Z 7 op 7 - Walk The Talk - Trends Talk met Bernard Gustin, CEO van Elia Group

I had the good fortune to be Chairman of the Board for the last seven years, so it gave me the opportunity to follow the company's strategy. My daughter says I got demoted and that I have more work, but it is also very satisfying, I must say, to be able to go operational and work on a daily basis with the teams I have known for a long time.

Yes, it was very important. We had said some time ago that we had a major capex plan of 31 billion, which is very important because we know that electrification of our countries Belgium and Germany is very important. Why is it important? Climate, of course, but also in the current circumstances, we know the problem of... and also the fact that we must be less dependent on fossil fuels, oil and gas. If we look at the crisis of '22, when the electricity bill shot up, it was mostly due to the evolution of gas prices. So if we don't want to live that again, we really need to invest in our infrastructure. So that's the famous 31 billion: 20 billion for Germany, 10 billion for Belgium. But we have to finance that, and there was some uncertainty about Elia's capacity to do that. We knew we had announced that we needed 4.4 billion equity, so debt and equity, equity, we had to raise. And so we announced on March 7 that we had a plan, and the capital increase of these days is actually the first step. That is one of the largest or the largest capital increase ever on the Brussels stock exchange, and that is good because it is a sign of the health of our economy. I think it is important that we can do such an operation in Belgium, but it was not obvious, of course, and it has cost me and the team many days and nights.

Yes, basically there are three sources of financing. On one hand, our own activity. We generate about 1.5 billion per year, and that will grow with the growth of activity. And we don't give everything to dividends; there is a part that stays. So that's the 1.5 billion I'm talking about in operational cash flow. Then we also have debt. We can take on debt. But of that 30 billion investment plan, we had to raise 4.4 billion in equity or equity-like. So now we have the first 2.2 billion that is underway. But we also have a plan to raise the 4.4 by the end of the period. I'll be a bit technical for two seconds. There are types of loans that are subordinated and considered equity, called hybrid bonds. We can raise 3.8 billion of that, of which half is equity. So that could close the gap. But we are also looking at partners in Germany. We don't own 100% of Germany; we have 80%. The German public-sector pension fund, if I may put it that way, has the remaining 20%. And I must say that works very well because we have clear strategic and operational control over 50Hertz, that's the name of our subsidiary in Germany. But we have a partner that bears 20% of the investments and is very happy with the 10% return we get in Germany.

Yes, it is also the case that at the group level, the government is an important reference shareholder, specifically the Belgian government or the Belgian local authorities. And there is an evolution that is very important. So maybe come back to that private placement of 850 million. That is something very important for Elia. First, we had to restore some confidence in the market. The share price had suffered in the first months of the year, and that was not good. So it was important that we could show that investors were willing to believe in Elia's strategy and were willing to invest in the capital at the price of the shares on that day without discount. The first one who said 'I believe in the strategy and I want to support you' was our reference shareholder, Publigas, and those are the municipalities. I think that is a very strong signal. But also very important, they are transforming themselves because one might ask, 'Is it the objective? Will the municipalities always be able to follow?' You know that they are being restructured, there will be a new name. But there are two new investors coming to strengthen them: on one hand, Fluxys, and on the other hand, FPIM. That is important because those are strategic investors who also give a signal that we are here to stay and support Elia. And that helped to get three new shareholders: a Canadian, an Australian, and the largest asset manager in the US, BlackRock. The Canadian is called SPP, and we have Future Fund. Those three large shareholders also give a signal of confidence because they invested without discount. But there are also people who will help us in the future through their network, their size, they really have the resources, so they are top investors. But we remain Belgian, and that is important. Because if I add up the Publigas side, we also have many other Belgian investors, including the Katoennatie group, which is our second investor, announced a few weeks ago, just above 10%. So that is also important for us because they support us. And it is important that Belgian groups support Elia in their strategy. So that means that we are easily 55-60% Belgian.

That energy island is quite important. We have decided, and we will perhaps, and I think it's not a bad idea, have nuclear energy in the future. But we know that either it will come relatively late if it's about new reactors, not before 2035, or the existing reactors, that will not be as much as today. So that means we have to look for other sources of energy. The easiest is the North Sea on one hand, but also interconnection with other countries like the UK. And the energy island is of course critical to bring that renewable energy to the land. Renewable energy remains the cheapest energy we can get. It is good for the climate, it is good for independence from fossil fuels, and it is also the cheapest. So I think it was enormously important that we had that island. And we will have it to connect those parks. What we are also trying to do, excuse me, you mean not only the parks for Belgium but also for example the park that... it is a bit innovative. Actually, a normal connection of a park with a... I don't know how to say it in Dutch, a socket at sea. We already have that with what we call MOG. And the island could have been just a second socket at sea. But you must know that that socket at sea works when there is wind, and the wind parks work when there is wind, which statistically is 50% of the time. And the beauty of the Princess Elisabeth Island is that we made the connector between the UK and Belgium, which will be called Nautilus, all our cables have a name. That would also go via the island, and we could organize the traffic so that when there was no wind, we could supply to that interconnector, and when there was wind, priority to the wind parks. Then the asset would be used 90% of its time, so in terms of effectiveness, that is much better. But it is also more expensive because we need two transformers on the island and on the beach, and it is also DC technology that is new. So it is clearly a premiere in terms of innovation, and there are of course more uncertainties regarding budget. And secondly, we are dependent on only three suppliers in the world that manage that technology, and therefore the price went up.

No, but the advantage is that I have to explain it simply because I can't make it complex. But if I try to describe Elia in a few years in Belgium in a very simple way: we had a goal in the past, and that is much simpler. But largely, we had to connect the rest of Belgium. If we decide that those two nuclear plants partially close, we have to get energy from other places, including the sea. But that means that the connections, the electricity will not stay on the beach but must go throughout the country. So the streets, if I may say so, that will bring that energy from the sea to the rest of the country, those were little streets, they now have to become highways. Because now at sea, when all the plans are done, we will have a capacity of more than four nuclear reactors. So that means that a different infrastructure is needed. And so today we are okay, but with the new parks coming, we are talking about extra capacity that is relatively important. Yes, we need that reinforcement, otherwise all that energy from the sea cannot be brought inland. And there is a second project that does the same thing: Boudewijnkanaal project. That is not in the south but more in the region where the network needs to be strengthened. But also in Ghent, there is a very smart strategy of data center development with Google, which is present there. But those data centers demand enormous amounts of energy, sometimes 1 gigawatt. So that Boudewijn project is enormously important to enable the development of Google in Ghent. And we would not want that due to a lack of energy, such an investor leaves our country.

Absolutely. And I take my hat off as Elia Group. I remind you that we are very operationally present in the Baltic Sea. So I think the danger is just as great in the North Sea as in the Baltic Sea. But you see what happened with telecom cables. Fortunately, energy cables are more in the ground than telecom cables. But we have to be very careful and attentive. I want to reassure everyone first: we have been protecting our network for years, and we are very attentive. But we have also seen with the latest developments in Ukraine and beyond that the protection of our network is becoming very important, and they are targets. So we must be careful about that. And it is clear that there must be very close cooperation with the federal government, but also national defense and NATO. That is certainly one of my priorities.

Yes, yes, yes. I think that... whatever one thinks about climate, I personally think it is a big problem that we must solve, but it is becoming more and more reality. And we see that those major events happen almost yearly. Not long ago we had the floods in Wallonia, where we lost a number of substations. We had that storm in Mechelen. And I think it is not only about protecting, but also... and I must really thank the teams of Elia, because when we see a storm like Mechelen or the floods in Wallonia, it did not take long for electricity to be restored. But that is a gigantic job, and the teams are willing to come day and night to get the network working again. Also important technologically that we are not dependent on one or two positions. We have seen what happened at Zaventem? We of course asked ourselves, 'What if it happened at Zaventem?' That is also important. Sometimes we have to invest a bit extra to have buffers or to have a network instead of just a point-to-point connection. I take one example that I think is known: we had a failure on one of our offshore platforms, Rentel. Nobody felt it. It was very difficult to repair, it was fantastic to see how technological it is to repair, but we didn't feel it because we are in a network approach where the parks are interconnected, and when that park was down, the others could compensate. So that is also the specificity of the island, or the hub, but we also have that onshore. We manage a network, not just point-to-point connections, so that when there is a problem with one of those connections, we can compensate. That is very important.

To ensure that we have enough electricity, not only today but tomorrow and the day after, and that capex plan we are talking about, that is what it is about. We must invest now, and I know that is not always easy because the cost comes now, but we must invest to ensure that we have enough energy in the future, taking into account the mix that will be different, the type of energy, but also taking into account that in the future we will have many more electric heat pumps at home, many more electric cars, and also that everyone now talks about data centers and artificial intelligence. I would not want it to be said that in Belgium we cannot proceed because the network cannot handle it. But one must not forget that building a line, we talked about Ventilus and Boudewijn, those are projects of many years, also because the permits are relatively lengthy. If it were only about building, that would be better, but even building is about 1-2 years. We also have to order the cables, etc. So that is why it is very important to plan. And so, yes, it is clear that for the coming years we see no problem. For next winter, the CRM allows us to cover, we have enough capacity. And the year after, we can count on the extension of the two nuclear reactors, which will ensure we have enough electricity. So with that hypothesis, if it goes as planned, there would be no problem in the next two years. But if I look further into the future, I can say 'That is still far away, in the long run we are all dead,' but one must not forget that this is the blueprint of Elia. We have done an analysis for Belgium where we say that for all good reasons, it is very good for Belgium, total energy consumption will generally be smaller, but electricity to make that energy consumption smaller will have to double. And today, if we take everything we know, there is still a gap that must be filled. We have years to do that, but we must have clear signals about what we do with nuclear, what we do with renewables, and how independent or dependent we want to be on other countries. That is a political responsibility. We are there to support it. And I know very well that it is one of the priorities of our minister, who does that very well. But these are not easy questions.

No, but what I really like is dossiers where we as a team, because it is usually a team story, can really have an impact. That is clear. When Sabena went bankrupt, it was only one day that people said, 'Oops, maybe it's not a good idea not to have a national airline because we know the impact of a national airline on the economy of a country.' Look at our connections with New York, with Africa. In that area, I found it really fascinating to be able to say, 'We will start this project.' I didn't know at that time that it would be so difficult. Because I said at the time, the difference between the optimist and the pessimist was: we will fly six months ahead for the optimist, and it will never happen for the pessimist. We are 25 years later, and I am very proud that 5000 people have had jobs, that we have an airline that we can be proud of, which has existed for 25 years. So that was worth it. Linas? Yes, I really regret... rail is the solution for climate and mobility. We are a country where logistics is important. The negative side is that if we don't have Linas, no one else will come to help us, and our ports are blocked. So we have to do something about that. But that was also an opportunity to work again with people I loved working with at Brussels Airlines, Jan de Raeker, Alban François, and others. And here, the luck I have is that I was chairman for 7 years. I thought it would be quieter, but the other two... so maybe I bring bad luck. But it was also a fantastic experience. This operation is one of the largest the stock exchange has ever seen. Building an international group with a Belgian anchor, with a team I know and have known for seven years, and we were very close to each other, maybe not daily, but now being able to work with them on a daily basis, and I know that team can be trusted. That is enormously appreciated.