EVN : Geschäftsverlauf im 1.–3. Quartal des Geschäftsjahres 2015/16

Highlights

• Higher demand for network stability leads to increase in thermal electricity production
• Operational improvements across the entire value chain in the energy business
• Reduction of 7% in the natural gas working price for household customers as of 1 May 2016 within the framework of EnergieAllianz Austria; reduction of 5% in the electricity working prices for house-holds as of 1 October 2016
• Investments related to drinking water supplies in Lower Austria
• New contract for sewage treatment plant in Croatia
• Group net profit above previous year
• Outlook for 2015/16: generally stable Group net profit expected

Key results

• Revenue: -2.9% to EUR 1,616.6m
• EBITDA: +5.7% to EUR 525.4m
• EBIT: +4.5% to EUR 299.3m
• Group net result: +6.3% to EUR 198.8m
• Net debt: EUR 1,098.8m (30.09.2015: EUR 1,230.9m)

Energy sector environment
The temperatures in EVN's relevant markets remained mild throughout the first three quarters of 2015/16. In particular, the winter months brought temperatures that exceeded the long-term average in all of the Group's three core markets. The heating degree total in Austria was 2.0 percentage points higher than the previous year, but still remained below the long-term average. Bulgaria recorded unusually mild temperatures during the reporting period, with a heating degree total that was 21.5 percentage points under the previous year's low level. The temperatures in Macedonia were also warmer, and the heating degree total was 7.0 percentage points below the previous year.

The reporting period brought a year-on-year decline not only in the price for primary energy carriers (crude oil, natural gas and hard coal), but also in the forward and spot market prices for base load and peak load electricity. The forward prices applicable to the reporting period fell to EUR 31.6 per MWh for base load electricity and to EUR 40.1 per MWh for peak load electricity. In comparison with the first nine months of 2014/15, the spot market prices declined to EUR 27.7 per MWh for base load electricity and to EUR 34.8 per MWh for peak load electricity.

Higher EBIT and EBITDA in spite of decline in revenue; Group net result above prior year
Revenue declined by EUR 47.5m, or 2.9%, year-on-year to EUR 1,616.6m in the first three quarters of 2015/16. Higher revenue was recorded from the marketing of the electricity generated in EVN's power plants and from the network business in Lower Austria. However, this increase was unable to fully offset the decline resulting from a reduction in the Group's natural gas trading activities and the volume- and price-related revenue decrease that followed the mild winter and the liberalisation steps in South Eastern Europe.

Operating expenses were lower, above all due to a decrease in the cost of electricity purchased from third parties and primary energy expenses as well as further improvements in collection and a parallel cost reduction in South Eastern Europe. These developments supported an increase of EUR 28.2m, or 5.7%, in EBITDA to EUR 525.4m.

Depreciation and amortisation rose by EUR 7.6m, or 4.0%, to EUR 199.3m as a result of the Group's ongoing investment activity. The effects of impairment testing also increased by EUR 7.8m, or 41.1%, to EUR 26.8m. The major component of the impairment losses was related to the Bulgarian heating company TEZ Plovdiv and reflected the continued adverse rulings of the regulatory authority in the heating sector. In spite of these developments, results from operating activities (EBIT) totalled EUR 299.3m and were EUR 12.8m, or 4.5%, higher than the first three quarters of the previous year.

Financial results amounted to EUR -39.5m and were EUR 1.7m, or 4.2%, higher than the previous year. Group net result rose by EUR 11.7m, or 6.3% to EUR 198.8m.

Sound balance sheet structure; reduction of net debt
EVN's positive operating results create the foundation for a solid balance sheet structure. The equity ratio rose to 41.7% as of 30 June 2016 (30 September 2015: 39.8%). Net debt declined by EUR 132.1m, or 10.7%, below the level on 30 September 2015 to EUR 1,098.8m, and gearing fell to 40.2% (30 September 2015: 47.5%).

Developments in the energy and project business
Energy business
EVN recorded a substantial increase in electricity generation during the first three quarters of 2015/16. The generation from renewable sources declined year-on-year, despite the expansion of renewable electricity production capacity, due to lower wind and water flows. In contrast, there was a sizeable increase in the use of EVN's thermal power plants to supply balancing energy and manage shortages in Austria and Germany. The use of the company's thermal power plants to supply balancing energy and manage shortages played an important role in this process and, accordingly, helped to protect supply security and support the system transformation towards renewable energy. EVN also intends to make its thermal power plants available for these key duties in the future. For example: these thermal power plants will be used as required during the summer months in 2016 and 2017, in particular to stabilise the networks in Austria based on contractual agreements. The contract for the provision of reserve capacity for southern Germany also covers the next two winter half-years.

The capital expenditure programme announced by EVN in the 2013/14 financial year, which calls for investments of EUR 1bn in Lower Austria over a period of four years, entered its third year as planned during the first three quarters of 2015/16. Roughly 70% of the total programme will be directed to the expansion or new construction of the network infrastructure, in particular to transport the increased feed-in of windpower-generated electricity. Renewable electricity generation capacity was further expanded by the commissioning of the Paasdorf-Lanzendorf windpark, as planned, in July 2016. The six wind turbines with an installed capacity of 19 MW can supply nearly 13,500 households with electricity from renewable sources. This facility raises EVN's wind generation capacity to 269 MW, and moves the company significantly closer to its medium-term goal of over 300 MW.

EVN's distribution company is continuing to pass on purchasing advantages from price developments on the energy market to its household customers. After a 5% decrease in energy prices for both electricity and natural gas last October, EVN's distribution company reduced the natural gas working prices for households by a further 7% on average as of 1 May 2016 within the framework of EnergieAllianz Austria. An additional reduction of 5% on average in the electricity working prices for households will follow on 1 October 2016.

Environmental business
Investments in the environmental services business focused primarily on drinking water, in particular the further strengthening of supply security and an improvement in quality. Two strategically important projects related to drinking water supplies in Lower Austria were completed by EVN in the third quarter of 2015/16 and will further improve supply quality for EVN's customers. EVN's third natural filter plant in Lower Austria, which will reduce the hardness of the water by natural means, was commissioned in Zwentendorf an der Zaya. EVN also increased the performance capability of the pumping stations in the Waldviertel region by roughly 25% in order to supply sufficient drinking water during peak periods in the traditionally dry months.

EVN's international project business was awarded another contract in South Eastern Europe during the reporting period: After EVN was selected to plan and build three wastewater treatment plants in Macedonia - as reported at the half-year - EVN received a contract in June 2016 for the construction of a sewage treatment plant in Vodice, Croatia. EVN is serving as the general contractor on both projects, and financing for the projects with a contract value of approximately EUR 20.0m (Macedonia) and EUR 6.0m (Croatia) will be provided by the customers, both using EU subsidies.

Outlook
Under the assumption of average conditions in the energy environment, the Group net result for 2015/16 is expected to remain largely stable. The factors that could significantly influence this net result include the regulatory background, developments in the proceedings related to claims from the tariff decisions in Bulgaria and the Duisburg-Walsum power plant as well as the progress on activities in Moscow.