This adjustment of the earnings forecast can be attributed to the following reasons:
- Low water supply
The water supply of 93% was significantly below the long-term average in the first half of 2014, and as a result, the planning assumptions for an average water supply for the full year 2014 could not be maintained. The negative effect of the low water supply amounts to €29m in EBITDA and €16m in the Group result. An average water supply is assumed for the remainder of 2014.
- Difficult market environment
The persistently difficult market environment and continued pressure on the European wholesale prices are having a more negative impact on earnings than planned. Excess electricity volumes therefore have to be sold at lower spot market prices. In addition, preliminary project costs for a wind farm in Romania and part of the net investment in the Albanian company Energji Ashta were written off. These effects have an adverse effect of €45m on EBITDA and €41m on the Group result.
- Effects related to the resolutions for decommissioning of thermal power plants
On 14 May 2014, VERBUND resolved to temporarily decommission the Mellach, Pont-sur-Sambre and Toul combined cycle gas turbine power plants and to close the Dürnrohr hard coal power plant as well as the Neudorf/Werndorf II oil-fired district heating plant. There are expenses associated with the temporary or final closure of the power plants and the remeasurements of the temporarily decommissioned thermal power plants. In total, these effects have an adverse effect of €118m on EBITDA and €36m on the Group result.
- Reduction in expenses
Adjustments to the equity interest portfolio initiated by VERBUND along with additional ongoing measures to reduce expenses associated with the implementation of the cost-cutting programme and the continued focus on investments serve to improve the result.
The adjustment of the earnings forecast is the result of a non-functioning pan-European electricity market characterised by massive regulatory intervention. The heavy oversubsidisation of new renewable energy sources, a non-functioning CO2 market and massive excess capacities in electricity generation are exerting enormous pressure on the profitability of European utilities. VERBUND is counteracting this trend with the restructuring in the area of the thermal power plants, cost-cutting programmes and a focus on the investment programme. In addition the company expands its portfolio with energy related services and solutions.