“... securely positioned for the future.“
An interview with the members of EVN’s Executive Board, Peter Layr and Stefan Szyszkowitz.
Mr. Layr, this year’s full report by EVN is entitled “Close by. And secure.” What are your first associations with these words?
Layr: Without a doubt, supply security and a focus on customers. These aspects form the focal point for all our products and services. They apply to the energy and environmental services business in Lower Austria and, in the same way, to our foreign markets. Their importance is also regularly confirmed in the dialogues that take place with our stakeholders. If we take a closer look at the current shift in the energy sector towards renewable energy, supply security and a focus on customers are much more than just slogans – they are essential requirements that demand our full commitment.
Mr. Szyszkowitz, renewable energies have been experiencing dynamic growth in recent years. How has this trend influenced EVN?
Szyszkowitz: Our corporate strategy includes three central points for this area: an increase in our renewable generation capacity, the provision of balancing energy to ensure supply security and the expansion of our networks. With regard to the expansion of our own renewable capacity, this past year we moved substantially closer to reaching our medium-term goal of 300 MW from windpower alone. The commissioning of the Paasdorf-Lanzendorf windpark in July 2016 raised our windpower capacity to approximately 268 MW. Our plans for the next two financial years include the realisation of further projects already approved by the municipal authorities, which will move us beyond the 300 MW threshold.
“Trust is a very important basis for strong customer relationships.“ Peter Layr
Layr: The second strategic focal point is based on the continuing high demand for the management of shortages and the delivery of balancing energy to stabilise the networks in Austria and southern Germany. Our commitment to supply security is accompanied by the challenge of maintaining the availability of our thermal power plants as reserve capacity. In this way, we can guarantee the stability of the networks despite the steadily growing feed-in of electricity from renewable generation which, by nature, is volatile. We set new records for the use of our thermal power plants in the cross-regional exchange of services during 2015/16. That also demonstrates the importance of our natural gas-fired power plants as “bridge technology”: as long as there are no marketable, efficient, large storage facilities for the surplus electricity production from windpower and solar energy and no controllable energy demand, thermal power plants are indispensable as backup facilities to ensure the reliable supply of electricity.
Szyszkowitz: The third important strategic contribution is our massive investment in network expansion. The EUR 1bn investment programme that was launched in 2013 will direct approximately EUR 700m to the expansion and improvement of our network infrastructure in Lower Austria over a period of four years. That will sustainably protect the transport and distribution of the rising volumes of windpower and solar electricity. With these investments, we are also making an important contribution to the Austrian economy – sector studies have shown that every euro invested in the networks creates two euros of added value for the overall economy.
In other words, EVN is positioned at pivotal points for energy supplies. What other concepts have you developed to meet the challenging sector environment?
Layr: We have relied on our integrated business model in the energy business for many years and are broadening it through targeted diversification along the entire value chain. In addition to generation, on the one side, and supplies for our customers, on the other side, the stable operation of electricity and natural gas networks forms the backbone of our activities. Diversity is another important feature of our product portfolio: in our Lower Austrian home market, we supply electricity, natural gas and heat. These business areas are supplemented by network operations, product offerings for cable TV and telecommunications, thermal waste utilisation and drinking water supplies.
The energy sales business is witnessing increased competition for customers and market shares. What are EVN’s strategies to meet these challenges?
Szyszkowitz: One of our most important strengths lies in a differentiated approach to meeting our customers’ needs. In doing so, we can count on a broad range of specially designed product solutions and services. Let me list a few examples of how we provide our customers with individual – and therefore the best possible – services: as a quality supplier, we are currently moving even closer to our customers by opening centrally located service centres in towns throughout Lower Austria. These modern locations bring our extensive offering of products, services and advising together under a single roof. The EVN Bonus World, our customer loyalty programme which combines brand allegiance with discounts on energy-efficient products and services, is another initiative to convince our customers with attractive offers. At the same time, we believe it is important to be prepared to deal with the customers’ future needs and to utilise the energy transformation and digitalisation for the benefit of our company.
What has the greater weight from your point of view – the opportunities or the challenges connected with digitalisation?
Szyszkowitz: Digitalisation primarily means greater efficiency for our existing activities, but also the development of new opportunities alongside our current business. One good example is EVN Geoinfo: based on plans and geodata that were digitalised many years ago, we are now able to offer wide-ranging services for communities in Lower Austria. In a similar way, we are developing solutions for digitalisation in all our business areas to make the best possible use of future opportunities for our customers.
For a network operator, digitalisation is unavoidably associated with the subject of smart meters. What does this mean for customers?
Layr: Trust is a very important basis for strong customer relationships – and that is our underlying principle for the introduction of so-called smart meters, i.e. intelligent electricity meters. Placing a focus on our customers in this context means careful and exact preparation for the meter exchange project, including the best possible technical standards for data security. Another important point is that we leave the decision over the installation of a smart meter up to our customers. In agreement with these guidelines, we will be starting the roll-out of intelligent electricity meters in 2016/17.
Key word drinking water supplies: how is EVN positioned in this business?
Szyszkowitz: We are addressing developments like weather-related shortages or rising water consumption and quality demands at an early stage. Dealing with these issues at an early stage will also allow us to meet our promise of supply security for customers in the area of drinking water supplies over the long term. Our investments in the supply infrastructure will therefore increase over the coming years. These investments will concentrate on increasing the capacity of our pumping stations, the expansion of our crossregional pipeline networks and the construction of additional natural filter plants, which reduce the hardness of the water by natural means. With these projects, we also want to create the basis for realising the growth opportunities in this area over the medium term.
Mr. Layr, we have now heard a great deal about EVN’s strategic positioning in its various business areas. How would you summarise EVN’s unique selling proposition?
Layr: Our strength lies in the ability to make the best use of our technical know-how, but always with an eye on the needs of our customers. Many years of experience in supplying electricity, natural gas and heat also help us to realise the planned investments in the water business, in particular the cross-regional extension of our pipeline networks.
What strategic focal points has EVN defined for its foreign markets in 2016/17?
Szyszkowitz: In the energy business, we will continue to con- solidate and optimise our activities in South East Europe and thereby maintain our current strategic direction. We are committed to our core strategies also in these markets, which include supply security and the best possible service for our customers – who currently number approximately 1.7m in Bulgaria and over 800,000 in Macedonia – through our activities as a local network operator and energy provider. The generation of positive operating cash flows in these markets is the requirement for future investments. Therefore we are concentrating on the further reduction of network losses and the continuous improvement of the collection rate in both countries. Anorganic growth in the international energy business, for example through acquisitions or new major projects in South East Europe, is not part of our plans at the present time.
“We want to be a stable and reliable factor on the capital market.“ Stefan Szyszkowitz
Layr: Our current order book in the international project business of the Environmental Services Segment reflects our efforts to realise wastewater projects as a general contractor in East and South East Europe. The financing is provided by the customer himself or is secured by subsidies from international institutions like the European Union. We are also very carefully evaluating potential new markets for the environmental services business. For example, countries on the Arabian Peninsula with substantial raw materials reserves – and therefore sound credit ratings – are currently preparing wastewater disposal and thermal waste utilisation projects together with the help of international consultants. These projects could also create interesting market opportunities for us in cooperation with partners.
Mr. Szyszkowitz, what expectations can shareholders place in the EVN share?
Szyszkowitz: EVN stands for solid business development. Our consistently strong operating cash flow allows for extensive investments which flow, above all, into regulated and stable business areas. These investments underscore our commitment to also guarantee supply security for our customers during the challenging energy transformation. In addition, we have been able to steadily reduce our net debt in spite of these wide-ranging investments. We want to be a stable and reliable factor on the capital market. For us, stability means predictability, a quality that is also reflected in the steady development of dividends. We will therefore also recommend a dividend of EUR 0.42 per share to this year’s Annual General Meeting.
Is the impression misleading, or are you looking towards the future with optimism in spite of the challenging sector environment?
Layr: That is exactly what we are doing. Our competent and dedicated employees give us the necessary flexibility to develop and implement the right solutions in spite of the challenging environment: for supply security, for our customers – and thereby also for our shareholders. EVN is securely positioned for the future. Just like the title of our full report: Close by. And secure.