Highlights

- Group net result above previous year due to revaluations

- Good wind flows and increase in wind power capacity to roughly 370 MW

- Focus of investments in Lower Austria on network infrastructure, renewable
  generation, district heating and drinking water supplies

- Commissioning of two wastewater treatment plant projects and orders received for
  six new general contractor assignments in the wastewater sector of the international
  project business

- Dividend recommendation: EUR 0.50 per share (EUR 0.47 plus a bonus dividend of
  EUR 0.03 per share)
 

Key results

- Revenue: +6.0% to EUR 2,204.0m

- EBITDA: -6.0% to EUR 631.7m

- EBIT: +2.7% to EUR 403.5m

- Group net result: +18.8% to EUR 302.4m

- Net debt: EUR 999.5m (30 September 2018: EUR 963.7m)
 

Energy sector environment
The temperature-related energy demand in EVN's three core markets was below the long-term average during 2018/19. In Austria, the weather was also warmer than the previous year. The market prices for electricity and CO₂ emission certificates rose significantly during the reporting period but declined for natural gas and, above all, for coal.
 

EBITDA below previous year; EBIT and Group net result above previous year
Revenue recorded by the EVN Group rose by 6.0% year-on-year to EUR 2.2bn in 2018/19. This increase was supported, among others, by substantial growth in renewable generation and positive impulses from heat supplies. Contrasting factors included declines in thermal electricity generation and in the Networks Segment as well as a changed, but earnings-neutral calculation for the so-called "green electricity mark-up" in Bulgaria.

The development of the costs for electricity purchases from third parties and primary energy expenses was influenced by contrary effects. Higher upstream network costs led to an increase, while the above-mentioned change calculation for the "green electricity mark-up" in Bulgaria was responsible for a reduction.

The share of results from equity accounted investees with operational nature declined 30.6% year-on-year to EUR 130.5m. Weaker business development at EVN KG due to higher procurement costs and negative effects from the valuation of hedges as of 30 September 2019 combined with a lower earnings contribution from RAG led to a reduction. Positive contrasting factors included the higher earnings contribution from Verbund Innkraftwerke GmbH, which was supported by an improvement in the operating business and a revaluation of the investment to reflect the decline in market interest rates and expectations of an increase in electricity prices.

Based on these developments, EBIDTA declined to EUR 631.7m in 2018/19 (previous year: EUR 671.8m). Scheduled depreciation and amortisation rose due to the high level of investments, but impairment testing led to positive revaluations and related non-recurring effects. These revaluations reflected the general decline in market interest rates as well as expectations of an increase in electricity prices and were related primarily to previously impaired renewable generation assets, electricity procurement rights, district heating assets and customer bases (in Bulgaria und North Macedonia). EBIT for the 2018/19 financial year therefore amounted to EUR 403.5m (previous year: EUR 392.9m).

Financial results improved by 19.5% to EUR -29.9m. At EUR 302.4m for 2018/19, Group net result was 18.8% higher than the previous year.
 

Sold balance sheet structure
EVN has a solid and stable capital structure which will support the implementation of its investment focal points in Lower Austria over the coming years. Net debt has been steadily reduced in recent years and - with fluctuations as of the respective balance sheet dates - now approximates EUR 1bn.
 

Developments in the energy and environmental services business

Energy business
Supported by a substantial year-on-year improvement in wind flows and the ongoing expansion of wind power capacity, EVN recorded a 4.6% increase in renewable electricity generation to 2,315 GWh in 2018/19. EVN accelerated the expansion of its wind power capacity during the reporting year with the commissioning of five projects and, in doing so, met its medium-term goal one year earlier than planned: as of 30 September 2019, the installed wind power capacity totalled 367 MW (30 September 2018: 318 MW). Plans call for this capacity to reach roughly 500 MW by the end of 2023 subject to appropriate framework conditions.

The 2018/19 financial year brought significant changes for EVN's thermal power plants. The separation of the German-Austrian electricity price zone as of 1 October 2018 ended the use of the thermal power plants for network stabilisation in southern Germany and led to a substantial reduction in EVN's reserve capacity under contract to prevent shortages: in 2018/19 only 430 MW were under contract as reserve capacity for the Austrian transmission network operator (previous year: 1,090 MW in total for southern Germany). In view of the current market environment, EVN therefore deactivated and conserved the thermal power plant capacity in Theiss und Korneuburg which is currently not under contract to prevent shortages at the beginning of October 2018. Electricity production at the hard coal-fired power plant in Dürnrohr was also terminated earlier than planned at the beginning of August 2019 in the wake of a threefold increase in the price of CO₂ emission certificates over the past one and a half years. These developments led to a decline of 1.0% in EVN's thermal generation to 3,279 GWh in 2018/19.

Dürnrohr will be assigned new responsibilities as an energy location: EVN is currently installing an additional gas fired boiler here to generate steam for industrial customers, and a sewage sludge incineration plant and large-scale photovoltaic plant are currently in the planning stage.

Investments in the network infrastructure for Lower Austria increased substantially during 2018/19 - they represent a central element of EVN's corporate strategy and make an important contribution to ensuring reliable supply security and quality. The very high level of investments in the electricity networks will increase further in 2019/20 since the roll-out of smart meters in Lower Austria marks the start of an additional investment cycle.

Environmental and water business
In line with its strategic focus, improving the security and quality of drinking water supplies in Lower Austria represents another focal point for investments. EVN plans to invest approximately EUR 165m in drinking water supplies for Lower Austria by 2030. Examples of these investments in 2018/19 include the construction of new pipeline networks in the region surrounding Vienna, which has seen steady population growth for many years. The new natural filter plant on the Wienerherberg well field was also commissioned during the reporting year and now supplies 18 communities with high-quality drinking water. The ground-breaking ceremony for a further natural filter plant to reduce the hardness of the water by natural means took place in Petronell during September 2019.

WTE Wassertechnik - EVN's subsidiary which is responsible for the international project business in the Group - commissioned two wastewater treatment plants, one in Vodice, Croatia, and another in Kočani, North Macedonia, on schedule and transferred them to the customers in 2018/19. The company also received six general contractor assignments during the reporting year. As of 30 September 2019, WTE Wassertechnik was working on eight general contractor assignments in Lithuania, Poland, Romania, Croatia and Bahrain.
 

Outlook for the 2019/20 financial year
Assuming average conditions in the energy business environment, Group net result for 2019/20 is expected to range from EUR 200m to EUR 230m. The year-on-year decline is attributable to after-tax positive valuation effects of approximately EUR 110m in 2018/19. Constant development is expected for the operating result.
 

For the complete Full Report on the 2018/19 financial year, see www.investor.evn.at.