Highlights

• Supply security fully guaranteed also during government-ordered measures to combat the Covid-19 pandemic
• Solid business development in the first half of 2019/20; 18.4% increase in Group net result due to lower valuation effects from hedges
• No significant operational effects from the corona crisis as of 31 March 2020, but negative non-cash valuation effects of approximately EUR 15m from higher country risk premiums for South East Europe
• Reduced outlook for the 2019/20 financial year: Group net result of EUR 180 to 200m
• Confirmation of dividend policy: ordinary dividend should remain at least constant at EUR 0.47 per share
• Share of renewable electricity generation rises to 53.8% (previous year: 39.8%)
• Further expansion of cross-regional drinking water pipelines in Lower Austria to cover peak demand periods; construction of a new 60 km pipeline from Krems to Zwettl
• General contractor assignment received for the construction of a thermal sludge treatment plant in Hanover

Key results

• Revenue: -4.2% to EUR 1,194.4m
• EBITDA: +17.7% to EUR 388.8m
• EBIT: +16.5% to EUR 230.7m
• Group net result: +18.4% to EUR 152.7m
• Net debt: EUR 1,191.2m (30 September 2019: EUR 999.5m)

Energy sector environment

The temperature-related energy demand was substantially below the long-term average in EVN's three core markets during the first half of 2019/20. The market prices for electricity, natural gas and coal declined, while the prices for CO₂ emission certificates increased during the reporting period.
 

EBITDA, EBIT and Group net result above previous year

Revenue recorded by the EVN Group declined by 4.2% year-on-year to EUR 1,194.4m in the first half of 2019/20. This development resulted, above all, from a lower volume of thermal generation and a reduction in the Networks Segment. Positive factors included higher energy revenue in Bulgaria and growth in the international project business.

In line with the development of energy revenue, the cost of electricity purchases from third parties and primary energy expenses fell by 12.8% to EUR 555.2m. The underlying reasons included the lower use of primary energy carriers which accompanied the reduction in thermal generation as well as declines in wholesale prices and purchased volumes.

The cost of materials and services rose by 8.4% to EUR 132.7m, in line with developments in the international project business.

The share of results from equity accounted investees with operational nature rose to EUR 61.2m in the first half of 2019/20 (previous year: EUR 4.6m). In addition to a positive non-recurring effect at RAG, this increase resulted mainly from an improvement in earnings at EVN KG. This company's prior year earnings had been influenced by higher wholesale procurement costs and by negative effects from the valuation of hedges as of 31 March 2019. A contrasting factor was the recognition of an impairment loss to the Ashta hydropower plant (EUR 4.9m) to reflect the higher country risk premium that resulted from the Covid-19 pandemic.

EBITDA recorded by the EVN Group rose by 17.7% to EUR 388.8m in the first half of 2019/20. Higher investments, the capitalisation of rights of use following the initial application of IFRS 16 and the increased carrying amount of property, plant and equipment that resulted from revaluations as of 30 September 2019 led to an increase of 7.8% in scheduled depreciation and amortisation to EUR 143.6m. An increase in the country risk premiums due to the
Covid-19 pandemic also led to the recognition of impairment losses to energy generation equipment in South East Europe and to the customer base in North Macedonia. EVN generated EBIT of EUR 230.7m in the first half
of 2019/20 (previous year: EUR 198.1m).

Financial results declined to EUR -29.1m in the reporting period (previous year: EUR -23.1m). Group net result for the first half of 2019/20 amounted to EUR 152.7m, which represents an increase of 18.4% over the previous year.
 

Solid balance sheet structure

EVN has a solid and stable capital structure which will support the realisation of its planned investments in Lower Austria over the coming years. Net debt rose by 19.2% over the level on 30 September 2019 to EUR 1,191.2m as of 31 March 2020, among others due to the recognition of non-current lease liabilities in connection with the above-mentioned initial application of IFRS 16. Consequently, gearing increased to EUR 29.8% as of 31 March 2020 (30 September 2019: 22.0%).

Both rating agencies confirmed their ratings for EVN in May 2020. However, Standard & Poor's revised the outlook from stable to negative in line with the outlook for the province of Lower Austria, EVN's majority shareholder: Moody's: A1 Rating (outlook stable); Standard & Poor's: A Rating (outlook negative). EVN's goal is to maintain ratings in the solid A range in the future.
 

Medium-term investment plan

EVN is continuing to implement its investment strategy, which is focused on the network infrastructure, renewable generation, natural heat and drinking water supplies in Lower Austria. The government-ordered measures to combat the spread of the Covid-19 pandemic are occasionally leading to delays on some construction projects in 2019/20.

In the area of renewable generation, EVN is continuing to expand its wind power capacity towards the targeted 500 MW and is currently constructing a wind park in Kettlasbrunn with an installed capacity of 8.4 MW; the commissioning is expected by year-end 2020. EVN is also evaluating the possible realisation of large-scale photovoltaic equipment in its supply areas. Investments in the electricity networks make an important contribution to protecting supply security and quality. The current roll-out of smart meters in Lower Austria marks the start of an additional investment cycle.
 

Developments in the energy and environmental services business

Energy business

Electricity generation from renewable energy totalled 1,155 GWh in the reporting period and was 2.4% lower than the previous year. The commissioning of new wind power plants during 2018/19 supported an increase in wind power generation despite a decline in wind flows, but water flows were lower than the previous year.

Electricity generation from thermal power plants fell sharply by 44.7% because the use of the thermal power plant in Theiss for network stabilisation was lower than the previous year and electricity generation from hard coal at the Dürnrohr power plant was terminated last year.

Environmental and water business

EVN registered a further increase in drinking water sales volumes based on strong demand for cross-regional supplies and by end customers during the first half of 2019/20. In view of this rising demand and to protect high-quality drinking water supplies, EVN is continuing to focus on the construction of new and the strengthening of existing pipelines. One major project involves the construction of a new 60 km pipeline from Krems to Zwettl.

WTE Wassertechnik, which is responsible for the international project business, had nine projects under realisation as of 31 Mach 2020: in Bahrain, Croatia, Kuwait, Lithuania, Romania and Poland.

sludge2energy, a 50:50 joint venture by WTE Wassertechnik, recorded a success in the area of thermal sludge utilisation. In February 2020, the company received an order for the construction of a thermal sludge utilisation plant in Hannover. The plant will have the capacity to treat 130,000 t of dehydrated sludge per year and is expected to start operations at the end of 2022. The contract volume amounts to approximately EUR 40m.
 

Reduced outlook for the 2019/20 financial year

As reported in an ad hoc announcement on 29 April 2020, EVN expects Group net profit of EUR 180 to 200m for the 2019/20 financial year (instead of the previously announced EUR 200 to 230m) under the assumption of average conditions in the energy business environment during the second half-year. This reduced outlook reflects the impact of the Covid-19 pandemic (delayed start of construction on the wastewater project in Kuwait and the above-mentioned impairment losses).

The Letter to Shareholders on the first half of 2019/20 is available under www.investor.evn.at.