VERBUND results for quarters 1–2/2021
Positive income trend due to higher sales prices and first-time consolidation of Gas Connect Austria GmbH
The Group turned in a very satisfactory business performance in quarters 1–2/2021. The energy market environment continued to improve apace, and particularly prices for European CO2 emission rights, which are crucial for the switch from carbon-intensive coal-fired power generation to lower-carbon gas-fired power generation, and the prices for primary energy sources, which determine the wholesale price of electricity in Europe, increased significantly in the reporting period. The Group’s long-term positioning across all segments fits seamlessly with the energy sector’s increasingly ambitious decarbonisation goals within the EU and in Austria.
These positive developments in the energy market environment will greatly benefit VERBUND’s business model. VERBUND is ideally positioned in this environment as a hydropower producer with an increasing share of new renewables. The VERBUND-strategy envisages that, in addition to hydropower, by 2030 a total of 20–25% of the electricity VERBUND generates will come from new renewable sources of energy in Europe. The Renewable Energy Development Act (Erneuerbaren-Ausbau-Gesetz, EAG), passed by the Austrian parliament in early July 2021, provides for extensive decarbonisation and climate neutrality by 2040 and thus creates the framework for achieving this ambitious goal. In addition to its activities relating to electricity and gas grids, which also need to be expanded on a large scale to achieve the ambitious climate targets, as well as in electricity trading and sales, VERBUND will move into new fields of application that will play an important role in the successful implementation of the energy transition over the coming years. Examples are the development of a green hydrogen system, the advancement of electromobility and the development of storage systems. VERBUND is thus making a vital contribution to the implementation of Austria’s climate strategy.
Renewable expansionVERBUND is investing more than half a billion euros in the expansion of existing pumped storage power plants in Salzburg and Carinthia: In mid-June 2021, construction started on the Reißeck lake plateau in Carinthia for the Reißeck II plus pumped storage power plant. VERBUND is currently investing a total of € 160 million in the modernization and expansion of the Malta-Reißeck power plant group in Carinthia in order to be able to temporarily store the increased electricity production from renewable energies in line with future demand.
The second major expansion project in the Kaprun power plant group is scheduled to start in September 2021: Limberg III, with a capacity of 480 MW, will also be built as a cavern power plant completely underground between the two existing storage lakes Mooserboden and Wasserfallboden. By 2025, a total of around 480 million euros will have been invested in future-oriented power generation and storage, including high regional value creation.
InfrastructureAt the end of May 2021, the closing of the acquisition of 51 % of the shares in Gas Connect Austria GmbH took place - an important strategic milestone for VERBUND. The agreed purchase price for the
51% share of OMV in Gas Connect Austria GmbH amounts to € 238.7 million less the dividend distributed for the 2020 financial year. In addition, VERBUND will assume the outstanding liabilities of the Gas Connect Austria Group to OMV. As an owner and operator of critical infrastructure, the acquisition of the shares in Gas Connect Austria GmbH represents for VERBUND, in addition to an improvement of the business profile through the increased share of stable and regulated earnings as well as a positive development of key figures, above all an optimal positioning with regard to sector coupling and the development of a green hydrogen system.
Results Q1-2 2021
The results posted by VERBUND for quarters 1–2/2021 were very gratifying. EBITDA increased by 2.5% to €654.9m, and the Group result rose by 4.5% to €324.5m. The adjusted Group result increased by 4.7% to €315.2m. At 0.96, the hydro coefficient for the run-of-river power plants was 4 percentage points below the long-term average and 1 percentage point above the comparative prior-year figure. Generation from annual storage power plants fell by as much as 16.0% in quarters 1–2/2021 due to lower natural water inflows and reduced turbining. Generation from hydropower thus decreased by 430 GWh compared with the prior-year reporting period. However, the marked increase in wholesale electricity prices on the spot markets gave a boost to earnings – unlike futures market prices, which declined in the period under review. The average sales price obtained for our own generation from hydropower thus rose by €2.2/MWh to €46.6/MWh. The first-time consolidation of Gas Connect Austria GmbH also resulted in a positive contribution to earnings.
VERBUND’s share price stood at €77.7 as at 30 June 2021, an increase of 11.2%. The value of VERBUND based on market capitalisation was therefore €27.0bn at the end of quarter 2/2021. This positions the Group at the pinnacle of the ATX by a large margin and makes it one of the largest utilities in Europe – a clear signal that the capital market takes a positive view of the Group’s strategy and positioning.
Outlook for 2021 adjusted
Based on expectations of average own generation from hydropower and wind power in quarters 3–4/2021 and the opportunities and risks identified, VERBUND currently expects EBITDA of between around €1,310m and €1,410m and a Group result of between around €590m and €660m in financial year 2021. The planned payout ratio for 2021 is between 45% and 55% of the Group result of between around €580m and €650m, after adjustment for non-recurring effects.