Highlights

- Demand for network stability leads to increase in electricity production

- Commissioning of the Paasdorf-Lanzendorf windpark with a capacity of 19 MW

- Average reduction of 5% in the electricity and natural gas working prices for household customers within the framework of EnergieAllianz Austria as of 1 October 2016

- New contracts for four wastewater treatment projects

- Increase in Group net result by 5.6% to EUR 156.4m

- Reduction of net debt by EUR 109.4m

- Dividend proposal to 88^th Annual General Meeting: EUR 0.42 per share

Key results

- Revenue: -4.2% to EUR 2,046.6m

- EBITDA: +3.6% to EUR 604.4m

- EBIT: -2.9% to EUR 260.4m

- Group net result: +5.6% to EUR 156.4m

- Net debt: -8.9 % to EUR 1,121.5m

Energy sector environment

The average temperatures in EVN's relevant markets were extremely mild during the 2015/16 financial year. In particular the winter months were significantly warmer than usual in all three core markets. The heating degree total in Austria remained below the long-term average, as in the previous year. Bulgaria recorded unusually warm temperatures, with a heating degree total that was 23.2 percentage points lower than 2014/15. In Macedonia, the heating degree total was 8.6 percentage points below the previous year.

The prices for primary energy carriers (crude oil, natural gas and hard coal) declined further in comparison with the previous year. The forward and spot market prices for base load and peak load electricity also continued to decline during the reporting year. On average, the forward prices applicable to 2015/16 fell by 12.8% to EUR 30.4 per MWh for base load electricity and by 13.0% to EUR 38.2 per MWh for peak load electricity. The spot market prices declined by 13.2% to EUR 27.8 per MWh for base load electricity and by 14.2% to EUR 34.2 per MWh for peak load electricity.

EBITDA and Group net result above prior year;
EBIT contains impairment losses to generation plants

Revenue recorded by the EVN Group declined by EUR 89.3m, or 4.2%, to EUR 2,046.6m in 2015/16. Higher revenue was recorded from thermal generation due to the increased use of the thermal power plants to support network stability and from the network business in Lower Austria. However, this increase was unable to offset the lower revenue from the reduction in natural gas trading activities and the revenue decline in South Eastern Europe which resulted, above all, from the increasing liberalisation and the mild winter.

EBITDA rose by EUR 21.2m, or 3.6%, to EUR 604.4m. This increase was supported by a decline in operating expenses, above all through a reduction in the cost of electricity purchases and primary energy expenses, as well as a further improvement in the collection rate in South Eastern Europe and cost reductions in the entire EVN Group.

Scheduled depreciation and amortisation rose by EUR 5.9m, or 2.3%, to EUR 266.1m in 2015/16 due to the ongoing investments. The effects of impairment testing were EUR 23.1m, or 42.3%, higher at EUR 77.9m. These impairment losses concerned energy generation plants and were recognised to reflect less favourable estimates for the long-term development of electricity prices. The results from operating activities (EBIT) fell by EUR 7.8m, or 2.9%, year-on-year to EUR 260.4m. Financial results amounted to EUR -61.6m and were EUR 1.3m, or 2.1%, lower than the previous year.

In total, the Group net result increased by EUR 8.4m, or 5.6%, and amounted to EUR 156.4m.

Solid balance sheet structure; reduced net debt

EVN's positive operating results are the basis for its solid balance sheet structure. The equity ratio rose from 39.8% in the previous year to 42.3%, and net debt was reduced by EUR 109.4m, or 8.9%, to EUR 1,121.5m during the reporting year. This led to a decrease in the gearing ratio from 47.5% to 40.5%.

Developments in the energy and environmental services business

Energy business

EVN's electricity generation increased by 20.1% and amounted to 5,866 GWh during the 2015/16 financial year. The generation from renewable sources declined year-on-year in spite of the increase in renewable electricity production capacity. This development resulted, in particular, from lower wind flows, but was also influenced by lower water flows. In contrast, electricity generation in the thermal power plants rose by 38.3% to 3,840 GW owing to the substantially higher use of EVN's power plants to stabilise the networks in Austria and Germany. As in the past four years, the Theiss and Korneuburg power plants provided reserve capacity for southern Germany also during the winter 2015/16 and, in addition, also provided reserve capacity for Austria during the summer 2016.

The four-year investment programme launched by EVN in 2013/14, which calls for investments of EUR 1bn in Lower Austria, continued its third year as planned in 2015/16. Approximately 70% of the total investment volume is directed to the Network Infrastructure Austria Segment. These investments are intended, in particular, to strengthen and expand the network infrastructure to accommodate the steadily increasing, volatile electricity volumes from decentralised renewable generation. The Paasdorf-Lanzendorf windpark, which has a capacity of roughly 19 MW, was commissioned during the reporting year, giving EVN a total of 16 windparks with a combined generation capacity of approximately 268 MW. This brings EVN significantly closer to its medium-term goal of more than 300 MW.

EVN's supply company again passed on procurement advantages to its household customers in 2015/16 within the framework of the EnergieAllianz: the 5% reduction in electricity and natural gas prices in October 2015 was followed by a further average reduction of 7% in the natural gas working prices for households as of 1 May 2016. In addition, the electricity and natural gas working prices for households were again reduced by 5% on average as of 1 October 2016.

On 23 November 2016, an arbitral tribunal has awarded the project company for the construction of the power plant Walsum 10 in which EVN AG holds an indirect stake of 49% claims in the amount of approximately EUR 200m. The arbitral decision will to a large extent result in a reduction of construction costs for the power plant and is thus currently expected to have no material effects on the financial results of EVN AG in the 2016/17 financial year.

Environmental services business

Investments in the environmental services business focused primarily on the further strengthening of drinking water supplies in Lower Austria. EVN's third natural filter plant in this province was commissioned in Zwentendorf an der Zaya. It will supply roughly 50,000 residents in the north-eastern Weinviertel region with water that is softened by natural means. In the Waldviertel region, the performance capability of the pumping stations for the drinking water network was increased by approximately 25% to better cover peak periods during the dry months and further improve supply security.

In the international project business, EVN successfully completed two wastewater projects each in Poland and Romania and a wastewater treatment project in Montenegro, with the transfer of the plants to the customers in 2015/16. EVN also received new contracts for the construction of four wastewater treatment plants in 2015/16; three of these projects are in Macedonia and one in Croatia. In total, EVN was working on the realisation of six projects in Croatia, Macedonia, Montenegro and the Czech Republic as of 30 September 2016.

Outlook

Under the assumption of average conditions in the energy business environment, the Group net result for 2016 /17 is expected to remain largely stable. Effects from the proceedings involving the Duisburg-Walsum power plant must be evaluated separately. Other factors that could influence this net result include the regulatory background, developments in the proceedings in Bulgaria and the progress on activities in Moscow.

For the complete Full Report see www.investor.evn.at.