The overall economic situation for the business year 2002 has not improved since the release of our good half-yearly results. All the relevant economic indicators fail to show any substantial recovery of the global economy for the immediate future. Slow economic growth, together with a stagnating growth in consumption in the electricity sector, has a dampening effect on the business development of VERBUND. But there are also other external factors, which come into play in the third quarter of 2002, that impede a further positive economic development of the group.
The "flood of the century”, in August this year, caused generation losses, especially at the run-of-river stations along the Danube, which have been countered only partially by optimizing the entire generation park. Moreover, various power plants suffered direct consequential damage, which requires additional repairs and investment over the following years. Overall, the flood caused direct damage in the amount of approx. EUR 20 million.
Domestic water supply, which is crucial to the development of the group result, is on the long-term average in this business year, but is still considerably lower than the excellent water levels of previous years. A decrease in water supply leads to fewer opportunities for generating revenue from marketed energy of the group. Over the short term, any energy shortfalls will have to be compensated with purchases on the international market at higher prices.
The continuing negative trends on the capital markets entailed, compulsory under IAS, the devaluation of the pension fund assets to the lower market value. This caused staff expenses to rise accordingly.
Despite the economic difficulties outlined above, the operating result for the quarter 1-3/2002 is on a level of 221.1 mio. € and only 3.0 mio. € or 1.4 % below the result for the quarter 1-3/2001. This is a clear follow-up on the excellent quarterly result of the previous year.
What was positive was that wholesale prices are still rising, compared to last year (even though this growth is more moderate than in previous years), as well as sales volumes in Germany (+ 36 %) and Italy, two foreign markets crucial to VERBUND. Furthermore, the business-customer segment, which accounts for more than 70% of the domestic electricity market, has seen a successful development. Compared to the same period of last year, we achieved in this market segment a considerable increase in sales (+ 50 %) with prices rising at the same time.
Sales to provincial companies have been stabilized at a high level and have now reached again the prederegulation level in terms of volume. Overall, we have widened our marketing mix in Austria, thus reducing significantly our marketing risk.
Also positive is the development of the group result, which could be improved due to a better financial result by EUR 25.6 million or 30.3 % up to EUR 110.2 million. This is the reason why the earnings per share year to date have reached a level of 3.58 € (+ 0.84 €) and are thus almost equivalent to the value achieved in the entire year 2001; according to current forecasts, earnings per share will significantly overshoot last year's level.
The project "Austrian Electricity Solution" has made headway: it comprises the major energy-utility companies of Austria, VERBUND and the EnergieAllianz partner companies EVN, Wienstrom, EnAG, Linz AG and BEWAG. The anti-trust decision is expected in the first quarter 2003. VERBUND reckons that the Austrian Electricity Solution will create sustainable synergies in the amount of EUR 39 million per year. By implementing the Austrian Electricity Solution (following the international trend towards vertical and horizontal integration), we would create a sustainable and competitive electricity-service provider that could hold its own against the major European electricity utilities.