Due to the group’s hedging strategy, the positive earnings trend was not adversely influenced by the negative effects of the drop in wholesale prices for electricity.
At the beginning of quarter 2/2006, the long-term wholesale prices fell significantly after a period of steady - and, in part, quite substantial - growth in the previous quarters. Thanks to VERBUND’s hedging strategy - 60 % of the total volume of electricity produced was already sold in 2005 on a year-ahead basis for 2006 -, the prices decreases did not have a negative impact on the group result. The average sales prices increased in spite of the price correction.
The spot market prices also declined in quarter 2/2006. This decline, however, was more than compensated by the strong increase in electricity generated from hydropower. The late onset of the thaw and heavy precipitation in quarter 2/2006 resulted in an above-average water supply from the Austrian rivers and streams.
The controlling group ratios also displayed a significant improvement. The EBIT margin rose from 21.4 % to 25.6 %, net gearing fell from 115.0 % to 80.3 % and the operating cash flow improved by 39.8 % to € 462.3 million.
VERBUND strengthened its international wholesale activities through the founding of three new subsidiaries in Europe. The company will use APT Czech Republic and APT Slovakia to further strengthen its position as a successful European electricity trader. The founding of APT Hellas will allow the group to further develop its successful electricity wholesale business in Greece.
In quarters 1-2/2006, VERBUND continued with the expansion of Austrian hydropower. A new pumped storage power plant, which will be constructed in Kaprun, will more than double the output capacity of the Kaprun power plant group. In addition, the preliminary work for the construction of the run-of-river plant Werfen/ Pfarrwerfen has already commenced. This project will have an investment volume of € 420 million.
In France, the first gas power plant will be realized within the framework of a joint venture with Poweo. In Italy, the 800 MW gas power plant Termoli, which is located to the south of Pescara, is already in the final commissioning phase. The official go-ahead has already been received for a second power plant of the same size in Modugno near Bari.
The share price of VERBUNDgesellschaft developed well ahead of the Austrian Traded Index (ATX) and the relevant benchmark index Dow Jones Stoxx Utili¬ties: since the beginning of the year, the ATX increased by 2.1 % and the Dow Jones Stoxx Utilities by 9.4 %. The VERBUND share, however, improved by a further 24.8 %.
The outlook for fiscal 2006 is very positive. VERBUND anticipates that the operating result for the full year 2006 will be up approx. 40 % on the value reported in the previous year. The group result is expected to improve by 30 % and net gearing should, on the basis of the current planning parameters, be reduced to below 70 %. In addition, the group is planning a further increase in the dividend for fiscal 2006.
Detailed information on the results for quarter 2/2006 can be found under www.VERBUND.at/. Here, you can either download the Interim Report or view the user-friendly online version.