VERBUND results for quarters 1-3/2016: Sound earnings performance and raised earnings outlook for 2016

VERBUND reports positive earnings trend for quarters 1-3/2016: Both EBITDA and the Group's result increased significantly, both adjusted and unadjusted. The improvement in earnings was due to the better water supply compared with the previous year, the resolution of outstanding issues between VERBUND and EconGas, the implementation of the measures under the cost-cutting and efficiency-enhancing programme, and higher (adjusted) contributions from the regulated grid area.

Wholesale electricity prices in European energy markets have recovered from the lows seen at the beginning of 2016, due primarily to higher prices for primary energy sources. However, conditions in the energy industry remain challenging.

The programme approved by VERBUND's Executive Board to further reduce debt has been systematically implemented. The measures announced as part of the cost-cutting and efficiency-enhancing programme – a significant reduction in capital expenditure, freezing of the cost level for 2015–2019 and a reduction in the dividend payout ratio for 2016 to around 30% – have already had a positive impact on VERBUND's credit rating. Although Moody's and Standard & Poor's left their ratings unchanged at Baa2 and BBB, they raised the outlook from ‘negative’ to ‘stable’.

Earnings for quarters 1–3/2016 were up year on year: both EBITDA and the Group's result increased significantly on both an adjusted and unadjusted basis. The year-on-year improvement in water supply had a positive impact on earnings. At a hydroelectric coefficient of 1.01, it was 7 percentage points above the level of quarters 1–3/2015 and one per cent above the long-term average. In addition, the resolution of outstanding issues between VERBUND and EconGas relating to gas deliveries for the Mellach combined cycle gas turbine power plant, the implementation of measures under the cost-cutting and efficiency-enhancing programme and higher (adjusted) contributions from the regulated network area had a positive impact on earnings. By contrast, the continued decline in average sales prices for electricity had a negative effect on earnings. These fell from €35.0/MWh at year-end to €30.6/MWh.

EBITDA rose by 11.5% overall to €809.7m. At €339.9m, the group result was up 48.7% on the same quarters of the previous year. However, the results for quarters 1–3/2016 were characterised overall by positive non-recurring items. Adjusted for these non-recurring items, the Group's result increased by 12.7% to €276.4m, while adjusted EBITDA rose by 2.8% to €698.4m.

​Pioneering partnerships

In Q3 2016, VERBUND announced two forward-looking partnerships with leading Austrian companies voestalpine and OMV. The partnership with voestalpine includes newly designed, longer-term VERBUND electricity supply contracts for individual voestalpine sites as well as flexibility concepts in the areas of electricity generation and demand, the review of potential photovoltaic projects at voestalpine sites in Austria and a research partnership in the future-oriented area of hydrogen. OMV and VERBUND are also looking into long-term cooperation at the operational level for the energy future.

Earnings outlook for 2016 raised

Due to the positive earnings development in quarters 1-3/2016, the earnings forecast for the year as a whole has been raised. Based on average water supply and wind conditions in the fourth quarter of 2016, we expect to achieve EBITDA of around €980m and a net profit of around €385m for the 2016 fiscal year. The planned payout ratio for 2016 is around 30% of net income, adjusted for one-off effects, of around €315 million.