Outlook for the 2014/15 financial year
The European energy markets are still challenged by numerous distortions. Electricity wholesale prices remain at a low level, which, in turn, has had a significant influence on generation. Thermal power plants, in particular, as well as new pump storage power plants are currently unable to recover their full costs.
EVN’s integrated business model diversifies the earnings contributions from the various business segments and, in this way, supports the company’s steady operating development. The stable components of the business model in the present environment are the regulated network business in Austria, water supplies, biomass- based heat generation and supply, thermal waste utilisation and cable TV and telecommunications services.
In the area of energy supply in Lower Austria, EVN supply company has reduced the energy price in electricity within the framework of EnergieAllianz by 10 % on average as of 1 October 2014.
The focus on the stable and regulated business areas will be strengthened by a complementary investment policy that is concentrated on the network infrastructure, the expansion of generation from renewable energies and drinking water supplies. Plans call for the investment of approximately EUR 1bn in these businesses in Lower Austria over the next four years.
The network infrastructure investments are intended to protect supply security for consumers as well as for the business and industrial customers in EVN’s network area. This will guarantee the continuation of the current high service standards. The investments in renewable energy generation will shift the generation mix towards the desired equilibrium. The careful use of natural resources based on sustainability criteria will also remain a key priority for EVN in the future. The high quality and reliability of drinking water supplies in Lower Austria shall be safeguarded over the long term by investments in the replacement of pipeline networks, in natural filter plants and in the development of well fields.
Tariff decisions in Bulgaria and Macedonia during July 2014 led to the recognition of impairment losses. EVN is working to realise further efficiency improvements in these markets and, above all, to further reduce network losses. The tariff increases in Bulgaria on 1 October 2014 were only able to partly offset the earlier reductions. The investment protection proceedings currently in progress at the International Centre for the Settlement of Investment Disputes (ICSID), an institution created by the World Bank, will be pursued and should result in compensation for the disadvantages caused by previous tariff decisions.
In the environmental services business, EVN had to recognise impairment losses on leasing receivables related to the waste incineration plant no. 1 in Moscow. Negotiations over the sodium hypochlorite plant in Moscow were concluded with positive results after the end of the 2013/14 financial year and led to the acquisition of the shares in the Russian project company by the city of Moscow for EUR 250m. EVN will pursue the realisation of new environmental services projects on a selective basis.
EVN also plans to continue its consolidation course in the coming years, whereby the current segments of business will represent the focal point of activities. Continuous efficiency improvements should provide protection for earnings. Assuming average conditions in the energy environment, the EVN Group expects to record a Group net result for the business year 2014/15 that will again exceed the result of financial year 2012/13. The factors that could significantly influence earnings include the regulatory background, developments in the proceedings related to claims from the tariff decisions in Bulgaria and the Duisburg-Walsum power plant as well as the progress on the activities in Moscow.
Maria Enzersdorf, 18 November 2014
EVN AG
The Executive Board
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Peter Layr |
Stefan Szyszkowitz |
