VERBUND and E.ON form European Hydro Power Corporation

7/9/2001Wien

Largest hydropower producers of Austria and Germany form hydropower group with European dimension – „European Hydro Power“ produces 35,000 GWh of clean electricity from renewable hydropower – Shares: 60% VERBUND, 40 % E.ON-Energie – VERBUND takes over economic management, company site is located in Austria) – Many strategic advantages to reinforce competitive position in Europe – E.ON and VERBUND plan further cooperation.

The managing boards of VERBUND and E.ON-Energie, largest producers of electricity from hydropower in Austria and Germany have agreed to form a joint hydropower corporation with European dimensions. This step involving two electricity companies who look already back on a long-standing cooperation leads to the creation of Europe’s largest company that produces electricity exclusively from environmentally friendly, renewable hydropower.

The new company will carry on business under the firm of „European Hydro Power GmbH (EHP)” and owns more than 200 hydroelectric power plants with a capacity of approx. 9,600 MW as well as an operational capacity of 35,000 GWh and will employ approx. 2,500 people from Austria and Germany.

E.ON-Energie as well as VERBUND will bring into the new company their hydropower activities, which are concentrated in the E.ON Wasserkraft GmbH respectively the VERBUND-Austrian Hydro Power AG. According to a provisional evaluation the VERBUND will hold approx. 60% and E.ON-Energy will hold approx. 40% of European Hydro Power.

The company site of the new hydropower giant will be in Austria, the management will be due to the distribution of shares in the hands of the VERBUND who is thus able to provide cross-frontier its excellent know-how in the area of hydro power. The legal set-up allows the investment property to remain with, on the one hand, the Austrian Hydro Power AG in Austria and, on the other hand, the E.ON Wasserkraft GmbH in Germany.

The total amount raised for the hydropower company is proportionally at the disposal of the VERBUND respectively E.ON-Energie and is optimized by EHP and used as a total. VERBUND and E.ON agree to purchase the total production of EHP as a whole at the extent of their ownership at market prices, which are derived from the wholesale prices.

The concentration of the hydropower capacities of both partners creates a series of important strategic advantages regarding the competition on the European electricity market, which is constantly increasing in speed and fierceness.

These are in particular:

• Optimization of using environmentally friendly hydropower for the production of electricity

• Maintaining high availability

• The role of a low cost producer in Europe

• Optimal increase of synergies due to regional proximity

• Increase of business values and

• Strengthening the competitive position on the liberalized market.

Beyond the production sector, the VERBUND and E.ON-Enetrgie strive for a longer-term cooperation in trade and distribution. As a first step they envisage to invest jointly in a European trading house in Berlin.