VERBUND Balance Sheet 2001

Best Group Result in the History of the Company

The sales revenues of the group increased by 30 % to 1,685 million EUR in the last business year and are for the first time clearly above the pre-liberalization sales level again. This positive development is mainly attributable to the successes in international business and higher wholesale prices.

At rising prices sales abroad increased by 57 %, in power trading by 169 %. The wholesale prices rose by more than 40 % compared to fiscal 2000. The development of business with domestic customers was also positive. For this major customer segment, which constitutes 70% of the domestic market, VERBUND is already the third largest supplier in Austria. Due to the market opening, which led to the legal termination of the coordination contracts, pressure was put on sales and contribution margins, however.

The persistent pressure on margins resulting from the liberalization was more than balanced by the sales records and the cost reduction programs. Thus the operating result went up by 5.2 % to 317 million €.

VERBUND is able to present for 2001 the best group result ever reached in its history: it rose by 38% to 115 million EUR (2000: 83 million EUR). This is also attributable to the extremely positive development of the financial result, the lower level of interest rates, and the decreased unrealized exchange effects from foreign currency liabilities.

With the group result, the earnings per share also climbed from 2.74 EUR to 3.74 EUR. At the shareholders’ annual meeting the Board of Management will therefore propose an 8% up dividend and further pursue the targeted reduction of indebtedness.

The liquidity situation has also shown a positive trend. The operating cash flow increased by 16% to 280 million EUR, the free cash flow went up by no less than 104 million € or 42%.

Another considerable increase was recorded in the company’s overall rate of return in the year under review. The return on capital employed (ROCE) rose to 9.5% and lies already far above the sector average in Europe. The productivity of the group in terms of the EBIT margin dropped to 18.8% but reached a level above sector average again.

Another highlight is the reduction of the indebtedness of the group, which has been pursued for years. After the net liabilities had been reduced considerably in 1999 (637 million EUR) and 2000 (270 million EUR), they were cut by another 397 million EUR in fiscal 2001.

Successful with a new strategy in the free European power market

In the liberalization year 2001, VERBUND established itself as low-cost and eco-friendly supplier of clean hydroelectric power in all customer segments. Approximately 90 percent of VERBUND power are produced in its own hydroelectric power stations.

2001 can be described as being the most successful year of VERBUND sales in the company’s history so far. It was characterized by successes in all customer segments. In the wholesale business, VERBUND is still the market leader. In the first year after the full market opening, VERBUND now also ranks third in the industrial customer segment. The move into the Austrian mass customer market has also been a success: With its joint venture distributors Raiffeisen Ware Wasserkraft (RWW) and MyElectric, VERBUND ranks at the top of the new suppliers in this segment, too.

The company’s strong orientation towards foreign markets remains another focus. In 2001, no less than 57% of VERBUND power were sold abroad. Following the foundation of subsidiaries in Germany and Italy, subsidiaries were founded in Slovenia and Poland in 2001. Thus VERBUND has taken a further step towards expansion into promising markets.

Key Statements for the Business Year 2001

VERBUND has mastered the challenges of the power market liberalization successfully and made a sustainable corporate turnaround

• The sales revenues increased by 30 % to 1,685 million € and are clearly above the pre-liberalization level again (1998: 1,494 million €).
• The operating result rose by 5.2 % to 317 million € and is approaching the pre-liberalization level.
• The group result is the best in the company’s history, showing an 38 % increase to 115 million €. Thus the earnings per share climbed from 2.74 € to 3.74 €. The stockholders enjoy an 8 % up dividend without jeopardizing the targeted reduction of indebtedness.
• The operating cash flow increased by 16 % to 279.8 million €, improving the company’s liquidity.
• At 9.5 %, the group’s return on capital employed (ROCE) is for the first time clearly higher than the sector average of European suppliers.
• Although at 18.8 % the productivity of the group, measured in terms of the EBIT margin, decreased, it is higher than the sector average again.
• The reduction of indebtedness of the group was spurred significantly. The net indebtedness was reduced by 637 million € in 1999, by 270 million € in 2000, and by another 397 million € in 2001.

Successful in the free European power market with a new strategy

• VERBUND has established itself successfully as eco-friendly, low-price service provider in Europe - producing approx. 90 % of its output from environmentally friendly hydropower.
• VERBUND has captured the domestic end user market. In addition to its market leader position in wholesaling, VERBUND already ranks third in the industrial customer market (70 % of the domestic end user market) in the first year of full liberalization.
• VERBUND has seized its opportunities in the foreign market and is already selling more than 50 % of its power abroad, primarily in Germany, Italy, Slovenia and Poland. With the joint-venture distributors Raiffeisen Ware Wasserkraft and Myelectric, VERBUND is one of the successful new suppliers in the small customer segment.