Revenue: Not explicitly mentioned in the transcript. EBITDA: Decreased by 22.5% to EUR3.48 billion. Hydro Segment EBITDA: Decreased by 23% to EUR3 billion. New Renewables Segment EBITDA: Decreased by 25% to EUR170 million. Sales Segment EBITDA: Increased to EUR7 million. Grid Segment EBITDA: Decreased to approximately EUR284 million. Gas Connect Austria EBITDA: Approximately EUR86 million. Group Result: Decreased by 17% to EUR1.87 billion. Operating Cash Flow: Decreased to EUR3.25 billion. Free Cash Flow After Dividends: Decreased to EUR145 million. Net Debt/EBITDA: At 0.6 as of December 31. Dividend Proposal: EUR2.8 per share for 2024. CapEx Plan: Increased to EUR5.9 billion over the next three years. 2025 EBITDA Guidance: Between EUR2.7 billion and EUR3.3 billion. 2025 Group Result Guidance: Between EUR1.35 billion and EUR1.75 billion.

Release Date: March 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Verbund AG (OEZVF) reported a significant increase in hydro generation, with a 9.6% rise to 33,448 gigawatt hours compared to 2023. The company successfully commissioned new renewable power plants in Spain, Austria, and Germany, contributing to increased generation from wind and PV. Verbund AG (OEZVF) completed important projects like the 45-megawatt ReiBeck II pumped-storage power plant and the 11-megawatt Gratkorn run-of-river power plant. The sales segment showed improvement, with EBITDA increasing to a slightly positive value of EUR7 million, driven by lower procurement costs. The company plans to invest EUR5.9 billion over the next three years, focusing on growth and maintenance, particularly in the regulated Austrian electricity grid and renewable generation projects.

Negative Points

Verbund AG (OEZVF) experienced a decrease in average achieved contract prices, impacting overall results despite increased generation volumes. EBITDA in the hydro segment decreased by 23% to EUR3 billion due to lower achieved contract prices. The new renewables segment saw a 25% decrease in EBITDA to EUR170 million, affected by lower achieved prices and higher operating expenses. The Grid segment recorded lower contributions from Gas Connect Austria and Austrian Power Grid, with a significant negative impact expected in 2025. The company faces uncertainty regarding the Austrian windfall tax and potential adjustments to the price cap, which could affect future financial results.

Q & A Highlights

Q: What is the impact of the new tax in Austria on Verbund's financials, and how does it affect future projections? A: Peter Kollmann, CFO, explained that the new tax could range between EUR50 million to EUR100 million for 2025. The government aims to collect EUR200 million annually from the energy sector, and Verbund, being a major player, will contribute significantly. The tax's future impact depends on potential changes in the price cap and the ability to offset investments against the tax.

Story Continues

Q: Can you provide more details on Verbund's hedging strategy and achieved power prices? A: For 2025, Verbund has hedged approximately 74% of its production at EUR117 per megawatt hour. The unhedged portion is currently marked at EUR90, leading to a mark-to-market price of EUR109. For 2026, 42% is hedged at EUR80, with a mark-to-market price of EUR82.

Q: How does Verbund plan to manage the lower hydro coefficient and potential buybacks of power? A: The hydro coefficient is currently 14% below the long-term average. Verbund typically hedges only 80% of its production, reducing the likelihood of needing to buy back power. However, if conditions remain dry, there is a possibility of buybacks, although it is considered a low-probability event.

Q: What are Verbund's plans for renewable investments, particularly in Spain, and how do they manage risks associated with these projects? A: Andreas Wollein, Head of Group Finance and Investor Relations, stated that Verbund aims to develop 1.7 gigawatts of renewable capacity in Spain, focusing on solar and wind projects. They plan to mitigate risks through long-term PPAs, although some merchant exposure will remain to optimize generation.

Q: How does Verbund view the potential for increased gas plant utilization in light of lower hydro production? A: Verbund's CCGT in Mellach is efficient and modern, but the company does not plan further investments in gas plants, as it focuses on renewable energy. The existing gas plant can help stabilize the system during low hydro production periods.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

View Comments