In the first two quarters of the current year, the business figures of VERBUNDdisplayed the following development: Sales revenue fell by 5.1 % % to € 1,582.0 million, the operating result sank by 28.4 % to € 382.3 million and the group result was down 41.6 % at € 210.3 million.
Economic recovery delayed
It is true that the European economy is slowly beginning to recover; there are also many positive signs in the energy sector: Industrial energy consumption is rising and the European wholesale prices for electrical energy are increasing slightly. Clear positive effects on the Verbund result can, however, only be expected with a time lag. This is largely due to the hedging strategy, whereby the largest share of the electricity is sold one year in advance. Therefore economic crisis has delayed effects on VERBUND results.
Despite the fact that economic conditions remain tough, VERBUND AG took key steps in quarter 2/2010 to enhance its capital structure and improve its results. Worthy of special mention in this regard is the planned capital increase of approximately € 1 billion.
Own generation from hydropower sank by 7.6 %
The water supply from Austrian rivers, which was well below average was of particular detriment to the half-year results of the hydropower company. The hydro coefficient lay at 0.92 in the first half of 2010 and was therefore 8 % below the long term average and 15 % below the value recorded in the previous year. Thanks to the acquisition of the Bavarian power plants on the Inn, the reduction in VERBUND hydropower generation was limited to 7.6 %.
Apart from a poor water supply, European wholesale prices for electricity remained relatively low thus also negatively impacting the results. While these are now rising slightly, they are still at a comparatively low level. Due to the hedging strategy, positive effects of a long-term price increase are expected to be felt in subsequent quarters.
Optimisation of capital structure
Because economic conditions remain difficult, VERBUND continues to put a great deal of stock in concentration, savings and efficiency enhancing measures. Every effort is being made toward further steps to streamline the capital structure and to improve the results. One of the first results is – as announced in the quarter 1/2010 – that EVN AG acquired a 50 % stake in the Albanian hydropower plant, Ashta.
Additionally, in June 2010, an initial tranche of holdings in the power plants on Bavaria's River Inn, which was purchased in August 2009, was sold: Verbund had already in 2009 offered to give a stake of up to 30 % to Bavarian partners in order to enhance regional cooperation. After a great deal of preparation and negotiations, Innkraft Bayern GmbH & Co. KG’s 17 partners purchased a 3.4 % stake. Negotiations are ongoing for the sale of additional tranches of holdings.
Capital increase planned
After approval of this measure by the Extraordinary General Meeting planned for September, Verbund would have the option of a capital increase that would give it additional flexibility in implementing its long-term investment plan while securing a solid capital structure and stable rating. The representatives of the majority shareholder, the Republic of Austria, are responding positively to the capital increase and would make a contribution of € 500 million. Verbund plans to enact the capital increase within this year. The exact date will depend largely on the market environment.
Investment in domestic market prioritised
Verbund will continue to invest in the Austrian market with a particular focus on hydropower with long-term profitability and the security of Austria’s electricity supply. Priority will be given to the Limberg II and Mellach power plants, which are under construction according to plan, and the completion of the 380 kV Austrian high voltage-ring. Investment decision regarding the construction of the pumped storage power plant Reißeck II was taken in quarter 2/2010.
For 2010 as a whole – assuming an average water volume in the second half of 2010 and a further stabilisation of wholesale prices – Verbund expects an approximately 25 % decline in the operating result and group result compared to the previous year. Dividends will approach a payout ratio of 45 to 50 %.