VERBUND results for 2014: income trend impacted by non-recurring effects

The income trend of VERBUND, Austria’s leading utility, was affected by non-recurring effects in financial year 2014. Performance of the operating business was impacted by the further decline in electricity sales prices and a reduced water supply compared with the previous year. The hydropower Group has taken decisive steps to meet the challenges posed by today’s energy market. The thermal power portfolio is being restructured, investments streamlined and the programme to reduce costs and increase efficiency continued. For financial year 2014, VERBUND has announced EBITDA of €808.8m and a Group result of €126.1m. The Group result after adjustment for non-recurring effects amounted to €216.0m.

VERBUND was again faced with extremely challenging market and sector conditions in 2014. The market climate for electricity producers was shaped by the weak economic trend, mild weather conditions and declining prices for primary energy and wholesale electricity. Over-subsidisation of wind and solar power, a CO2 market that continued to be non-functional and a lack of profitability of gas power plants continued to prevail in the European electricity sector in 2014. These factors directly impacted the business performance of VERBUND.

Restructured thermal power, greater efficiency, lower costs
Numerous measures to counteract the above developments continued to be implemented in financial year 2014. An important step was the restructuring of electricity generated from fossil fuels. The Neudorf/Werndorf II oil-fired district heating plant was closed and decommissioning measures for the Dürnrohr hard coal power plant are currently underway. The Mellach hard coal power plant will be used to supply district heating for the city of Graz as contractually agreed until 2020. Due to a temporary injunction, the Mellach combined cycle gas turbine power plant must be kept available as an additional outage reserve. In October 2014, the agreements were signed on the sale of the French Pont-sur-Sambre and Toul CCGTs, and it was decided in July 2014 to dispose of the equity interest in Sorgenia in Italy. Those transactions will bring VERBUND closer to the goal of CO2-free electricity generation as well as reduce future cash outflows arising from unprofitable plants.
In addition, VERBUND’s investment plan has been streamlined and adapted to the changing conditions in the European electricity market. In the period between 2015 and 2017, a total of €870m will be invested in Austria and Germany, approx. half of it on maintenance, the other half on growth investments. The majority of growth investments will flow into expanding Austria’s regulated high-voltage grid. Investments will also be made in increasing the efficiency of existing plants and finalising ongoing hydropower and wind power plant projects. 
VERBUND’s internal programme to reduce costs and increase efficiency, which has been underway for two years, will save the Group a total of more than €165m by the end of 2015.

Income trend impacted by non-recurring effects
As in 2013 the income trend in financial year 2014 was massively impacted by non-recurring effects, which makes year-on-year comparison difficult. Earnings in 2013 had received a very significant boost from the sale of our Turkish activities and the concurrent purchase of hydropower plants in Germany. In financial year 2014, the changed energy market parameters and an adjustment of the WACC to the lower interest rate levels led to impairment losses and reversals of impairment losses. Additional non-recurring effects resulted from the sale of the French Pont-sur-Sambre and Toul CCGTs and from the restructuring in the thermal area. The operating business was particularly impacted in 2014 by the further decline in electricity sales prices and a lower water supply compared with the previous year. EBITDA therefore decreased by a total of €492.6m to €808.8m, and the Group result declined by €453.5m to €126.1m. EBITDA after adjustment for non-recurring effects decreased by €270.0m to €889.6m, and the adjusted Group result fell by €168.2 to €216.0m.

Focus on customers and energy-related services
VERBUND is continually expanding its portfolio of affordable, innovative energy-solutions. Private customers can take advantage of the combinable VERBUND Eco packages to generate, store and use their own electricity. Since November 2014, VERBUND has been offering its new plusGas product range to provide climate-neutral gas. In October, VERBUND GETEC Energiecontracting GmbH began offering customised energy supply concepts for the industrial and manufacturing sectors. In Austria, VERBUND has a market share of 7% in the small customer segment for electricity and a share of around 20% in the large customer segment. In Germany, VERBUND is the leading provider of green electricity to resellers and wholesale customers.

Dividend for 2014
A dividend of €0.29 per share for financial year 2014 will be proposed to the Annual General Meeting on 22 April 2015. 

Outlook for 2015
Based on the average own generation from hydropower, EBITDA is expected to amount to approximately €770m and the Group result to approximately €180m in financial year 2015. VERBUND is planning a payout ratio of approximately 50% for 2015 on the basis of the Group result after adjustment for non-recurring effects.
Key figures Unit 2013 2014 Change in %
Revenue €m 3,266.5 2,834.8 -13.2
EBITDA €m 1,301.4 808.8 -37.9
Operating result €m 148.3 384.4 159.3
Group result €m 579.6 126.1 -78.2
Earnings per share 1.67 0.36 -78.2
EBIT margin % 4.5 13.6
EBITDA margin % 39.8 28.5
Cash flow from operating activities €m 841.4 717.6 -14.7
Free cash flow after dividend €m 546.7 -133.6
Net debt/EBITDA X 2.8 5.0
(Proposed) dividend per share 1.00 0.29 -71.0
- thereof special dividend 0.45
The profit/loss after tax from discontinued operations was included in the calculation of the key figures. The comparative figures have been adjusted retrospectively due to the initial application of IFRS 11.
Further information and the 2014 Annual Report can be found at > Investor Relations > Latest financial results.

Ingun Metelko Ingun Metelko

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