VERBUND reports lower results for Q1/2010

4/27/2010Vienna

VERBUND reports lower results for Q1/2010: Compared to the previous year’s first quarter, sales, operating result and group result fell, in some areas, sharply.

Due to the continued difficult economic situation, VERBUND is also expecting a noticeable decline in its business results for the entire fiscal year 2010. 

Europe’s energy industry is still marked by the effects of the global economic crisis and the hesitant recovery of Europe’s economy. VERBUND, too, is affected by the persistently low wholesale prices for electricity and a weak industrial consumption of electricity; apart from that, so far this year water supply for own electricity generation is heavily reduced.

VERBUND’s business figures showed the following trend in Q1/2010: Sales dropped by 8.5 % to € 806.4 million, the operating result sank by 24.1 % to € 194.3 million, and the group result fell by 39.4 % to € 119.8 million. 

The European wholesale prices for electricity are still listed at a relatively low level. The reasons for this are the weakened prices for primary energy sources, the decreased demand for electricity and the low level of CO2 spot market prices. In the context of its hedging strategy, VERBUND trades approx. 60 % of its own annual generation one year in advance, while the remaining 40 % are marketed based on spot market prices as well as quarterly and monthly forwards.

Electricity forward contracts traded in the year 2009 – year base 2010 – had an average price of 49.2 €/MWh, which is 30.0 % below the previous year’s level. Q1/2010 also saw a decline in electricity spot market price levels with prices falling to € 41.0/MWh, which means a reduction of 13.5 % compared to Q1/2009. The quarterly and monthly forwards relevant for the current interim results were listed clearly below the previous year’s level.

In addition to the weak wholesale electricity prices, the below-average water supply from the rivers that had a negative impact on this quarter’s results. The hydro coefficient in Q1/2010 was at 0.92, which is 8 % below the long-term average and 5 % below the figure recorded in the previous year.

Despite the poor water supply, VERBUND´s hydropower generation rose by 4.5% to 5,257 GWh. This is attributed to the purchase of Bavarian Inn power plants in August of the previous year as well as to increased generation by annual storage power plants. Compared to the previous year, thermal production showed a rise by 30.1 % to 1,317 GWh. This increase is entirely due to the VERBUND quantities from the POWEO power plant Pont-sur-Sambre, which was commissioned in late September 2009. 

Chairman of VERBUND, Wolfgang Anzengruber: “As no lasting European economic recovery is yet in sight, VERBUND will be placing concentration, frugality and increased efficiency right at the top of this year’s agenda. For VERBUND, the current year 2010 will be entirely characterized by focusing and consolidation.” Absolute priority will be given to the power plants Limberg II and Mellach that are currently under construction as scheduled and the completion of the 380-kV Austria ring. Abroad, the company’s focus will remain on its investments in Turkey, Italy and France.

Apart from that, further measures are being planned to optimize the capital structure and to improve the result. Initial results are the signing of the syndicate agreement on 21 April between EVN and VERBUND for the Albanian hydropower plant Ashta. This will give the two companies a 50% share in the River Drin power plant. Additionally, negotiations continue with added pressure over the participation of Bavarian countries, communities and public services in the Inn power stations acquired in August the previous year. The sale of an initial tranche of holdings is close to being finalised. 

Due to the persistently tough economic conditions and still very low wholesale prices for electricity, VERBUND expects a decline in the operating result and the group result of approx. 25 % for the entire financial year 2010 compared to the previous year. The dividend will be based on a payout ratio of 45 to 50 %.