DGAP-News: EVN AG (Energie-Versorgung Niederösterreich AG)

Highlights

• Significantly milder temperatures in Austria, Bulgaria and Macedonia
• Increase by 10.5% in renewable electricity generation
• Continuing high demand for electricity from thermal generation to support network stability
• Network expansion between Mödling and Baden creates the largest cross-regional natural heat network in Austria
• Management of drinking water networks in two additional Lower Austrian communities taken over as of 1 January 2018
• Completion of a wastewater treatment plant project in Macedonia
• Continuation of investment strategy with focus on networks, renewable generation and drinking water supplies in Lower Austria

Key results

• Revenue: -2.7% to EUR 590.9m
• EBITDA: +5.4% to EUR 231.6m
• EBIT: +32.5% to EUR 166.0m
• Group net result: +17.7% to EUR 112.2m
• Net debt: 1,132.5% (30.09.2017: EUR 1,213.2m)

Energy sector environment

The first quarter of 2017/18 was characterised by significantly milder temperatures in year-on-year comparison in EVN's core markets of Austria, Bulgaria and Macedonia.

The forward prices for base load and peak load electricity increased during the reporting period, but spot market prices were lower than the previous year due to the mild weather. The prices for primary energy carriers, e.g. natural gas, were driven by the improvement in economic indicators and were higher than the previous year on average.
 

Year-on-year increase in EBITDA, EBIT and Group net result despite decline in revenue

Revenue recorded by the EVN Group declined by EUR 16.5m, or 2.7%, year-on-year to EUR 590.9m in the first quarter of 2017/18. This development was influenced by contrary factors. Increases were recorded in renewable electricity generation, the marketing of the thermal power plants for network stabilisation, heat sales and the regulated network business. However, this growth was unable to offset lower revenues from Natural Gas trading, the weather-related decline in energy and network distribution volumes in South Eastern Europe and lower revenue in the international project business.

The cost of electricity purchases from third parties and primary energy expenses were lower as a result of the decline in natural gas trading, the reduced use of primary energy carriers for thermal generation and the weather-related reduction in energy sales volumes in South Eastern Europe. The resulting improvement in energy sector results led to an increase of EUR 11.8m, or 5.4%, in EBITDA to EUR 231.6m.

Scheduled depreciation and amortisation were nearly stable at EUR 65.0m (previous year: EUR 65.7m) and depreciation and amortisation including the effects of impairment testing declined by EUR 28.9m, or 30.6%, to EUR 65.6m. However, the prior year value included an impairment loss recognised to the Gorna Arda hydropower plant project in Bulgaria. EVN generated EBIT of EUR 166.0m in the first quarter of 2017/18, which represents a year-on-year increase of EUR 40.7m or 32.5%.

Financial results declined to EUR -11.8m (previous year: EUR -8.6m), above all due to the absence of positive non-recurring effects in interest result in the previous year. Group net result for the reporting period rose by EUR 16.9m, or 17.7%, to EUR 112.2m.
 

Sound balance sheet structure; reduction of net debt

EVN's positive operating results create the foundation for a solid balance sheet structure. EVN's net debt fell by EUR 80.7m below the level on 30 September 2017 to EUR 1,132.5m. As a result, gearing declined from 38.5% to EUR 34.6%.
 

Developments in the energy and project business

Energy business

EVN's electricity generation was 12.9% lower year-on-year at 1,687 GWh in the first quarter of 2017/18. Renewable generation rose by 10.5% to 577 GWh due to better wind and water flows and additional windpower capacity, while production from the thermal power plants was 21.5% lower than the previous year at 1,110 GWh. This decline is primarily attributable to a high level in the first quarter of the previous year when the demand for electricity in Europe was favourably influenced by the unusually cold weather.

The demand for reserve capacity to stabilise the networks remained at a high level. All EVN thermal power plants in Lower Austria, which have a combined generation capacity of 1,090 MW, were under contract for the first time to serve as reserve capacity for southern Germany in the winter half-year 2017/18.

EVN will increase its windpower generation capacity from the current level of 279 MW to 314 MW during the current financial year through the planned commissioning of the Sommerein windpark in spring 2018. In a next step, the realisation of projects already approved by the authorities will raise this generation capacity to roughly 370 MW by the end of the 2019/20 financial year. EVN's target is to expand windpower capacity to 500 MW over the medium term through the realisation of projects which, in part, have already been approved by the authorities. However, this will depend on appropriate framework conditions.
Environmental and water business

Investments in the Environment Segment continued to concentrate on the improvement of supply security and quality for drinking water supplies in Lower Austria. The focal points included the expansion of the cross-regional pipeline networks and the construction of a further natural filter plant on the Wienerherberg well field southeast of Vienna to reduce the hardness of the water by natural means. EVN also took over the management of the local drinking water networks in two additional Lower Austrian communities, Leopolsdorf bei Wien and Haugsdorf, at the beginning of January 2018.

In the international project business, the first of four wastewater treatment plant projects in Macedonia was completed and transferred to the customer during the first quarter of 2017/18. Activities in EVN's international project business included work on six general contractor assignments for the construction of wastewater treatment plants in Croatia, Macedonia, Poland and the Czech Republic as of 31 December 2017. In January 2018, EVN was awarded a general contractor assignment (contract value: approximately EUR 170m, converted) for a wastewater treatment plant in Bahrain. The contract is expected to be signed in the coming months. This project will double the capacity of the existing plant to service roughly 1.6m residents. The contract also covers the construction of a sludge drying and sewage sludge incineration plant with a performance of approximately 15 MW. The construction of the entire project is expected to take 36 months and, after that time, EVN will operate the plants for a period of ten years.
 

Outlook

Assuming average conditions in the energy business environment, Group net result for 2017/18 should return to a normal level that reflects the average of the 2015/16 and 2016/17 financial years. However, Group net result could be significantly influenced by the regulatory background, the proceedings currently in progress in Bulgaria and the remaining proceedings connected with the Walsum 10 power plant project as well as the progress on activities in Moscow.

The complete Letter to Shareholders for the first quarter of 2017/18 is available under: www.investor.evn.at.