Q2 2026 EnBW Energie Baden Wuerttemberg AG Earnings Call

August 7, 2026

Operator: Ladies and gentlemen, welcome to the EnBW's Investor and Analyst Conference Call for the H1 2026 results. I'm Moritz, your conference call operator. I would like to remind you that all participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing Star and One on your telephone. Webcast viewers may submit their questions in writing via the relative field. For operator assistance, please press Star and Zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Marcel Münch, Senior Vice President of Finance, M&A, and Investor Relations. Please go ahead, sir.

Operator: Ladies and gentlemen, welcome to the EnBW's Investor and Analyst Conference Call for the H1 2026 results. I'm Moritz, your conference call operator. I would like to remind you that all participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions in writing via the relative field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Marcel Münch, Senior Vice President of Finance, M&A, and Investor Relations. Please go ahead, sir.IVR/Non Conference related audio

Speaker #1: Ladies and gentlemen, welcome to EnBW's Investor and Analyst Conference call for the half-year 2026 results. I'm Moritz, your call operator. I would like to remind you that all participants will be in listen-only mode and that the conference is being recorded.

Speaker #1: The presentation will be followed by a question-and-answer session. You can register for questions at any time by pressing star and 1 on your telephone.

Speaker #1: Webcast viewers may submit their questions in writing via the relevant field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast.

Speaker #1: 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.

Speaker #2: Good morning, 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 our Deputy CEO and CFO, Thomas Kusterer, who will lead you through the presentation in just a moment.

Marcel Münch: Welcome, ladies and gentlemen. Thank you for joining today's call on EnBW's results for the H1 2026. Pleased to be joined by Deputy CEO and CFO, Thomas Kusterer, who will lead you through the presentation in just a moment. Afterwards, as always, 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. With that, let me hand over to you, Thomas.

Speaker #2: Afterwards, as always, 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.

Speaker #2: And with that, let me hand over to you, Thomas.

Speaker #3: Yeah, 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.

Thomas Kusterer: Thank you, Marcel, and welcome all of you. EnBW delivered a solid and resilient financial performance in the H1 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 continued to execute consistently on our strategic agenda. We made tangible 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 H1 of this year.

Speaker #3: Earnings remained stable, supported by the resilience of our integrated business model. At the same time, we continued to execute consistently on our strategic agenda.

Speaker #3: 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.

Speaker #3: 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 after the first six months of this year.

Speaker #3: An adjusted EBITDA of €2.3 billion was largely stable year-on-year and provides a solid base for achieving our full-year target. We therefore confirm our guidance for fiscal year 2026 at both group and segment level.

Thomas Kusterer: At EUR 2.3 billion, adjusted EBITDA was largely stable year-on-year and provides a solid basis for achieving our full-year targets. 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 H1 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.

Speaker #3: 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.

Speaker #3: Turning to investments, we deployed €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.

Speaker #3: Net debt stood at €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.

Speaker #3: 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.

Thomas Kusterer: 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 investments make a difference. Across grids, power generation, flexibility, and customer infrastructure, we are helping to strengthen 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%.

Speaker #3: 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 makes a difference.

Speaker #3: Across grids, power generation, flexibility, and customer infrastructure, we are helping to strengthen security of supply, affordability, and energy sovereignty. In system-critical infrastructure, our major north-south transmission grid projects continue to make strong progress.

Speaker #3: The 2-gigawatt converter station for Seedling in TransnetBW's grid area is now close to completion. Ultranet is in the final stretch and remains on track for commissioning by year-end.

Speaker #3: Both projects are key building blocks for secure and efficient energy systems. In sustainable generation infrastructure, the share of renewables in our installed capacity reached a record 72%.

Speaker #3: At the same time, we are expanding flexibility. Two large-scale battery storage projects in Marbach and Philipsburg took combined capacity currently under construction. Together, they support a more resilient and increasingly self-sufficient energy system.

Thomas Kusterer: At the same time, we are expanding flexibility. 2 large-scale battery storage projects in Marbach and Philippsburg, with a combined capacity of 900 MWh, 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 H1 of the year. This supports the electrification of mobility and helps reduce dependence on fossil fuels. 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. He Dreiht now in the final phase of construction and nearing completion.

Speaker #3: In our 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.

Speaker #3: We support the electrification of mobility and help 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.

Speaker #3: Installation for old turbines is virtually complete, with head right 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.

Thomas Kusterer: 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 MW, He Dreiht is currently the largest offshore wind farm in Germany and will almost double EnBW's installed offshore wind capacity to around 1.9 GW. The project also highlights how far offshore wind technology has come over the past 15 years. Compared with BARD 1, Germany's first commercial offshore wind farm, which EnBW commissioned in 2011, He Dreiht delivers 20 times the capacity by requiring only around 3 times the number of turbines. Beyond its scale, He Dreiht was one of the first offshore wind projects worldwide to be awarded without public support.

Speaker #3: 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.

Speaker #3: At 960 megawatts, He Dreiht is currently the largest offshore wind farm in Germany, and will almost double EnBW's installed offshore wind capacity to around 1.9 gigawatts.

Speaker #3: The project also highlights how far offshore wind technology has come over the past 15 years. Compared with '41, Germany's first commercial offshore wind farm, which ENBW commissioned in 2011, He Dreiht delivered 20 times the capacity by requiring only around three times the number of turbines.

Speaker #3: 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.

Thomas Kusterer: Backed largely by long-term PPAs, it will make a meaningful contribution to our long-term earning space. Finally, European suppliers play the leading role across key components, underlining both supply chain resilience and European industrial strength. 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 H1 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 StromFAKG, makes an important step towards establishing a capacity market. It provides greater investment visibility for dispatchable generation ahead of the first planned auctions later this year.

Speaker #3: 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 Headright.

Speaker #3: 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 increasingly supportive of investment and energy transition execution.

Speaker #3: First, the recent adoption of Germany's new framework for dispatchable generation, the so-called StromVKG, marks an important step towards establishing a capacity market and provides greater investment visibility for dispatchable generation ahead of the first planned auctions later this year.

Speaker #3: Second, the grid package is progressing through the legislative process. Better coordination between grid expansion and renewable build-out should support a faster and more efficient energy transition.

Thomas Kusterer: Second, the grid package is progressing through the 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 believe incentive-based approaches as the best way forward to reduce these dispatch costs. Third, discussions around the future renewable framework are moving in a constructive direction. Proposed support mechanisms, including two-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 grids, renewables, and system stability. With that, let's turn back to our financial performance on slide seven. As highlighted earlier, adjusted EBITDA reached EUR 2.3 billion after H1 and was in line with our expectations.

Speaker #3: We continue to see scope for more and further improvements during the parliamentary process, and we leave incentive-based approaches to reduce re-dispatch costs. And third, discussions around the future renewables framework are moving in a constructive direction.

Speaker #3: Proposed support mechanisms, including two-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 grids, renewables, and system stability.

Speaker #3: With that, let's turn back to our financial performance on slide 7. As highlighted earlier, adjusted EBITDA reached €2.3 billion after six months, and was in line with our expectations.

Speaker #3: Earnings continue to be underpinned by a strong contribution from low-risk activities, which accounted for 79% of adjusted EBITDA at half-year. This concretely, infrastructure loan contributed almost 60%, reflecting the continued earnings impact of our investment program.

Thomas Kusterer: Earnings continue to be underpinned by a strong contribution from low-risk activities, which accounted for 79% of adjusted EBITDA at H1. System-critical Infrastructure alone contributed almost 60%, reflecting the continued earnings impact of our investment program. Remaining segments also performed broadly as expected, albeit at 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 three business segments and move on to slide eight. Starting with System-critical Infrastructure. Adjusted EBITDA of our grids business reached EUR 1.3 billion in H1 2026, broadly in line with prior year.

Speaker #3: Remaining segments also performed broadly as expected, although at the lower end of the scale in sustainable generation infrastructure. In renewable energies, we saw that lower hydro conditions were largely compensated by favorable wind conditions and organic growth.

Speaker #3: Thermal power generation and trading were 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.

Speaker #3: Let's now take a closer look at the performance of our three business segments and move on to slide 8. Starting with System Critical Infrastructure.

Speaker #3: Adjusted EBITDA of our Grids business reached €1.3 billion in the first half of 2026, broadly in line with the prior year. Earnings benefited from higher regulated revenues across all grid assets, led by electricity distribution.

Thomas Kusterer: 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 high 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 nine. Adjusted EBITDA in Sustainable Generation Infrastructure amounted to EUR 806 million in H1 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 weaker performance in thermal generation and trading. Let me start with renewable energies. Adjusted EBITDA amounted to EUR 495 million.

Speaker #3: 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 high operational activity and partly offset the asset-based earnings growth.

Speaker #3: 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 €806 million in the first half of 2026, and was below the prior year level.

Speaker #3: While the earnings contribution from our renewables portfolio remained resilient despite exceptionally dry weather conditions, segment earnings were impacted by weaker performance in thermal generation and trading.

Speaker #3: Let me start with renewable energy. Adjusted EBITDA amounted to €495 million. Earnings proved resilient despite below-average water flows and declining margins affecting hydrogeneration.

Thomas Kusterer: 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 a 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 H1. Earnings were stable Q-on-Q, but remained below prior year levels. Y-on-Y, earnings were affected by lower hedged generation margins and the scheduled phase-out 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, with a combined capacity of around 1.7 GW. Trading performance improved compared with Q1, but remained impacted by continued market volatility. That said, margin movements were fairly moderate, while our liquidity position remained strong.

Speaker #3: 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.

Speaker #3: In thermal generation and trading, adjusted EBITDA was at €311 million after six months. Earnings were stable quarter-on-quarter but remained below the prior-year level.

Speaker #3: Year-on-year, earnings were affected by lower hedged generation margins and the scheduled phase-out of coal capacity. This included our lignite exit at the end of 2025, as well as the transfer of the Heilbronn hard coal power plant into grid reserve, for a combined capacity of around 1.7 gigawatts.

Speaker #3: Trading performance improved compared with the first quarter but remained impacted by continued market volatility. That said, margin movements were fairly moderate, while our liquidity position remained strong.

Speaker #3: 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.

Thomas Kusterer: 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 hedged generation position. For 2026, we are almost fully hedged. Looking further ahead, hedge ratios for 2027 stand above 80%, while 2028 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 continued 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.

Speaker #3: We are almost fully hedged, looking further ahead. Hedge ratios for 2027 stand at about 80%, while 2028 is between 40% and 70%. Also, we have already started hedging for 2029.

Speaker #3: To go ahead with smart infrastructure for customers on slide 10: In smart infrastructure for customers, adjusted EBITDA increased by 33% year over year to €309 million, reflecting continued strong momentum in e-mobility.

Speaker #3: Charging volumes continue to grow, translating 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 break-even this year.

Speaker #3: 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.

Thomas Kusterer: Commodity sales delivered a strong performance and further supported earnings growth in this segment. Let me now turn to adjusted net profits and the reconciliation on slide 11. Adjusted net profit attributable to EnBW shareholders reached EUR 595 million in H1 2026, broadly matching the prior year. A stronger adjusted financial result partially offset the decline in operating earnings. Positive valuation effect from the solid performance of financial assets covering dedicated long-term obligations more than compensated for slightly higher interest expense. At the same time, earnings attributable to non-controlling 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 H1 mark, gross investment amounted to EUR 2.4 billion.

Thomas Kusterer: In addition, Commodity sales delivered a strong performance and further supported earnings growth in this segment. Let me now turn to adjusted net profits and the reconciliation on slide 11. Adjusted net profit attributable to EnBW shareholders reached EUR 595 million in H1 2026, broadly matching the prior year. A stronger adjusted financial result partially offset the decline in operating earnings. Positive valuation effect from the solid performance of financial assets covering dedicated long-term obligations more than compensated for slightly higher interest expense. At the same time, earnings attributable to non-controlling 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 H1 mark, gross investment amounted to EUR 2.4 billion.

Speaker #3: Adjusted net profit attributable to EnBW shareholders reached €595 million in the first half of 2026, broadly matching the prior year. A strong adjusted financial result in particular offset the decline in operating earnings.

Speaker #3: 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 non-controlling interests increased, reflecting better performance of minority-owned entities and weighing on adjusted net profit.

Speaker #3: Moving on to slide 12, with a brief update on our investments. At the half-year mark, gross investment amounted to €2.4 billion. The year-on-year decline was fully anticipated and mainly reflects portfolio effects, including our value-driven exit from two offshore wind projects, as well as the timing and maturity of projects currently under construction.

Thomas Kusterer: The year-on-year decline was fully anticipated and mainly reflects portfolio effects, including our value-driven exit from two 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 grids. System-critical infrastructure accounted for 61% of gross investments in H1, supporting the expansion and modernization of our electricity and gas grids as the backbone of the clean energy transition. Further 30% of investments were directed towards sustainable generation infrastructure. This primarily included our offshore wind farm, He Dreiht, and the construction of two hydrogen-ready gas-fired power plants. Remaining investments mainly supported the continued rollout of our fast-charging network in Smart Infrastructure for Customers.

Speaker #3: 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.

Speaker #3: Our investment priorities remained unchanged and continued to focus on grids. System-critical infrastructure accounted for 61% of gross investments in the first half, for the modernization of our electricity and gas grids as the backbone of the clean energy transition.

Speaker #3: Further, 30% of investments were directed towards sustainable generation infrastructure. This primarily included our offshore wind park Heerema and the construction of two hydrogen-ready gas-fired power plants.

Speaker #3: The remaining investments mainly supported the continued rollout of our fast-charging network and smart infrastructure for customers. On the funding side, cash inflows from project partners increased as planned and mainly related to Head Right and TransnetBW.

Thomas Kusterer: 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. 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 H1 2026 and developed in line with our expectations. Compared to the prior year, the decline mainly reflects lower operating earnings, higher non-cash effects in our gas storage business due to the higher price environment, and higher cash contributions to shareholders following both the increase in our dividends per share and our capital increase. With that, let's move on to net debt on slide 14. At the H1 mark, net debt stood at EUR 13.9 billion, slightly up from year-end 2025.

Speaker #3: 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.

Speaker #3: Retained cash flow amounted to €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 non-cash 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.

Speaker #3: And with that, let's move on to net debt on slide 14. At the half-year mark, net debt stood at €13.9 billion, slightly up from year-end 2025.

Speaker #3: Net cash investments of €2 billion were the main driver for it, partly offset by our solid cash generation. Structural support came from our permanent hybrid stock, capital stock, which reached its increased target level of €3.5 billion by the end of June.

Thomas Kusterer: 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 Q2. During Q1, 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.

Speaker #3: During the first quarter, we successfully issued €1 billion of new hybrid capital. Following the subsequent redemptions of an existing hybrid instrument, the resulting increase in equity credit amounted to €250 million, as reflected in the bridge.

Speaker #3: Let's close today's presentation with a few remarks on our full year guidance. Ladies and gentlemen, as presented, we are on track to deliver our full year guidance for fiscal year 2026.

Speaker #3: As discussed, sustainable generation infrastructure is currently trending toward the lower end of our expectations, while the overall group outlook remains unchanged. Earnings were solid, despite continued geopolitical uncertainty and volatile market conditions.

Speaker #3: At the same time, we maintained strong operational momentum across our strategic business growth areas. 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.

Thomas Kusterer: At the same time, we maintained strong operational momentum across our strategic 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. Now let me hand back to Marcel.

Speaker #3: Taken together, this leaves us well positioned for the remainder of the year and beyond. And now, let me hand back to Marcel.

Speaker #1: Thank you, Thomas. Ladies and gentlemen, we'll now start the Q&A session. Moritz, please begin.

Marcel Münch: Thank you, Thomas. Ladies and gentlemen, we'll now start the Q&A session. Moritz, please begin.

Speaker #3: Thank you. Ladies and gentlemen, we will now begin the Q&A session. Anyone who wishes to ask a question may press star one on their telephone.

Operator: Thank you

Operator: Ladies and gentlemen, we will now begin the Q&A session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Webcast viewers may submit their questions in writing via the relative field. Anyone who has a question may press star and one at this time. One moment for the first question, please. There are no questions by phone at this time. I would like to turn back to Marcel Münch for any written questions.

Speaker #3: You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two.

Speaker #3: Questioners on the phone are requested to disable the loudspeaker mode and, if possible, turn off the volume from the webcast while asking a question. Questioners using the webcast may submit their questions in writing via the appropriate field.

Speaker #3: Anyone who has a question may press star and one at this time. One moment for the first question, please. There are no questions by phone at this time, so I would like to turn it back to Marcel Munch for any written questions.

Speaker #1: Yeah, thank you, Moritz. We have a few questions submitted via the webcast function. So let me start with the first question raised by Joshua Kriesel from Inside Investment.

Marcel Münch: Yeah. Thank you, Moritz. We have a few questions submitted via the webcast function. Let me start with the first question raised by Joshua Krieger 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 operation?

Speaker #1: 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?

Thomas Kusterer: I think that's a question from Joshua Krieger, 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. I will not give you any indication regarding our potential financial final investment decision on any power plant. That's at this point just not possible in all fairness. Secondly, 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.

Speaker #2: from Joshua Kriesel, 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.

Speaker #2: So I will not give you any indication regarding our potential financial final investment decision on any power plant. That's, at this point, just not possible, in all fairness.

Speaker #2: 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 participating in for any kind of auction.

Speaker #1: Thank you, Thomas. We have another question from Bobby Dinko at Credit Sides, which was along the same lines. So, Bobby, I'll pass on your question since Thomas addressed it as he went along.

Marcel Münch: Thank you, Thomas. We have another question by Bobby Dinko from the credit side, which went into the same direction. 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. Bobby Dinko 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?

Speaker #1: If you have a follow-up question, follow-up question, the webcast. But Bobby Dinko also raised another question regarding which elements of the new upcoming regulatory period remain most important from EnBW's perspective.

Speaker #1: Are they allowed returns? And are absolute return percentages the primary area of focus, or are there other aspects that you believe will improve the return profile for transmission investments?

Speaker #2: 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.

Thomas Kusterer: Thanks for the question. First and foremost, of course, allowed returns are important. However, it's the overall system as such. Allowed returns is one thing, equity return is another topic. 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 third 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 return in the regulated business.

Speaker #2: Equity return 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 fifth regulatory period are comparable to what we are currently seeing in the rest of Europe.

Speaker #2: Which means that we would assume that, with a new system, we should be able to see an increased equity return in the regulated business.

Speaker #1: Thank you, Thomas. Now, we have a few questions regarding our rating 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.

Marcel Münch: 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 Pritly from BofA and Alessandra McDonald. 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-minus 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-minus rating with S&P? Clearly, you have sufficient levers to maintain A-minus ratings, including additional hybrid bond issuance. Keen to hear your views.

Speaker #1: It was raised, among others, by Prithvi from BOFA and Alessandra McDonald. So, let me start with the first one. May I kindly ask about the credit ratings target?

Speaker #1: In the past, there was a solid commitment to A-minus ratings at S&P. How are you viewing those credit ratings in light of S&P's negative outlook?

Speaker #1: Do you have any obligation to maintain that A–minus rating with S&P? Clearly, you have sufficient levers to maintain the A–minus rating, including additional hybrid bond issuance.

Speaker #1: Keen to hear your views.

Speaker #2: Thanks a lot, actually, for the question. And let me be precise, actually, as I've been doing this now for quite a while. I always—and we always—said that we are fully committed to solid investment-grade ratings.

Thomas Kusterer: Thanks a lot, actually, for the question. Let me be precise, and I'm doing this now since quite a while. We always said that we are fully committed to a solid investment-grade rating. We never said we are committed to an A-minus or whatever rating. We always said we are committed to solid investment-grade ratings. Having said that, what we've seen from S&P lately is, first of all, affirmation of our A-minus rating to start with, albeit with negative outlook, and that very much relates to S&P assuming that the credit metrics might be under pressure with limited headroom relative to the current rating level. 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.

Speaker #2: We never said we are committed to an A-minus 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-minus rating to start with, albeit with a 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.

Speaker #2: 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.

Speaker #2: I mean, when you look at our project, in our transition grid or hydride—take it as an example—or our gas power stations, they have a substantial lead time and construction time.

Thomas Kusterer: When you look at our projects in our transmission grid or He Dreiht, take it as an example, or our gas power station, they have a substantial lead time and construction time. 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, I think, 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. You can assume that that's exactly what we are going to do In the future. 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 H1 of 2026.

Speaker #2: 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, yeah, almost 15 years, in all fairness—and that's also our intention going forward.

Speaker #2: We've managed the company with a long-term perspective, and we've always tried to balance financial discipline, value creation, and strategic setup. You can assume that's exactly what we will continue to do in the future.

Speaker #2: I mean, we are well placed when it comes to our rating. I think we do have a strong foundation—80% of low-risk earnings. You've seen that in the first half of 2026.

Speaker #2: 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.

Thomas Kusterer: Stable cash flows, strong capital base. Actually, we also have the operational flexibility to manage our rating going forward. Again, still committed to what we have said all along, solid investment-grade ratings, and you shouldn't expect anything else from us.

Speaker #2: So again, we are still committed to what we have said all along: solid investment-grade ratings, and you shouldn't expect anything else from us.

Speaker #1: Thank you, Thomas. Now, there are a few questions regarding our CapEx program and the expected development of net debt. Let's start with a clarifying question from Alessandra McDonald.

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

Speaker #1: Is the Morven CapEx—the potential Morven CapEx, I should add—included in the €50 billion CapEx plan, should you decide to go ahead with the project?

Speaker #2: Alessandra, thanks a lot for the question. It is included. However, given the timeline of Morven until 2030, it's limited to a CapEx-below impact on our investment.

Thomas Kusterer: Alessandra, thanks a lot for the question. It is included. However, given a timeline of Morven until 2030, it's limited to a CapEx low impact on our investment. It's not really relevant until the early 2030s, and we are going to see what we are going to do with Morven at a future time.

Speaker #2: 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 that future time.

Speaker #1: 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 Dinko.

Marcel Münch: Thank you, Thomas. Following up with the next question, what's the latest guidance on the debt for fiscal year 2026? That was a question raised by Bobby Dinko.

Speaker #2: Yeah, Bobby, the guidance is as it was before, around €17 billion. Currently, we are just short of €14 billion. When you look at our investments—on average, €7 billion annually—you can assume that we are kind of at that level by the end of 2026.

Thomas Kusterer: Yeah. Bobby, the guidance is as it was before, around EUR 17 billion. Currently, we are just short of EUR 14. When you look at our investments of, I think the average EUR 7 billion annually, you can assume that we are at that level by the end of 2026. Our cash flow generation, it's fair to say that we are moving toward EUR 17 billion, potentially.

Speaker #2: And our cash flow generation, it's fair to say that we are moving towards €17 billion, potentially.

Speaker #1: And following up on that, a question from Michael Charlton from Cooper Santander. Where do you expect the debt repayment ratio to be for fiscal year 2026?

Marcel Münch: Following up on that, a question from Michael Charlton from Grupo Santander. Where do you expect the debt repayment ratio to be for fiscal year 2026?

Speaker #2: It's in our annual report. I don't have it on the top of my head, but it's 15 to 18%, right? 15 to 18%.

Thomas Kusterer: It's in our annual report. I don't have it in top of my head, but just, it's 15% to 18%, right? 15% to 18%.

Speaker #1: Thank you. Sorry, let me just quickly see if that's okay. Sorry, there was one aspect of Alessandra McDonald's question that we haven't touched upon.

Marcel Münch: Thank you. Sorry, let me just quickly see if there's Okay. Sorry, there was one aspect of Alessandra McDonald's question that we haven't touched upon, at least during the Q&A session, the second leg. Can you provide more detail as to how the energy policy reforms in Germany will impact your CapEx and planned returns in the region?

Speaker #1: At least during the Q&A session, the second leg. Can you provide more detail as to how the energy policy reforms in Germany will impact your CapEx and planned returns in the regions?

Speaker #2: Different question, actually. What I said in the presentation is that we do have the feeling that the overall legislative framework is becoming more supportive.

Thomas Kusterer: That's a good question, actually. 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. 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. That needs to be seen. There's still a lot of pending topics, especially actually allowed return, which will be clarified for electricity not before 2028, if I'm not mistaken.

Speaker #2: This means that we are well placed to execute our $50 billion investment program. As I said earlier, we also assume that, from an equity return perspective, when it comes to our regulated business, we expect it to improve in the next regulatory period.

Speaker #2: But that remains to be seen. There are still a lot of pending topics, especially, actually, Lout Return, which will be clarified for electricity, not before 2028, if I'm not mistaken. Yeah.

Speaker #1: Thank you, Thomas. Now, another question from Joshua Friedl 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?

Marcel Münch: Thank you, Thomas. Another question from Joshua Krieger from Insight Investment. Rather than just hedge percentages, how should we think about the progression of achieved generation prices and margins from 2026 to 2029? Are later year hedges currently being added above or below the prices rolling out of the portfolio?

Speaker #1: Are later-year hedges currently being added above or below the prices rolling out of the portfolio?

Speaker #2: 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.

Thomas Kusterer: That's a great question. 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, that's potentially an indication for the future hedging levels.

Speaker #2: So, that's potentially an indication for the future hedging levels.

Speaker #1: Thank you, Thomas. Now, one additional question from Michael Lee Murphy with regards to Hydride. What work is paused on the construction of Hydride in the wake of the late failure?

Marcel Münch: Thank you, Thomas. One additional question from Michael Lee-Murphy with regards to He Dreiht. What work is paused on the construction of He Dreiht in the wake of the blade failure?

Speaker #2: I mean, obviously, we are not allowed to work on the impact of that windmill, and also actually on those with blades from the same production side.

Thomas Kusterer: 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. This is ongoing. Having said that, we are just about to finalize the 64th turbine. The completion of the wind farm is to be seen over the next couple of days, or as we speak. We are progressing well, and what kind of impact it really has needs to be seen over the next couple of days, so for one or two weeks. Root cause analysis is ongoing. However, from today's perspective, we do assume that it is a single issue with one blade and not a broader technical issue.

Speaker #2: However, the basic commissioning of the wind park is progressing well. This is ongoing. Having said that, we are just about to finalize the 64th turbine.

Speaker #2: 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.

Speaker #2: And what kind of impact it really has needs to be seen over the next couple of days, so one or two weeks. Root cause analysis is ongoing.

Speaker #2: However, from today's perspective, we do assume that it's a single issue with one blade and not a broader technical issue.

Speaker #1: Thank you, Thomas. Now, two additional questions came in regarding our CapEx plans. Let me group them together. One came from Álvaro Sanchez from Wellington, and the other one from Joshua Friedl from Insight Investment.

Marcel Münch: Thank you, Thomas Kusterer. Two 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 Krieger from Insight Investment. The first one, what explains the lower CapEx year on year? The second one, again following up, it was mentioned that the lower H1 grid investments year over year. 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? Could you identify the main projects affected and quantify how much CapEx, if any, has moved to 2027? That's, I must say, a very detailed question, which we will, of course, most likely not answer in detail.

Speaker #1: 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-on-year and what, sorry?

Speaker #1: 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?

Speaker #1: We laid site access, civil works, et cetera, et cetera. Could you identify the main project effect and quantify how much CapEx, if any, has moved to 2027?

Speaker #1: Now, that's, I must say, a very detailed question, which we will most likely not answer in detail.

Speaker #2: 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 two hydrogen-ready gas power stations.

Thomas Kusterer: I can give you a broad view on it. It is predominantly timing factors. We are in the middle of the construction of our two hydrogen-ready gas power stations, at the same time construction of He Dreiht. When we look at our transmission and distribution network, it's SuedLink and Ultranet, and we had more activities in the H1 of last year than this year. That's not something you should anticipate as a delay in our CapEx program. It's just timing between quarters. By year-end, we do assume that our investment in 2027 is still at around EUR 7 billion. Today we do not see any kind of mere slippage into 2027.

Speaker #2: At the same time, construction of hydride. And when we look at our transmission and distribution networks, it's Seedling and Ultranet. And we had more activities in the first half last year than this year.

Speaker #2: 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 €7 billion.

Speaker #2: So today, we do not see any kind of major slippage into 2027.

Speaker #1: Thank you, Thomas. Now, again, coming back to the capacity auctions for gas-fired power plants, another question raised by Álvaro Sanchez from Wellington. How much incremental EBITDA could the proposed German capacity market generate for EnBW once fully implemented?

Marcel Münch: Thank you, Thomas Kusterer. Coming back to the capacity options for gas-fired power plants, 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 nine gigawatts? I think that's a question we've answered already.

Speaker #1: How much are you expecting to get from the 9 gigawatts? I think that's a question we've answered.

Speaker #2: Yes. I mean, in all fairness, as I just said earlier, due to competition in the auction process, we will not go into detail.

Thomas Kusterer: I mean, as I just said earlier, due to competition in the auction process, we're not going into detail. 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.

Speaker #2: And as I also said, we are just looking into a framework provided. We do think we have economically viable projects on hand. However, to what extent, it's too early to say.

Speaker #1: Thank you, Thomas. And then there’s one final question from Camilla. Can you provide an update on the demand growth?

Marcel Münch: Thank you, Thomas. Then there's one final question from Camilla. Can you provide an update on the demand growth?

Speaker #2: Camilla, good question, actually. 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.

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

Speaker #2: So, from our perspective, it's not like we are going to see a significant additional demand.

Speaker #1: Thank you, Thomas. And that was one final question here. Why are the webcasts that came in, again, just from Alessandra McDonald's to clarify, again, would you remind repeating the CapEx guidance for '26 and '27?

Marcel Münch: Thank you, Thomas. There was one final question here via the webcast that came in again, just from Alessandra McDonald. To clarify again, would you mind repeating the CapEx guidance for 2026 and 2027?

Speaker #2: It's broadly in line with the €50 billion program over seven years. So last year, we were at about €7 billion, and this year, we will be around €7 billion.

Thomas Kusterer: It's broadly in line with the EUR 50 billion program and over 7 years. Last year, we were about EUR 7 billion, and this year we will be around EUR 7 billion. The guidance is pretty much flat, 2026 and 2027.

Speaker #2: So the guidance is pretty much flat for '26 and '27.

Speaker #1: 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.

Marcel Münch: 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.

Speaker #3: There are no questions by phone at this time.

Operator: There are no questions by phone at this time.

Speaker #1: Thank you, Moritz. With that, we 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 the IIR team for more details or in-depth discussions.

Marcel Münch: Thank you, Moritz. With that, we 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.

Speaker #1: All the best. Have a great rest of the day, and for those who still have it ahead of you, have a great summer break.

Speaker #1: Bye-bye.

Speaker #2: Bye.

Thomas Kusterer: Bye.

Speaker #3: Ladies and gentlemen, the conference is now over. Thank you for choosing Carls Car, and thank you for participating in the conference. You may now disconnect your lines.

Operator: 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.

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Q2 2026 EnBW Energie Baden Wuerttemberg AG Earnings Call

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