taking out nearly 1.7 gigawatts of coal-fired capacity over recent months. On track for coal exit by 2028, we sold our last lignite plant, Lippendorf end of 2025 and recently took another hard coal unit off the market.

Finally, in our third segment, smart infrastructure for customers, which includes our retail and e-mobility activities, we continue to build strong momentum. We added more than 2,000 fast charging points, reinforcing our market-leading position in the DACH region and supporting the rapid growth in electric mobility. All of this shows we are delivering today and building the energy world of tomorrow. With this in mind, let us move to the financials on Page 6, and I will hand over to Thomas for a closer look to the numbers.

Thank you, Georg, and welcome also from my side. Let me get started with financial highlights for 2025. They show a strong year, fully in line with our guidance and the balance sheet that gives us room to invest and grow over the coming years. Our adjusted EBITDA came in at EUR 5.1 billion, right within our guided range and above last year, driven above all by the sustained strength of our grid business.

Retained cash flow was also strong at EUR 3.3 billion, reinforcing our internal funding capabilities. The net debt with a debt repayment potential of 25%, we are well ahead of our target range of 15% to 18%. To support our growth program, we secured EUR 5 billion in diversified equity and debt funding since the beginning of 2025, including the capital increase last summer. This further strengthens our financial flexibility.

Let's now turn to the performance of our 3 business segments on Slide 7. Our adjusted EBITDA came in exactly as guided, growing by 3% year-on-year. The key driver was System Critical Infrastructure, achieving a 20% earnings increase in line with our upgraded guidance. This was fueled by the investment-backed expansion of our regulated asset base in both transmission and distribution. We also benefited from one-off tailwinds, including higher peak load effects in transmission and lower costs for grid losses. In sustainable generation infrastructure with our renewables, thermal generation and trading, earnings came in at the upper end of our revised guidance. However, they trended below last year due to weaker wind and hydro conditions and lower realized hedged margins.

Our third segment, Smart Infrastructure for Customers performed well and reached the very top of the guidance we had set for 2025. Within the robust set of results, our low-risk activities continue to gain weight. Grids and Renewables contributed more than EUR 3.8 billion to adjusted EBITDA in 2025, lifting their share to 76%, up from 71% in 2024. This expanding predictable earnings backbone is a central pillar for long-term stability.

Moving on to adjusted net profit and our dividend proposal for 2025 on Slide 8. Adjusted net profit attributable to EnBW's shareholders amounted to EUR 1.4 billion, broadly in line with the previous year. The development largely reflects higher expenses in the adjusted financial result due to market valuation effects and slightly higher interest costs from increased financing volumes. Based on this earnings development and our positive outlook, we propose to increase the dividend for 2025 by 6% to EUR 1.70 per share. This corresponds to a payout ratio of 39%, which is broadly in line with our policy of distributing between 40% and 60% of adjusted group net profit.

Let's turn to our investments on Slide 9. Ladies and gentlemen, our investment program remained at a very high level, reaching EUR 7.6 billion in 2025, which is 22% more than in the prior year. Around 60% of our gross investments went into system critical infrastructure focused on expanding and modernizing our transmission and distribution grids. Key projects included SuedLink, ULTRANET and the South German natural gas pipeline. About 30% were allocated to sustainable generation infrastructure. This mainly included construction and development of our offshore wind projects, He Dreiht and Dreekant in Germany as well as our discontinued U.K. projects, Mona and Morgan. We also invested further in our hydrogen-ready gas power plants.

Furthermore, our investments went into smart infrastructure for customers, above all in the continued rollout of our fast charging network. Overall, 90% of our CapEx was taxonomy aligned and 87% supported growth. Divestments totaled EUR 1.5 billion, well above last year, driven by portfolio optimization and co-financing contributions by partners. Let's turn to our retained cash flow, which rose by 42% to more than EUR 3.3 billion, clearly exceeding the prior year. While adjusted EBITDA increased modestly, the strong uplift in retained cash flow was mainly driven by lower tax outflows in fiscal year 2025 and refunds for previous periods.

Net debt decreased by 8% to roughly EUR 13 billion and remained well below our original guidance of around EUR 17 billion. This was supported by the capital increase last summer and the strong contribution from retained cash flow by being only partially offset by our investments. Accordingly, this leads to a debt repayment potential of 25% for 2025, well above our long-term target of more than 15%.

That brings me to our guidance for 2026. In 2026, we anticipate continued operational strength across all segments. In System Critical Infrastructure, earnings will continue to mirror the momentum from our grid investments and the resulting asset growth. At the same time, peak load and loss energy effects are expected to normalize. In renewables, part of sustainable generation infrastructure, earnings will benefit from new wind and solar capacity coming online in 2025 and '26, in particular from He Dreiht, which will be fully operational this summer. Thermal Generation and Trading are expected to deliver a solid performance as well.

However, lower realized power prices and the absence of a lignite contribution following the sale of our lignite power plant end of 2025 will likely lead to lower earnings compared with last year. In Smart Infrastructure for Customers, operating earnings are set to further improve, supported by the continued e-mobility growth and recovery in our solar home storage business. Overall, we expect group adjusted EBITDA of EUR 4.6 billion to EUR 5.1 billion in 2026.

And with that, let me hand back to Georg to take you through our strategy update and to outline our ambitions for 2030.

Thanks a lot, Thomas. Ladies and gentlemen, I am pleased to present our strategy update, our road map to 2030. The energy system is moving towards greater electrification and integration. EnBW is ready for this next phase, ready to execute our ambitious investment program and ready to unlock our full potential as one of the companies shaping the future. EnBW is uniquely positioned in Europe with all key assets of the energy transition in one integrated portfolio. We combine a complete electricity and gas grid footprint with deep expertise across all major technologies, strong market positions along the value chain and proven track record of execution.

That is what makes us so distinctive. Across our core markets, Europe and especially Germany, we hold leading positions in all essential elements of the energy transition. As one of only a few European utilities, we bring together regulated, high-growth electricity and gas grids, a substantial renewables and dispatchable power generation portfolio optimized by smart energy trading, a large and loyal customer base and a leading e-mobility footprint with one of Europe's most extensive high-speed charging networks.

This integrated strength gives us a distinctive platform to build on and the results speak for themselves. EnBW is stronger than 5 years ago. Our strategic direction has consistently proven right with resilient and profitable earnings growth and the ability to weather even major external shocks. And as we continue our transition journey, the benefits are becoming increasingly visible, a growing low-carbon portfolio and a meaningful contribution to a more resilient and affordable energy system. Let's turn from what we delivered to what lies ahead. Large-scale electrification and industrial decarbonization will shape the next phase of the energy transformation in Europe.

In Germany, this dynamic is already supporting structural growth in energy demand. Mobility, heating and the rising power needs of data centers are the main contributors. This transformation demands a major system build-out. By 2030, Germany must expand renewables far beyond today's 200 gigawatt, develop about 70 gigawatts of flexible capacity and invest roughly EUR 150 billion in transmission and distribution grids to integrate new assets and ensure system stability. This is not just a challenge, it is a significant opportunity for Europe with Germany at the core. With our integrated portfolio, EnBW is exceptionally well positioned to turn this momentum into durable, high-quality growth.

With that, let me now turn to our business segments, starting with the backbone of our company and of the entire energy system, our grids. Grids are the core enabler of Europe's future energy system. As electrification accelerates and renewable generation scales up, the stability and performance of our networks will determine how fast the transformation can happen. Nowhere is the more true than in Germany, providing a clear opportunity for EnBW. With our fully integrated electricity and gas grids, EnBW is uniquely positioned to capture this momentum in both transmission and distribution. Anchored in Southern Germany, our grid backbone is one of the central enablers of Germany's decarbonization journey. Across the country, a rapidly growing pipeline of renewables, batteries and new electricity demand is waiting to connect.

Enabling these connections requires a significant network expansion and offers a unique opportunity to scale stable regulated earnings in the coming years. Our regulated asset base of more than EUR 19 billion provides a highly solid foundation for this. In distribution, we operate Germany's second largest network, supported by more than 1,000 municipal concessions, a partnership model that gives us exceptionally long-term stability and reach. In transmission, we are delivering key North-South corridors that will transport offshore wind power to industrial centers.

And through our involvement in the German hydrogen core network, a cornerstone of the future European hydrogen backbone, we are helping to shape the next stage of transformation. This brings me to the future development of our regulated asset base on Slide 17. With strong contributions from our transmission projects, growth in EnBW's regulated asset base is set to accelerate meaningfully. Following robust expansion since 2020, we expect the remuneration basis to significantly grow at an annualized average rate of around 14% until 2030, driven by sustained CapEx in both transmission and distribution.

This translates into highly predictable, low-risk earnings growth under a proven and robust regulatory framework. The regime effectively safeguards network operators' revenues. Investments are fully reimbursed, capital returns are granted over time. Cost outperformance is incentivized and inflation protection as well as multiyear regulatory periods ensure visibility and stability. With a framework currently under review, it will be crucial that the regulator puts in place an internationally competitive regime, one that ensures adequate capital returns to support sustained large-scale investments.

Let us now turn to sustainable generation infrastructure, our generation business and second pillar of our integrated portfolio. Smart, green and flexible generation is essential for a resilient, affordable and climate-neutral future. We continue to grow our portfolio from a position of strength. EnBW is one of the most experienced players in the European energy sector with deep expertise in developing, building and operating complex generation assets. Our teams on the ground in origination, engineering and project development are doing an excellent job in driving this forward.

Today, our generation portfolio is well balanced between renewables and flexible assets and both have made significant progress since 2020. We have added around 2 gigawatts of renewables and substantially decarbonized our fleet with renewables reaching 66% of total capacity by 2025. By 2030, we plan to double our net installed renewables capacity by 10 to 11.5 gigawatts compared to 2020, including large-scale batteries. To accelerate the system supportive approach, we will increasingly leverage existing grid-connected power plant sites, building on a 27 gigawatt strong pipeline across multiple technologies, we can deliver this growth in a disciplined manner, selecting the most value-accretive projects.

Thereby, we maintain a clear geographical focus on Europe with Germany as our core market. Having covered our renewables, let us turn to flexible generation. And let me be clear, when we talk about flexible generation, we mean low-carbon dispatchable capacity that stabilizes the system and support a high share of renewables. In this area, we are also perfectly positioned. Today, EnBW operates around 4 gigawatts of flexible capacities with further 1.3 gigawatts under construction, assets that act as key stabilizers in an increasingly volatile energy system.

Demand for flexible capacity is expected to rise sharply across Europe with Germany standing out as the only major market where almost the entire existing controllable capacity needs to be replaced. Our increasingly hydrogen-ready fleet in system critical Southern Germany is well placed to benefit from this, in particular, from upcoming gas tenders and the future capacity market. By the early 2030s, we plan to further expand our hydrogen-ready capacity, reaching around 2.2 gigawatts. A key advantage is that our development pipeline is rooted in the potential of our sites, excellent locations with grid connections, nearby gas supply and over time, hydrogen access. And with our strong trading, acting as a smart energy manager of these assets, we can optimize the value across markets and time, supporting both system stability and commercial performance. Based on our strong commercial know-how, we maximize the value of our portfolio through an active and disciplined hedging approach.

We operate our assets around the clock, 7/24 and trade across all relevant energy markets, ensuring that our flexible and renewable generation is optimally positioned at all times. Through our forward-looking hedging strategy, we secure generation volumes up to 3 years in advance, providing prudent risk management and stable earnings visibility. For our renewable assets, we also conclude long-term power purchase agreements with leading industrial partners.

These green PPAs offer stable and predictable revenues over many years and support the decarbonization of industrial sectors. To date, we have signed more than 1 gigawatt of such contracts already with terms of up to 15 years, including a recent 100-megawatt PPA with Google, and this portfolio continues to expand. In direct marketing, we manage around 10 gigawatts of capacity, making us the second largest player in Germany, a clear demonstration of the scale and expertise of our trading business. And looking further ahead, we are already exploring future imports of green energy with international partners, most recently with Aqua in Saudi Arabia, opening new avenues for long-term cost competitive supply.

And with that, I hand over to Thomas.

Thank you very much, Georg. Let us turn to our third segment, Smart Infrastructure for Customers with our retail and e-mobility activities. Here, we effectively turn energy into action, close to the customers, deeply integrated with smart energy services and at the forefront of electrification in households and mobility. Our retail activities are set to benefit significantly from the deep electrification of mobility and heating, as electric vehicles and heat pumps scale rapidly across Europe and especially in Germany. Household energy demand will rise sharply, creating strong long-term growth opportunities for EnBW. Serving more than 6 million customers across electricity and gas, e-mobility and energy-related services, we have a powerful base to capture this momentum. Customer loyalty remains exceptionally at EnBW with relationships last on average around 10 years.

This reflects the strength of our strong brand and the quality of our offerings, providing a stable earnings base. Our retail strategy is to turn the traditional household power contract into a digital energy ecosystem as electric vehicles and heat pumps multiply roughly 4 and threefold, respectively, by 2030, customers want to steer their higher consumption more intelligently. Bundled digital offerings drive volume growth, strengthen customer retention and unlock meaningful cross-selling opportunities in a competitive market, supported by our strong and loyal customer base.

And alongside our retail activities, our e-mobility business is a true success story. One-Way EnBW is actually setting industry standards through the country's largest and densest fast charging network. Supported by strong market fundamentals and accelerating electric vehicle adoption, our charging business has developed extremely well, as shown on Slide 23. We reached EBITDA breakeven in 2024 and 1 year later, earnings already moved into a solid double-digit euro contribution with more than 8,000 fast charging points mainly located across Germany. EnBW operates the largest high-power charging network. Carefully selected, our sites rank among the most attractive, which is critical to profitability. Based on a 20% market share in Germany, EnBW sites deliver an impressive 1/3 of all fast charging sessions nationwide. Our strong brand further amplifies this.

The EnBW Mobility Plus app exceeds 3 million downloads and has around 500,000 active customers. The seamless integration of customer front end and charging infrastructure drives traffic to our sites and supports recurring revenues. Building on this success, we will continue to expand our charging infrastructure in line with electric vehicle adoption, strengthening our leadership position in one of the most attractive and scalable growth markets in Europe. This brings me to the final part of our strategic update, our capital allocation priorities and our financial targets for 2030. At the core of this chapter is one message.

Our future growth is predominantly low risk, highly visible and grounded in strict value-driven capital allocation. Focused on regulated grids and other low-risk activities, EnBW is stepping up its efforts to shape the clean energy transition, including gross investments of EUR 6.2 billion and EUR 7.6 billion in 2024 and 2025, respectively. We intend to invest up to EUR 50 billion by the end of this decade, mainly in our home market, Germany. Project selection and decisions follow strict investment discipline, safeguarding value-driven and efficient growth. This policy is built on our integrated setup, which enables swift and flexible deployment of capital to the most value-accretive opportunities across our portfolio.

Every investment decision is based on clear hurdle rate requirements, typically 100 to 300 basis points above the respective weighted average cost of capital, depending on the specific risk profile. This is consistent with project IRRs of around 8% for FID in 2024 and 2025, particularly across renewables, dispatchable generation, e-mobility and broadband. Grid projects are not part of this calculation as earnings in this segment are regulated. All investments undergo thorough payback assessments and sensitivity analysis. We also conduct regular portfolio reviews to confirm decisions and maintain a disciplined capital allocation approach. In parallel, we are driving efficiency across all functions.

Our continuous improvement program targets sustainable savings of around EUR 900 million by 2028. Roughly 1/3 has already been delivered and another 1/3 is identified. Key levers include process optimization, standard direct procurement and the broader use of AI. Let's have a look on how we fund our strategy. Our investment program is fully funded and structured to ensure both robustness and flexibility in execution with roughly 50% CapEx being discretionary.

BBW's funding mix is well diversified across multiple sources. Retained cash flow is the largest and most important single source, contributing around 40% of the total program and underlying the strength of our internal financing capacity.

Capital markets account for roughly 25%, excluding refinancing, complemented by our EUR 3 billion capital increase in 2025, which further strengthened our balance sheet. In addition, partnership models, including asset rotation and disposals will contribute around EUR 13 billion with execution already well underway with more than 85% or over EUR 11 billion already secured today.

That leads me to our financial outlook for 2030 and the final part of our strategic update. This is where our strategic priorities translate into clear financial ambition. We are set to grow the business steadily over the coming years. Between 2026 and 2030, adjusted EBITDA is expected to grow at a compound annual growth rate of around 6%, driven primarily by regulated activities. This takes us to our ambition of EUR 5.8 billion to EUR 6.6 billion by 2030.

For 2026 and the midterm, our guidance is based on a normalized price environment and reflects our internal market outlook. We have not factored in any effects from the next regulatory period as key elements of the new grid framework are still pending. Any upside would come on top of our earnings guidance. The same applies for any book gains from divestments or asset rotation.

Our financial strength supports this trajectory. We continue to steer net debt using our debt repayment potential, key KPI that relates retained cash flow to net debt and reflects our ability to repay our debt from our underlying earnings. We target at least 15% by 2030, aligned with our solid investment-grade ratings.

Our dividend policy remains unchanged with a payout ratio of 40% to 60% of adjusted net profit. Altogether, this positions us to deliver resilient growth and long-term value, supported by disciplined balance sheet management and prudent capital allocation.

With that, I'm handing back to Marcel.

Thank you, Georg and Thomas. Ladies and gentlemen, we'll now begin our Q&A session. [Operator Instructions] And for technical details, let me now hand back to, Segen, the operator.

[Operator Instructions] We don't have questions from the webinar yet. I would now like to turn the conference to Marcel Munch for questions from the webcast.

Yes. Thank you, Segen. So let me start with the questions that we've received via the chat. First, slot of questions relates to a rather topical situation right now in the Middle East. These are a few questions on the situation in the Gulf from [ Michael Carlton ] from Grupo Santander. First part of that question, has EnBW fully contracted its gas procurement needs for 2026 and 2027? Second leg of the question is the portfolio fully hedged between gas consumers and power generation on one side and procurement on the other? And what main sources of EnBW's natural gas -- what are the main sources of EnBW's natural gas supplies?

Let me take this question. Thanks a lot. I mean you might be aware of our hedging policy. We are fully hedged for '26. We are roughly 70% hedged for 2027. And when it comes to our customers, we do back-to-back sourcing. So our customer base is fully hedged in our underlying hedging policy. We do not have any exposure currently to the Middle East when it comes to sourcing. Our main sources are pipeline gas from Norway, the wholesale market in Europe. And besides that, we do have contracts with the U.S. and other countries. So we have no exposure to the Middle East. I think that were the question, if I'm not mistaken.

Thank you, Thomas. I would just follow up with another question that Andrew Moulder raised via the chat, and that goes into a bit more detail. And the question is whether we have any specific exposure in our gas subsidiary, VNG with regards to the Middle East?

Andrew, good question. Actually, we do not have any exposure from VNG to the Middle East. We do not have it group-wide. VNG is sourcing LNG through EnBW trading with internal contracts. So there is no exposure -- LNG exposure or Middle East exposure from VNG.

Thank you, Thomas. Let's continue in the chat. A question from Jose Ruiz from El Periodico de la Energia. Would you expect any initiative from the German government to cap electricity bills or intervene in the power wholesale market by decoupling power and gas?

Yes, I will take this, Marcel. We have in Germany clearly this discussion, especially in public. Let me compare with the situation that we had during the energy crisis as a result of the Ukraine war. We had, at that time, structural differences to today's situation. We had a security of supply issue at that time, and we had a much higher level of pricing issue compared to today. So with the current situation, we do not think that it is necessary that any measures will be taken, especially if you look at the electricity sector. At the electricity sector, the introduction of CfD mechanism for the -- in the framework of the EG.Law and the adjustment and revision of the EG.Law is foreseen. And therefore, you have already there the possibility to have a cap on electricity and energy prices.

For gas, we think it is important to keep the market signals also to the consumers. And if something needs to be done is to consider the creation of a strategic reserve of about 7 to -- corresponding to the consumption of around 7 to 10 winter days and have this reserve in place when it is really needed when the markets lead their limits. Other than this, we do not see any necessity, and we also do not think that the German government will proceed into this direction.

Thank you, Georg. We have no more questions in the chat. So let me just check in with Segen whether there are any questions directly in the call.

Yes. We now got a question from Andrew Moulder from CreditSights.

Can you hear me now? Yes. Good. Okay. No, I just have a question about your net debt. I mean I was -- I'm certainly expecting it to be more than sort of EUR 14 billion, EUR 15 billion around that sort of level, and it's significantly lower than that. Can you just give me a little bit more color on your net debt number? I mean, I know you did the capital increase, but even with that, I was still thinking it was going to be higher than EUR 14 billion, EUR 15 billion or so. So have you sort of slowed down investments or something like that? What's the -- why is debt lower than I expect really?

And the second question, I just wanted to be clear on your investments in your guidance. You were talking about some of the investments were proprietary investments that you -- or sorry, you would be looking at -- they weren't committed investments. I think you said you had about 50% of the investments weren't actually committed, and yet you're talking about aiming for guidance of around EUR 6 billion, EUR 6.2 billion or so for 2030. So what percentage of those uncommitted investments are you actually expecting to materialize in order for you to hit that EBITDA guidance in 2030?

Andrew, welcome to the call. Let me get started with the second question and the discretionary or nondiscretionary CapEx, respectively, how much of it we do assume to be needed for the guidance. Most of it is actually relevant to get to the guidance of EUR 5.8 billion to EUR 6.6 billion. However, I think the point we are trying to make is we are flexible in terms of which kind of investments we are investing our capital in. And secondly, also from a timing perspective, so we can move investments from one year to another. And some investment, and that goes back to your first question regarding our net debt. We also assumed at the beginning of 2025 that our net debt is above EUR 15 billion.

So effectively, what happened, some of our investments slipped into 2026. We had some delays at He Dreiht, our offshore wind park. We originally assumed it's going to be fully constructed by the end of the year, and it's now mid of 2026. So some delays here. And likewise, with our 2 still under construction, our hydrogen-ready gas power plants, they also had some delays in construction, which means that our investments overall, our gross investments and also our net investments were below our original expectations. And that's the reason for the reduction in net debt. Does that answer your question?

Yes. Yes, it does, Thomas.

And you're sitting in the middle of a control center, if I'm not mistaken.

Yes.

That's fabulous.

It's a bit cheating to be honest, actually. It's batter than power station. I don't know. It's been upgraded into a fancy residential and shopping destination, but they still have the old power station. But anyway, I just had one more quick question. It's just a very small point actually. On the EV charging, I mean, I can remember when people were starting to build EV chargers, everyone was saying it wasn't a profitable business, it needed subsidies. And now you're talking about it being, I think double-digit EBITDA. I know it's not really huge in the context of the group. But is that purely in terms of sort of EnBW's performance? Or are you getting subsidies for the electric vehicle charging? Why -- what's making it profitable?

It's not subsidies, Andrew, it fully relates to our performance. However, it's on EBITDA level, as you just said. So I mean, we still have a way to go to recover all the investments in the next years. On EBITDA level, we are already and we are happy that that's the case. However, having said that, the utilization of charging infrastructure in Germany, not the EnBW numbers, but Germany wide for fast charging is 15% currently. So what we are looking for is a higher uptake of e-mobility to further utilize our charging infrastructure. And that would increase also actually profitability also below EBITDA level. However, having said that, I think we're doing a really good job in also being -- in already being in an investment case. We shouldn't be forgetting that we're investing EUR 200 million annually still in this business that we are already -- on an operational perspective, we are already positive.

Okay. And maybe if I could ask one more question, unless there's someone else, Marcel, that you want to bring on to the call. There was some speculation -- I mean, obviously, you've got all this volatility in the Middle East. There was some speculation and some headlines on the Bloomberg that RWE, I believe, was positioned at the wrong side of the gas price increase, i.e., they were short gas and so they need to buy in the market. Now I'm not going to say I don't know how positive or negative or whatever that would be for EnBW. But trading is always a black box. So really, my question is, how are you positioned now that we've gone into this business? Markets are clearly volatile, which I would expect would help the trading business. But if you're in a short gas position, actually, maybe you're not doing so well. So can you give me some comments on where you're positioned on your trading business?

Yes. First of all, we are not on a short position, which is a good news. And then we shouldn't be forgetting, I mean, we're not talking about volatility and market disruptions that we have seen back in 2022 in the Ukraine -- when the Ukraine war began. So it's a totally different situation today. Again, with higher volatility, there are opportunities also for our trading organization. And I think I made a point earlier already. We are fully hedged for 2026, and we are hedged by 70% plus for '27 already. And that's also true for gas. It's our overall hedge level. So we are not directly impacted so far. However, having said that, I mean, it very much depends on how long the conflict is going to last and what it really means for mid- and long-term supply chains in total, not just energy, but also energy related.

[Operator Instructions] There are no more questions at this time. I would now like to turn the conference back over to Marcel Munch for any closing -- we have the last minute registration coming from Richard Alderman from BTIG.

Can you hear me?

Yes, we can.

A few questions, just to follow on from Andrew, if I may. Just on the uncommitted CapEx, the EUR 24 billion number you were talking about, could you just give us an update on your thoughts on the regulatory process and where that may go? And how much of that CapEx could be committed to extra regulatory investments if the returns are proven to be attractive, to be adequate? E.ON obviously have voiced some frustrations around the pace of that process. So any thoughts you have on cost of capital, where that is, where we might find that information would be helpful as well?

And then also in terms of commitments to further renewable investments, I saw a banner headline today that suggested the German government might be increasing onshore wind auctions from 10 gigawatts per annum to 12. Have you seen that information? Is it something that might take you down a route to participate in that angle?

And then also I'm just interested in, as a secondary question, you're pursuing the hydrogen side of the gas auctions. Can you give us an update on what you think will be the time scale for that? And would you also participate in the natural gas side of that auction if it's coming this summer?

And then the last question would be just I'm interested on -- following up from Andrew's questions around the very impressive performance in net debt, even though you've got some delayed CapEx slipping into 2026. I was just interested as to why you came below the 40% to 60% dividend payout range, given you've had very strong cash generation, you seem to have decent earnings momentum. And also, you seem to be quite happy with the start to the year given you're not short gas. So just some thinking around that, please.

Good questions. Actually, let me get started with -- I'm starting with your Question 4. We'll jump to 1 and then hand over for 2 and 3 to Georg, if that's okay for you. Regarding net debt, I think I made a point why we were below our original projection of EUR 15 billion. Having said that, we do assume that we are going to see an increase in 2026 from EUR 13 billion to around EUR 15 billion given that some of the CapEx is slipped into 2026.

Regarding the dividend payout ratio, we are just below our self-set guidance of 40% to 60%. And that was on purpose. We would like to show stability in our dividend payout, so EUR 1.70, that's something we can -- we would also aspire actually going forward. So it's about stability. And at the same time, actually, given our investment program, I think it makes sense actually to strengthen our balance sheet and our shareholders are supportive of that. So that's why we came out with the 39%.

Regarding your first question on regulated business and the process of the new regulatory system going forward, I think the question you were asking was around how flexible are you to allocate CapEx. We do have some flexibility, not total flexibility, of course, because some we do have to do because of network development plans and so forth. But we do have some flexibility to allocate more or less to -- also to our regulated business. I think for us, it would be important that we do see an increase in the equity return for the next regulatory period. We currently -- what we are currently looking at is around 2% below the average in Europe. And we need to be competitive when it comes to international capital because we do need international capital for the enormous investments needed in our network infrastructure going forward. So a 2% increase to something like 8% would be something we would strongly advocate for, and that's what we currently do. I hope that answers the 2 questions for you.

Yes.

Okay. Perfect. And I hand over to Georg.

Yes, with pleasure, Thomas. You have asked about the new climate protection law that was announced almost in parallel to our press conference that we had before this call. So I am not 100% informed on every detail of this new law. But the first points that I have seen are very encouraging. It is a commitment to the targets of the German government in terms of climate neutrality until the year 2045. And there was an announcement made out of the Ministry of Economy in Germany for additional auctions in wind onshore of 12 gigawatts. I mean this is a strong signal also in Germany. In the last years, we had a rather restrictive auction regime and rather restrictive participation in the auctions from all market players. This is not an EnBW specific, and therefore, it is very good news for us that additional 12 gigawatts are going to be auctioned.

Again, and the last on this question, we need first to see the details. We need to see how this is going to be realized, what is the time frame and what will be the speed of these auctions? How many are going to come still in the year 2026 or in the next years until 2030?

Also, you have asked about an assessment about the establishment of the hydrogen economy in Germany. EnBW is participating at the backbone grid, at the core grid of hydrogen with an investment in total of approximately EUR 1 billion and a length of pipeline of approximately 900 kilometers. This is approximately 10% of the total length of this core grid. And we are doing this investment. We are doing this for both the Southwestern part of Germany, where EnBW headquarters are located, but also for the Eastern part of Germany where VNG is located. Nevertheless, in order to answer to your question, we need to know or to assess when hydrogen is going to come to this grid. The grid on its own does not help a lot. And this is where we see a difficulty in the market.

We try from our side to secure the upstream position. We have several projects, and we are still in discussions with hydrogen producers also outside the European Union. We have -- what we can announce and we have already announced are quantities that -- or options that we have secured from Norway and also from Saudi Arabia. The first starting in the year 2027 and the second starting in the year 2031. Nevertheless, we see the challenge at the downstream side.

For sure, we need some hydrogen for our own power plants, but we know that the consumption of our own hydrogen-ready gas-fired power plants will not be enough in order to make this project sustainable and economically viable. We need also consumers from the industry, from the chemical industry, from the steel industry. And the last year, the last months, the industry was very reluctant in committing to concrete agreements on hydrogen supply. We still work on this. I wanted to give you the framework and the background and now the assessment is coming, I think we will be in a position by the end of the 2030s years to see first projects and first fuel switching towards hydrogen.

That's very interesting. And just following up on that, I had one more question on just the current status of the capacity auction. Could you just update us? The timetable has been slipping to the right, so do you still envisage that you will be bidding into that at, say, 2 to 3 gigawatts of capacity? Is it going to happen by the end of July? Or will it be later? Will you bid for any natural gas as well as hydrogen-based gas? And have you also made any prepayments on turbine capacity to guarantee that you can deliver those investments if you're successful in the auction?

Yes. You're asking about the hydrogen-ready gas turbines. First of all, you need to see when the first auction is going to take place. We still do not have a law, not even a law in force, but -- not a law in force, but not even a draft version of the law that will be discussed in the parliament and also with the stakeholders. It is promised by the federal government to be published by end of March, but I think this is a very ambitious target given the date that we are today. And why I'm saying this, we do not really expect the first auctions to happen by September, October this year. The most optimistic scenario we see by the end of the year.

We have announced already, first of all, we need to consider that we have today in construction approximately 1.4 gigawatt of hydrogen-ready gas capacity. The smallest of this plant is already in operation, and the 2 others are going to come into operation by the end of 2027. Beyond this, we have already announced a hydrogen-ready gas power plant of a capacity of approximately 800 megawatt. And we have also additional sites where we have not announced it, but let me say, in the total number, we target approximately 2 to 2.5 gigawatts. But this depends also on the details and on the framework that the law is going to prescribe.

You have asked about the commitments that we have with gas turbine suppliers. We have such commitments that cover, of course, the projects in construction and also the one project of 800 megawatt for Karlsruhe, and we have the options for further capacity reservation at the gas turbine manufacturers up to a point of approximately 2 gigawatts. So we think, from this point of view, we are going to -- we are not going to have a limitation. The limitation are the financial, the economics. If the framework is good and supportive, we will participate. If we do not expect this, we will not participate.

And the risk of asking a fifth or sixth question, can I just extend that -- then that point you just made into your positioning with data center customers, hyperscalers. Do you envisage any sort of powered land type construction deals where you might be building renewables or hydrogen close to data centers coming out of that capacity auction or any other part of your CapEx plan?

We do not see ourselves directly in the construction of data centers. But for sure, we see ourselves in the supply of energy, of electricity to these data centers. I think we have a big advantage and good sites in terms of grid connection. These are the old nuclear and coal-fired power plants that were taken out of operation, but we still have the grid connection, and we have enough capacity to supply these sites with electricity, first low-carbon electricity and after some years with net zero electricity. We are in discussions for several sites with interested companies, but we are not so far to date to announce something.

RWE talked about, I think, 10 to 20 sites in Germany and a similar number in the U.K. Could you put some sort of figure on that in sites or gigawatts?

I think this is very optimistic. We suppose that one site, in order to be viable, should have a grid connection of approximately 1 gigawatt. In the short term, let me say, until the year 2030, we see maximum 2 or 3 such data centers in Germany and maybe 5 in the European Union. After this, we need to see how the development is going to be.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Marcel Munch for any closing remarks.

Thank you, Segen. And with that, we'll bring today's call to an end. So many thanks, Georg, to you and, Thomas, to yourself and obviously, to everyone on the call and in the webcast for following us. We'll now be traveling to London, Paris, Amsterdam and Frankfurt next and look forward to picking up the conversation with many of you as we move along. If further questions arise in the meantime, please reach out to our IR team who are obviously very happy to assist you. And with that, many thanks again, and enjoy the rest of the day. Bye.

Ladies and gentlemen, welcome to the EnBW Investors and Analyst Conference Call for the Third Quarter 2025 results. I'm Vicki, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Lenka Zikmundova, Head of Investor Relations. Please go ahead.

Thank you, and good afternoon, ladies and gentlemen, and welcome to our conference call on EnBW's performance over the first 9 months of 2025. As always, I'm joined here by our Deputy CEO and CFO, Thomas Kusterer, who will walk you through the key financials and the developments. After the presentation, we will be happy to take your questions.

So without further ado, Thomas, over to you.

Thank you, Lenka, and a warm welcome to everyone joining us on this call. We truly appreciate your interest in our company.

Today, we are pleased to report that EnBW delivered a robust set of results, reflecting a continuation of trends already seen in the first half of 2025. Adjusted EBITDA at group level reached EUR 3.6 billion, nearly matching last year's level after 9 months. This performance was supported by a strong contribution from our Grids segment, which successfully compensated for lower earnings in Generation and Trading.

Based on this performance, we reaffirm our full year group earnings guidance. However, this comes with the segment realignment. We now expect higher earnings from our Grids business and lower earnings from generation, reflecting the respective market and weather-driven development.

Turning to our operational progress. Construction of our 960-megawatt offshore wind farm, He Dreiht is advancing well. The project is moving steadily towards first power soon with 26 turbines already installed. We expect commercial full-scale operation in summer 2026. It is currently Germany's largest offshore wind farm and once fully commissioned, we will be able to supply electricity for around 1.1 million households.

Same with offshore, we are happy to report that our 1.5 gigawatt Morgan offshore wind farm, jointly developed with JERA Nex bp has been awarded development consent. Now both of our projects in the Irish Sea, Mona and Morgan have reached this significant milestone.

This provides the certainty we need to move into the next phase with our supply chain and key stakeholders who have supported us to date. Securing the development consent order represents a major step forward in delivering the kind of low-carbon infrastructure the U.K. urgently needs. At the same time, we are closely monitoring the development in the U.K. and the upcoming allocation rounds.

Sufficient revenues in the form of viable CFD prices are a prerequisite for the economic viability of offshore projects in the U.K. and the further positioning of project owners.

The recent initial budget proposal for the U.K.'s allocation round 7 offshore auction is, from our perspective, too low and not a good sign as it puts both the U.K.'s 2030 clean energy target and the future growth of offshore wind in the U.K. in general at risk.

Switching now to onshore wind and solar. Our expectations of these technologies is well underway, year-to-date. EnBW has secured a record of more than 330 megawatts in German and French public tenders. In total, we currently have around 1.7 gigawatts of renewables under construction.

Let's move on to Grids. SuedLink Germany's largest energy transition infrastructure project has now received full approval. Our TSO TransnetBW was recently granted plan permission for the final remaining section. With this approval, our joint project with TenneT is now under construction in all 6 federal states.

Finally, we are pleased to share an update on our sustainability commitment. EnBW has expanded its climate targets to include a comprehensive net 0 goal covering all company-related emissions. We aim to achieve net 0 greenhouse gas emissions for Scope 1 and 2 by 2040 and for Scope 3 emissions encompassing the entire value chain by no later than 2050.

Our clearly defined and strategically aligned reduction path has been rated NZ-2 by Moody's in their net 0 assessment, the second highest rating on their scale. Importantly, Moody's confirmed that our path is aligned with the 1.5-degree climate target.

And now let's turn to the financials on Page 3. As previously mentioned, our business continued to deliver a robust set of results, reflecting the momentum observed in the first half of 2025, while also demonstrating the strategic strength of our integrated business model.

Earnings remained nearly flat year-on-year with adjusted EBITDA at group level reaching EUR 3.6 billion, mainly driven by a strong development of our Grids segment, offset lower earnings in generation due to normalized margins, subdued trading results, amid lower market volatility and a decline in earnings from renewables generation caused by weaker wind and hydro conditions, particularly in the first half of the year.

Low-risk activities comprising our grids as well as renewable business contributed EUR 2.8 billion to adjusted EBITDA, accounting for 76% of our total earnings. This represents a 5 percentage point increase compared to the prior year, given the growing earnings from our regulated grid activities.

In light of this performance, we reaffirm our full year group earnings guidance. However, as already mentioned before, we are adjusting on segment level. We now anticipate higher earnings from our Grids business and lower earnings from generation, reflecting the respective market dynamics and the weather-related developments.

Let's now have a closer look at the performance of our 3 business segments in more detail, starting on Slide 4. In Sustainable Generation Infrastructure, adjusted EBITDA stood at EUR 1.6 billion after 9 months, which is 20% lower than last year. While third quarter earnings nearly reached last year's levels, the positive trend was not sufficient to fully offset the impact of normalized price levels and poor weather conditions in the first half of the year.

Looking first at Renewables. Adjusted EBITDA amounted to EUR 793 million. Earnings were impacted by weak offshore load factors and limited rainfall affecting run-of-river power generation. Conditions only began to normalize in the third quarter. Additionally, reduced availability of our pumped storage assets in the last quarter weighed on results. On the positive side, solar generation was better than in prior year, though not enough to fully compensate.

Moving on to Thermal Generation and Trading. Adjusted EBITDA was at EUR 796 million. Lower realized hedge margin and subdued market volatility impacted earnings. However, it was partially balanced by a solid LNG business and the initial contribution from our newly commissioned grid stabilization power plant in Marbach.

Accordingly, we now expect adjusted EBITDA for sustainable generation infrastructure for the full year to be in the range of EUR 2.1 billion to EUR 2.4 billion compared to the previous guidance of EUR 2.4 billion to EUR 2.7 billion.

Before we move to the next segment, let's take a brief look at our thermal power generation hedge levels for the coming years. For 2026, we are now almost fully hedged. For '27, we have hedged levels between 50% and 80%, while hedging for '28 is also well on track. The approach remains fully aligned to our established and proven hedging policy.

Moving on to System Critical Infrastructure on Slide 5, which comprises our electricity and gas transmission and distribution grid. Adjusted EBITDA of System Critical Infrastructure reached almost EUR 2 billion after 9 months, representing a year-on-year increase of 12%. The strong organic growth was driven by robust earnings across all assets, supported by continued investment activity. Lower expenses for grid losses provided an additional positive effect.

On the other hand, higher personnel expenses and increased operating and maintenance costs resulting from ongoing grid expansion partially offset these gains. Reflecting this strong performance and underlying trends, we have adjusted segment guidance upwards for the full year and now expect adjusted EBITDA in a range between EUR 2.6 billion to EUR 2.9 billion compared to a previous guidance of EUR 2.3 billion to EUR 2.6 billion.

Turning now to the details on the development of smart infrastructure for customers, as shown on Page 6.

In our retail business, adjusted EBITDA was at EUR 288 million after 9 months, representing an increase of 24% year-on-year. Earnings were in line with the full year guidance and driven by our e-mobility business continuing a profitable development, while B2C activities reported a stronger performance as well.

Growth in our customer base, supported by successful new client acquisition provided an additional positive boost. On the downside, increased overhead personnel expenses weighed on results. Furthermore, our solar home storage subsidiary, Senec, faced headwinds from ongoing battery module replacements and costs related to the launch of a new product.

Moving on to the earnings drivers down to adjusted net profit on Slide 7. Adjusted net profit attributable to EnBW shareholders was at a solid level of almost EUR 1 billion after 9 months. Figure was below prior year's level, mainly given higher financial expenses in the adjusted financial results relating to market valuation effects and slightly higher interest expenses resulting from increased financing volume. Overall, this reflects a similar pattern of value drivers as already seen in the first half of the year.

Moving on to Slide 8 with a brief look at our investments. After 9 months, EnBW's gross investments totaled EUR 4.7 billion, reflecting a 21% increase in investment activity compared to the previous year. This continued high level of investment underscores our commitment to driving the full-scale transformation of the energy system. 86% of these expenditures were attributable to our growth projects.

Nearly 40% of our gross investments were allocated to sustainable generation infrastructure, primarily for advancing and constructing offshore projects in Germany and the U.K. as well as for our 3 hydrogen-ready gas power plants in Germany.

Around 55% of our CapEx was directed towards system critical infrastructure, focusing on the expansion and modernization of our transmission and distribution grids. This includes major projects such as SuedLink and ULTRANET, along with the development of the South German natural gas pipeline essential for our fuel switch power plants and future part of Germany's hydrogen core network.

The remaining share was invested in smart infrastructure for customers, supporting the continued rollout of our e-mobility charging network and related customer solutions. Disposals were substantially higher year-on-year. This reflects -- and this increase reflects portfolio optimization measures and capital inflows from our municipal participation model.

In addition, minority stakes in selected subsidiaries were sold during the reporting period, supporting our disciplined approach to portfolio management. By contrast, co-financing contribution by partners, particularly for our transmission grid operator, TransnetBW and our offshore wind farm from He Dreiht remained broadly in line with last year's level.

Now let's take a brief look at our retained cash flow on Slide 9. Retained cash flow increased by 34% to more than EUR 2 billion after 9 months, while adjusted certainly remained broadly in line with last year and at a solid level. The improvement in retained cash flow was primarily driven by lower tax outflows following refunds for previous periods. This resulted in a higher funds from operations compared to the prior year period.

With that, let's move on to the development of net debt. As illustrated on Slide 10. Net debt decreased by 14% compared to year-end 2024 and now stands at roughly EUR 12 billion. This reduction largely reflects the proceeds from the capital increase executed in the third quarter. This benefit was reduced somewhat by increased investments during the period.

Looking ahead to year-end, we expect net debt to come in at around EUR 15 billion, well below our original guidance of roughly EUR 17 billion. This is mainly due to project slippage across our portfolio, including some grid projects caused by supply chain.

While this shifts part of our planned CapEx into the future periods, it is actually positive on a margin from a financial perspective as it spreads investments more evenly over the coming years rather than peaking in the current year.

That brings me to the last slide and our guidance for 2025. Ladies and gentlemen, as highlighted at the beginning of the presentation, we confirm our full year guidance for fiscal year 2025 at group level. This comes with the segment realignment. We now expect stronger earnings from our Grids business and lower contributions from generation, reflecting market and weather-driven development. Guidance for our Retail segment remains unchanged.

And now let me hand back to Lenka.

Thank you, Thomas. Ladies and gentlemen, we will now start with the Q&A. Feel free to call us or use the test tool for asking your questions. For more details, I will hand back over to the operator. Vicki?

[Operator Instructions] The first question from Andrew Moulder, CreditSights.

Yes. Thomas, Lenka.

Andrew, happy to have you on the call.

I've got a few questions actually. So if you haven't got a 2-question rule, I'll jump in with all of them. Project slippage, you mentioned this before, and I think it relates to He Dreiht, but could you perhaps give a bit more information about exactly what's happened there and sort of why you've got this? And is it particularly just related to that project? Or do you expect the same sort of thing on some of your other projects? So that's my first question.

I also just wanted to ask about this thermal, the downgrade of your generation guidance. I mean maybe I'm being naive, but it kind of strikes me that you ought to have kind of expected that you'd have normalized generation margins with power prices and gas prices and lower volatility. So I kind of think you should have already incorporated that into your guidance.

So I guess really what my question is, is the downgrade of the guidance in the Generation segment really just due to this normalized margins that you didn't anticipate? Or is it actually mostly due to weather-related effects that you really couldn't anticipate when you had the guidance in place. I mean you have no control over that.

And my final question, I just wanted to ask about your thoughts on this downgrading of the pot for [ AR7 ]. I mean it sounds very counterintuitive to me given that costs have increased and the needs for the renewable capacity also seem to have increased. And I just wonder, what do you think the U.K. government is playing at here? I mean, do you think it's game theory or something like this where they're actually just trying to get you guys to perhaps offer lower prices for a CFD in the hope that you'll accept that just because the prices are higher than they were before in the previous rounds. I just can't really understand exactly what they're trying to do here. And I wonder if you could add a little bit of color on that.

Andrew, let me get started with probably the most difficult question, right, in the beginning, that's your last question regarding the EUR 900 million annual budget for [ AR7 ], like yourself, we are a bit puzzled and not happy with that result. And I think likewise, all the other developers for the obvious reason you just mentioned, we have seen an increase in costs across the supply chain, and that's not just our project. I think that's across the industry.

And I mean, when you look at the prior auctions unutilized, if I be kind and the fact that even some projects were handed back even after receiving a positive auction result. You can clearly see that a CFD level that is at a level that we have an economic viable project in hand is crucial. And that's why we're all a bit concerned in terms of what does it really mean for the transformation of the U.K. offshore wind business as such because we all know we are talking about high CapEx, long-term investments. And in such an investment, I think it's all about trust and reliability.

So we -- like you just mentioned, we're all a bit puzzled about this result, and we do not have any clear idea why this could have happened. I mean one thing is clear, a higher budget has an impact on end customer bills, and that's obviously a concern and rightfully so. Affordability is something you have to be concerned about.

But besides that, I do not see the logic and rationale behind this EUR 900 million budget. That's all I can say to you. I mean we do have [indiscernible]...

Okay. That's fair enough.

But I do agree with the concerns you were just raising. Regarding your second question regarding our generation guidance, of course, we did also assume when we looked at 2025 in '24, we did assume that we are going to see a decline in wholesale market prices. However, when you look at the wind -- offshore wind performance, we are almost 20% below prior year, and that's really due to lower wind availability.

And then you look at hydro, I think rain was 60% below average in Germany for a normal year. So it is predominantly better related what we are currently experiencing here in our generation portfolio.

And to the slippage, it is He Dreiht to a certain extent, He Dreiht, is going to slip more into '26. So for a couple of months, we are talking about 3 to 4 months delay in installation. That's nothing serious. However, it does cost mid-double-digit million in earnings in 2025 and '26. So that's the downside of it. However, we also see some slippages and delays when it comes to our fuel switch project.

And there's nothing really concerning about it. It's in a certain extent, late delivery of components, it's installations that take a bit longer than you would normally have expected or planned, some quality issues that have to be resolved, site-specific issues, but nothing serious and nothing that is out of the ordinary when it comes to projects of that size. So that's the 2 main topics.

And on top, when you look at our TSO business, TransnetBW, also for the larger projects like SuedLink, you do see some delays. But as I just said, nothing here. And from my perspective, from a financial perspective, it's not really something I'm concerned about. I think I mentioned it during the presentation, it kind of evens our investment profile. Otherwise, we would have been quite front-loaded. So it's not really a bad thing, especially not in the regulated business because we are reimbursed for any kind of cost overruns anyways.

[Operator Instructions] At the moment, there are no more questions from the telephone.

Thank you. And we'll start with the questions which we have received in our chat function. I'll start with Michael Dutton from Santander. He's asking on the new grid regulation in Germany. How do you consider the most recent signals coming from the regulator for the next regulatory period?

Yes. Michael, thanks for asking the question actually. First of all, let me get started with the remark that we are in the middle of the process still. So we do not have full clarity how the ultimate regulation is going to play out. However, we still make the point that we do need an increase in equity returns. We are lobbying for 8% because I think that's what's needed also when you look at European regulation. We are currently, as you might be aware, lagging behind the European average, which is 2% points higher than the current German regulation.

However, having said that, I'm not that optimistic to really see a significant improvement compared to the current situation. I mean, the regulator indicated to increase allowed returns compared to the initial draft. However, I think we need to wait until we have all the components on the table to see what it really means from an economic perspective and what economic impact it really makes.

So I'm carefully optimistic mix that we do see a significant improvement from what we currently see. However, by year-end, we should have more clarity.

Thank you, Thomas. So let's continue with the second question from Michael. It goes towards the new gas-fired power plant. Are the conditions in Germany in place to encourage significantly more investment in CCGT?

I mean, Michael, we are waiting since I think it feels like 3 years, but it's at least 2 years that we are waiting to get the respective laws in place. I think it's currently held up still by state aid discussions being had with the EU. We do hope that by the end of the year, that's clarified, and we get a respective law in place, which would allow us to invest into more hydrogen-ready gas power plants. But before we do have the clarity on a potential auction in the next year.

And secondly, how capacity market is going to be structured afterwards, we do not have the framework in place to invest into more gas power stations as of today. Again, we would hope to have more clarity in due course.

And the third one for Mike goes on power prices. How do you expect German baseload prices to develop given the EUR 36 per megawatt hour lower price in France?

You're talking about wholesale market prices, I would assume. We do not see the levels you are just mentioning here for France. When you look at future prices, we are currently between EUR 80, EUR 85 on base level in Germany. What we do expect is actually that it's going to be flat over the next couple of years. So we do not expect a significant increase, but on the other side, also not a significant decrease.

Of course, I mean, when you look at demand, demand very much depends, of course, on the recovery of the German economy. But demand -- if demand is steady and on current level, we do not see any decreasing wholesale market prices. I hope that answers your question.

And the last one for Michael is the sale of former power generation sites for data centers has become very trendy. What is in EnBW's position?

I think our sites are extremely valuable to ourselves, given that we have opportunities for CCGTs potentially, which just -- I just made a point around the clarification of legal framework that's needed. And secondly, also battery systems to be installed, all the respective infrastructure is on the site available. So the sale of our sites for data centers is something we can be looking into. But currently, we're happy to hang on to our sites by ourselves.

Thank you. I'm just asking our operator, are there any questions?

There are no more question -- there are no more questions from the telephone.

Good. Then we are done. Thank you. So with that, we can come to a close. Once again, thank you very much, Thomas and everyone online. As always, if you have any further questions, please do not hesitate to reach out to our IR team for more details or further discussions.

All the best, and have a great rest of the day. Bye-bye.

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