Corporate news: VERBUND 2021 annual results
17.03.2022Vienna
VERBUND posts very encouraging business and share price performance in 2021
The
VERBUND Group delivered a very strong performance in 2021. The financial year
was marked by a huge rise in wholesale electricity prices in Europe, which are
a key value driver for VERBUND’s performance. This trend can be attributed to
two main factors. First, the strong commitment of the
EU member states to achieving comprehensive decarbonisation of the energy system caused prices for European emission allowances to soar. This prompted the European Commission to take further clear decisions as part of its Fit for 55 package targeting a 55% reduction in all of the EU’s greenhouse gas emissions by 2030 compared with 1990 levels. Second, prices for primary energy sources such as natural gas and coal – key elements in the formation of wholesale electricity prices in Europe – rose sharply in 2021. Reasons for these price increases were the worldwide hunger for energy, especially in Asian countries (above all in China), below-average gas storage inventories in Europe, unfavourable weather conditions and the delay in putting the Nord Stream 2 gas pipeline into operation.
VERBUND benefited considerably from these trends and from the strong demand for companies with a clearly sustainable positioning. The income trend in 2021 was therefore very positive, and the performance of VERBUND shares with gains of 41.6% underpinned the Group’s attractiveness in an environment that prioritises climate change mitigation and sustainability. VERBUND shares thus outperformed against the ATX (+38.9%) and the STOXX Europe 600 Utilities (+5.4%). Moreover, with a market capitalisation of €34.4bn VERBUND was once again Austria’s largest listed company at the end of 2021 by a large margin.
At 0.95, the hydro coefficient for the run-of-river power plants was 6 percentage points below the prior-year figure and 5 percentage points below the long-term average. Generation from VERBUND’s annual storage power plants fell by 6.9% in quarters 1–4/2021 versus 2020.
Cash flow from operating activities was down substantially on the prior-year figure, however. This decrease is largely due to considerably higher margining payments for hedging transactions in electricity trading provided as security for open positions held with exchange clearing houses (note: the security deposits shall be returned upon fulfilment of the supply agreements). Free cash flow after dividends also trended downwards. In addition to a lower operating cash flow, this decline is attributable to increased capital expenditure on property, plant and equipment and consolidated subsidiaries, and to higher dividend payments compared with 2020.
EU member states to achieving comprehensive decarbonisation of the energy system caused prices for European emission allowances to soar. This prompted the European Commission to take further clear decisions as part of its Fit for 55 package targeting a 55% reduction in all of the EU’s greenhouse gas emissions by 2030 compared with 1990 levels. Second, prices for primary energy sources such as natural gas and coal – key elements in the formation of wholesale electricity prices in Europe – rose sharply in 2021. Reasons for these price increases were the worldwide hunger for energy, especially in Asian countries (above all in China), below-average gas storage inventories in Europe, unfavourable weather conditions and the delay in putting the Nord Stream 2 gas pipeline into operation.
VERBUND benefited considerably from these trends and from the strong demand for companies with a clearly sustainable positioning. The income trend in 2021 was therefore very positive, and the performance of VERBUND shares with gains of 41.6% underpinned the Group’s attractiveness in an environment that prioritises climate change mitigation and sustainability. VERBUND shares thus outperformed against the ATX (+38.9%) and the STOXX Europe 600 Utilities (+5.4%). Moreover, with a market capitalisation of €34.4bn VERBUND was once again Austria’s largest listed company at the end of 2021 by a large margin.
Significant improvement in VERBUND’s results for financial year 2021
EBITDA was up 22.1% to €1,579.0m. The Group result climbed by 38.3% to €873.6m compared with the same period of the previous year. Earnings received a boost from the marked increase in wholesale electricity prices on the spot markets and the prices for short-term futures. Consequently, the average sales price obtained for VERBUND’s own generation from hydropower rose significantly by €10.2/MWh to €54.8/MWh despite the drop in futures market prices for yearly products. The first-time consolidation of Gas Connect Austria GmbH (GCA), the regulated gas transmission and distribution system operator in Austria acquired with effect from 31 May 2021, likewise bolstered earnings. Flexibility products also made a substantially higher contribution year-on-year due to increased volatility in the electricity market and the greater significance of the storage power plants. The decline in production of electricity from hydropower had a negative impact on earnings.At 0.95, the hydro coefficient for the run-of-river power plants was 6 percentage points below the prior-year figure and 5 percentage points below the long-term average. Generation from VERBUND’s annual storage power plants fell by 6.9% in quarters 1–4/2021 versus 2020.
Cash flow from operating activities was down substantially on the prior-year figure, however. This decrease is largely due to considerably higher margining payments for hedging transactions in electricity trading provided as security for open positions held with exchange clearing houses (note: the security deposits shall be returned upon fulfilment of the supply agreements). Free cash flow after dividends also trended downwards. In addition to a lower operating cash flow, this decline is attributable to increased capital expenditure on property, plant and equipment and consolidated subsidiaries, and to higher dividend payments compared with 2020.
Dividend for 2021
A dividend of €1.05 per share for financial year 2021 – 40.0% higher than in the previous year – will be proposed at the Annual General Meeting on 25 April 2022. The payout ratio calculated on the basis of the reported Group result amounts to 41.8% for 2021 and the payout ratio calculated on the basis of the Group result after adjusting for non-recurring effects is 45.7%.Forecast for 2022
Based on expectations of average levels of own generation from hydropower and wind power and the opportunities and risks identified, VERBUND currently expects EBITDA of between around €2,600m and €3,500m and a Group result of between around €1,400m and €2,000m in financial year 2022. VERBUND’s planned payout ratio for 2022 is between 45% and 55% of the Group result of between around €1,340m and €1,940m, after adjustment for non-recurring effects.* calculation adjusted retrospectively in accordance with
IAS 8 in financial year 2019 with effect from 1 January 2018
** calculation adjusted retrospectively in accordance with IAS 8 in financial year 2021 with effect from 1 January 2020
*** Scope 1 excl. GCA. Total electricity generated incl. purchase rights excl. electricity generated for district heating. Preliminary data prior to audit.
Additional information on the non-financial KPIs can be found in the Integrated Annual Report 2021, available on the website www.verbund.com > About VERBUND > Investor Relations > Latest financial results.
** calculation adjusted retrospectively in accordance with IAS 8 in financial year 2021 with effect from 1 January 2020
*** Scope 1 excl. GCA. Total electricity generated incl. purchase rights excl. electricity generated for district heating. Preliminary data prior to audit.
Additional information on the non-financial KPIs can be found in the Integrated Annual Report 2021, available on the website www.verbund.com > About VERBUND > Investor Relations > Latest financial results.
