50Hertz-Bilanzpressekonferenz 2015 am 14.3.2016 - Die Zahlen für 2015 (Marco Nix (CFO))

The quality of the special year 2015 for both 50Hertz and for me personally now needs to be translated into quantity. We have already heard the figures: 902 million in investments. To put them in context, we have plotted the development over the last 5 years. Compared to last year, we see a significant increase of 40% in investment volume. That means the investment in our organization, our processes, our people has paid off. We are now at a level that we will maintain in the coming years. Looking at a horizon of 5 years, we aim for an investment volume of around 3.5 billion. We believe we can achieve that.

We also need this financing. Approximately one third of this investment volume we want to cover from our internal financing, that is from depreciation returns and retained earnings. But that means two thirds must be financed via the capital market. For that we need stable conditions because the capital market is very nervous, uncertain, and volatile, reacting strongly to news in both directions. Last year, despite all the uncertainty, we were very successful. We went to the capital market twice and beforehand were able to significantly increase the flexibility of our financing by agreeing a consortium credit of 750 million with eight banks, which are now our core banks. This gives us the necessary flexibility if markets do not show the financing volumes we need.

We went to the market twice: once in June, after 5 years, with our comeback so to speak, placing a 10-year bond, and then a second time in autumn, placing two tranches: a 750 million bond over 8 years and a 140 million bond over 15 years. The 15-year bond was particularly well received because we came to market in an environment where markets were still very restrictive and cautious. Overall, this shows confidence in 50Hertz and in German regulation. But this should not lead to the false conclusion that we can take significant discounts on quality. We need both internal and external financing.

To give you a relation: last year we were among the top 10 German issuers, ahead of companies like Linde and Bayer in terms of investment volume. That is only possible by offering the necessary security that investors expect. For that, we do our part. The total assets of the group have increased significantly, also by almost 40%. Half of that is due to investment and financing activities, the other half comes from the EEG, from the increase in volumes in renewable energies, which is essentially reflected in working capital. Our internal financing power has also increased significantly. Equity increased by 100 million, which shareholders left in the company to keep investments financeable.

The equity ratio has naturally declined, which is not unexpected when we look at the debt ratio. The ratio between financial debt and equity is now 1.5 after the nearly 1.4 billion in financing we raised, which is not surprising. However, we still have room for further financing activities. For that we need, as I said, a stable rating, which we have received again. But it is strongly linked to the regulatory framework. To give an example: a drop of one notch would have made the financing we raised last year about 35 million more expensive for the network customers. Transparency overall is a factor we believe creates trust in the capital markets and in our stakeholders.

Here we have shown you the revenue breakdown. Overall, we show a core revenue of 1.5 billion. To create transparency, we even accept a limitation of the audit opinion under IFRS because we believe this is the more accurate representation. The breakdown is as follows: the majority comes from the amounts we earn through our network charges, namely 1.1 billion on the left side of the chart. Then we transfer 120 million in the nationwide balancing to other transmission system operators, which are essentially the offshore costs that we have a nationwide sharing of. These costs accrue with us but are compensated in the network charges of other TSOs. The revenues in the energy business are mainly services, for example we provide redispatch services for Tennet and are compensated by them. The other revenues include, for example, customer contributions for line conversions. Looking at our core revenue, the figure that drives our network charges, there is a significant increase of 30% compared to last year. Our network charges did not increase by that extent last year, but will increase by that extent in 2016 because we did not get compensation for a large part of these costs. We have seen a significant under-recovery, and that is the main driver of our network charges.

We see onshore including system services at a relatively stable level with 396 million and 154 million. The big driver is naturally the offshore connection costs, particularly in the North Sea, where we have this nationwide sharing. For congestion management costs, we do not have this nationwide sharing, and they are currently paid by our network customers. We do not consider this a fair distribution of burdens, especially because we are the region that is advancing renewables. It is not fair that the region alone bears these costs.

Why are we telling you this? There have been some discussions about transparency, certainly largely aimed at DSOs. There is always the accusation that network operators are intransparent, hiding the basis for their network costs and charges. We also do not regularly publish our revenue cap. The main reason is that we consider this figure to be correct - it is essentially the real revenue cap that would have resulted if we had had all the information we need at the beginning of the year for calculating our network charges. That revenue cap would have been 1.1 billion. We were not able to achieve that amount in 2015. The HGB result suffers greatly from this. I will come back to that later. But this is the amount that is decisive for how our network charges develop. And this red bar in particular gives us some concern.

Under IFRS, we neutralize these congestion management costs, and we have seen that the result determined according to economic criteria gives a much more successful impression than the distribution-relevant HGB result. In 2015, we were able to achieve significant one-time effects. Let me give you an example: regulation always thinks only in annual values. As Boris Schucht already said, we were able to complete the network connection for Baltic 2, thus starting depreciation. From the regulatory side, we received depreciation for the full year, which will be missing later. In reality, we had about one and a half months of depreciation, and this naturally results in a significant profit jump in this year, which we will not see in permanence. It will reverse at the end of the useful life, but it was a major driver of the exceptionally good result we determined according to the economic criteria of IFRS. The sustainable result, shown in dark green, of 148 million, increased by about 10% compared to last year, which roughly corresponds to the increase in business volume from investment activities.

As already indicated, what concerns us is above all the middle bar: the under-recovery of congestion management costs. That means our revenue cap, which we priced into network charges, was 200 million, 250 million below the costs we actually incurred. This led to the distributable result falling by over 70% compared to the previous year to now 46 million. That means we have a volatility in the earnings series that one would not expect from our business. Volatility is risk, and for that we receive a theoretical return of 7.39% after tax, which we have not seen in reality over the 10-year horizon since the beginning of regulation; we average 6.5%. And if we look at 2016, assuming that the development of congestion management costs is sustainable there - because we will not find a short-term solution to reduce this amount significantly - then 2016 will not look so great either. It is certainly difficult to explain this to equity investors, but this is a point we have to fight out with the regulator. We believe we have good arguments. We need to maintain the attractiveness of the regulatory framework at a level that is both achievable and allows us to make the investments necessary for the energy transition.