Yes, we have gone through the individual cost order so we know that. What we do not know yet is the general efficiency factor and that’s on the efficiency side the one thing, which is still outstanding. And as said by March our expectation is that we are on track time-wise by March we’ll have all things in place. It will then be able to update our financial framework on that. Maybe that’s the segue to our customer solutions. Look as I said take it as a positive for today that we will be achieving this margin expansion earlier. Again that is largely a reflection of that with higher commodity prices and higher volatility compared to pre-crisis. So I’m talking about the year 2018, 2019, 2020 before we ran up into this gas price induced — price rally that if those prices are sustainably higher in order to be on a risk-adjusted basis have an as good business you need to increase your absolute margins to bring it back to the same relative margin.
It’s all about commanding a revenue margin, which compensates you for the risks which you are transferring. And so this is something which honestly you should anyhow be expecting from us to do. And the message is not simply we are doing this much faster. And again I said that when we gave that commitment I guess you all can imagine that the uncertainty back then was still very high. So — and whether it’s going to be more or not is in a different — is a different discussion and theme which as I said has to do more than about how can we then transform transition or a pure commodity retail business into a business which takes into account customer flexibility and offerings about e-mobility and so on and so forth where we see RCS very well-positioned.
This is a very digitally led — these are very digitally led offerings. And I think that’s where our strategic focus and strength in terms of digitalization has the potential to pay off over time. Good. That said, I think we…
Iris Eveleigh: We come to the last question now –
Marc Spieker: The last question? Okay.
Iris Eveleigh: From Deepa from Bernstein. Deepa? So if there are — there any remaining questions please the IR team is there to answer those. Please reach out to us. So Deepa you have the last word. I should say.
Q –Unidentified Analyst: Thank you. Thank you. There is lot of question, since this last question – value add. So I have two follow-ups. So one is on the German regulation. Is your expectation that once the process is done with the BGH, you might gravitate towards that 7.09 which is being allowed for the new assets? Or is this going to basically be some different hypoformulations? So where would you expect the outcome to be? And then the second one is obviously the retail earnings are tracking well ahead of your expectations. That’s great to hear. But we’re also seeing a softening of the wider economy with consumer sentiment being weaker and maybe bad debt. So how are you thinking about that risk while on the other hand obviously you’ve seen lower churn rates and disappearance of irrational customers.
So how are you weighing that probably more into 2024 maybe it doesn’t change too much for 2027. I’m just thinking that’s the other risk which might be sitting on the horizon which is not obviously manifested this year yet? Thank you.
Marc Spieker: Yes, Deepa. Second one is a fair observation affordability of course in terms of recession gets a different weight. And of course it has to. I think on the other side, we need to look at how variables get in sync for households. We do see that commodity prices are coming down that we do see that energy prices for that reason are coming down. We have seen huge wage inflation during this year. We do see the saving rates go up. So in that sense net spendable income may not be affected as much as if you just look at some variables. And I think we need to put all this together and this is coupled with what I said before from what we can observe an unbroken demand from customers to basically say “I do it on my own. I want to have more solar.
I want to have a battery. I want to have a heat pump. ” And although the demand for these products due to the legislative kind of ping pong in Germany has come off from the very high-levels last year. It’s still if you take a holistic view it’s a very robust growth what we will be seeing of energy infrastructure which will be added to the networks. So I think you — it’s a very relevant point. And that’s why I would not ignore it. We need to deal with it but it does not automatically mean that this has a significant impact on how we will be and can deliver next year. And on the ROE question, look, it’s very simple. The — everything what the German regulator up until now has done with regard to new investments is to adjust for a higher interest rate environment i.e. a higher risk-free rate.
This court case is not about the risk-free rate. This court case is about that even, if we hadn’t seen a much change in the interest rate environment that the initially announced ROE of 5.1% is far too low. It’s far too low. So we are talking here about something which actually needs to come on top of the 7.1% which are now earmarked for new investments. And this is why also there the messaging towards the regulators unchanged. If you want to send the right incentive for growth, we need to talk and we’ll have to talk about further expansion of the allowed returns going forward because otherwise, the required demanded growth that we shall deliver. I can’t see how that shall be justified from an investor point of view. And so this is why this court case for us is of high relevance.
And again, this is not about addressing now the risk-free rate. This is really about addressing in any interest rate environment. What’s actually the reasonable and sensible spread that we should be able to earn as long as we are an efficient operator and we are an efficient operator.
Iris Eveleigh: Thank you very much, Marc. Thanks Deepa. With that we come to the end. Thanks to all for participating in the call. And if there are any further questions, please reach out to the IR team. Thank you very much. And take care. Bye-bye.
Marc Spieker: Bye-bye. Thank you very much.
