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Outlook for the 2012/13 financial year

The success of the EVN Group in the Energy business depends primarily on the wholesale prices for electricity in the European spot and forward markets as well as on the prices for primary energy and CO2 emission certificates. In addition, the development of outdoor temperatures also influences energy sales volumes. In the Environmental Services segment demand in the international project business depends on the financial resources of public institutions. Moreover, the project structure in the environment services business could lead to fluctuations in revenue and earnings. In the Strategic Investments and Other Business segment, the earnings contribution mainly depends on the development of primary energy and electricity prices for EVN’s investments in RAG and Verbund AG.

The following tariff rate changes will have an impact on the business development of EVN in the 2012/13 financial year: in Austria, EAA and its regional energy sales companies reduced the end customer prices for electricity as a result of the decrease in the additional costs for renewable energy as at January 1st, 2012, and as of July 1st, 2012 as a consequence of changes in the financing of renewable power plants which took effect on July 1st, 2012. For private customers, this comprises a net annual cost decline of about 8.0% or EUR 25.0 per year, depending on consumption levels.

Within the context of the incentive regulatory system, the E-Control Commission reduced natural gas network tariffs by 1.9% on average as at January 1st, 2012. The effects on individual customers depend on consumption behaviour and technical conditions. Electricity tariffs remain unchanged.

In South East Europe, the following tariff changes were carried out: in Bulgaria, regulatory authorities increased end customer prices for electricity by 13.9% effective July 1st, 2012. In contrast, the tariffs for heat were reduced by 20.6%. The prices for procured natural gas rose by 4.9%. In Macedonia, the regulatory authority adjusted prices twice during the year under review. The end customer prices for electricity applying to EVN Macedonia AD were increased by 4.8% as at January 1st, 2012 and 6.1% as at August 1st, 2012. At the same time, the energy sourcing prices were hiked by 3.8% effective August 1st, 2012.

The business success of EVN in the 2012/13 financial year will be shaped by the ongoing difficult market conditions.

The stable earnings in the 2011/12 financial year are basically attributable to a significant external factor in our business, namely the historically coldest winter on record in South East Europe. On balance, the energy sector factors had a negative effect on our business results.

The crude oil price mainly rose due to the ongoing strong demand in Asia, and the continuing conflict between Iran and the Western industrialised nations. The price of natural gas, which is linked to the crude oil price, also rose. Despite the natural gas price revisions, there were increasing differences between the natural gas price defined in long-term supply contracts and those on the spot market. This development can be attributed to the higher exploration volumes, mainly in the USA, and falling demand in Europe. The development of primary energy and electricity prices led to lower or negative margins for thermal electricity production.

In addition, the focus is on the challenge n Europe related to increased power generation from renewable energy sources. The strongly subsidised tariffs from electricity from renewable energies further put pressure on the profitability of thermal electricity generation. The weak economic development also reduced demand for energy. The EU was characterised by a GDP decline, with major economic differences continuing to prevail within the eurozone.

Accordingly, our economic and energy sector expectations are dampened with respect to the 2012/13 financial year. No trend reversal is on the horizon with regard to forward prices for electricity, and primary energy prices remain high. In addition, economic prospects in Europe have not improved. In our South East European markets, we continue to assume weak growth throughout the entire region.

A further challenge will be the changed regulatory conditions for interim financing of the additional costs of renewable energy in Bulgaria.

In spite of the challenging environment, we expect Group net profit in the 2012/13 financial year to be close to the prior-year level. We will determinedly continue on our defined path, and exploit our strong operational basis in order to once again be able to assert ourselves in the marketplace in an above-average manner. We consider our broad customer base in our domestic market and the high level of customer satisfaction to be important success factors. We are striving to maintain the attractive dividend policy in combination with a value-oriented corporate strategy.

In terms of investments, the focus will continue to be on expanding and modernising the network infrastructure in Austria and abroad, and expanding power generation capacities from renewable energy sources.

Maria Enzersdorf, November 15th, 2012

The Executive Board

Unterschrift Layr Unterschrift Szyszkowitz Unterschrift Pöttschacher
Peter Layr
Spokesman of the Executive Board
Stefan SzyszkowitzA
Member of the Executive Board
Herbert Pöttschacher
Member of the Executive Board



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