E.on Se (OTC:EONGY) Q4 2025 Earnings Call Transcript

E.on Se (OTC:EONGY) Q4 2025 Earnings Call Transcript February 25, 2026

E.on Se misses on earnings expectations. Reported EPS is $0.3297 EPS, expectations were $0.3303.

Iris Eveleigh: [Audio Gap] our full year results. As with every occasion, we will leave enough room at the end for your questions. With that, over to you, Leo.

Leonhard Birnbaum: Yes. Good morning, everybody. Thank you, Iris, for the introduction also from my side. The past financial year has once again proven one thing. We at E.ON deliver on our promises, and we at E.ON are exceptionally well positioned to not only be the playmaker of the energy transition, but also a beneficiary of this transition. In a year that has been characterized by geopolitical instability and macroeconomical challenges, E.ON is a safe haven. One has to admit that our business is facing a secular growth opportunity. It has no U.S. dollar exposure. It’s largely inflation protected. It’s unaffected by U.S. tariff policy, and it’s even largely shielded against the latest fear of an AI disruption. What more can you ask for in terms of resilience.

But that doesn’t mean that we are without challenges. And so let me now move to our — my 4 messages before handing over to Nadia. First, we have delivered strong financial results for the year 2025. again. Second, we have not only delivered financially, we have also delivered operationally. And our focus on outstanding operational excellence means that we are at the forefront of the energy transition, and this enables us to execute our growth plan successfully now and also in the future. Third, our growth case is based on a secular growth trend, and this trend is extremely robust. It’s driven actually by a broad set of structural drivers and not only by one thing changing. And it’s largely independent of short-term economic and — economical and political fluctuations.

And fourth, we are committed to long-term shareholder value with a disciplined focus on value creation. We will grow our investments until 2030 and are ready to pursue further growth opportunities, but only once the parameters for RP5 in Germany are set. So on my first message, we have delivered on our financials with an adjusted EBITDA of EUR 9.8 billion and adjusted net income of EUR 3 billion, both actually reaching the upper end of our guidance range. In 2025, we have on top, executed, increased our group CapEx for the fifth consecutive year, and we have completed a record level of investments into Energy Networks up to 20% up year-over-year, supported by successful project executions across Europe. And this demonstrates again the continuous progress of our growth strategy driven primarily by our Energy Networks business.

We are operationally well set up. Nadia will talk you through the details of the financial performance later. To my second message, we have not only delivered financially, we have also delivered operationally. In August 2025, we crossed a major milestone, around 110 gigawatts of renewable energy sources are now connected directly to our grids in Germany. Let me just give you some perspective. We operate around 1/3, if you calculate it in grid length of the German grid, but we have 70% of Germany’s total onshore wind power capacity and around 50% of its solar capacity. We have 58% of the installed battery capacity, you name it. It’s like the energy transition is happening and taking place in our grids. At the end of January 2026, just last month, we hit another milestone.

Q&A Session

We connected the 2 million renewable energy source to our German grid. For perspective, we celebrated 1 million somewhere in October 2023. So it took us 15-plus years to reach — to do the first million, it took us 2.5 years to deliver the second million. The third million will happen in less than 2 years. That’s the scale of acceleration that is currently just being driven by us. And in parallel, we are delivering on the smart meter rollout. All E.ON DSOs in Germany have met the mandatory 20% rollout target for smart meters with an increase of, on average, 60% in rollout volumes versus 2024. For us, at E.ON, this makes one thing clear, the energy transition is now an operational task on an industrial scale. And aside from massive investments, operational excellence is a prerequisite, not only to scale the business, but to stabilize also an increasingly complex system.

Regarding operational excellence, let me share a few highlights from 2025 regarding standardization and digital transformation as well as some innovation examples. Within Energy Networks, we have successfully concluded our component standardization project in Germany. This gives our EU-based manufacturers visibility and builds the basis for long-term supply agreements on key components well into the 2030s. And it contains enough flexibility and scope to support a CapEx envelope beyond what we have in place right now. We are now rolling out this approach across our European DSOs as well to further strengthen supply chain planning and improve component quality across all our DSOs. And in these less standardized markets, we have already achieved a 20% reduction in technical specifications across key categories.

Beyond standardization, we actively pushed the digital energy transformation by embedding digital capabilities deeply into our operations. Obviously, you can’t integrate 2 million feed-in points without digitization. So in Energy Networks, for example, our new field assistant app in Germany provides technicians real-time visibility of the power grid real time. I emphasize real-time visibility. Early results show up to 45% less effort for circuit planning, up to 40% less documentation, enhancing both safety and productivity. In Energy Retail, we continue to invest into digital capabilities that improve efficiency and performance. Based on that, our U.K. business was able to increase digital sales by 30% in Q4 2025 compared to the same period 2024.

And finally, as a playmaker, we do, as you would expect, also innovate. In Energy Networks, we are rethinking grid expansion. We developed a feed-in grid socket as we call it, that bundles renewable energy sources at a single grid connection point. The simplicity, speed and cost effectiveness of the feed-in grid socket means that developers can access capacity faster through online booking and achieve a quicker and cheaper route to grid connection. For our retail customers, we continue to rapidly expand our innovative offerings, and we now have around 16 flexible energy propositions across 6 markets, including the world’s first bidirectional charging proposition launched with BMW in September 2025. So standardization, digitization, innovation, the message is clear.

This is part of operational excellence, and this is how we deliver and build the foundation for future success. Let me get to my third message regarding the extremely robust secular growth trend that we are in. On our Capital Markets Day in 2021, which was the last one we did, we set a clear strategic course, focusing the business on energy networks and investing decisively in grid infrastructure. Since then, we have continuously ramped up our investments. When we compare the year 2021 to 2025, the level of energy networks investments has doubled. And many of the emerging growth drivers have not yet reached their full potential. Let me touch upon a few ones. Continued grid expansion and modernization. It’s clear that grid reinforcements are necessary to deal with the integration of renewable energy sources associated — and the associated increase in volumes.

But that’s also true for other drivers like data centers. In the south of Frankfurt, for example, we planned upgrades to the high-voltage lines, and that will increase transmission capacity by 2.5x replacing 170 old mass with 135 new ones. In data centers, we have last year committed to connect an additional 12 gigawatt of data centers to our grid in future years. And just as one example, we will build the connection for 700-megawatt data center in Nierstein, close to Frankfurt, which will be one of the largest grid connections for data center within Europe. E-trucks, 5 years ago, when we did a Capital Market Day, we were still assuming that hydrogen is going to take a large part of truck transportation. But right now, actually, this is not looking like it.

We are moving towards electrification also here, and we are reaching the tipping point with the total cost of ownership approaching parity, if not having being already beyond parity. And the EU-wide CO2 fleet standards require manufacturers to reduce new fleet emissions. This is an emerging opportunity, but also a big commitment of E.ON for the green mobility transition. In Germany alone, we will be adding more than 160 new grid connections for high-performance electric truck charging infrastructure. That represents roughly half of the nationwide fast charging network for electric trucks as initiated by the German government. So to summarize, our growth case is robust, supported by diverse growth drivers that accelerate well into the decade ahead.

And if one driver turns out to be less than in the past, always others have turned out to overcompensate for that. So we are extremely confident on that trend. And that brings me to my final message for today, the further upgrade of our networks investments that we will do. So we have rolled forward our guidance to 2030, and we will increase our 5-year CapEx envelope from EUR 43 billion to EUR 48 billion for the years 2026 to 2030. We continue to invest at a run rate of close to EUR 10 billion per year from 2027 onwards, which translates into a 10% power RAB growth in Germany. As said, we are operationally ready to invest more. Our processes and capabilities fully would support a higher investment pace that is also potentially really needed.

As highlighted today, it is our continued operational excellence that enables us to capture and convert this growth into strength and value for our shareholders. And our attractive combination of organic growth with a continued dividend growth target of up to 5% per year offers attractive long-term value with an opportunity for more. Now a successful energy transition requires significantly more network investments. They are essential from a macroeconomic perspective to avoid cost. They are good for our customers. They are politically supported in the business case in itself crucial for industry. Therefore, our confidence that final RP5 package will be attractive enough to actually deliver on those CapEx envelopes remains unchanged. We need more infrastructure.

More infrastructure is good for German customers. Therefore, we assume that the prerequisites will be in place. What we need as a prerequisite is the necessary regulation that gives us the long-term planning certainty and financial attractiveness to support this further expansion. With that, let me hand over to Nadia. Nadia?

Nadia Jakobi: Thank you, Leo, and a warm welcome to all of you from my side. I’m pleased to share with you the details of our 2025 financial performance and our new guidance for 2026 and outlook to 2030. My 3 key messages for today are: first, we delivered a strong performance in 2025. Once again, our steady execution translated into strong full year results and record high investments, providing growth despite ongoing geopolitical and macroeconomic uncertainty. We achieved an adjusted EBITDA of EUR 9.8 billion and an adjusted net income of EUR 3.0 billion, both reaching the upper end of our guidance range. Our investments increased by 13% year-over-year to EUR 8.5 billion, supporting continued growth in our regulated asset base.

Second, we introduced our 2026 guidance and provide an outlook to 2030. We expect to deliver more than 6% earnings growth, while shareholders continue to benefit from a reliable dividend growth commitment of up to 5% per year. This represents an attractive total shareholder return. We maintain strong investment momentum, increasing our 5-year CapEx plan by over 10% to EUR 48 billion, while strictly adhering to our value creation framework. And third, our strong balance sheet provides further opportunities to pursue additional investments beyond the current guidance once regulatory visibility on key RP5 parameters in Germany improves. At the same time, it provides us with a prudent buffer against potential risk. On my first message regarding our strong 2025 delivery.

As we already anticipated earlier this year, our adjusted EBITDA came in at the upper end of our guidance range with EUR 800 million year-over-year growth. We saw a significant EBITDA increase in our Energy Networks business through accelerated investments in our regulated asset base across all our regions. Our annual network investments increased to EUR 7 billion in 2025. As is well known, the result was also driven by value-neutral timing effects. Further effects in Q4 bring the total amount to around EUR 400 million. Most of the effects came from our Energy Networks Europe business, driven by volume effects and recovery of network losses. The remainder is with our German Networks business, where higher volumes and lower redispatch costs added a high double-digit million euro amount.

Our Energy Infrastructure Solutions business grew by around 5% year-over-year to EUR 588 million. The growth was driven by higher volumes compared to previous year and improved asset availability in the U.K. and Nordics. Additionally, we saw investment-driven organic growth as well as continued smart meter installations in the U.K. Moving to Energy Retail business. Here, we landed as expected at the midpoint of EUR 1.8 billion. The earnings development in the U.K. progressed as anticipated with the well-known effects continuing. In our B2C segment, customers continue to switch from SVT into fixed-term tariffs. In our B2B segment, contracts from previous years continue to roll off. Price adjustments in Germany from earlier in the year had a positive compensatory effect.

Just for completeness, we had a negative high double-digit million euro one-off effect from efficiency programs in our Energy Retail and ICE business. This brings our total one-off effects to around EUR 300 million, resulting in a total underlying EBITDA in 2025 of EUR 9.5 billion. Our adjusted net income came in at EUR 3.0 billion at the upper end of our guidance range. We continued to see slightly higher depreciation costs caused by the increased digital investments with shorter useful lifetimes. At the same time, our interest cost rose due to the higher net debt level compared to last year and the higher refinancing cost for maturing bonds. On an underlying basis, this converts into EUR 2.84 billion of adjusted net income. We maintain a strong balance sheet.

Economic net debt decreased by EUR 200 million quarter-over-quarter to around EUR 43.2 billion at full year 2025 despite the continued investments in Q4. Our investment increased by 13% year-over-year to EUR 8.5 billion, extending our track record of 5 consecutive years of annual increases following our strategic repositioning in 2021. Our strong operating cash flow of EUR 3.6 billion was the main driver of the debt reduction in line with the typical pattern. As a result, we closed the period with a comfortable debt factor of 4.4. This shows that we remain fully committed to a capital structure staying below our up to 5x promise to maintain a strong BBB/Baa rating. This balance sheet strength is further supported by 100% cash conversion rate, reflecting disciplined working capital management and the high quality of our earnings.

Turning now to my second message, our new attractive guidance framework. For 2026, we are guiding an EBITDA of EUR 9.4 billion to EUR 9.6 billion and an adjusted net income of EUR 2.7 billion to EUR 2.9 billion. For 2026, we expect a broadly stable EBITDA development. In the Energy Networks segment, continued investments into the regulated asset base will be largely offset by cost for further growth in our Networks business. Our Energy Retail segment is expected to remain broadly stable at EUR 1.6 billion to EUR 1.8 billion with operational improvements, including increased stabilization of our procurement, largely offset by the structural deconsolidation of one of our participations, moving it to at equity accounting. In Energy Infrastructure Solutions, continued investments are expected to drive earnings growth in 2026.

This development feeds through into our adjusted net income. Looking out to 2030, we expect our underlying earnings to grow by more than 6% on average per year. In absolute terms, that means adjusted EBITDA increasing over EUR 3 billion to around EUR 13 billion by 2030. Over the same period, we expect our underlying adjusted net income to grow at the same pace by 6% per year on average. This takes us to around EUR 3.8 billion by 2030, an increase of around EUR 1 billion. Let me now outline how each of our 3 business segments contribute to our growth story. In Energy Networks, we are stepping up investments in all our markets, which translates into underlying EBITDA growth of around 6% per year to 2030. Germany is by far the largest contributor, driven by continued investments in the power RAB.

In addition, Sweden and Czechia are key contributors. In Energy Infrastructure Solutions, we expect to see a CAGR of 12% by 2030, turning into an EBITDA of approximately EUR 1.1 billion. The largest business drivers are B2B solutions, including on-site generation, battery opportunities and district heating and cooling. In Energy Retail, we expect to ramp up our EBITDA to EUR 2.1 billion by 2030. The growth is primarily driven by innovative products such as flexibility and e-mobility offerings as well as higher efficiencies stemming from the centralization of our procurement and further digitization. This translates into exceedingly strong cash generation. By 2030, our Energy Retail business is expected to generate a cash contribution of around EUR 7 billion, almost 3x what we plan to invest.

Therefore, Energy Retail plays an important role in funding our investment program. Let me now outline the CapEx envelope that underpins our growth story. Since our strategic repositioning in 2021, we have consistently increased our CapEx envelope, and we are doing so again. We raised our CapEx to EUR 48 billion for the 5-year period to 2030. We have rolled forward our CapEx for another 2 years. Our CapEx amounts to around EUR 10 billion per year in 2027 and 2028. We will maintain this level in 2029 and 2030. This translates into a 10% power RAB CAGR in Germany, reflecting investments of more than twice our depreciation. This also increases the power share of our total WAP from 88% in 2025 to 94% by 2030. This expansion is fully aligned with our strict value creation framework, ensuring that each segment delivers a business-specific value creation spread.

By far, the largest portion of the investment budget, around EUR 40 billion is allocated to our Energy Networks business. Most of this capital is allocated to power grids. In our Energy Infrastructure Solutions business, we plan to invest around EUR 5 billion over the 5-year horizon. These investments are mainly allocated to our district heating network, our industrial and commercial customers for decarbonized energy and heating solutions as well as to opportunities for data centers and batteries. Within Energy Retail, our investment focuses on innovative products and — advancing our digital capabilities to service our customers in an efficient way. Let’s move to our financing outlook. Our balance sheet capacity remains unchanged at EUR 5 billion to EUR 10 billion, even with a higher investment budget.

We retain flexibility for selective value-accretive portfolio opportunities while benefiting from high cash contributing of our energy retail business. Hence, our strong balance sheet provides a solid foundation for additional investments while keeping a prudent risk buffer to preserve financial resilience. As Leo mentioned earlier today, the growth opportunities we have are robust and long term, particularly for power grids. And we stand ready to invest more, considering what is still necessary for a successful energy transition. We are operationally and financially prepared to increase our CapEx run rate in the outer years and invest an additional EUR 1.5 billion to EUR 2 billion per year, considering what is still necessary for a successful energy transition.

But for that, we first need the necessary regulatory visibility for improved RP5 parameters. This brings me to my final message. With our new attractive outlook to 2030, we are fully committed to deliver sustainable earnings growth of more than 6% per year and grow our dividend up to 5% per year. And we have optionality for more based on the structural growth of power grids that is still needed. Our combination of organic growth alongside growing dividends offers attractive long-term value for our shareholders with an opportunity for more. And with that, back to you, Iris.

Iris Eveleigh: Thank you, Nadia. And with that, we will start our Q&A session. Let me remind you all please stick to 2 questions each. And the first question for today comes from Wanda from UBS.

Wierzbicka Serwinowska: Hopefully, you can hear me. Two questions, one for Leo, one for Nadia. Maybe let’s start with Leo. Today, at the Bloomberg interview, you said you are quite confident that you will get a regulation that will allow high CapEx program in Germany. But at the same time, you didn’t really raise your 5-year CapEx program. So what makes you confident? How the talks with the German regulator have been going so far? And when do you expect to have enough visibility to basically make up your decision on the financial headroom? And the question to Nadia, could you please talk about the assumptions behind your 2030 German network EBITDA? What allowed return did you assume? And what is the cost outperformance cut versus today that you assume in your 2030 numbers?

Leonhard Birnbaum: So there is no new information that has emerged over the last months that has changed our position. So the confidence that I’ve shown is just a repetition of what I’ve said in the past. And what I also tried to say this morning it’s absolutely clear that we have a structural shortage of infrastructure. It’s actually not a German issue, it’s a European issue, it’s actually even in the U.S. It’s a general issue. It’s number one. Number two, bottlenecks in infrastructure are extremely expensive, and we see that they are especially expensive in Germany, but they’re actually expensive all over the place. The third one, the acceptance, the fact that the energy transition becomes a business place — business case depends on somehow solving this structural need.

And therefore, like I think it has been acknowledged now by everybody that we need more infrastructure. It has been acknowledged by everybody that we need private capital for that. And therefore, I’m saying, well, then I’m confident that there will be a regulation in place that allows for private capital to be invested via E.ON into infrastructure. And therefore, I’m saying, I can’t see why we would not get something like that with all the ongoing discussions. But clearly, it’s not that I can point to a big revolutionary development since we last time met. Now on the question until when will we have visibility? This depends on the news that we get. Like this year, we have RP5 in Germany, we have RP5 in Sweden. But in Germany, actually, we have the OpEx adjustment factor we are expecting eventually, let’s say, in the first half, some news what it really is and what it could mean so that we could potentially quantify it.

We are expecting regulation on the gas side that would give us potentially a cross read. And we are expecting then the OpEx regulation in the next year with the cost base based on the cost audit that’s being done right now. So it depends a little bit on the news that we are getting in the next — let’s say, in the next month.

Nadia Jakobi: Yes. And regarding the assumption that we took, we — please understand that we not disclose the single individual regulatory parameters. What we say and what we have said in the past, our goal is to reach our value creation spread of 150 to 200 basis points ROCE over WACC. And we would assume that we have included that. You can assume that we have included that in our guidance. Yes, full stop.

Wierzbicka Serwinowska: So in that case, can I ask another question because I didn’t really get anything about the 2030 German network EBITDA.

Nadia Jakobi: Yes. So again, when it comes to the 2030 EBITDA, we are disclosing at this point in time that our overall networks result is at EUR 9.8 billion as long as I remember that correctly. And we are not disclosing what share of that is now within Germany or in the international business. Because if we were to do that in the end, we would sort of give — I think we are giving quite some insights, but we don’t — also in the past, haven’t given the further drill down into the subsegments.

Wierzbicka Serwinowska: So you can’t disclose the allowed return, which was baked into Germany in 2030?

Nadia Jakobi: So what we are saying is our goal is that we aim to get the same value creation spread the 150 to 200 basis points. And our expectation is that all our Networks businesses live up to that.

Iris Eveleigh: Thank you, Nadia. The next question comes from Julius Nickelsen from Bank of America.

Julius Nickelsen: Yes, I have 2. And the first one is kind of a follow-up on the timing. So as you mentioned, there is the OpEx adjustment factor and then there’s the gas draft determination. But let’s assume those come out and the outcome is favorable. Is there scope to already do like a CMD or so after the summer to raise the CapEx? Or do we have to wait until basically 1 year, full year ’26 until there’s another opportunity for you to fully open the CapEx envelope? That’s the first question. And then the second one is maybe a little bit cheeky, but if in your absolute bull case scenario, if regulation comes out, how you like and you can raise the CapEx, do you feel comfortable to give any kind of indication where EPS in 2030 might land in that scenario? That would be quite useful.

Leonhard Birnbaum: Yes. So you rightly pointed out that timing is, let me call it a bit path dependent. And I would, at this point in time, not like to now say it’s like let’s revisit on the whatever day X in months Y because then we think the timing is too unclear. I would say the following. If we only get good news, then we will react to that. If we only get bad news, then we will react later to that. So sincerely, I can’t give you a specific timing right now. This is in the hands of the regulator who now needs to first give us additional information so that we have something additional to say. And on the bull, I don’t want to speculate now on bull, because I think we have given you a guidance what we expect. If — and if the word would be a paradise, I would try to figure out what makes sense for my customers because then I would know that if I do something which is beneficial for my customers, it will be honored that I have done it.

If I do something which is stupid for my customers just because I got a lucky strike somewhere, this will come back at me. So we more have a perspective to do. We do what is needed, and we are confident that the regulation will be good enough. We don’t bank on bull’s cases.

Nadia Jakobi: Yes. Maybe adding to that, we have deliberately chosen that we just keep our annual run rate of CapEx at this level overall, E.ON, approximately EUR 10 billion from 2027 onwards because we have got very positive signs from politics, from what is needed from macroeconomic, also what regulator has been saying that he appreciates that there are higher returns and higher revenues needed, but then we haven’t seen anything black on white. And that’s why we neither increased our run rate nor decreased our run rate. And you need to bear with us, of course, as we don’t know anything more, what we also said in Q3 that we would have hoped, we would know more by this time, but we don’t. We cannot also now not guide for a specific EPS increase. On top of what we — we would say we’ve already demonstrated, of course, quite a significant EPS increase with a very attractive 6% CAGR up til 2030.

Iris Eveleigh: And the next question comes from Alberto from Goldman.

Alberto Gandolfi: I think you already provided quite a good picture, so I’ll avoid talking about returns. But I wanted to ask you one point on the assumption of the power networks, which is maybe 2 parts. The first part is, can we get a feel for how saturated is the German network? We are hearing that network is at capacity around Frankfurt. You’re talking about all this gigawatt of data center demand. So do we know with this investment plan, what is the saturation level today? Is it running at 90%, 95% capacity? What will it be in 2030? And as a second part on the assumption, would you be able to tell us of the CapEx upgrade you presented today, how much is perimeter, how much is equipment cost inflation and how you think about that? And the second question is actually totally different. Your supply…

Iris Eveleigh: I would say it’s the third one.

Alberto Gandolfi: Should I stop here, Iris? I will face the police.

Iris Eveleigh: No, no, no.

Alberto Gandolfi: Sorry. Sorry. Sorry. I will not do follow-ups. So in terms of cost savings, your supply retail business was originally created as a people business, but we are seeing companies putting out there recently big cost savings program, AI-driven facilities and software, natural attrition. So I wonder, is this target including a significant cost reduction effort? I noticed in your guidance, your holding costs are going down quite a bit, but I suspect there’s much more to go. Am I right?

Leonhard Birnbaum: Okay. Since the second question was the third one, I’ll give a very short answer. Cost reductions are baked in. But I’m sure we will actually see much more opportunities for much further cost reductions, which we might not have baked in. But on the other side, we will see also pressure, which we might not have baked in. So in that sense, AI will change, will clearly change the retail business. But I think that’s maybe a good point to make. It’s like your colleagues came up with the Halo suggestion. I really think that the advantage which we have in the majority of our business in the ICE and energy networks is actually that we can’t really be disintermediated because the disintermediation of the physical grid doesn’t work because it’s a physical grid in the end.

So AI will completely change. Also ICE business will completely change Networks business, the way we run our processes, but it will not disintermediate us. So that’s maybe a nice point to make here. Now on the add capacity, I think overall, we are in a better situation in Germany than a number of other markets, which we observe across Europe. We have taken note of the load, for example, in the Netherlands or we have taken note of what Endesa presented yesterday or what we have seen in the U.K. I think we are not there yet. But it’s clear, whilst we had massive bottlenecks on the TSO level in the past, these bottlenecks are trickling down into the — from the extremely high voltage into the high voltage and where we have solar also in medium voltage, not yet on a kind of like complete level as in other markets, as I just mentioned.

Now 2 comments. I think we can’t give a general statement. It really depends on the region. For example, in Eastern Germany, where we have massive additions of renewables, we are in many places, clearly at capacity already. In others, this is different. So we have to look at it on a regional basis. That is number one. Number two, it will depend massively on the upgrade, the revision of the grid connection regime, which is under current — under discussion right now in Germany. I would say if the proposals which are on the table right now for a new grid connection regime, use it or lose it, something else than a first come, first serve, if that materializes, we can achieve much more with the same capacity. Whilst if we do not change the current picture, then I would think that the grid would run to full usage — to being fully blocked very fast because we have, let’s say, a speculative run for connections.

So it depends a little bit on the political debate. And on the inflation and growth, we are continuously looking at that. I’m not sure, did we do in the context of the budgeting a new exercise then? Or is it still the 1/3 or whatever inflation that we…

Nadia Jakobi: I think there was more that what we communicated like 1.5 to 2 years ago, when we look now at the higher level, we say from this level that we have been communicating our price inflation is at this point, moderate and it’s primarily volume growth. But we, of course, as Leo has said, we have seen a step change of higher inflation when we last spoke about that.

Iris Eveleigh: Thank you, Nadia. With that, we come to the next question. Thank you, Alberto. The next question comes from Pavan from JPMorgan.

Pavan Mahbubani: I have 2, please. So firstly, and it’s following up from Julius’ question, Leo, but maybe in a different frame. Can you give us an indication of the quantum of which you think you can accelerate the CapEx to 2030? And should we be taking the EUR 5 billion to EUR 10 billion headroom as an indication of the upside you can see there? That’s my first question. And secondly, related to that, are you able to talk about or give investors comfort on your readiness, as you mentioned in your opening remarks, to accelerate on CapEx? Do you already have the supply chain capacity that you need, your workforce? I appreciate the acceleration is not coming today, but given it’s a big focus, I would appreciate some color around that.

Leonhard Birnbaum: Okay. So I’ll take the second one, and then Nadia will follow up on what you said in your speech on the additional quantum. So I would say, first, E.ON, we have put in the last 5 years, a big focus on operational excellence. I tried to say that in the speech. So — and we are — we have been building up a workforce. Again, in the last year, we had a net increase of the workforce. So we have built up in the networks around 7,000 additional people over the last years. So we have the workforce, number one. Number two is we have the supply chain contracts for the critical equipment. I cannot exclude that we will have a bottleneck here or there. But I think actually, overall, for the critical components, switchgear equipment, power electronics, transformers, cables, we are actually well set up.

So we should be able to manage that. On the permitting side, we would need faster permitting that would be — but we are — actually, we are set up for the 8-year processes. If we would get an acceleration, we should have absolutely no problem there as well. And on the digitization side, I think we have now pushed the envelope really with the transformation programs that we have done. By the way, the last point is the one where I usually never get a question is the one that I find personally the most challenging one to deliver large-scale IT transformations at — on time, on budget. So having said that, with the confidence that I have is we have achieved it year-over-year over the last 5 years. We have always achieved what we said that we would do with a few small exceptions from which we have learned.

This year, we have achieved every single operational target that we have set for ourselves. I have absolutely no reason to believe that my organization would not be able to repeat that going forward also with a higher volume. But again, it doesn’t come by itself. It’s the result of very hard work on all of these topics. I hope that gives you enough color. We can obviously detail that in more afterwards. So Nadia on…

Nadia Jakobi: Yes. So regarding the potential for additional CapEx. So when you look at total envelope being like easy to remember, EUR 10 billion per annum overall E.ON CapEx, out of that, approximately EUR 6.3 billion is for Energy Networks Germany. Out of that, approximately EUR 5.3 billion is dedicated to WAP effective — power RAB effective Germany. So if you then take the EUR 4.3 billion, we would have an additional EUR 1.5 billion to EUR 2 billion per annum, where we could invest more at the — in the outer years when we look at our network build-out plan that we did in 2024. Of course, these network build-out plans are, of course, also — we will have — we see no new network build-out plans, but the data that we’ve got compared to this network build-out plan that was issued in 2024, that would be this EUR 1.5 billion to EUR 2 billion more in CapEx from — in the outer years.

Leonhard Birnbaum: So operationally, we can. And financially, it depends on regulation.

Iris Eveleigh: Thank you, Pavan. With that, next question comes from Harry.

Harry Wyburd: This is Harry Wyburd from BNPP Exane. So 2 ones for me. So first, can we focus a bit on this grid connection regime reform because it’s actually quite significant and it’s actually hit seemingly quite a lot of resistance from certain political parties and lobbies. So if you — maybe you could just remind us a little bit for those who aren’t familiar, what has been proposed here and sort of locational reform and so on. How do you think that’s going to end? And is that actually going to impact you because it could theoretically shift around where you’re investing? And is that something that feeds into your CapEx deployment or operations and so on? And then the other one is on affordability. So we’ve had all these headlines on carbon, all these headlines on EU power market reform.

I guess you’re, in some ways, a sort of neutral observer here given you’re not exposed explicitly to power prices. So I value your independent view on how you think this is going to end. So do you think we are going to get power market reform. Is that going to cut baseload power prices in Europe? And do you see this as something that’s actually relevant for you if we end up with lower electricity prices via regulatory change and that triggers higher power demand?

Leonhard Birnbaum: Harry, good seeing you. Two tricky questions as a price for seeing you. Now on the grid connection regime, first, let me just repeat. What we’re currently seeing in terms of request is completely unsustainable. There’s no question. We are seeing connection requests at E.ON only, we actually published those numbers, 500 gigawatts for batteries, 70 gigawatts for data centers. It’s just absolutely unfeasible that we can deliver on that. Even what we only agreed to deliver is already stretching the limits in the envelope massively, 12 gigawatts on batteries, 16 gigawatts on data center or the other way around, I always mix, that doesn’t matter. 28 gigawatts data centers plus batteries in 2025 only, plus 20 gigawatts, nearly 20 gigawatts in renewables.

So there is a limit for that. Now what we are seeing is, we clearly see that there is speculation for grid connection because grid connection is scarce, so it must have a value. If I can secure it, then I have something which I can sell expensively. And since we have the first come first serve and no use it or lose it, actually, this is pretty cheap speculation. And therefore, I think something needs to happen. So this grid package, I think, is just a reaction to an absolute unsustainable situation that needs to be changed. Now for us as E.ON, it’s like don’t we — I mean, it’s like if we don’t change it, we have to invest like hell and if we change it, we have to invest like hell. So it doesn’t really make a difference. But it makes a difference whether we can actually connect customers.

And what I’m really afraid of, if you ask me what’s the biggest impact of E.ON is that the biggest impact on us would be if we don’t get changes and we need to tell consumers that we can’t connect them because the grid is full with solar farms, which we have to redispatch. That would make no sense. And that would be then very detrimental for our perception. So this is what I — so I’m not concerned financially because I mean it’s like the CapEx opportunity is just too big. But I’m concerned that we don’t do an efficient energy transition and then we get an affordability backlash at the whole energy transition. So that’s the point that I would really like to make here. Now what is materially in the package? I think you can differentiate 3 buckets of discussion.

One bucket is, should we philosophically change the approach, not the first come, first serve, not — should we introduce something like use it or lose it. And I think there is broad consensus that something needs to change in that direction. That’s not contentious. Then the second one is we have many innovations that we could do to just be more efficient in how we connect, for example, renewables. We have technical innovation. That’s not contentious either. It depends what the regulation we do, et cetera. For example, do we get combined connections between solar and PV? Do we — your 100 megawatt of PV, do you always get your peak or you get 97%. So there are technical details. And then there’s a third one, which I would call how do we achieve locational signals so that the expansion of the feed-in happens not in grid-constrained areas.

That’s one really contentious point because obviously, the renewable players, especially renewable players here have a big interest in getting only locational signals that they can calculate and which don’t bite them too hard. But if they don’t bite, as we say in Germany, then they are meaningless. So — and that is now depending on the details. If you ask me what’s going to happen, I think bucket #1 is going to change. Bucket #2 is going to change. Bucket #3 is something is going to happen. Whether it’s going to be enough, we will see from the discussion. But I think it’s absolutely the right discussion that we are having at this point in time. Now on the switch, that was regulation on grids. Now on the wholesale power, we obviously have looked — I have also looked with interest at what was proposed in Italy or what will happen now in Italy.

So I’m certainly not the best experts to talk about that. But actually, I would say it’s not an economic consideration which has taken place. This is a political — these are political actions. You are trying to achieve somehow a politically — a target which you see necessary politically and then you just taking whatever tool works. I personally think that marginal pricing and the pricing is coming from that will be needed, but the position is weak because we know that if we go to 300 gigawatts of renewables in Germany, marginal pricing won’t be the one that is going to incentivize investments anyway. So there will be — there will need to be a change in the power market design. But what we see here is not building something which is sustainable in 2050 in a 100% renewable world.

What we’re saying here is a political intervention to achieve a political goal. Whether this is done efficient? I think the only debate that you can have is, is this more or less efficiently, but I think it’s inevitable that we will see this more and more. Personally, I think the discussion will never go away on market design. But luckily, I’m not in this commodity volatile business on the generation side. For me, regulation on the grid side is already enough.

Iris Eveleigh: Okay. Thank you, Leo. With that, next question comes from Deepa from Bernstein.

Deepa Venkateswaran: So I had 2 questions. One on the data center opportunity. Can you quantify how much of the EUR 40 billion network CapEx is for connecting data centers? Just trying to get a feeling for how meaningful it is or it is not? So that’s the first question. And secondly, maybe moving away from Networks. Your Customer Solutions business, you’ve had ambitions to improve your revenues from selling solar panels, batteries, maybe exploiting flexibility. I wanted to check how that development is going. Are you seeing the necessary uptake from consumers for these low-carbon solutions? Is it ahead of plan, in line? Just directionally, how is that going? I know it’s a much smaller part, but obviously, you are projecting earnings growth in that business to 2030, and I’m assuming that this would be a part of that. So those are my 2 questions.

Leonhard Birnbaum: I cannot quantify, maybe Nadia can, but I can’t quantify how much of the EUR 40 billion is data centers. But I would say there is a remarkable difference between the data center boom in the U.S. and in Europe. So in our case, the infrastructure growth is really driven by multiple simultaneous factors that we’re seeing, truckloading, data centers, renewable connections, heat electrification. So the growth trend is extreme — or batteries and so on. So the growth trend is extremely robust. because it’s driven by multiple factors. And we have not quantified how much of the million goes into batteries, into data centers and into renewables. I think the situation is different in the U.S. where data centers — in some parts, at least must be the overwhelming driver.

So sorry for that. On the Customer Solutions side, I think I can answer it. So yes, we have combined the flex, let me call it, non-commodity retail products that you alluded to. They’re part of our retail business — customer solutions business, I would say. We are seeing a tick up. We are seeing a nice tick up. It’s number-wise irrelevant. You said that yourself rightly so. And we would like to see even more aggressive tick up operationally. There, we are actually readjusting every month, so to say. But it’s moving.

Iris Eveleigh: Thank you, Leo. With that, we move to — we still have quite a few hands up. Maybe if someone just has one question so to get everyone the chance to actually still ask the question. Louis from ODDO is the next.

Louis Boujard: Actually, the second one will be very fast. So I think it’s going to be okay. So the first one, regarding the capital allocation, I was wondering, in case it’s not going exactly in the right direction for you regarding the CapEx expansion, do you have any leeway in your capital allocation to eventually adjust and increase your CapEx envelope in the other geographies? Or eventually, would you consider higher payout or share buyback program in order to allocate maybe better your current financing capacities? That would be my first question. How would you do in a worst-case scenario? And the second question, which is quite fast, I guess, is regarding the underlying assumptions that you could have taken in your cost of debt by 2030. When I look at your guidance for the EPS, the EPS does not look highly demanding considering the EBITDA. So I was wondering if you were taking into consideration some increasing interest cost of debt in your assumptions for 2030.

Leonhard Birnbaum: I take the first one. So we have a clear plan A, and we are pursuing this plan A. I don’t want to speculate on a plan B.

Nadia Jakobi: And as you know from us, we are always committed to value creation and to balance sheet efficiency.

Leonhard Birnbaum: So I’m sorry, that sounds like now we don’t want to treat you badly, but it’s really as short and crisp.

Nadia Jakobi: So the second one was cost of debt or sort of why we didn’t increase the dividend?

Leonhard Birnbaum: Cost of debt.

Iris Eveleigh: Cost of debt assumptions, higher interest.

Nadia Jakobi: Yes. On the cost of debt, we have — when you look at — we have been just issuing some of our new bonds at the beginning of the year. And when you look at that, we had an 8-year bond, we had a 12-year bond. And if you combine the 2, they were of an average of 3.7%, that is sort of actual numbers we had. I don’t know, I think, 95 basis points credit spread on the 12-year duration bond, that is sort of one sign of guidance that I can give to you that also, I think we are communicating later in our pack some of the maturing bonds. So it’s fair to say, as you would anticipate that some of the very low interest bonds are maturing up until 2030 and that need to be then refinanced at these levels that we have been seeing now in January this year.

And that is also, as we have been highlighting, when you are confronted with a cost of debt for existing assets, which is just backward-looking 7 years and includes the low interest years, then of course, you cannot assume that you can still refinance at these low levels because everybody of us would love to still do the — buy a house and finance it on the terms of 2020. Unfortunately, that’s not possible. So I think that’s kind of the indication that I can give to you.

Iris Eveleigh: Thank you, Louis. And with that, we move on to Rob from Morgan Stanley.

Robert Pulleyn: I have one question. We’ve spoken a lot about the regulatory terms to increase CapEx and guidance. But could we just dive into specifically which areas are you looking for from the regulator to improve versus the rest of draft materials we got towards the end of last year?

Nadia Jakobi: I think, Rob, there is something — one of that is what we have just discussed, i.e., being the cost of debt, both the level and also the fact that there is no mark-to-market for the cost of debt on all those assets that are built up until end of 2026. That’s something where you cannot refinance at the levels in the market even as we do it in a very proficient way. Second one, I think we also debated that in this round when it comes to cost of equity, there is just some high-level explanations. We don’t have clarity yet. Also this look-back period for the risk-free rate is important. MRP, even if we are going to a higher level, where we appreciate the arithmetic mean you can see that the market clearly demands an MRP of 6% plus.

And there, we are still quite a gap apart. And then there are quite some other elements also regarding the benchmarking that are open and as Leo has just said, so far, we only know that there will be an OpEx adjustment factor, but that’s about it. There hasn’t been any specification how that’s going to work. In principle, this is something that we clearly value and we are welcoming that this has been appreciated that when you grow your CapEx, you also, of course, will grow your OpEx. But so far, we don’t know which kind of magnitude this is going to have.

Iris Eveleigh: Thank you, Nadia. With that, we move on, thank you, Rob, to James from Deutsche Bank.

James Brand: I’ve got one — kind of one straight two questions. One question and clarification. So the question is on the benchmarking actually, the efficiency assessment. I think you talked about in the past as being quite tough or certainly getting tougher than it has been in the past, but then we had some new proposals come out before Christmas. So I was wondering whether you could just give us an update on whether the proposals there have moved in a more positive direction or whether you still think they’re very challenging. And then the clarification is just on the timing. So obviously, we’ve got the paper on the OpEx adjustment factor and then the determination of the cost of capital for the gas networks. I think you mentioned you’d have visibility in the next month.

Was that for both of those or just for the OpEx adjustment factor? Because I think the paper on the OpEx adjustment factor is due fairly soon, but it was less clear when the cost cuts of gas was due.

Leonhard Birnbaum: So I’m always careful to say it will come out in March because my experience is then it turns out April, and I need to explain all the time where it was in March. So I would say OpEx adjustment factor first half, the gas side, second half of the year. So — and rather go to the back end and be surprised if it happens earlier. So that on the timing. Second, in the final papers, there were no real substantial improvements. Therefore, the criticism on the benchmarking is still very clear. We actually have seen that it will be harder to achieve top efficiency, which is okay. That’s fine. That’s the challenge that the regulator should put in front of us. But we have still seen that redispatching costs are included in the operational benchmarking as influenceable cost.

And since when it — I mean, clear, 90% of the redispatching costs are with the TSOs, but out of the 10%, which are with the DSOs, we at E.ON get 90%. Why? Because we are the rural guys, which are connecting the renewables and basically putting redispatching into the picture just punishes exclusively E.ON, which has done the most investments, kind of like to achieve an energy transition. I repeat my word, 1/3 of the networks, 70% of the wind, 50% of solar, and then we get redispatch — and then no agreement on localization signals and then we get the redispatching cost allocated on top of us. Still the same criticism. Really no changes in the final paper versus what we explained to you in the second half of last year.

Iris Eveleigh: Thank you, James. And with that, we move to the 2 last questions, while the first one comes then from Ahmed from Jefferies and then Piotr from Citi. We’ll then close the call.

Ahmed Farman: I guess just a very quick follow-up question. You just mentioned — gave us some sort of time lines, right? You said the OpEx adjustment factor and I think it’s the draft for the gas distribution that you mentioned. Are there any other data points or milestones that are required from your side to get the clarity? Or are these the 2 critical data points? I just want to make sure sort of just for completeness that if there is a full — there are other elements as well that we are just aware of what other regulatory updates are required. So that’s my first question. My second question is on retail. This is a follow-up to an earlier question. So retail, if I look at the last couple of years of results, it sort of hasn’t really delivered much growth, and you are guiding to growth going forward.

I just wondered if you would explain a little bit — you already talked a little bit about the drivers, but a more profile of this growth as to where the growth will come through. Obviously, you’re sort of talking about a sort of flattish profile to 2026. But do we expect to see this growth profile already in ’27? Or is this more back-end loaded?

Leonhard Birnbaum: Yes, I’ll take the timing question. So I understand from all of your questions that you would ideally want us to give a precise time line when is what materializing so that we can give you a further update. But — I mean, this is really where I would need to say you need to raise those desires somewhere else, I’m afraid. I can only repeat what I just said. It depends a little bit what information we got. Look, last year, I told you, I am confident about the outcome because I still believe that if something needs to happen, eventually, it happens because the alternative is just unattractive. So I truly believe we are going to get a regulation which is sufficient to make the necessary investments because the investments are good for Germany, good for our customers.

But having said that, it’s kind of like I did not get anything positive last year that actually really helped me to say, I — now look at this. This is why I’m right to believe that. Now if the next news that come out would clearly show in the direction that, let me say, a basic optimism is okay, then I can be bolder going forward and say, look, this works out, it will come to the right result. Let’s make a judgment call. But if the same thing happens this year that happened last year that I get negatively surprised, like, for example, by this redispatching cost, which you all know annoyed me like hell, if something like that happens again or if whatever details come out on the OpEx adjustment factor make it irrelevant, then it’s kind of like then I don’t have something.

So it’s a bit past dependent. But clearly, like the people who can influence that time line are less us, I’m afraid. We can only do operational great work and show that what we are doing is beneficial for our customers and then expect that others will honor that.

Nadia Jakobi: Yes. So coming to your energy retail question. So when you refer back in the past years, there were past years also from the energy crisis where we took on a lot of risk when it comes to revenues. So we had high prices. And now we have seen some normalization. We have still stuck to our 3% to 5% B2C margins. But of course, when you had a far higher revenue level, then that sort of meant that the absolute amounts reduced. So that’s basically the reduction that you have been seeing coming from — when you take sort of 2022 and ’23 as a basis here. When you sort of go further back into the year 2020 or ’21, you see that we’ve actually seen some significant increase also in our energy retail business. Second, I guess you are less interested in the past, but more into the future.

We’re very much aware that we are projecting stable EBITDA from 2025 to 2026. There’s one technical effect in there, i.e., we are deconsolidating one of our entities and the equity contribution to that is then because of the joined up grid and retail business, that’s now portrayed in the grid business, but going from EBITDA to only a net equity contribution. And then the second one, so we see some operational growth, but it’s fair to say that some of the digital foundations that we need for future flexibility products and the ramp-up that we are seeing will be also late in 2026. And then when it comes to how near term the progression is, I think we have been guiding to an energy retail business in 2028. And then we see some further increase in 2030.

So as you say, first stable, laying the foundations, and then we would expect to see some increases in 2027 going forward.

Iris Eveleigh: And with that, we come to Piotr with the very last question then for today. And obviously, we’re happy on the IR side to follow up on any further questions that you might have. Piotr?

Piotr Dzieciolowski: I have just one big picture question to Leo actually about — how do you think about the grid fee structures going forward in the context of affordability and the need of CapEx, in a sense that a lot of the growth comes from the data centers and therefore, the cost when it goes into the RAB, the connection it’s being socialized and therefore, all of the consumers have to pay for it. Likewise, there are a lot of consumers that really have a lot of self-consumption and also pay less than for the infrastructure. How do you think — in the context of affordability, would charging for infrastructure differentiated prices to different consumers would not be a solution? And likewise, when you think about the investments, there are certain investments like releasing redispatch costs and so on.

So what is the return on the investments from the consumer perspective on this extra EUR 5 billion to EUR 10 billion CapEx that you propose to the regulator? Because if it’s about the data center connection, I agree why the regulator may not be willing to give you the higher rate. But if it’s about really saving cost for consumers, then he should be more than willing to spend — for you to spend this money.

Leonhard Birnbaum: Yes. I think actually, there is a misperception on the impact that data centers have on consumers. If — now we take the German example and then we — like in Germany, you have actually — you pay grid fees and you can pay a lump sum for your connection…

Nadia Jakobi: Construction grant.

Leonhard Birnbaum: Construction grants. That’s the word, okay. So you have construction grants and grid fees. Now data centers, the overarching target is to get fast access. So they are perfectly fine to pay high construction grants. That’s number one, which means actually that the cost really socialized in the grid fees are not that big. Second is they are actually pretty big consumers. And we have energy-related and capacity related, I mean, fees in Germany. So what happens actually if a data center gets added into your DSO area, you as a consumer, a B2C customer, you see lower grid fees because then the same — basically the same cost base is spread on a larger volume. So — and that’s actually the whole way how the energy transition can work.

We need to increase electricity volumes so that we can allocate the higher cost base on a higher volume basis. And so specific costs stay constant or even decline. So data centers in a DSO area reduce the grid fees. Now on the generation side, they need additional power stations. That’s what’s being discussed in the U.S. right now. Obviously, if you have like in Tennessee, a 5 gigawatt, whatever data center, you don’t want to put that into the rate base and then have the consumers pay for the 5 gigawatts of additional generation capacity. But if the data center comes with its own PPAs and new assets, then it’s actually fine. So in our case, data centers in Germany would reduce the grid fees and actually would be beneficial. Now on the wholesale market side, they would need — they would require more baseload capacity probably, which is why we think generation capacity needs to be added.

But so for us, data centers are beneficial for us at E.ON, data centers are beneficial from an affordability standpoint. They make our life easier.

Iris Eveleigh: Thank you, Leo. Thank you, Piotr. With that, we come to an end. Thank you all very much for participating and the interest in E.ON. And if there’s anything else you would like to discuss, the IR team is happy to follow up with you. Thank you, Leo and Nadia. With that, I close the call for our full year ’25 presentation. Take care. Bye-bye.

Leonhard Birnbaum: Thank you.

Nadia Jakobi: Bye-bye.