VERBUND Makes an Important Step Towards Restructuring in France

12/22/2010Paris/Vienna

Company takes full control of the POWEO production subsidiary POWEO Production S.A.S.

VERBUND, Austria’s leading electricity company, makes an important step towards the restructuring of POWEO and reaches an agreement with the shareholders of POWEO S.A. for full control of the production subsidiary POWEO Production S.A.S. Through the purchase of the remaining 60 % hitherto held by the parent company, POWEO S.A., VERBUND is also concentrating on its core business of production and wholesale. POWEO recently came under enormous pressure due to the delayed market deregulation in France.

Background
Since 2006, VERBUND has been active on the French market, the second largest in Europe, via its shareholdings of 46 % in POWEO S.A. and 40 % in the production subsidiary POWEO Production S.A.S. The POWEO strategy envisaged development of thermal and renewable production capacities, as well as a strong end-customer portfolio. While the production segment is running satisfactorily for VERBUND, the end-customer business environment is difficult since the market deregulation is not yet as advanced as that of other European countries.

Given the current situation, it is impossible to achieve positive margins in this market as an alternative supplier. This doesn’t just apply to POWEO, but to all alternative suppliers. Under the “Loi NOME”, it is intended that the French energy market be restructured and sustainable competition made possible. Although the law was sanctioned by parliament in a second hearing on 17 November 2010, a decree is required for its concrete implementation. However, this decree is not expected to take effect before the second quarter of 2011.

In order to permit POWEO S.A. a long-term, positive business model, the French energy market must provide fair competitive conditions that enable a sustainably profitable end-customer business. First and foremost, these must be processed by the French government into a law reform (Loi NOME) by means of rapid implementation of the decree.

By taking full control of the production capacities, VERBUND is underlining its strategy in France as an asset-based wholesaler and simultaneously supplying POWEO S.A. with assets. This solution enables the company to continue with its business activities in the medium term.

Priority Given to Investments in the Domestic Market
VERBUND’s investments in the domestic market of Austria will continue unchanged, especially in the more future-proof, sustainably profitable hydropower. Priority is being given to those power plants currently undergoing construction as planned, namely Limberg II, Reisseck II and Mellach, as well as the completion of Austria’s 380 kV ring.