EVN AG

Highlights

- Decline in Group net result in line with expectations; outlook confirmed for the upper end of the assumed range of EUR 160m to EUR 180m

- Higher wholesale prices lead to a decline in results from sales activities; year-on-year comparison influenced by non-recurring positive valuation effect in the third quarter of 2017/18

- Solid earnings contributions from wind power due to good wind conditions and the expansion of wind power generation capacity; interim expansion target of roughly 370 MW met more than one year earlier than planned

- EVN terminates coal-fired electricity generation at the Dürnrohr plant in August 2019

- Focus of investments on drinking water - new transport pipelines for the Vienna region

- Orders received for five new wastewater treatment plant projects in the international project business

Key results

- Revenue: +3.5% to EUR 1,712.6m

- EBITDA: -25.5% to EUR 435.7m

- EBIT: -39.0% to EUR 236.4m

- Group net result: -38.4% to EUR 168.2m

- Net debt: EUR 1,000.4m (30 September 2018: EUR 963.7m)

Energy sector environment
The temperature-related energy demand in Austria nearly reached the long-term average due to the cooler temperatures in May 2019 which followed the mild winter half-year. In Bulgaria and Macedonia, the heating degree total improved slightly year-on-year but remained below the long-term average. The reporting period brought a significant rise in the market prices for electricity and CO₂ emission certificates as well as a decline in the prices for natural gas and especially for coal.

EBITDA, EBIT and Group net result below previous year
Revenue recorded by the EVN Group rose by 3.5% year-on-year to EUR 1,712.6m in the first three quarters of 2018/19. This growth was supported, for example, by a substantial increase in renewable generation and positive impulses from the heat supply business. These factors were contrasted by declines in thermal electricity generation and in the Networks Segment as well as a change in the calculation method for the so-called "green electricity mark-up" in Bulgaria which, however, had no effect on profit or loss.

The cost of electricity purchases from third parties and primary energy expenses were also influenced by contrary effects. Upstream network costs were responsible for an increase, while the above-mentioned change in the calculation method for the green electricity mark-up in Bulgaria led to a reduction. The cost of materials and services was nearly stable, in total, at EUR 194.2m.

The share of results from equity accounted investees with operational nature fell to EUR 17.3m in the first nine months of 2018/19 (previous year: EUR 160.7m). This decline reflected the development of business in EVN KG during the reporting period, which was influenced by higher procurement costs and negative effects from the valuation of hedges as of 30 June 2019, in combination with a lower earnings contribution from RAG. EBITDA recorded by the EVN Group fell by 25.5% to EUR 435.7m in the first nine months of 2018/19.

Scheduled depreciation and amortisation, including the effects of impairment tests, increased slightly as the result of investments. EVN generated EBIT of EUR 236.4m in the first three quarters of 2018/19 (previous year: EUR 387.2m).

Financial results remained nearly stable at EUR -14.4m for the reporting period. Group net result amounted to EUR 168.2m in the first three quarters of 2018/19 and was 38.4% lower than the previous year.

Solid balance sheet structure
EVN has a solid and stable capital structure which will support the implementation of its planned investments in Lower Austria over the coming years. Net debt has been reduced continuously in recent years and - subject to fluctuations as of the individual balance sheet dates - now stands at a level of approximately EUR 1bn.

Developments in the energy and environmental services business

Energy business

EVN's electricity generation from renewable energy rose by 6.0% to 1,860 GWh in the first three quarters of 2018/19. This development was supported by substantially better wind conditions compared with the previous year and by the expansion of EVN's wind power capacity. Following the commissioning of two new wind parks - Gänserndorf West (6 MW, repowering, December 2018) and Au am Leithaberge (18 MW, December 2018) - plans for the current financial year call for the completion of three further large wind power projects with a combined capacity of 31 MW. EVN's wind power generation capacity will then equal 367 MW at the end of 2018/19 (30 September 2018: 318 MW), which means the interim goal for expansion towards the targeted 500 MW will be met ahead of schedule. Water flows again exceeded the long-term average during the reporting period, but were unable to match the very good prior year level.

Electricity generation from the thermal power plants declined by 1.2% to 2,507 GWh, primarily due to a reduction in the reserve capacity under contract to prevent shortages. Since 1 October 2018, 430 MW from the natural gas plant in Theiss have served as reserve capacity for the Austrian transmission network (previous year: 1,090 MW of capacity reserved for southern Germany). The underlying contract covers three years. The thermal capacities of the Theiss and Korneuburg power plants, which are currently not under contract to prevent shortages, are inactive and have been conserved due to the present market environment. In view of the threefold increase in the prices for CO₂ emission certificates within the past one and a half years, EVN terminated electricity production at the coal-fired Dürnrohr power plant earlier than planned during August 2019. Dürnrohr will, however, be expanded as an energy location due to its importance. EVN is currently installing an additional gas-fired boiler to generate steam for industrial customers, and a sewage sludge incineration plant and a large-scale photovoltaic plant are currently in the planning stage. EVN's electricity generation was 1.7% lower at 4,367 GWh in the first three quarters of 2018/19.

In line with EVN's corporate strategy, investments in the network infrastructure in Lower Austria represent a key focal point and thereby make an important contribution to reliable supply security and quality. The projects realised during the reporting period were directed to the expansion and strengthening of power lines and to the construction of new transformer plants and stations.

Environmental and water business

The new natural filter plant on the Wienerherberg well field advanced from test to full operations at the end of May 2019 and now supplies 18 communities south of Vienna with high quality drinking water. The expansion and new construction of cross-regional pipeline networks represents a focal point of investments in the area of drinking water supplies. Projects like the 20 km connecting pipeline from Wienerherberg to the Mödling region, which is scheduled for completion in the near term, will strengthen supply security, especially in a region that is characterised by strong population growth and a related increase in water consumption. These developments are reflected in EVN's plans to invest approximately EUR 165m in drinking water supplies in Lower Austria by 2030.

WTE Wassertechnik, the subsidiary responsible for the international project business, was awarded contracts for five new general constructor assignments during this financial year. EVN is currently working on seven such assignments (as of July 2019). The wastewater treatment plant project in Kočani was transferred to the customers in the third quarter of 2018/19 and represents the fourth plant of this type built by WTE Wassertechnik in North Macedonia.

Confirmation of outlook
Group net result for 2018/19 is expected to reflect the upper end of the assumed range of EUR 160m to EUR 180m.

The complete Letter to Shareholders for the first three quarters of the 2018/19 is available under www.investor.evn.at.