Energy sector environment

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    2008/09 2007/08 Change in %
1) Calculated according to the heating degree total in Austria. the basis (100%) corresponds to the long-term average value 1997– 2006.
2) Gas Import Price (GIMP)
3) ARA notation (Amsterdam, Rotterdam, Antwerp)
4) EEX – European Energy Exchange
5) Average prices for the respective EEX quarterly forward market prices, beginning one year before the respective period under review.
Temperature-related energy demand1) % 94 102 –7.8
Crude oil – Brent EUR/bbl 42.91 70.41 –39.1
Gas – GIMP2) cent/m3 25.21 28.09 –12.1
Coal – API#23) EUR/t 65.23 98.84 –34.0
CO2 certificates (1st and 2nd periods) EUR/t 14.50 17.92 –19.1
         
Electricity – spot market EEX4)        
Base load EUR/MWh 46.20 63.20 –26.9
Peak load EUR/MWh 61.57 86.58 –28.9
         
Electricity – forward market EEX4) 5)        
Base load EUR/MWh 66.57 56.01 18.9
peak load EUR/MWh 93.33 79.64 17.2

The business environment in the Energy sector has a considerable influence on the business development of the EVN Group. Weather conditions have a particular impact on household energy consumption, in particular on gas and heating demand. The energy demand on the part of industrial companies is mainly dependent on their sales development and thus on the macroeconomic environment.

In the 2008/09 financial year, the mild temperatures in Austria and Macedonia had a slightly negative effect on overall demand. Temperature-related energy demand was down 6.0% and 13.1% respectively compared to the long-term average. In contrast, the heating degree total in Bulgaria was 2.8% higher than the long-term average.

As a consequence of the economic recession, primary energy and electricity prices as well as the costs of CO2 emission certificates declined considerably in the course of the 2008/09 financial year. The price of North Sea crude oil (Brent), the variety of the highest relevance to Europe, decreased by 45.3% in US dollars, whereas the euro price was down 39.1%. The coal price, which fell by about 34.0%, also reflected this development. Gas procurement costs, linked to the price of crude oil but with a time delay, only declined by 12.1% on average during the period under review, but posted a massive drop of 30.0% in the second half of the financial year. The prices for CO2 emission certificates were down 19.1% in the 2008/09 financial year, due to lower electricity demand and production.

Primary energy price trends (indexed)
in %

During the year under review, European electricity prices fluctuated inconsistently at a low level. As a result of the price decline for primary energy since the middle of 2008 as well as the economic downturn since the fourth quarter of 2008, spot market prices for base load and peak load electricity fell by 26.9% and 28.9% respectively compared to the previous year.

In order to ensure the reliability of its energy supply, EVN purchases primary energy and electricity on the forward market. At the time supply contracts for the first three quarters of 2008/09 were concluded in the summer of 2008, prices were still at a high level, comprising the main reason for the rise in EVN’s end customer prices for electricity and gas carried out as of November 1, 2008. However, the gas price was reduced twice during the 2008/09 financial year, reflecting the development of primary energy prices.

Electricity price trends (electricity spot and forward market)
in EUR/MWh

Due to the recession, electricity consumption in Austria has declined significantly since the fourth quarter of 2008. According to the regulatory authority E-Control, electricity use decreased by 3.2% in the fourth quarter of 2008, and dropped 2.9% and 7.9% respectively in the first and second quarters of 2009. Industrial electricity demand fell by about 10.0% due to the overall economic situation. On balance, total Austrian energy consumption is expected to decline by about 8.0% in the year 2009.

However, sales volumes of the EVN Group declined more moderately due to its stable customer structure in Lower Austria and in the south-eastern Europe region. Electricity sales were only down slightly in Lower Austria. Despite the economic crisis, revenues continued to rise in Bulgaria and Macedonia.

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Influencing factor Effect on the business development
compared to 2007/08
Temperature Slightly negative
Primary energy prices Positive
Electricity prices – forward market Negative
Electricity prices – spot market Positive
Electricity sales Positive
Gas sales Negative
Heating sales Positive

The following conclusion can be drawn when taking the various influencing factors into account. The price decline for primary energy (crude oil, natural gas and hard coal) generally had a positive effect on the business development of the EVN Group. EVN’s procurement strategy focuses on ensuring the reliability and security of energy supplies. Therefore, prices on the forward market comprise the decisive factor underlying EVN’s earnings development. At the time supply contracts were concluded in the autumn of 2008, electricity prices for delivery in the 2008/09 financial year were still at a high level (see chart above). For this reason, the market price effects impact the earnings development of EVN with a corresponding time delay. Due to the limited use of EVN’s own thermal power stations, the prices for CO2 emission certificates were not of major significance during the year under review.

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