DGAP-News: EVN AG: Business development in the first three

DGAP-News: EVN AG / Key word(s): Interim Report EVN AG: Business development in the first three quarters 2013/14 28.08.2014 / 08:00 --------------------------------------------------------------------- Highlights * Energy business negatively affected by price and volume effects and environmental business through a decline in orders processed * Change in the scope of consolidation to reflect IFRS requirements * Impairment losses to goodwill and customer bases in Bulgaria and Macedonia as well as recognition of a regulatory liability in Bulgaria * 10% price reduction for electricity customers as of 1 October 2014 * Investment offensive: One billion euro for supply security in Lower Austria and in renewable energy in the next 4 years * Outlook 2013/14: negative Group net result for the year; no influence on expected dividend payouts due to non-cash effects Key figures Revenue: -8.7 % to EUR 1,514.4m EBITDA: -23.1 % to EUR 377.0m Results from operating activities before impairments tests: -40.8 % to EUR 186.2m Results from operating activities (EBIT): EUR -23.0m versus EUR 306.7m in the prior year Group net result: EUR -44.7m versus EUR 170.2m in the prior year Cash flow from operating activities: -6.6 % to EUR 367.2m Energy sector environment The first three quarters of 2013/14 brought temperatures that were substantially higher than in the previous year in all EVN core markets. The heating degree total in Bulgaria and Macedonia was 8.2 and 6.0 percentage points lower than the already mild prior year temperature level, while Austria recorded a decline of 19.6 percentage points. The forward and spot market prices for base load and peak load electricity continued to fall during the reporting period. This decline resulted, above all, from the on-going expansion of renewable energy generation capacity in Austria and Germany as well as lower prices for coal and CO2 emission certificates. Reduction in Group net result The EVN Group generated revenue of EUR 1,514.4m in the first three quarters of 2013/14, for a decline of 8.7%, below the comparable prior year period. Revenue development was negatively influenced by the warmer winter in supply areas and the effects of previous tariff decisions in Bulgaria and Macedonia as well as the regulatory liability recognised in Bulgaria in connection with the 1 July 2014 tariff ruling. In addition, the international project business recorded a decline in orders processed. In connection with the initial application of the new IFRS consolidation standards, from now on results from all equity accounted investees with operational nature are presented under results of operating activities instead of financial results. The share of results from equity accounted investees with operational nature rose by 16.0%, over the previous year to EUR 108.9m. EBITDA fell by EUR 113.5m, or 23.1%, to EUR 377.0m. Results from operating activities before impairment tests declined EUR 128.1m, or 40.8%, to EUR 186.2m. Impairment testing led to the recognition of impair-ment losses totalling EUR 209.2m during the reporting period, primarily to reflect value declines resulting from the tariff changes in Bulgaria and Macedonia. As a result of these impairment losses, EBIT fell to EUR -23.0m. In addition to an increase in the dividend from Verbund AG, financial results were favourably influenced by the absence of negative valuation effects from the shares held by WEEV Beteiligungs GmbH in Verbund AG. Financial results improved by EUR 45.2m to EUR -9.8m. Group net result equalled EUR -44.7m. Strong cash flow; solid balance sheet structure Gross cash flow fell by EUR 144.2m to EUR 349.3m due to the earnings development in the reporting period. This affected also the cash flow from operating activities; higher regulatory payables and trade payables smoothed the decline and resulted in a EUR 25.3m lower but still strong amount of EUR 367.3m. The cash flow from investing activities amounted to EUR 156.6m and mainly comprised by investments in network infrastructure, renewable energy generation capacity and the Duisburg-Walsum power plant. Equity was 7.7%, or EUR 236.5m, lower at EUR 2,852.9m owing to the payment of the dividend in January, earnings effects from the first three quarters of 2013/14 and a decrease in the valuation reserve caused by the lower price of Verbund shares. The equity ratio equalled 40.5% as of 30 June 2014 (30 September 2013: 43.0%). Net debt declined EUR 167.0m below the level on 30 September 2013 to EUR 1,642.6m, and gearing was reduced from 58.6% to 57.6%. Developments in the energy and project business The protection of supply security in Lower Austria is a key objective for EVN and is reflected in numerous projects. For example: we set an important milestone with the filling of the final section of the 143 km Westschiene natural gas transport pipeline, which completed a direct connection to the Rohöl-Aufsuchungs AG natural gas storage facility in Upper Austria. Investments in the electricity area focused on the expansion of network infrastructure to keep pace with the rapid increase in the generation from renewable energy sources throughout the network region. The 110 kV network was extended to transport the rising feed-in of wind energy, and sections of the network in Bruck an der Leitha and Poysdorf were commissioned during July 2014. The objective to improve supply security in Lower Austria was reflected by an increase of 17.2%, in investments by the Network Infrastructure Austria Segment. To support the further development of renewable energy sources, after the commissioning of the Prellenkir-chen wind park, the start of construction on the Prottes-Ollersdorf wind park during the reporting period began, which, with its 12 wind turbines, will have an installed capacity of approximately 37 MW. In addition, a photovoltaic plant was opened in Schönkirchen during May 2014 and offered EVN's customers an opportunity for investment. This plant has roughly 4,000 panels with a total output of approximately 1,000 kWpeak. Investments in production capacities increased by 7.2% during the first three quarters of 2013/14. In total, about EUR 1bn will be invested for supply security in Lower Austria and in renewable energy in the next 4 years. Within the framework of EnergieAllianz Austria, EVN supply company as of 1 October 2014 will lower the end customer price for electricity. This will lower the energy price by 10.0% for an average household of Lower Austria with a power consumption of 3,500 kWh per year. With this price reduction, EVN is passing on the lower wholesale. In Bulgaria and Macedonia, decisions by the respective regulatory authority over electricity tariffs resulted in the full write-off of goodwill and customer bases. The tariff decisions in Bulgaria call for a substantial increase in the electricity purchase price for EVN during the period from 1 July 2014 to 30 June 2015, but include only a slight increase in end customer prices. These decisions also use a tariff component which, from an economic point of view, could lead to the repayment of revenue from previous regulation periods. In Macedonia, the increase in network tariffs was lower than expected and excluded cost elements expected from the next planned stage of market liberalisation beginning on 1 January 2015. EVN is currently realising nine international projects in the international environmental services business. In Montenegro, the contract for the planning and construction of a wastewater purification plant in Kotor-Tivat was signed in February 2014; the wastewater treatment project in Budva, Montenegro, entered the commissioning phase. The Mia Milia/Haspolat wastewater purification plant in the Cypriote capital of Nicosia, which has a capacity to service 270,000 population equivalents, officially opened in April 2014. This project also covered the construction of a sludge treatment plant and a biogas recovery plant. In addition, EVN and its Polish subsidiary received a contract for the planning, modernisation and expansion of the Pruszkow wastewater purification plant in Warsaw, Poland. The building permit for the modernisation and expansion of the Kujawy wastewater purification plant in Krakow was received and work has already started. In regards to the projects in Moscow, discussions with the local authorities over the projects also continued during the first three quarters of 2013/14. EVN decided during the reporting period to draw a guarantee for foreign direct investments issued by the Federal Republic of Germany in connection with the sodium hypochlorite plant project. The building permit for the waste incineration plant has still not been issued by the City of Moscow. EVN took over the management and operation of water supplies for the Lower Austrian community of Göllersdorf in January 2014, which raised the number of end customers who are supplied by EVN with drinking water to roughly 87,000. EVN also gained a further customer with the municipality of Litschau, which has been serviced by the cross-regional "Waldviertel" drinking water system since mid-June 2014. Work started on the construction of natural filter plants in the Lower Austrian communities of Drösing and Obersiebenbrunn during the reporting period; a further plant is planned for Zwentendorf. The plants will improve the water quality for the roughly 100,000 residents in the involved regions. Outlook Based on the above-mentioned developments, we expect to record a negative Group net result for the 2013/14 financial year. Group net result could also be significantly influenced by the development of the proceedings with the Bulgarian government and progress on the projects in Moscow. The effects of the impairment losses in Bulgaria and Macedonia are non-cash and should therefore have no influence on the dividend payment. For the complete Letter to Shareholders for the first three quarters of 2013/14 see www.investor.evn.at. --------------------------------------------------------------------- 28.08.2014 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG. The issuer is solely responsible for the content of this announcement. The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- Language: English Company: EVN AG EVN Platz 2344 Maria Enzersdorf Austria Phone: +43-2236-200-12294 Fax: +43-2236-200-82294 E-mail: info@evn.at Internet: www.evn.at ISIN: AT0000741053 WKN: 074105 Indices: ATX Listed: Foreign Exchange(s) Wien (Amtlicher Handel / Official Market) End of News DGAP News-Service --------------------------------------------------------------------- 284185 28.08.2014