The business trend at VERBUND, Austria's leading electricity company, was once again extremely positive in Q1-2/2005 and this paved the way for the above-average development of the VERBUND share price. The results reported in the previous quarters were clearly exceeded and the market value of the group was increased significantly. The operating result improved by 30.0 % to € 248.6 million, profits after taxes were up 28.0 % at € 205.0 million and the group result rose by no less than 28.0 % to € 186.0 million. The international capital market also took a very positive view of this development. The VERBUND share once again performed excellently with a plus of 39.1 % since the beginning of the year.
The favourable earnings trend at VERBUND is driven on by the excellent position the group has established in the strategically important European electricity markets, above all in Germany, Italy, France and Slovenia. As a result, VERBUND was able to make full use of the significant price increases in the relevant wholesale market and also benefited fully from the positive price effects in market price indexed contracts.
In Europe, where electricity generation is largely dependent on thermal generation, the wholesale prices for electricity rose to an unexpectedly high level, particularly in Q2/2005. These increases resulted, not least, from the stable oil price but also from the sharp jump in the prices for CO2 certificates. The price of € 7 per ton, which was originally expected at the commencement of certificate trading, rose to € 28 per ton. The limited overcapacities in electricity generation throughout Europe also pushed up the wholesale prices. At the end of Q2/2005, the massive drought in Southern Europe and the related drop in electricity volumes generated contributed to the jump in short-term electricity prices.
The positive performance of the VERBUND share (+77.0 %) in the previous year was followed by a further improvement of 39.1 % in the first half of fiscal 2005. As a result, the share price overstepped the € 200 mark for the first time and finally recorded a new high of € 227.99 on 30 June 2005. Hence, the VERBUND share developed ahead of the ATX (+25.4 %) and the DJ STOXX Utilities (13.8 %), the benchmark index of the major European utility stocks. The market value of VERBUND has therefore almost trebled in the last two years and amounted to € 7.0 billion on 30 June 2005. We view this positive development as confirmation that the capital market takes an extremely positive view of our current positioning. Yesterday, 18 July 2005, the VERBUND share was quoted at € 236,90 on the Vienna Stock Exchange.
Within the framework of its strategy, VERBUND, Europe’s leading hydropower producer, engages in numerous new projects that will also secure profitable and sustainable growth in the future. The hydropower plant projects Gerlos II and Limberg II will increase the capacity of the existing storage power plants and therefore take account of the additional demand for peak-load electricity in the relevant market. In addition, the construction of an 800 MW gas power plant in the South of Austria to replace the thermal power plant Voitsberg which will be decommissioned in mid-2006 is also being planned.
Within the framework of the successful joint venture “Energia” in Italy, one of the most important energy markets in Europe from a strategic viewpoint, VERBUND is also working on the further expansion of its thermal power plant park. VERBUND currently holds a 38 % stake in Energia with strong minority rights. Based on the generation capacities, the joint venture Energia will be almost as a large as VERBUND by 2007 and it is also expected to make significant earnings contributions to VERBUND in the form of dividend flow backs.
A clear trend towards vertically integrated corporate structures has become noticeable in the European electricity industry. VERBUND now aims to further spread its sales portfolio more widely in the next five years. From 1 July onwards, VERBUND will also directly supply electricity to households, commercial businesses and SMEs. This diversification into a customer segment that displays less price elasticity should pave the way for a minimisation of risks.
VERBUND is confident that the positive development will continue throughout fiscal 2005. Given that most of VERBUND’s own production for 2005 has already been sold on the basis of the increased wholesale prices, the earnings forecast can now be raised. The operating result is expected to be up approx. 20 % on the value reported in the previous year. The group result is also expected to improve by approx. 25 %. Taking the current planning parameters as a basis, net gearing should be further improved to approx. 100 %. In addition, VERBUND is planning to increase the dividend once again and aims to hold the payout ratio at 40 %.