VERBUND AG — Earnings Release 2010

Jul 27, 2010

News Details

Ad-hoc | 27 July 2010 07:59

VERBUND AG: Decline in result – Outlook for fiscal 2010 confirmed

VERBUND AG / Half Year Results/Half Year Results

27.07.2010 07:59

Dissemination of an Ad hoc announcement, transmitted by
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The issuer is solely responsible for the content of this announcement.

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As the economic environment remained challenging, the business development
of the Verbund Group was marked by lower earnings and cash flows in
Q1-2/2010. Factors included a much lower water supply for hydropower
generation, continued low demand for electricity and lower sales prices. In
the last weeks, however, electricity demand and prices have risen on the
spot and forward markets. We see this as a first sign that the economic
conditions are improving and anticipate a positive business trend for
Q3-4/2010.

Verbund, Austria's leading electricity company, therefore presents a
declined result for Q1-2/2010. Verbund can, however, confirm the outlook
for 2010 as a whole.

Compared to Q1-2/2009, sales declined by 5.1 % to EUR 1,582.0 million, the
operating result fell by 28.4 % to EUR 382.3 million and the group result
was down 41.6 % to EUR 210.3 million. The control-specific ratios displayed
the following development: The EBIT margin sank from 32.0 % to 24.2 %,
gearing rose from 103.7 % to 159.2 % and the operating cash flow fell from
EUR 540.1 million to EUR 420.9 million. Economic Value Added, the
control-specific ratio for value creation within the Verbund Group, sank by
EUR 209.2 million to EUR 33.1 million.

Ratios Unit Q1-2/2009 Q1-2/2010 Change
Sales EUR m 1,667.8 1,582.0 -5.1%
Operating Result EUR m 533.7 382.3 -28.4%
Group Result EUR m 359.9 210.3 -41.6%
Economic Value Added EUR m 242.3 33.1 -86.3%
Gearing % 103.7 159.2 53.5%
Operating Cash Flow EUR m 540.1 420.9 -22.1%

Clearly below average water supply and low sales prices burden results

Of particular detriment to the half-year results was the water supply from
rivers, which was well below average. The hydro coefficient lay at 0.92 in
the first half of 2010 and was therefore 8 % below the long term average
and 15 percentage points below the value recorded in the previous year.
This lead to a major reduction in energy production from run-of-river power
plants. Generation from annual storage power plants also dropped by
approximately 11 % due to a significant decline in inflows compared to the
previous year. The reduction in Verbund's hydropower energy production,
however, was shored up considerably by the acquisition of power plants on
Bavaria's River Inn in August of last year. It dropped by 7.6 % from the
previous year to 12,497 GWh. Thermal generation, on the other hand, rose
55.3 % from the previous year to 1,830 GWh. Verbund's portion of the volume
at the POWEO power plant in Pont-sur-Sambre (France), which began operating
at the end of September 2009, accounts for a large share of this increase.
Apart from a poor water supply, the low sales prices were also largely
responsible for the negative development of the half-yearly results. While
spot market prices were largely stable, the contracted forward market
prices fell sharply.

Steps to optimise capital structure and improve results

Because economic conditions remain difficult, Verbund continues to put a
great deal of stock in concentration, savings and efficiency enhancing
measures. Every effort is being made toward further steps to streamline the
capital structure and to improve the results. One of the first results is
the decision - as previously announced in the Q1/2010 Interim Report - that
EVN AG should acquire a 50 % stake in the Albanian hydropower plant, Ashta.
Additionally, in June 2010, an initial tranche of holdings in the Inn power
plants, which were purchased in August 2009, was sold: After a great deal
of preparation and negotiations, Innkraft Bayern GmbH & Co. KG's 17
partners purchased a 3.46 % stake. Negotiations are ongoing for the sale of
additional tranches of holdings.

Capital increase planned

On 30 June, the Supervisory Board authorised the Managing Board to call an
Extraordinary General Meeting in order to generate authorised capital
subject to the necessary resolutions by the majority shareholder, the
Republic of Austria. If the General Meeting approves this measure, the
company would have the option of a capital increase that would give it
additional flexibility in implementing its long-term investment plan while
securing a solid capital structure and stable ratings. The capital increase
in the amount of approximately EUR 1 billion will be enacted - depending on
the market environment - in Q4/2010 at the earliest.

Outlook

Despite the significant decline in the operating result and group result as
of mid-year, Verbund confirms the results forecast. For 2010 as a whole -
assuming an average water supply in the second half of 2010 and a further
stabilisation of wholesale prices - an approximately 25 % decline in the
operating result and group result is expected compared to the previous
year. Dividends will approach a payout ratio of 45 to 50 %.

Please find further information and the interim report Q1-2/2010 on
www.verbund.at

Contact:
Andreas Wollein
Head of Group Finance and Investor Relations
T.: +43 (0)5 03 13 - 52604
F.: +43 (0)5 03 13 - 52694
mailto:investor@verbund.at

27.07.2010 Ad hoc announcement, Financial News and Press Release distributed by DGAP.
Media archive at www.dgap-medientreff.de and www.dgap.de

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Language: English
Company: VERBUND AG
Am Hof 6A
1010 Wien
Österreich
Phone: 0043-1-53113-52616
Fax: 0043-1-53113-52694
E-mail: andreas.wollein@verbund.at
Internet: www.verbund.at
ISIN: AT0000746409
WKN: 877738
Indices: ATX
Listed: Regulierter Markt in Frankfurt (General Standard);
Freiverkehr in Berlin, München, Düsseldorf, Stuttgart,
Hamburg; Foreign Exchange(s) Wien (Amtlicher Handel /
Official Market)

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