VERBUND Result for First Quarter in 2014- Difficult Market Environment Burdens Results
VERBUND, Austria's leading electricity company and one of the largest hydropower producers in Europe presented results for the first quarter of 2014 which were lower than the currently expected energy economic general framework. The production co-efficient was 7.0% lower than the long-standing average, due to below average water flow in the rivers. The results were also 27 percentage points under the comparative value of the period of the previous year. The EBITDA fell by 33.9% to 207.1 million euros, the group earnings were 40.9 million euros, which is 46.8% under the comparative quarter of the previous year. Based on their average own production using hydropower, the outlook for the business year of 2014 is an EBITDA of around 850 million euros and group earnings of around 150 million euros.
The first quarter saw the difficult economic market environment continue to worsen for VERBUND. The level of electricity wholesale prices has further declined. Three factors are primarily responsible: excessive subsidisation of new renewable energies, excess capacities in the European electricity market, as well as the non-functioning CO2 market in Europe. Neither the stabilisation of emissions trading in the form of "backloading", as agreed by the EU, nor the planned reform of green energy subsidies in Germany are sufficient to improve the energy market environment.
Operating results
The operational business was characterised by a below-average water supply from rivers in quarter 1/2014. The production coefficient of 0.93 was 7.0 % below the long-term average and 27 percentage points below the comparable value of the previous year. Generation from hydropower therewith fell by 1,077 GWh. In total, VERBUND’s own generation of 6,544 GWh in quarter 1/2014 was 22.9 % lower than in the first quarter of the previous year.
The negative business environment is also reflected in falling average contract prices. The EBITDA thus fell significantly by 33.9 % to EUR 207.1 m and the Group result of EUR 40.9 m was 46.8% below the respective quarter of the previous year.
Gas portfolio optimisation
In the current environment, gas power plants are not economically viable in Europe. VERBUND continues to work on optimisation for the entire gas portfolio. For the gas combined-cycle power plant in Mellach an application has been lodged to redress infringements under competition law relating to long-term and oil price-based gas supply contracts with compulsory order quantities. All options are being reviewed for the entire Mellach/Werndorf site – taking into account the current district heating supply obligation for the town of Graz, which runs until 2020. The shares in Italy’s Sorgenia have been written down to zero. The two French gas-fired power plants of Toul and Pont-sur-Sambre are up for sale or prepared for decommissioning, as the case may be.
Successful market offensive
As the first electricity supplier in Austria, September 2013 saw VERBUND reducing the electricity price for household/agricultural and commercial customers by around 10 %. The electricity price reduction, as well as the rapid change of supplier, are advertised in the multimedia advertising campaign "Thanks, hydropower!", featuring the public’s favourites Stermann and Grissemann. In the first quarter of 2014, VERBUND was able to expand its customer base by around 17,000 new customers and reached 322,000 private customers by the end of March.
Outlook for 2014 confirmed
Based on an average own generation from hydropower, we expect EBITDA to be around EUR 850 m for the financial year 2014 and the Group result to be approx. EUR 150 m.
A payout ratio of around 50% of the Group result after adjustment for non-recurring effects is planned for 2014.
